Posted on Thursday, Jul 5th 2018
Earlier last month, financial technology Billion Dollar Unicorn Avalara (NYSE: AVLR) went public. While it has been a very short run so far, the stock has done rather well. The company estimates its US addressable market alone at $8 billion. Avalara has just scratched the surface here, and has a lot of potential. But first the numbers.
Seattle, Washington-based Avalara was founded in 2004 by Jared Vogt, Rory Rawlings, and Scott McFarlane with a mission to help business of all sizes manage tax compliance easily and efficiently. It operates on the motto of “Tax compliance done right.” It delivers on this through its cloud-based solutions that help in simplifying and automating the processes of determining taxability, identifying applicable tax rates, determining and collecting taxes, preparing and filing returns, remitting taxes, maintaining tax records, and managing compliance documents. In 2017, its platform was processing more than 16 million tax determinations per day.
While automated tax filing is not new, Avalara’s offerings focus on automating the processes surrounding transaction tax calculation, compliance and filing. Avalara covers these transaction taxes including sales and use tax, excise tax, value added tax (VAT), goods and services tax (GST), lodging taxes, and communication taxes. It has been built with the digital world in mind and it offers a multi-channel approach that helps businesses manage their online sales that can traverse multiple jurisdictions ranging from the local state tax laws in the US to international tax laws.
The Avalara Compliance Cloud integrates an advanced database of an up-to-date tax content with technology for executing on the taxation process. It has partnered with the invoice providers themselves as a go-to market strategy. That has helped Avalara build more than 600 prebuilt integrations including those with Adobe’s Magento, Oracle, SAP Hybris, and Stripe. The integrations are useful in picking up the transactions conducted by the business and identifying the taxation rules that apply on those transactions.
Avalara is not the only one in the segment. Its competitors include CCH, Sovos, Vertex, and Onesource Indirect Tax. But Avalara finds itself ranked as the easiest to use and implement.
Avalara’s product attracts customers of all sizes. They range from part-time online sellers to some of the largest global industrial companies. Its product has seen strong revenue growth over the past few years. Revenue grew from $123.2 million in 2015 to $167.4 million in 2016 to $213.2 million in 2017. For the first quarter this year, revenues came in at $61.4 million, translating to an annualized run rate of $245 million. Despite the revenues growth, the company is yet to turn in profits. It generated net losses of $77.8 million in 2015, $57.9 million in 2016, and $64.1 million in 2017. For the first three months this year, net losses came in at $15.2 million. Avalara attributes the losses to investments in growth.
Till recently, Avalara was venture funded. It had raised $341 million in funding from investors including Battery Ventures, Sageview Capital, TCV, Arthur Ventures, and Warburg Pincus. Its last funding round was held in September 2016 when it raised $96 million at a valuation of $925 million. Earlier last month, the company went public and raised $181 million at a valuation of $1.4 billion.
The stock has been doing well since it listed at $24 apiece. It is currently trading at $49.59 with a market capitalization of $3.3 billion. It had soared to $59.40 earlier last week.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns.
This segment is a part in the series : Billion Dollar Unicorns
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