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I had a really insightful (and fun) chat with Arj, the co-founder of Taxd (taxd.co.uk).
With his 2 co-founders, Eamon Shahir and James Green, Arj has just raised pre-seed funding with angel investors and QVentures.
Arj shared stories about the beginnings, marketing mistakes and explained how the funds were raised. The fundraising part is actually a great example of how founders should keep the message simple and not be afraid of approaching VCs, even at an early stage.
Let’s jump in!
I asked this question to Arj, here’s the transcript of the video:
“Hello, startupmag. I'm Arj, one of the founders at Taxd and our mission is to provide everyone with their own personal online accountant. And we've started off with tax returns.
Tax returns are something that are incredibly stressful. Often individuals might try to tackle taxes themselves, but might be leaving money on the table or having to go through the stress of looking through the tax legislation themselves.
Alternatively, they may resort to outsourcing to an expensive accountant. Which can take a lot of time, but also can burn a hole in the wallet. Taxd helps users to save them time and money because you can file a tax return in literally 10 minutes, but for a fraction of the price of an accountant. Also with the tax efficiency that human accountants can't support.
We suggest to our users the deductions and expenses that are relevant to them, but also pick the most efficient route for their tax.
Taxes are something that we think will become completely autonomous in the future with all the tax related information being out there in some way, shape, or form, whether it be bank transactions, trading apps, and so on, that data is available.
So taxes at some point will become autonomous. And that's our end goal and vision. Thanks.”
Taxd was founded in May 2021. The idea was born while they were working on automating Tax compliance processes at PwC. Big 4 type firms like PwC do this very well for large wealthy clients, but nobody was doing it for individuals and small businesses.
So we have 3 founders with a strong tax, accounting and tech background who want to make accounting easier and cheaper. It’s such a brilliant and easy to understand pitch. And that’s actually quite rare!
The team started off with the personal tax return, aiming at the self employed and landlords. Recently opening up to their tax technical expertise, expats and international tax matters.
As a lot of these processes can be automated, Taxd can deal with a large amount of customers and the company is able to slash prices compared with a typical accountant.
I know that tax can sometimes feel quite daunting, so I thought it would be a good idea to get things rolling with here few definitions:
Taxd deals with HMRC self assessment and tax returns.
HMRC self assessment is a process by which individuals in the United Kingdom can calculate and pay their own income tax. This process is typically used by individuals who are self-employed or have other sources of income that are not subject to tax withholding. Under the self assessment system, taxpayers are required to complete a tax return each year and submit it to HMRC, along with any tax that is due. This allows taxpayers to take responsibility for paying the correct amount of tax on their income.
A tax return is a form that individuals and businesses in the United Kingdom use to report their income and calculate their tax liability. Tax returns are typically filed annually with HM Revenue and Customs (HMRC). The information reported on a tax return is used to determine how much tax the taxpayer owes, or how much they are owed in the form of a tax refund.
Taxd is entering a market where automation could become the new norm.
Making Tax Digital (MTD) is HMRC’s attempt to make it easier for individuals and businesses to submit their taxes.
And although MTD for income will likely be pushed back to 2026, this means that sole traders and landlords will need to file their taxes using 3rd party software on a quarterly basis.
These are perfect conditions for Taxd to thrive.
I really thought that this part of the interview was interesting.
I talk to a lot of founders who shy away from contacting VCs early on. They wait for intros, or traction or for an angel to tell them to do it…
And yes, it’s true… if you are a 2x founder, with £50K MMR, and warm intros to top tier venture capital firms, then you will have a better chance of raising funds! But who has that on day 1?
This all happened to Arj and his team in 5 steps:
Step 1 - Arj started off by asking their current employer to be able to work on their project while they were still employed. And the employer said “yes”! Good start…
Step 2 - They then contacted friends and family (love money) with a clear message:
“ We have experience in a sector and we want to build a company around this experience.”
They were not promising a massive crypto-like payout. And they also talked to friends who were in the industry and understood the problem (I thought that was a great insight).
Step 3 - The Taxd team quickly built a product and started marketing. They made mistakes going from Royal Mail Flyers (fail, I loved that story Arj :-)) to learning about Google Ads and SEO, and slowly they started building a pipeline of clients.
These guys were not marketers, but they just tried, failed, learnt and tried again. And it worked.
Step 4 - Arj started building his investor network. He put an ad on the angel investment network, applied to pre-seed VCs on their websites and contacted VCs and angels on Linkedin. He also started posting regularly on Linkedin and a few articles started to take off.
Step 5 - Of course at the beginning they got crickets, but slowly angels talked to VCs, VCs talked to each other, their name got mentioned a few times. Suddenly VCs were contacting them directly. And that’s exactly what happened with qVentures who contacted Arj on Linkedin.
There is no silver bullet with pre-seed fundraising.
If you don’t know anybody, you have to start somewhere, and Taxd is a perfect example of slowly building your network brick by brick. Suddenly you get momentum and you become a funded startup.
This was a great interview about a real business that is solving a real problem for millions of people in the UK. Accounting software has already disrupted the accountants market, but automation will take this even further. I’ve got a feeling we’ll be seeing a lot more of Arj and his team at Taxd!