Vancouver-based Boast.AI will hire up to 25 people and open a new Montreal office after the company raised $126 million ($100 million USD).
The $130 million will come as repayable credit from Brevet Capital, a New York-based alternative credit investment and specialty finance firm. Boast will hire for roles in business development, engineering and customer success in Montreal.
Boast.ai uses artificial intelligence to automate the process of applying for R&D tax credits. Tech companies can plug in both their technical stack and financial stack into Boast’s platform, which analyzes how much in R&D tax rebates the company is entitled to.
Boast offers to pay that company up front, taking a fee. It’s a price that some companies would rather give than wait until the following year to get their money.
‘Massive red tape and frustration’
The process of applying for R&D tax credits comes with “massive red tape and frustration for business owners,” Lloyed Lobo, Boast’s President.
“You get all these accounting firms that come in at the end of the year and they ask everything you did last year and drag you through the mud. Then the CRA comes around and they want to see the entire trail of work you did in order to qualify,” he said. “But as a business owner, your job is to run your business. You don’t have time to chase tax credits and deal with red tape, so we automate it and give you access to that money before you would get it from the government.”
Boast previously raised $30 million in Series A funding from Radian Capital. Lobo says the company is already profitable, having earned near double year-over-year growth. The company has about 50 employees. It plans to double to 100, which includes the new staff it will bring on in Montreal.
The company was founded by lifelong friends Lobo and Alex Popa, who met while studying engineering at Lakehead University in Thunder Bay, Ontario. Both cofounders are immigrants to Canada: Popa from Romania and Lobo from Kuwait.
An engineer and an accountant, Popa eventually went to work for a large Canadian accounting firm on its R&D tax credit team, where he saw a large opportunity and a large service deficit. Meanwhile, Lobo went to San Francisco after university to work for several startups.
“Alex told me the process was broken and it wasn’t serving startup founders. It was painful and accountants were making it even more painful. As a founder myself I wished there was technology that would streamline that process and give me access to money sooner,” said Lobo.
When Popa approached Lobo to head up the company together, he jumped at the chance.
A very big market
Lobo said that the US and Canadian governments combined give out close to $15 billion in SR&ED tax credits. It’s a large market, but the process of going after those credits is cumbersome for business owners.
Moreover, it can take over a year to get that tax credit cash returned to your bank account, said the cofounder.
“You have to incur a year of expenses and then file it with your taxes, and that’s another few months. And then you’re waiting on the government for a few more months,” said Lobo. “Every dollar you incur in R&D expenses or product development is locked up for over a year. We’ll not only automate your tax credits for you, we’ll give you the money now.”
According to the company, Boast integrates with a company’s technical project tracking systems such as Jira, GitHub, etc. and payroll and bookkeeping systems such as Gusto, Quickbooks, etc. to help identify and categorize R&D tax credit-eligible projects and associated expenses proactively through the year. It also ensures everything is compliant with the government guidelines. Boast will estimate, prepare and give the tax credit money real-time throughout the year.
As for the $126 million in repayable credit funding, Lobo was direct when addressing why the company went this route.
“Equity is expensive. We’re a very profitable company and we’re growing. If you give up so much equity then investors virtually own you. If you take debt when you’re profitable you can get a phenomenal interest rate, much cheaper than giving up equity. It’s smarter business to effectively help you grow,” Lobo told MTLinTECH.
“We want it to be more than just opening an office”
Lobo emphasized that Boast doesn’t want to come into Montreal without helping the local tech community. They do not want to “just open up another office.”
The cofounder said that Boast’s mission is help innovative companies become successful. If they want to do that, he said they need to take a “very community-driven approach,” partnering with local organizations to run events and bringing in speakers from Silicon Valley.
It seems as though Boast backs up their word.
The guys previously founded Traction, a community of over 95,000 members. Traction hosts weekly webinars, monthly dinners, founder-funder matchmaking events in different cities and it even hosts an annual conference. Lobo said they donate all the profits and partner with local organizations. Here in Montreal, Traction partners with Startupfest, Montreal Techstars and Montreal NewTech.
Boast has now run Traction events in Toronto, Vancouver, Calgary and San Francisco, and will expand into New York as well.
In fact, Lobo and Popa met the folks at Radian Capital though their own Traction founder-funder matchmaking event that they hosted in Toronto at the MaRS Discovery District.
“They said they see a massive opportunity and a big market. Just beyond SR&ED, there’s a trillion dollars in global tax credit value for all kinds of other things tied to business. They told us we have a big opportunity to streamline and automate that.”