TaxBit Brothers Austin & Justin Woodward — Solving Crypto’s Tax Problem & A $100M Series A!
Listen on Apple | Spotify | Soundcloud
Procrastinate on your crypto taxes? Don’t want to deal with painful tax interfaces on crypto exchanges? Thankfully, TaxBit has us covered.
As a fan of the show, head to This Link and use code whartonfintech for a special rate on Taxbit’s crypto software. In <5 minutes you create an account, connect your exchanges/wallets, and TaxBit will spit out a beautiful, consolidated PnL and necessary tax forms.
Now onto the show…
—
In today’s episode, I sit down with Austin & Justin Woodward, Brothers & Co-Founders of TaxBit!
Austin and Justin, a CPA and Lawyer respectively, just raised a $100M(!) Series A to solve the massive problem of taxes and cryptocurrency.
This round included a who’s who of investing: Tiger Global, Paradigm, Coinbase Ventures, PayPal Ventures, Bill Ackman, Winklevoss Capital, Qualtrics Co-Founder Ryan Smith, and more!
TaxBit offers a suite of products for consumers, enterprises, and governments to easily aggregate and analyze crypto balances, generate and review tax forms, recommend tax-loss harvesting strategies, and more through their API suite and software. Whether you’re a platform that needs to issue 1099s, or a user that needs to report taxes, TaxBit’s cryptocurrency tax software unifies the process.
While many try to strike gold on the next big alt-coin, TaxBit is building the picks and shovels for the crypto boom!
With crypto prices getting more volatile and tax day around the corner, this episode came out at the perfect time. Let’s take a look at the episode:
The Founding Story
“It was really evident that this is something that can disrupt FinTech in a way unlike anything, perhaps in our lifetime.”
Both brothers were introduced to the power of cryptocurrency early on in their careers. Austin was a CPA and early hire at Qualtrics, the Utah-based SaaS unicorn, and first got introduced to the problem of cross-border payments while working there. He sent a wire 10 minutes late, causing the company to miss payroll in Australia since it took 48 hours to clear. Austin knew there had to be a better way, and started poking around.
Justin was in law school at UChicago, and was an early adopter of cryptocurrency. While at UChicago, he actually did consulting work for a Fortune 100 client that was getting into crypto:
“They essentially wanted to accept Bitcoin in exchange for goods and services on their platform back in 2014, and were brand new to the area. It was my first exposure to Bitcoin and cryptocurrency as well, I kind of dove into all areas of the law and how we could make this work for this client.”
Eventually, they started comparing notes and spending all of their free time in crypto. In 2017, they took the plunge, moved into their parents’ basement, and got to work:
“We did start in a basement. It was a fun time…this was back when we were trying to prove product-market fit and get off the ground. And that was a cool part of our DNA and story…we had four people living there, sleeping and eating there full time! It was basically a college dorm room, just a bunch of folks hanging out and doing what we love!”
What is TaxBit?
TaxBit has a 3-pronged business focused on consumer, enterprise, and government.
Consumer:
TaxBit allows anyone to connect their crypto accounts from companies like Coinbase, Gemini, Kraken, Celsius, and BlockFi. TaxBit will then hook in with view-only APIs, download information, and produce tax forms for the customer.
“That’s what we like to call the unsexy, must-do piece. People were calling us the TurboTax of crypto really early in this process, and that was glamorous for maybe a few weeks.”
However, they’ve built a lot more than just taxes. TaxBit has added wealth optimization and spending tools including tax-loss harvesting tools (a la Betterment + Wealthfront), spending optimizers (choosing which coins to spend), and more.
Enterprise:
They are working directly with major brokerages and institutions to help them sort out their tax reporting, documentation, and more.
“Through our work early on, we identified a massive problem in the information reporting scheme. We’ve brought this technology straight to the brokerages and the exchanges themselves. The exchanges can now provide their users with useful tax forms that they can hand over to their CPA, similar to the equity world.”
Government:
TaxBit is also expanding into government clients, a client I found pretty surprising.
“Regulatory authorities use our software. And when you look around these three ecosystems [consumer, enterprise, government], each one of them in FinTech is a multi-multi-billion dollar opportunity...You can imagine as this new asset class disrupts FinTech, and potentially the greatest disruption since the replacement of the gold standard…there’s going to be a huge need for enterprise, professional-grade software to enable this on both the tax and accounting lens…
…There is no Oracle, SAP, NetSuite type ERP, dedicated to cryptocurrency!”
Founding With Your Brother
Austin & Justin share some fun bonds and insights about founding a company with family, and the importance of radical transparency & honesty:
“That doesn’t mean that we don’t fight like brothers. I remember the teenage years, putting on the boxing gloves and having broken noses! But when it comes to starting a business, honestly, it’s all I really know. Qualtrics was formed by two brothers and their dad as well in a basement. And so it was this model that I had kind of essentially started my career around, and I saw work brilliantly!
One of the huge things about any co-founding relationship is you’ve got to have radical transparency & honesty with each other. And that relationship of being comfortable with one another, allows us to have very tough conversations. And we’ll be the first to admit things aren’t all roses and butterflies all the time. We’ve lost our temper and our cool, walked out on each other many times. But that’s all part of starting a company! …it’s not about who’s right and who’s wrong, but putting your brains together.”
Hiring and Growth Challenges
“You’ve got to be able to inspire people and sell the vision to your team members. Otherwise, you’re not going to be able to do that to customers and to investors. Can you recruit people? I think that’s your first kind of gut-check moment. If you’re having a tough time inspiring people on what you’re building, then maybe you’re not building the right thing, or maybe your company isn’t as great as you think it is.”
Austin & Justin were fantastic in today’s episode. We also discuss:
- Their $100M Series A, and the intense 3-year journey it took from building while BTC sat at $3,000 to now phones ringing off the hook!
- How they’re working with the regulatory agencies and government
- New products to look forward to
- And a fun rapid-fire round including their dream board member!
Listen on Apple | Spotify | Soundcloud
—
Y Combinator’s Michael Seibel & Dalton Caldwell — Lessons from 5000 Entrepreneurs
Mayor Francis Suarez — Bringing Silicon Valley to Miami!
11:FS Co-Founder Simon Taylor — NFTs, Clubhouse, & The State of Crypto
Mike Dudas, Founder of The Block and VP at Paxos: Crypto, Venmo vs. CashApp, Andrew Yang, and More
Lex Sokolin, ConsenSys CMO & Fintech Futurist — Fintech Trends, Defi, & Digital Collectibles
Noah Kerner, CEO of Acorns — Leveling the Investment Playing Field
NFL Star & Penn Professor Brandon Copeland — Tackling Financial Education Through “Life 101”
Anish Acharya, General Partner at Andreessen Horowitz — Doubling Down on Fintech
Robinhood’s COO, Gretchen Howard — Democratizing Finance, Navigating a Crisis, & Embracing Change
Frank Rotman, Founding Partner at QED Investors — Past, Present, and Future of Fintech!
Crypto Comes to India with Neeraj Khandelwal, Co-Founder of CoinDCX
B2B Venture Investing with Evgenia Plotnikova, Partner at Dawn Capital
Did Fintech Save Minority-Owned Businesses in the PPP? With NYU’s Dr. Sabrina Howell
Fractional Trading 101 with Apex Chief Product Officer Dustin Kirkland
Jackie Reses — Leadership Lessons, Fintech Innovation, & Helping Small Businesses at Square
—
For more Fintech insights, follow us below:
Wharton FinTech
Twitter | Medium | LinkedIn | Facebook | Instagram
Ryan Zauk
—
Ryan Zauk is an MBA Candidate at The Wharton School, where he runs the Wharton FinTech Podcast. He currently works with the US International Development Finance Corp looking at technology impact investments in developing markets. He has a passion for music, media, and all things FinTech.
You can reach him at rzauk@wharton.upenn.edu or on Twitter.
