Cloud-based Tax Platform Canopy Raises $8 million In Series A Funding

My friends over at Canopy Tax are on fire, and have some big plans in place to change the very landscape of tax practice software. Take a look at what they just announced. I’d like to extend a hearty congratulations to them, and I’m excited to see what they come out with next!


SALT LAKE CITY, UT – June 23, 2015 – Canopy (formerly Beanstalk), a SaaS tax and practice management platform for small-to-medium sized accounting and tax practices, announced today that it has raised $8 million in Series A funding led by leading venture capital firm New Enterprise Associates (NEA), with participation from returning investors EPIC Ventures and Deep Fork Capital. The new funds will allow Canopy to accelerate hiring and product development.

Canopy is currently focused on automation tools for the tax resolution market. Their offerings improve the interaction between tax advisors and their clients and automate much of the tax practitioner’s workflow by utilizing web-based client intake surveys, robust tax analytics, auto-populated IRS forms, and a dynamic portal that allows the client to effortlessly exchange information and documents with their advisor. Tax advisors can manage their practice and clients more efficiently with Canopy by having files, notes, dates, and invoicing all in one place.

Founder and CEO Kurt Avarell, a former tax attorney turned tech entrepreneur, aims to transform the entire experience of paying and resolving taxes for tax professionals and their clients. Prior to launching Canopy, Avarell implemented the initial version of the product within his own tax practice and observed that not only did the platform minimize paperwork and streamline tax resolution—it also improved the client-advisor relationship by increasing communication and comfort throughout a process that is notorious for being stressful and cumbersome. “We are fundamentally rethinking how taxpayers currently interact with their advisors and how we can improve that experience for both parties,” said Avarell. “Traditionally tax advisors send their clients a bunch of paperwork to fill out and then they manually key that client’s written responses into their tax software. That’s not a great experience for either person. Canopy moves the experience online and eliminates the inefficiencies. It’s a win-win for all parties involved.”

“Taxes aren’t going away anytime soon; it’s a $100 billion market riddled with inefficiencies and eager for disruption,” said Chetan Puttagunta, Partner at NEA. “Canopy provides an extensive aggregate of tools for client management that benefit both tax pros and their clients. We were extremely impressed by their organic customer traction, and look forward to partnering with them to amplify their existing success.”

Since launching a limited beta in March 2014, Canopy has been growing rapidly among tax professionals who are eager to modernize their practice and automate their workflow. By using Canopy, tax advisors can provide their clients with a better customer experience while eliminating inefficiencies in their own practice—a winning combination.

Connect with Canopy
Twitter: https://twitter.com/canopytax
LinkedIn: https://www.linkedin.com/company/canopy-inc
Facebook: https://www.facebook.com/canopyHQ

About NEA
New Enterprise Associates, Inc. (NEA) is a leading venture capital firm focused on helping entrepreneurs build transformational businesses across multiple stages, sectors and geographies. With approximately $17 billion in committed capital, NEA invests in information technology, healthcare and energy technology companies at all stages in a company’s lifecycle, from seed stage through IPO. The firm’s long track record of successful investing includes more than 200 portfolio company IPOs and more than 320 acquisitions. For additional information, visit www.nea.com.

About EPIC Ventures
For over 20 years, EPIC Ventures has partnered with entrepreneurs to build lasting, category-defining information technology businesses. The firm focuses on early-stage opportunities throughout the western states, and works actively alongside a broad network of advisors to help its portfolio companies succeed. www.epicvc.com.
About Deep Fork Capital

Deep Fork Capital is a San Francisco- and New York City-based early-stage venture capital firm focused on investing globally in entrepreneurs who are building disruptive, technology-driven companies in the Consumerized Internet. Founded, funded and operated by entrepreneurs, Deep Fork Capital partners are familiar with the challenges and opportunities of launching and building a new business; as such, the firm seeks to collaborate actively with the entrepreneur throughout the lifecycle of their business. For additional information, visit www.deepforkcapital.com.

Media Contact: Jordan Ray, Canopy Tax, Inc., 801-215-9990, press@canopytax.com

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If I was broke and homeless, here is what I would do to start over (again)

It was April 24, 2001, and I had just shut down a tax prep office with 15 preparers that completed a five-figure 1040 volume, and that hadn’t even existed five months earlier.

It was my last day on active duty in the U.S. Navy, and I was heading back home to Oregon. I only made it to Colorado, but that’s a totally different story.

As I left Norfolk, VA that day, I was obviously thinking about my future. Given my nuclear training, I assumed that the legacy of my Navy experience would be a career in nuclear power. The strange task of building a tax prep office from scratch to service the largest concentration of military personnel in the world was something I viewed as nothing more than the grunt work I had to do because I was on the short end of my enlistment.

I never thought it would become my career.

And that’s one of the great things about life: You just never know where it’s going to take you.

If I had had a crystal ball at the time, I would have treated that tax season differently. I would have actually learned how to prepare a return, rather than just treating it as an IT problem, among other things. It could have been a tremendous learning experience, if I had allowed it to be, and it would have put me several years ahead in life.

As I started civilian life, tax or accounting never even crossed my mind. And later in 2001, I chose a woman over a nuclear power job in New York. Then I somehow ended up in real estate. Then I ended up divorced, bankrupt, and homeless.

So seven years after my first tax season, I ended up having my second, entirely out of necessity. I consider it somewhat humorous that this period of my life was bookended with tax work. Some people might even say that my return to the tax field was inevitable.

In retrospect, I sometimes wish that I had gone into tax or accounting straight out of the gate when I left the Navy. But at the time, I didn’t respect it as an occupation, and I didn’t understand the value of the skill set.

But now I do. And I hope that you do, too.

Tax preparation is a skill. Tax resolution is a skill. Marketing is a skill. Your skill set is your livelihood, and that livelihood gives you a lifestyle.

A commercial fisherman knows the right bait to use, how to find the best fishing spots, and the best time of year to fish. Those are his skills, and those skills produce a livelihood and a lifestyle.

Living in a car is also a skill, one that I happen to possess. It’s also a lifestyle, one that I know all too well.

The bank can take the house, and the bankruptcy court can take everything else. But your skills belong to you for life.

Short of major health problems, major cataclysmic disaster, or war, the only thing you ever need to get back on your feet when you’re down are your skills.

And let’s face it, the IRS ain’t going nowhere, and business owners are always going to need to know their numbers. Our profession has been around since the dawn of civilization, and it’s not going away anytime soon. Your skills are your Golden Ticket.

If my life suddenly became a real-life episode of Naked & Afraid, I know that I can rely on my skills to get me back on my feet.

I’ll skip the water, fire, food, shelter, and clothing portion of this recovery operation. Let’s also assume that I manage to trek back to civilization, and that I’m in the United States. All games need a set of starting conditions, so these will be mine. Yes, I’ll be using a game analogy, because I have come to view economic life as an artificial game not unlike Monopoly, because, well it is a game, and it’s completely artificial. But that also is a story for another post.

So our game is Economics, and we use money to keep score. In our game, we have various ways to obtain money, and then we use money to obtain other goods and services. Some of these goods, which would be free if we didn’t play Economics, are necessary just to survive. Others just make life much more comfortable.

To get started, I would do whatever was necessary to obtain a tiny amount of money. Seed money is necessary to start the whole process. Playing Economics doesn’t work at all without some startup money. I would walk into every business I could find, offering to do whatever grunt work they needed done, for whatever they were willing to pay me.

Whether this work was pulling weeds, patching the roof, changing oil, reconciling accounts, doing outbound telemarketing, or representing them in an examination, I would do it. That first bit of seed cash is necessary to play Economics.

I will point out that many homeless people are capable of reaching this stage, but simply don’t. Those with mental or physical disabilities may not be able to do it on their own, but I see many homeless people that could definitely reach this stage.

With a little bit of seed money, I would work on making myself more presentable. It’s amazing how cheap a shower, haircut, and fresh clothes from a thrift store can be. It’s even more amazing what that can ll do for your self-esteem, confidence, and ability to be taken seriously.

From here, even though I might be living in a cardboard box in an alley, and dumpster diving for food, the process of building a high score in a game of Economics becomes the same for everybody: Use your resources wisely, combined with your skills, to multiply your money.

I would do “seed money” work as necessary until I could obtain a pre-paid cell phone. A phone is an incredible force multiplier in terms of economic productivity. Think of it as a power-up in our game of Economics.

With a phone, and a trip to the library, I can obtain various basic telemarketing lists, then call those lists. I simply direct solicit my tax and accounting skills.

This one marketing method, using the telephone, is sufficient to get me into a much, much more comfortable lifestyle. Like, a van. Vans are great, compared to a cardboard box. In fact, if I’m on the phone selling tax resolution services locally, I could most likely get enough cash to buy a van with just one paying client. This is an example of a higher value skill, which brings tremendous advantage in a game of Economics.

Once I’ve upgraded to a van, my next goal is to get an executive/virtual office that I can work from. This will require several hundred dollars per month, but having a clean, quiet place to work from (instead of the library or the homeless shelter) will help my business tremendously. I can still get to this point strictly via the phone.

In short order, I’ll have enough points, errr, money, to get online. Online tools provide me tremendous business growth leverage, even if I’m doing all the work myself. Using both free and paid online marketing, as well as some very affordable marketing automation tools (such as email autoresponders), I can leverage myself.

With some more capital coming in, now I can leverage other marketing media, such as broadcast media, direct mail, etc. The multiplication from these sources quickly makes me too busy to do everything myself, and soon I become an employer.

The process of financial recovery isn’t really that complex. It just takes the will to do it, to take action. The most important thing to never forget is that you possess a financially valued skill, and the skill set for marketing and selling your tax/accounting skills is itself a skill set, one that can be learned.

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What the Tax and Accounting Firm of the Future Looks Like

Lately, I’ve been immersed in helping to actually create the future of continuing education for our profession. This has led me into a fascinating exploration of recent discoveries in the world of K-12 education, the rapidly growing segmentation of higher education, and the changing landscape of interactive learning modalities.

Through it all, I have noticed two key elements upon which the entire conversation hinges:

  1. Changing attitudes about human interaction.
  2. Integration of technology advancements into the learning process.

This particular blog isn’t really the place for me to discuss changes in education. What I will discuss here, however, is that these same two key elements are going to have significant impact on how all professional service businesses are operated. Let’s take a look at some specifics.

Certain shifts in technology, such as the tornado cloud, are already quite pervasive in our profession, and impossible to ignore. Cloud accounting, cloud CRM, cloud tax return preparation, and even cloud word processing are now all parts of our professional lexicon. For better or worse, these technologies are here to stay.

Several of the companies upon which we rely for our software needs have flat out told us that desktop versions of their software will some day not be available anymore. Some specialty services, such as tax resolution case management software, have never had desktop software equivalents, and have only existed in the cloud.

Technology is also driving significant changes in staffing. We are solidly locked in the era of knowledge workers, of which all tax and accounting professionals are a part, by definition. But on top of that, we have also entered the eras of the mobile workforce and the flexible workforce.

According to PGi, which provides collaboration tools for distributed workforces, a 2014 survey of executives and managers indicates that 80% of surveyed companies offer some sort of telecommuting option for knowledge workers. Not surprisingly, 70% of those taking the survey indicated that they themselves telecommute at least occasionally. Telecommuting also isn’t what it used to be, which was often “all or nothing”. Now, it may be any blend of 100% to only occasional, and it may be from home or from a beach in Bali. These trends are what make up the mobile workforce.

The flexible workforce collectively refers to a number of distinct societal changes. First is the fact that, since the 2008 economic decline, more and more knowledge workers are self-employed, freelancing themselves out to several different companies that need their skills, but either can’t afford to hire staff or are risk-averse to doing so.

Second, there is the growth of temporary employment, more appropriately called term employment. This is actually nothing new to those of us in the tax world, as seasonal employment has been normal in the tax preparation industry for decades. Due to both economic realities and generational attitudes, term employment has become mainstream in all areas of the knowledge economy. Older workers that do not have sufficient retirement resources now take on short-term employment as an economic necessity. Even if they do have sufficient retirement resources, many baby boomers hitting retirement age simply don’t want to retire, and thus change the nature of their work schedule to prevent boredom.

The Millennial generation, on the other hand, has been faced with two compounding factors that lead to term employment. One has been the difficulty of finding full-time work in recent years. It is estimated that 40% of those included in the official unemployment number in the US are millennials, making the unemployment rate for that generation about 15%. It’s even worse in some parts of Europe, where young adult unemployment exceeds 50% in several EU countries. The other factor impacting millennials has to do with attitude. Some may argue that it’s an issue of work ethic, but whatever it is, millennials appear to be less ambitious as a whole than previous generations. I realize that stereotypes aren’t necessarily fair, but data indicates that as a group millennials are OK with living at home with their parents even into their late 20’s, which actually makes term employment an attractive option to them in a tight job market.

The flexible and mobile workforces can be a wonderful thing for professional service businesses like ours. Imagine being able to expand your tax prep capacity on any given day with only about four hours notice. Or consider a short-term need for that in-house telemarketer you’ve been wanting to hire, but can’t justify an FTE for. If you don’t regularly engage in tax debt resolution work, and a large case suddenly falls in your lap that you aren’t equipped to handle, you can take the case anyway. Every one of these scenarios is made possible by the flexible workforce.

Consider the benefits of a mobile workforce. In other words, staff people (full time or otherwise) that aren’t physically present in your office. Ever. Imagine the savings on office space and IT support. Lower electric bills. Reduced overhead in almost every way conceivable, to be honest.

The mobile workforce allows you to run what we used to call a virtual office. That phrase has long since been displaced, because it’s already the new normal.

Just as an example, let’s consider a multi-million dollar per year, locally-oriented firm that specializes in 941 tax debt resolution on the front end, but also provides ongoing tax preparation, payroll service, and bookkeeping on the back end. In other words, let’s take a typical Main Street, USA tax/accounting office, slap on a tax resolution front end, and kick the whole thing into the 21st century.

Here’s what that business might look like, today:

  • A simple, two-room office suite with a front reception area.
  • One full time office manager/receptionist/customer service person, on site.
  • Two licensed partners, on site, one in each office.
  • One full time, off-site marketing manager that coordinates all marketing/sales activities, including managing cloud-based software platforms, managing online marketing campaigns, coordinating direct mail vendors, etc.
  • One off-site, full time admin coordinator, that coordinates all client case work, tax prep, bookkeeping, etc.
  • One off-site QuickBooks expert and payroll processor. This person is a freelancer that provides services to one other firm, also.
  • Two off-site tax preparers and tax resolution admin assistants that enjoy flexible work schedules most of the year.
  • Three additional part-time, seasonal tax preparers, all of whom work remotely.
  • Floating pool of contract telephone appointment setters, all hired via Craigslist, managed via online scheduling system, and trained via Skype or Facetime. Outbound calls are handled by cloud-based autodialer, and appointments are set using cloud-based calendar for the two on-site licensed partners, one of whom takes mornings, the other afternoons, for new appointment coverage.

All of the off-site people can be spread out across different states, or even different countries. This operation even works during tax season, as the on-site partners are handling tax prep intake in 15 and 30 minute blocks for those clients that need it, although much of their tax prep work is “drop off” service or even “upload” service. Most tax returns are prepared off-site, and partners simply review and deliver. Everything in the entire organization is 100% paperless.

The operation described here can easily generate $2 million or more per year in revenue. It’s all done very efficiently, and mostly with mobile and flexible staff, with everybody using cloud technologies.

This example isn’t even a fantasy. In fact, many firms already exist that operate precisely in this manner. And don’t forget — we’re talking about a LOCAL service business.

The tax and accounting firm of the future is, in reality, already here. The technologies already exist. The staffing models already exist. Flexible office space solutions exist.

As our society as a whole embraces the two key elements mentioned at the beginning of this post, we will see greater and greater use of these technologies and services in our profession. Excellent customer service will never go out of style, but changing attitudes about the nature of human interaction will continue to change how we do business. The integration of technology into all aspects of our practice operations will make us more efficient, and help us to actually deliver a better quality of end product to our clients.

I still remember preparing tax returns with pen and paper, because it was only six years ago, when I took it upon myself to add the tax preparation revenue stream to an existing tax resolution firm that didn’t do returns for clients. Despite the fact that tax prep software was already ubiquitous, I distinctly remember the increase in efficiency, profitability, quality of work product, and customer satisfaction that resulted from our switch from paper to software.

The tax/accounting professional that fails to embrace these changes in their business will, inevitably, find themselves losing local market share to their competitors. The firm of the future is already here, and it’s time for your practice to either evolve, or slowly wither into marketplace obsolescence.

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