Leveraging R&D Tax Credits: Boast.ai Inks $100M To Front Tax Credits

Boast.ai, a tool to automate R&D tax credit-based financing for startups, has secured a $100 million credit facility from Brevet Capital to provide cash advances on tax credits and subsidies.

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Keeping track of R&D tax credits is manual, cumbersome and time-consuming, and companies typically don’t note which employee did what and for how long, Boast.ai co-founder and President Lloyed Lobo told Crunchbase News. In 2019, more than an estimated $18 billion in R&D credits were reported by businesses, according to financial advisory services firm BDO.

“Companies incur R&D expenses throughout the year, but don’t see financial benefits for 16 months or more because they can’t submit for the credits until they file taxes,” Lobo said. “We are automating the collection of data to identify, categorize and time-track eligible projects, which gives an estimate of how much time was spent in R&D. You leverage your R&D to grow without giving up equity.”

The $100 million credit facility will enable Boast.ai to give money to companies so they don’t have to wait for the tax credits. In return, the borrowing company pays back the credits with interest.

Rather than having to pay several times a year to use the platform and return the credits, Boast.ai will create one fee the company will pay that encompasses everything. That fee will typically be lower than taking a loan or paying an accounting firm to compile the data, Lobo said.

The new funding follows a $23 million Series A round of funding in December, led by Radian Capital, bringing the company’s total funding to $123 million since its inception in 2012, according to Crunchbase data. Prior to that, the company was bootstrapped, Lobo said.

Douglas Monticciolo, co-founder and CEO of Brevet Capital, said in a written statement that R&D tax credits are an “untapped resource for companies looking to invest in and accelerate innovation.”

“R&D tax credits are a valuable form of capital — but the delays can be extremely challenging for early-stage companies,” Monticciolo said. “Boast.ai’s AI-powered financing platform eliminates those delays and allows startups to focus on creating new solutions and products while immediately reaping the benefits of their hard-earned R&D efforts.”

Boast.ai says it has worked with more than 1,000 companies to recover R&D costs from the U.S. and Canadian governments, streamlining the process and reducing the risk of costly audits.

The company says it has doubled its revenue year over year. If all of its customers use Boast.ai’s new cash advance offering, Lobo expects to exhaust the $100 million this year. He hopes to be able to extend the facility to $500 million.

“The next steps are scaling and growing,” Lobo added. “We are almost going to triple operations in the next little while. Our goal is to get to 5,000 customers, and that will take us to $100 million in revenue.”

Illustration: Li-Anne Dias