Dublin-based tax automation platform Fonoa raises €59M from Coatue, Dawn Capital, others

Dublin-based Fonoa, an API-first company that automates tax obligations of internet companies, announced on Thursday that it has raised $60M (approximately €59M) in its Series B round of funding. 

The funding comes just six months after the company raised its Series A round of $20M. 

Investors in this round

The round was led by Coatue Management, a hedge fund that invests in public and private equity markets focusing on technology, media, and telecommunications.

Lucas Swisher, General Partner at Coatue, says, “As more companies start global-first, tax compliance becomes increasingly important. However, managing, processing and reporting taxes is cumbersome and complex. From the moment we met Davor, Filip, Ivan and the rest of the Fonoa team, we were struck by the simplicity and effectiveness of the Fonoa platform to turn a complex process into a seamless one. Coatue is thrilled to support Fonoa as it scales its platform to meet the increasing demand for tax compliance solutions.”

The round also saw participation from Dawn Capital, Index Ventures, OMERS Ventures, FJ Labs, and Moving Capital.

Mina Mutafchieva, Partner at Dawn Capital, says, “Scaling across borders is a challenge for any size of the organisation and controlling costs has never been more important. Being able to enter new markets with complex tax regimes using Fonoa’s automated tax compliance, is of great value to any size of business, saving both cost and time and providing invaluable governance support in a digital world.”

Capital utilisation

Fonoa says that the Covid-19 pandemic caused a fundamental shift in consumers’ e-commerce purchasing behaviours, which resulted in increased demand for the company’s services. Fonoa witnessed 7X revenue growth through 2021.

In order to continue serving this demand, Fonoa will use the proceeds from this round  to improve the features of its product and continue global expansion. The funds will also help launch new products in the next 12 to 18 months.

Fonoa also reports that after increasing its headcount by 5X in the last 12 months to 110 employees, it will further double the size of its workforce by the end of the year with a focus on its engineering and sales teams.

Automating taxes for the internet economy

Three Uber alumni, Davor Tremac, Filip Sturman, and Ivan Ivankovic, founded Fonoa in 2019 after experiencing how difficult it is to correctly calculate and report taxes to authorities throughout the world. 

According to Fonoa, current tax software solutions are not developed for the digital era and hence require clients to hire hordes of installation specialists for lengthy projects. Additionally, software developers for these solutions don’t always understand how digital-first organisations function internationally, meaning users can’t quickly adapt a tool to their needs in specific countries.

This is where Fonoa steps in. The founders developed a plug-and-play platform that allows customers to automate all relevant aspects to ensure tax compliance globally. Using an API solution, the platform determines and calculates the right amount of tax a business should pay, in the right place, at the right time. This results in profitability for users who can reduce their operating costs and increase their tax compliance at the same time.

Fonoa mentions that the expansion of businesses selling their products and services internationally has resulted in governments losing significant sums of tax money. Previously, customers would buy goods and services within their own country and the company they bought from would send the VAT to the government. 

According to the OECD, on average, nations struggle to collect 44% of these taxes, leaving them with a sizable VAT gap in their budgets each year that they are trying to overcome. Due to the complexity of the tax regulations for digital transactions implemented by more than 90 nations worldwide, businesses are now responsible for calculating, collecting, and remitting taxes on a global scale.

Co-founder Davor Tremac says, “We take the hassle out of all these changes and make it easy and efficient for digital-first companies to understand, report and abide by the tax obligations in every country they work in. Our platform verifies the tax status of the buyer and seller, calculates the correct tax to charge and creates a locally compliant invoice after a transaction takes place, while also providing real-time reporting to a country’s government.