Zamp's Series A: $14M in 15 Months

0:00Ed has mentioned that you're one of the fastest growing companies in the space. Could you share more on your growth metrics and some milestones that you've hit? Yeah, for sure. I'll start out with exciting operational stuff and then I'll kind of get into specific metrics. We launched 15 months ago now and already, I think, within the last 15 months, and this is from basically building the rocket ship in the air type thing. we're able to now fully complete the sales tax compliance process for any customer across e-commerce SaaS. We have integrations across Shopify, Stripe, Amazon, QuickBooks, BigCommerce, adding more.

0:40From an operational perspective, we do thousands of filings for customers. We're now working with almost 400 customers, and that's just in 15 months. I think year after launch, or I guess like a year since today, we're at almost like 6x revenue. So we're hitting mid seven figures ARR, growing pretty fast. I think for us, the things that are, like I said, that are really working is building the trust with the customer on the organic educational content side, but also using the partner channel. But yeah, I mean, that's kind of how we've grown. It's been pretty exciting.

1:25Welcome to Sorcery. I'm your host, Molly O'Shea. Today, we have Rohit Badangue, founder and CEO of ZAMP. ZAMP is one of the fastest growing sales tax startups in the US. They've just completed a $10 million Series A led by Valor Equity Partners and are ready to grow even faster. A special thank you and shout out to Edlando Purito for the introduction. This is a very fun conversation on the founding of the company and the business behind it all. I hope you enjoy. Hi, Rohit. Thanks for joining us. Hey, Molly. How are you? Thanks for having me. Of course. Yeah, so I think we have some big news on hand.

2:04Congratulations on your recent Series A. I appreciate it. Yeah, it was a relatively quick process for us, but I'm glad that it's kind of behind us. like any founder i'm sure um so who led this round how much was it what was the general process like you mentioned it was quick because it mostly existing investors yeah so it was pretty interesting because we went out to i actually sent out an investor update uh earlier this year and in that update i'd mentioned hey listen we're thinking about potentially raising towards the uh towards the end of summer. And I think we'd shown pretty solid traction from our side in terms of growth and all those things.

2:49And at that time, I think we were just probably like 10 months, 11 months, 12 months from launch, give or take. And we already had a few hundred customers. So seeing the momentum, one of the insider investors, Valor Equity Partners, decided to put forward a term sheet to our group and to our team. And yeah, it was great. They were like, hey, listen, we'll put together a term sheet here. We'll preempt you here. You don't have to go out and fundraise and waste time on that operational process away from the business, things like that, especially because when you're a small team, CEO is still pretty involved and founders are pretty involved in running the day-to-day.

3:27And I was like, well, this sounds pretty great. Started talking to other people that were potentially interested in joining on. Um, so brought on folks like, uh, the founder of Rippling, uh, the other, uh, SVP of Yelp for 12 years, the ex mayor of DC head of ML at Amazon, things, people like that, uh, across the board from like government, general tech consumer, et cetera. Um, raised about, yeah, raised$10 million. That brings our total funding to about$14 million. Uh, and yeah, I mentioned like it was led by a fellow equity partners. So a relatively fast process. It took us about a month or two, give or take.

4:04But I think we were fortunate in the sense that we had an existing investor that was pretty excited about what we were doing. That sounds ideal. And congratulations again. It's also not an ideal fundraising market. I appreciate it. Yeah, it's pretty interesting. I am working with some other founders to help them with their fundraise motions. And it's just been pretty rough out there, not just for consumer brands, but even for SaaS companies that are growing, even AI companies that are growing. It's still pretty tough. Everybody's just being a little bit more conservative in the market right now, both in terms of valuation, but also pulling the trigger on some of these things.

4:44but that's why I think for us, one of the key parts when we brought on people into our first round was bringing on a multi-stage venture group that could potentially invest across multiple rounds if they saw the conviction. So I think I tell this to most founders today is if you can get a multi-stage VC in really early, it could really help your fundraise processes down the line too. So let's talk about that. So you've raised 14 million to date, 10 million off the latest round, you're backed by some pretty awesome existing Silicon Valley funds like Valor, which is interesting. And I'll get to that in a second.

5:21But you also have Day One Ventures. We had Masha on. She's great. Soma Capital and some more. So how did you compose that existing round and how did you get essentially a PE fund in the mix? Yeah. So the Valor equity partners that actually, Valor had invested in us at the seed stage. One of the guys on my board, his name is Avi Ramesh. He's the founder of Misfits Market. Also a friend of mine since Penn. Given his early involvement, we were able to build a relationship with the Valor team pretty early on. Fortunately, the guy who helped lead the deal there, his name is John Shulkin. He was pretty tactically aware of the sales tax problem.

6:08He had done a lot of the filing compliance processes before. So A, I think we were in somewhat of a fortunate position because that partner had specifically touched sales tax, understood the pain points. And then B, we also had a kind of a relationship through a board member whose existing investor is Valor. So we brought them on really early and they have a program where they put in a million dollar check type thing pretty early on into businesses. And then if they're really excited about it, they'll come in and lead their A round. And the idea is that you're kind of growing with this group over time.

6:41And I think for us, the question was, do we want to continue working with Valor in this next phase of growth? And I think that answer was pretty much a no-brainer. It had been super helpful from the beginning. I think unlike a lot of VCs, they have internal ops teams and go-to-market teams to help make intros with portfolio companies, things like that. So can't say enough great things, but yeah, it was largely through existing relationships from people that were involved super early on, plus the fact that they have this unique and special touchpoint to the sales tax process. Right. That's important because I think we need to talk about what you do.

7:22Could you just explain more about Zamp and how you got to Zamp? I know you have a background in PE, in finance. You actually took an entrepreneurial stint early on and then that kind of cultivated into Zamp. So could you explain like how you got to Zamp and what Zamp is? Yeah, I'll give a little bit of context. So I went to school with my co-founder at Penn. I studied kind of computer science, finance, and typically like a lot of Penn, Wharton kids, I went to this investment banking finance side of things. The Wall Street side did everything from private equity, early stage venture, growth equity.

7:59And I think that was great. But I was at a point in my career where I was like, hey, I can either become a VP or principal on the investing side and kind of commit to my career that way, or I could decide to do something else. And for me, I just didn't find as much excitement and value out of being an arm's length away from investing in companies and not being able to drive actual operational value and growth. And so the group at Pareto, especially Ed, he recruited me to join their team at Pareto. And that was kind of my most recent stint before running XAMPP full time. there it's it's like this investment slash incubation vehicle where we build companies and invest in really early stage companies and we largely were investing in like pre-seat to series a businesses and while i was there i was i helped invest across a lot of e-commerce businesses across a lot of these like boring sass businesses compliance tech uh you know tax those kind of things.

8:59And then also focused on building companies and helping companies launch on the side. A lot of the, everybody that I worked with at Pareto, they're all founders. So these are founders that are running multi-billion dollar companies, whether it's like John Oranger is the founder of Shutterstock, you know, Avi is founder of Misfits or other folks, or they're founders of growth stage companies or early stage companies. Well, the reason I bring that up is because one day we get this email from an existing portfolio company. My job was to make sure that the portfolio companies that I was covering got the kind of support that they needed.

9:34It was a differentiator for us because a lot of VCs just don't frankly do that. And so got an email from a portfolio company. They said, hey, we have this huge problem with sales tax. We need to raise more money. And I was like, are you kidding me? You guys just didn't take care of your shit. What are you guys doing? You guys just raised money like six months ago. So, and I remember I forwarded that email to our team and it was like seven, eight of us right on that thread. And almost immediately, everybody from these early stage founders to the late stage founders or these, you know, multi-billion dollar unicorn companies, they were all like, yeah, this is a huge problem for us.

10:11And it was interesting because, you know, at first I was trying to make light of fun of the fact that, oh, sales tax was this issue and I can't believe they didn't figure it out. But I think after talking to everybody on the team, it's a lot more, it's a lot deeper than that. I think what I came to realize is sales tax isn't something that people really talk about, something that just happens to companies. And then they get, they get, you know, rear-ended or hit from the side and they get hit with these like unexpected sales tax bills through audits. And that's kind of what was happening with this company.

10:41And so for me, I was like, okay, you know what? Like, this is obviously a problem for a lot of us internally. Let's see if we can make some money for the business. And so at first, I actually set out to potentially partner with an existing provider, like a legacy solution or a newer solution. I just assumed there were hundreds of startups doing this, right? I mean, typically, whenever you look at a space, you always see like 50 startups doing the same thing. And I was like, okay, you know what? I'm going to help out one of these startups. And we have hundreds of portfolio companies. They all have this problem, or they'll all have this problem at one point.

11:13Let me just have some kind of recurring referral agreement with one of these new sales tax providers and maybe add hundreds of thousands or millions of dollars per year as revenue that we could then use to reinvest in our portfolio companies. So I surveyed the market and realized there were really only two competitors. One of them was Avalara, which had been acquired by Vista Equity, this private equity group, for about$8.4 billion. dollars. And then you had TaxJar, which got acquired by Stripe for close to a billion dollars as well. And with these acquisitions, what had happened was these two businesses were effectively stopped supporting this SMB mid-market.

11:57And we can get into the details why, but for the business, it really made sense. And I was like, okay, well, there's obviously this opportunity to support these businesses, there's not somebody doing it super well right now. So what could we possibly do here? So I started talking to people in the space, started to usually with these acquisitions, there's layoffs, people let go, people want to move jobs, they're not happy, big organizations, things like that. So you start talking to folks at the companies and you realize like TechShare was letting go of a lot of the people on their go-to-market team, engineers were leaving, et cetera.

12:32And so when we were thinking about starting ZAMP, Ed and I were thinking, okay, we obviously don't know sales tax. We know how to fundraise. We know how to think about things from an investing perspective, and we know how to build go-to-market motions. But the sales tax is a very niche domain expertise that impacts a lot of people. Every company has to deal with it. So we really need experts to build this. And so we just, we went out there and we said, hey, the timing makes sense on this, but can we find the right people to do it with? And so we went out there and we started talking to people and ended up building this like sales tax super team pretty quickly.

13:07So we had some of the probably like our first five hires or some of like probably the first 20, 25 hires from either Tax Store or Avalara. So, and that was across like engineering, compliance, tax, sales. So you kind of had the gamut of things. And I think our team has just kind of expanded from there, especially within the sales tax pedigree. So So that's kind of how we started it. It wasn't this like revelation that I had waking up one day where it was like, oh, sales tax is this like, you know, crazy problem. It was just, we identified a problem. We realized a massive opportunity here. And we were like, wait, let's, let's go out and execute on this because we know that we can win.

13:46And then over time, I, I kind of, I was the one leading our fundraise calls. I was the one, you know, building operations, building the team and things like that. So I ended up just transitioning to a full-time as CEO. That's incredible. That's a great story. Yeah. Yeah. Yeah. If you asked me three, you know, maybe I think it was two years of being incorporated today. If you'd asked me like two and a half years ago that, hey, do you think you're going to be a CEO or a founder in six months? I'd probably say no. But now like I look back and I tell everybody, I'm like, hey, if there's one thing that you can do, you should just start a company or start a business on the side.

14:26You'll just learn so much. I kind of just fell into it, just like how so many VCs fall into VC. Yeah, I don't know about the VC falling into VC thing, but yeah, that's an interesting one. Hey, we'll get right back to the conversation after a word from our sponsor. Sorcery is brought to you by Archer. I'm genuinely amazed at what Archer has been able to accomplish. Archer's goal is to transform urban travel, replacing 60 to 90 minute car commutes with estimated 10 to 20 minute electric air taxi flights. They are safe, sustainable, low noise and cost competitive with ground transportation. Archer's Midnight is a piloted four passenger aircraft designed to perform rapid back to back flights with minimal charge time between flights.

15:12Learn more about how Archer is set to open up a new world of opportunity for passengers by providing safe and efficient access to people, places, and events across the communities they live. Visit Archer.com.

15:27Hey, everyone. If you're enjoying Sorcery, I'm excited to tell you about a new show called This Won't Last. The show includes Logan Bartlett of Redpoint, Keith Raboy at Kostla, Kevin Ryan at AlleyCorp, and Zach Weinberg, a biotech founder and investor. They're not here to promote a portfolio company or share marketing blurbs. If you were curious about what VCs talk about in group chats when the cameras are normally gone, they're releasing footage for a short time. A link is in the description. Listen wherever you get your podcasts. Yeah, it's a hard job. It was a joke. It's a hard job. People like to say that it's easy somehow.

16:04I don't know how. Okay, so I want to break that down a little bit further. their sales tax? For people that aren't familiar, how big of a problem is this? If there is a problem, there is a problem. And what portion of companies have to deal with it? What industries are they in? How much time does it take? Et cetera, et cetera. Yeah. That's a great question. I think number one, sales tax impacts every company that is running a transaction at the most basic level. It's the tax that's applied at the transaction level. So you buy something, there is a potential for sales tax to be applied. And that's pretty much every single business in the world.

16:48So from a macro perspective, who does sales tax apply to? It's every business that's selling into the United States specifically. And they have other taxes like VAT, international taxes, but we can just focus on the US side. The reason that this has become a little bit of a stab in the back for a lot of businesses today is because in 2018, there is this Wayfair versus South Dakota ruling that happened. And are you familiar with Wayfair, the furniture company? Yeah. So think about this. Before 2018, e-commerce and SaaS companies, they did not have to charge their customer sales tax. So what was happening was you'd go into a furniture store, you'd go to Artvan or something, you'd find some furniture for$1 ,000 and with tax, maybe it's like$1 ,050,$1 ,100 plus shipping.

17:36Maybe you're paying$1 ,300,$1 ,400 for this couch. And now you're going to Wayfair. They're giving you free delivery. There's no taxes. Now you're just paying $1 ,000 for this couch. So now what's happening is the states are starting to lose out on this tax revenue as e-commerce continues to scale. And so the reason this has become a problem is because in 2018, the government said, hey, listen, states are really upset. South Dakota specifically, was really upset that Wayfair was basically pushing them to lose out on a lot of this tax revenue. And they were taking money away. States government just generally doesn't like it when you take money away from them.

18:18They like it when you add money to the system. And so South Dakota sued Wayfair. This thing went to the Supreme Court. And ultimately, the federal government decided, hey, we're going to let the states decide whether to tax digital transactions. So this is like e-commerce businesses, these marketplace businesses, these SaaS companies. But nobody made this... It was not on the front page of the Wall Street Journal. It wasn't like... It's not in like a one-to-one how to start a company guide. This is just something that kind of happened a little bit on the back end. I mean, I interviewed somebody that worked at Wayfair during that time, had no idea this happened.

18:56So when you look at that, that's in 2018, that impact started affecting every single SaaS and e-commerce business. And so now when you think about it, just within Shopify, there's millions of merchants. On Stripe, there's hundreds of thousands of merchants. And you look at it across every single platform, you're looking at about like, I don't know, 10, 15 million merchants just in the US that now have to deal with sales tax and never had to deal with it before. And these laws, they're just kind of springing up. And these laws are also constantly changing. The rates are changing, the rules are changing, but nobody's really telling anybody.

19:30So how does a business actually deal with this problem? And that's what solutions like ZAMP. But I think generally it's hard for somebody to do this internally because of the fact that it's one of those things that even with a software provider, it could, you know, these legacy software providers, it could take you 20, 40, 50 hours a month just to manage. And people, you know, people have lean teams at the SMB mid market level, you just don't have the overhead to kind of manage that full time. It's just a cost center. So a lot of folks, what they're looking to do is they want to just outsource this entire sales tax function.

20:08And so when you ask like, hey, like who does this really impact? It impacts every single business in the United States. But more specifically, since 2018, it's really impacted these e-commerce and SaaS companies at the SME mid market, because they just don't have the resources in house to manage it. Because even if they have a controller, accounting manager, or whoever else, they're spending time doing hundreds of other things. This just doesn't bubble up to the top of the stack. But if you do it wrong, you could be paying like millions out of pocket. Right. So is that then the portion that you're initially going after?

20:38How are you strategizing out your go-to-market if the market's so big? Yeah. For us, we're staying super focused on the e-commerce and SaaS companies, e-commerce, level, it's the folks that we support Shopify merchants, BigCommerce merchants. We're starting to add integrations to Magento. We support Stripe customers, things like that. So largely focusing on a select group of platforms and just going deep within these specific platforms, because a lot of these platforms just have a pretty wide base of merchants. And the reason that we're going after e-commerce and SaaS specifically is because because that's where the pain point is the highest right now.

21:26That said, next year or the year after, we could potentially see ourselves getting into retail. These are people that have brick and mortar stores, things like that. Will we ever touch specific other industries? We probably won't ever touch like telecom, oil and gas, things like that. It's just not our sweet spot industrial companies. But yeah, the pain point is just the highest in the e-commerce segment, but specifically within these like one to$200 million revenue businesses. Got it. Are there any names you can mention? Yeah. I mean, a few of the folks that we work with today, on the e-commerce side, there's folks like Cult Gaia, which apparently is popping off according to TikTok.

22:07We work with Sanzo. They have beautiful stores. Beautiful stores. Oh, really? Yeah. I went to one when we were in the south of France and I was like, oh, look, that's our customer. I told my fiance and she was like, Oh, that brand is huge. So for, for the, for what it's worth, I don't have Tik TOK or Instagram. So I don't really know when brands are doing well. I just know them kind of as, Oh, this, these are some of these, this is a group that we work with. Well, you're missing out. That's a beautiful brand and they make really good clothes. Anyways. Yeah. So we work with, we work with, uh, called Gaia.

22:39We work with this, uh, everyday dose Sanzo, um, Glamnetic, I'd say like pretty much all across the e-commerce that's on the e-commerce side. And then on the SaaS side, there's groups like ProBuild Software, there's Puzzle, and a few other folks on the SaaS side. So I think now we're slowly starting to make inroads on that side too, because we just recently launched our Stripe integration. And so slowly, I think we'll start to see a little bit of a balance across the two. I know you're quite active on LinkedIn. You go viral a lot. You have a really good strategy there. So I guess one, what is your go-to-market strategy in acquiring all these different companies?

23:22Yeah, for us, it's largely, it's really two things. The first is inbound, the other one's partnerships. And the reason we take that approach is because A, we want to be able to build trust with the customer over time. And within this specific space, I think that's really important. it. I think if you take more of a transactional approach and you don't really build that trust, then if there's a potential mishap or things happen, which human error happens, then there's more of a transactional relationship and there's less of an ability to sort through it, I'd say. And the reason the content really helps is because it helps build that relationship of being able to build trust with the end user, whether it's a customer, whether it's a partner, whether it's just people in the space.

24:08I think when there's individuals, founders, executives, just talking knowledgeably about the space that they're in, that helps long-term trust. But yeah, for us, it's largely partnering with bookkeeping partners, accounting partners, platform partners like Stripe, Zenni, folks like that. And then on the inbound side, just focusing on content, giving people... Like I said, this whole sales tax thing that came up since 2018, people just don't know enough. And a lot of times people are just looking for a guide or solutions or ways to go about things independently. And perhaps like, I don't always agree with that because I think it's really hard for individuals to set up things themselves, but if they do want to, we want to be able to provide the right kind of educational material for them.

24:53So that's the approach we take. I think even on the inbound side, it's largely educational focused. And even on the partnership side, it's leaning on people who have built that trust with that customer. and people that we've built trust with on a one-on-one basis. To break down the product itself, could you just share what the onboarding process is, what you deliver afterwards and what they're buying? The way that we engage with customers though, first off is A, we don't take on every customer, which makes the rest of the stuff easier. I think I see a lot of businesses and founders, they just take on customers and they're like, okay, we'll figure it out, even though it's not in my ICP.

25:29And I think our team has done a really good job of making sure that we qualify our customers if we can't support them. Let's say we don't have this integration. We'll tell them straight up, hey, we don't have this integration. This is our path. This is what we can do. The reason I bring that up is because being transparent with the customers upfront really helps the onboarding process and it really helps the customer experience downstream. And from an onboarding perspective, because the sales team's already kind of laid out the process, this onboarding process typically takes an hour, two hours tops.