Backed by a slew of Silicon Valley-based investors, ClearTax wants to make tax filing a cake walk for individuals and businesses. Thus far, it claims to have one million end users and 20,000 chartered accountants using its service, from across 1,000 cities in India.
As the final date to file income tax returns looms around the corner, many a working professional (including me) grapple with our pay slips, PAN cards, Form 16S, ITR 4S and a string of other financial documents, in an attempt to bring the process to a close. While some of us have the luxury of handing over this procedure to a chartered accountant, some others probably Google for every requirement mentioned in these forms in a desperate attempt to comprehend it. So, where do we start, to even begin to understand the income tax rates for our income brackets and to understand the filing process in a much simpler way?
Just as there are numerous startups out there, in the food tech, delivery and commerce segment, designed to ease customer lives, so are ones emerging in the B2C financial sector working towards this goal. One among them, and among the earliest players in this space, is ClearTax, which aims to help customers file their taxes with ease. “The motivation behind starting ClearTax was that there was a huge lack of information while filing taxes. And, there was huge scope for creating a great technology product for this,” notes its founder, Archit Gupta.
He founded the startup in 2011, under the parent brand Defmacro Software Pvt. Ltd. While it began with the goal of simplifying the tax filing process for individuals across the country, today it offers an array of B2B and B2C products such as ClearSave, ClearTDS and TaxCloud India for over one million end users and 20,000 employees. In fact, as recently as May 2016, ClearTax even launched an Android app, compatible on 2G Internet speeds. “The app has been designed in a way that one can continue to use it even without Internet connection. It also syncs the data with the web version, thus allowing the user to file across the app and web version,” claims Gupta.
Carving a Niche
Although there are companies like MakeYourTax and Tax Mantra, which operate in a similar space, Gupta is clear that his competition still lies with the tax department’s excel/ Java-based software. “It’s a tough procedure, especially if you are filing tax returns for the first time,” states Gupta. Hence, the startup’s objective is quite clear; to focus on simplicity and design of its software and user experience, and to encourage users to file their own returns instead of relying on chartered accountants or other offline channels.
The startup offers a slew of interesting features, such as a free self-filing platform for business returns, reading Form 26AS, determining next steps if a customer receives a demand notice from the Government, and more. Since its launch, it has launched a series of additional features, such as ClearSave, a robot-advisory tax platform which enables users to maximize their tax savings, ClearTDS, which helps SMB’s/CA’s generate Form 16s and prepare and file TDS Returns, and TaxCloudIndia, which helps CA’s file multiple ITRs for their clients.
It operates on a revenue model wherein it offers paid and assisted plans to businesses and NRIs, and charges companies and SMBs which use its products for TDS and Form-16 generation. “Some individual users with complicated returns procedures also opt for the paid plans,” he adds.
Today, our largest competitor is the tax department’s excel / java based software which is pretty tough to use if you are filing tax returns for the first time. Hence, our key focus is simplicity and design of our software and user experience
The Big Buck
In June 2015, ClearTax became among the five Indian startups so far to raise seed funding from Y Combinator, the US-based seed accelerator. “The most important YC learning we had is to make something people want. As long as you can create products which add a wow factor to a user’s life – you are doing good,” cites Gupta.
Following that round, in April 2016, the startup raised an angel round of US $1.3 million from Silicon Valley investors Max Levchin, the PayPal co-founder, Neeraj Arora, business head of Whatsapp, Navan Ravikant, AngelList’s founder, among others. A month later, it raised US $2 million from Silicon Valley-based Founders Fund and Sequoia Capital, and topped it with a US $12 million round from SAIF Partners in June 2016. “We are using these funds to build a strong leadership and product team, and channelise some investments into branding and marketing,” shares Gupta.
Although active in over 1,000 cities across India, the company, until now, hasn’t invested heavily in marketing. Instead, it has relied on a combination of word-of-mouth, organic channels and content marketing. “Around 75 per cent of our business growth has been through these channels. Since it’s largely dependent on referrals by exiting users, our customer acquisition cost is also low,” cites Gupta.
With ClearSave hitting the market only in July 2016, Gupta doesn’t see this as a reason to go slow on growth. His team has already set the ball rolling to introduce a slew of new features into the market in the next three years. This, combined with a focus on monetising its products and further strengthening its position in the fintech space, seems to be the key focus area for Gupta and his team in the coming term. “We are targeting roughly five million tax filings on our platform, and with the right team and great products, we’re confident that our business goals can be easily achieved,” he says, on a concluding note.
WHAT WE LEARNT FROM Y COMBINATOR
The most important YC learning we had was ‘make something people want’. As long as you can create products which add a ‘wow’ factor to a user’s life – you are doing good.
Moreover, the important part is to keep an open mind to everything the partners say. Being in YC led to extreme willingness to dig deeper on all aspects of our business. Paul Graham, for example, will always tell you to focus on your users and improve the product. That is really the only way to win. A lot of the initial help comes from the YC partners. Over Tuesday dinners and internal talks, they will talk about principles of growth and product.
We used to get a lot insight on user growth, retention and how to build and scale the best products. Kevin Hale helped us develop a data sense for our products – he emphasized the need of every single page/button on our website and focus on conversions, bounce rates and drop offs. This forced us to become data driven. Kevin is an expert on form design and we benefitted a lot from that as ClearTax has a lot of forms.
Founder: Archit Gupta
Concept: An online platform for individuals, businesses and NRIs to file their taxes
Investors: Y Combinator, Max Levchin, the PayPal co-founder, Neeraj Arora, business head of Whatsapp, Navan Ravikant, AngelList’s founder, Founders Fund, Sequoia Capital, SAIF Partners