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Collective, an online back-office platform for solopreneurs, today announced it has raised $50 million in funding from a syndicate of investors, including Google’s AI fund, Gradient Ventures, Innovius Capital, The General Partnership, General Catalyst, QED , Expa and Better Tomorrow Initiatives. The funding will support the launch of Collective’s new AI-powered financial management offering.
By implementing AI technology across its operations, Collective aims to accelerate its growth and onboard the nearly 100,000 companies on its waitlist.
Collective offers bespoke ‘business-of-one’ services including corporate formation, S-election, payroll, tax and accounting solutions.
The company says its services have experienced significant growth in tandem with the burgeoning freelance industry. Collective said 39% of the US workforce is currently engaged in freelance jobs, a number expected to exceed 50% by 2027.
To meet growing demand, Collective used large language models (LLMs) to develop AI co-pilots. These co-pilots work with a company’s tax experts, accountants, bookkeepers and relationship managers, significantly reducing the time required for essential processes such as bank reconciliation and expense categorization.
“AI is profoundly impacting our platform across all of our workflows,” Collective CEO Hooman Radfar told VentureBeat. “Nearly 60-70% of manual accounting is spent on bank reconciliation and expense categorization. Our co-pilot is designed to assist our team with bank reconciliation and categorization, transforming their role from authors to editors. Millions of manually classified account entries are used in conjunction with the GPT-4 API to power our internal application, which can reduce the time for expense categorization by 90% and bank reconciliation by 70%.”
With the additional funding, Collective plans to expand its range of AI tools and scale its operations to achieve double its original growth projection.
“The funding will be used to deepen our investment in our core platform, deliver new internal AI co-pilots, and upgrade our member-facing applications. Additionally, we will continue to scale our operations to better serve our rapidly growing and evolving member base,” Radfar told VentureBeat.
Simplify financial management for freelancers through artificial intelligence
Collective’s platform offers company formation, full accounting, payroll and tax filing services. The company emphasizes its ability to tailor this stack specifically to the needs of individual business owners, providing end-to-end support, from training to tax services.
“When it comes to training, we elect S our member entities (example: LLC), allowing them to save an average of $10,000 annually by optimizing self-paying methods,” Radfar said. “Our payroll engine is customized using the Gusto API for this particular use case, and in combination with our platform, we can help advise our members to maximize their tax savings.”
According to Radfar, the team is dedicated and well trained in understanding the nuances of this business category. Their experience allows them to optimize the categorization of expenses, minimizing quarterly and annual tax liabilities.
Radfar further noted that many successful solopreneurs are currently in a “dead zone.” Despite having enough revenue to invest in a solution, their businesses are designed to remain small-scale, making them unsuitable for the services of existing SMB software vendors that cater to larger enterprises.
Collective fills this gap by using artificial intelligence to provide an enterprise-grade solution at an affordable cost.
“We fill a gap in the market for companies that are usually too small to be served by existing SMB accounting and payroll solutions (even the do-it-yourself tools for training, accounting, tax and payroll payroll require more domain skills than most freelancers possess), and don “I don’t have the time or budget to put together a network of local accounting, payroll, tax and legal consultants,” Radfar told VentureBeat.
Radfar says using AI gives the firm significant advantages over traditional accounting firms, making it a strong competitor.
“The use of artificial intelligence has a major impact on the economics of our unit. As our unit economy improves, we can scale up our GTM efforts, spending in ways other companies can’t. With a larger ‘collective’ of members, our dataset grows and further fuels our AI effectiveness,” Radfar added. “This driver is incredibly powerful as it delivers compounding benefits over time to our platform.”
He said Collective has ambitious plans for growth. With the infusion of new funding, the firm aims to enhance its AI capabilities and introduce a new web-based digital experience for its members.
“We plan to make this experience available to freelancers wherever they work by launching mobile-first apps. We also plan to expand the core apps available to our members in areas like banking, credit, retirement and more,” Radfar said.
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