AI-powered automation platform disrupts $544B+ accounting services market
Working extensively with founders at the seed stage over the last decade has helped me to develop a solid understanding of the major challenges faced on the ‘zero to one’ journey. Whether it’s designing a go-to-market strategy, finding a product-market fit, thinking through customer acquisition channels, or fundraising, I am passionate about helping visionary entrepreneurs redefine massive, inefficient markets from day zero.
One such market is accounting software. The average entrepreneur spends 68% of their time on back-office operations, leaving only 32% available for strategy and delivering on their long-term performance goals. Yet, designing the right products to automate bookkeeping at scale across industries and geographies is extremely challenging, as the accounting process necessitates a deep understanding the minute nuances of a company’s books.
That’s why we at Phystech Ventures are thrilled to (re-)invest in Osome, an accounting and compliance platform for SMEs, in a $16M Series A investment round together with Peng T. Ong, co-founder and managing partner at Monk’s Hill Ventures, and AltaIR Capital among others. The company’s platform uses a blend of AI and operational excellence to automate administrative, accounting, payroll, and tax-related work.
Osome was started in 2017 in Singapore by three-time entrepreneurs Victor Lysenko and Konstantin Lange to address the exact problems they’ve struggled with while running their prior businesses. Turning a seamless SME-focused back-office service into reality was their way to help fellow entrepreneurs overcome the bane of small businesses: tedious, time-consuming accounting work that eats up valuable company time and resources. We were drawn to the company for their personal exposure to the problem and genuine empathy for their customers, in addition to 4 other central factors:
1. Their big, bold vision of the future, in which small business owners can fully rely on technology to streamline and handle their operational routine.
2. Their contrarian insights that flew in the face of conventional wisdom in the field. From the early days of Osome, Victor and his team deeply believed that AI would enhance rather than replace humans in certain industries. At a time when the majority of industry players believed that AI-powered tools could completely replace the accountant, given the high rate of repetitive manual workflow, he was a strong proponent of SaaS with a human-in-the-loop model — an insight that has been key to Osome’s recent success.
3. Their great leadership team with strong domain expertise in tech and operations that comes as a result of multiple prior experiences of running tech-enabled businesses.
4. Their unique go-to-market strategy. The company built loyalty among early adopters in Singapore by providing them with company incorporation and administrative services, and scaled up from there. Singapore itself was the perfect roll out market, since it has no legacy infrastructure, simple business rules, a simple tax system, and high contribution of SMBs to its GDP.
From a business performance perspective, Osome had a breakout COVID-19 year, doubling the prior year’s ARR to $9.5M, scaling to two new geographies (Hong Kong and the UK), servicing over 6,000 happy customers, and entering new market verticals. As the world entered lockdown early last year, fundraising proved to be a bumpy ride, but Victor and his team never settled, never gave up. They met their fundraising challenges with grit, determination, and perseverance, emerging from 2020 leaner, more aligned as a leadership team, and more connected with their customers globally. Seeing them grinding through these challenging circumstances made me incredibly proud to be associated with them.
Osome’s next phase of development coincides with a broader transformation of the bookkeeping industry — one that the company anticipated, in many ways. The COVID-19 pandemic has accelerated the mass migration of traditionally brick-and-mortar businesses online, creating huge disruptions around tech-enabled infrastructure for SMBs and rapidly intensifying the growth of the digitized accounting industry. We expect that within next 5 years, this rapid digitalization will transform accounting from a stand-alone product into a full SaaS offering integrated with banks, e-commerce platforms and payment processing systems with real-time data available to entrepreneurs and third parties. As a result, we anticipate that several key players will emerge in markets with a disproportionately high SMB contribution, and further growth will continue through mergers and acquisitions. We believe that Osome has an excellent shot at being one of those players, and are excited to be by their side along the way.