Canopy, the client and practice management platform for accountants that raised $30 million in late March, has raised an additional $12 million in funding from Tenaya Capital and Nyca Partners. This latest injection of capital, which resulted from the initial round being oversubscribed, brings the round total to $42 million for what the company calls a “Series B-I.”
The idea for the Salt Lake City-based company was rooted in Avarell’s own frustrations with antiquated client and practice management systems available to accountants.
“It’s a huge disadvantage to accountants who are trying to compete with modern solutions[…] when they have to be in Windows and their competition, like TurboTax, can be in the cloud,” CEO Kurt Avarell told Crunchbase News in an interview.
Canopy has grown to a team of more than 250 employees and 5,000 users since its founding in 2014. Its aim to challenge the ages-old paper and Windows-based tax management system with its cloud-based platform has caught on with investors, too.
Chad Packard, Canopy Board Member and Partner at Pelion Venture Partners, told Crunchbase News in an interview “it’s a huge industry with a problem that software can solve around automation.”
According to the CEO, its software is increasingly attracting mid-sized regional accounting firms looking to automate their practice management systems. And while sales and marketing is a focus point for Canopy, especially as it raised its first $20 million Series B, Avarell emphasized that the $30 million Series B-I and $12 million extension will be primarily directed to product development.
“Tax is so complicated — you have 60,000 plus pages of internal revenue code and you have to get all of those rules, [and] tax information into software… you have to give recommendation to accountants on how to solve those things,” Avarell explained. “So it’s just a very R&D intensive SaaS company.”
“We know exactly what we are going to be building for the next three years[….] We know where we need to be in a year and two and three years from now with the product,” Avarell said.
With clients increasingly turning to automated, cloud-based options to manage tax frustrations, Canopy is hoping to position itself to disrupt the out-of-date accounting systems used by individual accountants and large firms alike. The company is potentially offering accountants and firms the competitive advantage they’ll need to combat that movement.
Illustration: Li-Anne Dias