The following interview is a conversation we had with Pujun Bhatnagar, CEO & Co-Founder of Kintsugi, on our podcast Category Visionaries. You can view the full episode here: $8.2 Million Raised to Build the Future of Sales Tax Automation
Brett
Hi, everyone, and welcome back to Category Visionaries. Today we’re speaking with Pujun Bhatnagar, CEO and Co-Founder of Kintsugi, a sales tax automation platform that’s raised 8.2 million in funding. Pujun, how are you doing?
Pujun Bhatnagar
Well, thank you for having me.
Brett
No problem. Super excited for our conversation and let’s go ahead and jump right in and talk to us about what you’re building.
Pujun Bhatnagar
Today on a 30,000ft view. What we do is we put your sales tax on autopilot. What that means is we will plug it into your ERP platform, whether that’s Shopify, stripe, charge, be quickbooks online, whatever it is, and we will tell you where you have sales tax exposure and how much sales tax liability you have from there on out. We will do your registrations when the time is right and you will always be in power. But we’ll make sure that your sales tax compliant by registering you with different jurisdictions. There are 48 different jurisdictions in the US, just FYI. Then we will programmatically make sure that you’re collecting the right sales tax amount at the time of invoicing.
Pujun Bhatnagar
We’ll remit it and file your sales tax reports to these jurisdictions on a monthly, quarterly, or a semiannual basis, or even annual basis, depending on the size of your business, and really handle everything related to sales tax, whether that sales tax exemption certificates or even dealing with your back sales tax liabilities, in case you’re thinking of selling your business, because that’s the number one place where, when you’re at the time of selling your business, where large companies might ding you on valuation because you’re not sales tax compliant.
Brett
This is probably a dumb question, but why are there only 48 jurisdictions and not 50?
Pujun Bhatnagar
So this is all of the sales tax landscape has gone through a massive shift, especially in the last six years. So prior to 2018. The way to think about sales tax was charged based on where you were headquartered. So a lot of companies were headquartered in California, and hence, like a lot of software companies, they didn’t have to worry about like sales tax. Everything changed in this landmark ruling case, which was South Dakota versus Wayfair, where now it does not depend where you’re headquartered, but it, your sales tax liability is dependent on who is buying your product. So South Dakota essentially was pissed off at Wayfair being like, hey, you’re using our infrastructure. And they took it to the Supreme Court.
Pujun Bhatnagar
And as a result, all d, two c businesses, all e commerce businesses, and even software businesses, both B2B and b, two C SaaS companies got affected by this ruling change. And this case ruling came out in November of 2018. By November of 20, 1948, jurisdictions including DC and Puerto Rico had passed regulations around whether or not people should collect sales tax and how people should be thinking about sales tax, especially businesses who are operating in these states. And for the remainder of the states or jurisdictions, as I should say, it’s really a political angle where they’re trying to push these laws. I suspect that in the next two years, it’s gonna be all 50 states and all 52 jurisdictions, which includes DC and Puerto Rico, as I was mentioning.
Pujun Bhatnagar
And that is because sales tax has now become the number one driver of source of revenue for local governments.
Brett
Interesting. I knew a little bit about that backstory, but I didn’t know the whole thing. That’s super fascinating.
Pujun Bhatnagar
And can I add a little bit more tidbit here?
Brett
Yes, of course.
Pujun Bhatnagar
Yeah. So sales tax is also interesting in the sense that without going into the us politics, really, sales tax has now become the number one driver of revenue. Prior in like 1990s and early two thousands, it was really property tax that was funding a lot of local jurisdiction projects. But what has happened is as the political landscape has developed in the US, all these local jurisdictions are very scared of increasing property taxes. So as a result, they are now turning to sales tax and especially doubling down after this like Supreme Court ruling to essentially fund their projects. Because sales tax in the US is defined on a city, county and state level. So it’s not something that you’re dealing with.
Pujun Bhatnagar
The IR’s, it’s actually like this is one of the key levers where now nearly 60% of local governments, the number one source of revenue, has become sales tax. And it is due to interesting political ramifications that our country is going through.
Brett
This is somewhat unrelated, I think, but whats the deal in San Francisco, I see a lot of chatter about that San Francisco passed some local tax and thats why a lot of the big payments companies were leaving. Do I have that right?
Pujun Bhatnagar
I would say that there are a couple of different kinds of taxes, but San Francisco right now, as a city, does not charge sales tax on software companies. It does have interesting ramifications on income taxes and payroll taxes. And I think that is what you’re alluding to. But for sales tax, I think people in SF are safe for now.
Brett
I thought it was something related to transactions, but I’ll have to look up. I’m not totally sure what that was, but it was something else, not income related.
Pujun Bhatnagar
Okay, got it.
Brett
Now let’s go back to September 2021, the founding of the company. So what happened there with this background? Did you just observe that these legal cases were happening, observe that the laws were changing and say, that’s our opportunity, we’re going to build a. What was it about this opportunity that made you say, yes, that’s it, I’m gonna go build a company to solve this problem.
Pujun Bhatnagar
So really, like, I think at the time I was at Facebook before and really I wanted to shoot for the fences rather than be comfortable. And I come from a taxation background. My dad built a career in compliance and taxation and really worked in the space for 37 years before retiring. And ever since this case was taken to Supreme Court, he was like, Hujin, you should really like, keep an eye out on this, because if South Dakota wins, this could have, quote unquote, an earth shattering effect on how sales tax is handled today. And guess what? That is exactly what happened.
Pujun Bhatnagar
So in September 2021, were coming out of COVID and there was also already talks that Avalara, the 800 pound gorilla in the space, was not doing super hot because honestly, they were kind of caught with their pants down when this regulation changed. And as a result, people were talking that Vista Equity is going to take them private, which ended up happening in 2022. So there was a massive hole in the market. This is when I was like, okay, I’m a data guy. I’ve already worked at Facebook for five plus years. I know how to build these systems. My unique unlock was I have a unique advantage because my dad has worked in the space, plus my technical ability of building these large systems. So I decided to marry them together and build a company in this space.
Brett
Was that a really hard decision to leave Facebook? I think there’s a lot of people who’d be very happy with that type of career, and you stick around for 20 years and make a lot of money. It’s very stable. Was that hard to leave that behind and jump into the land of startups?
Pujun Bhatnagar
Personally, I would say no. And I know that’s an odd answer, but I’m also. I need to say this, and I’m not saying this as a, this is not a feather in my cap, but I feel like I’m just built differently. A lot of people look at companies like Facebook and Apple and Google, and there’s nothing wrong with these companies and wanting to work there. But for me, I just felt that I was not meeting my potential by staying at these companies. Don’t get me wrong, working at these companies is usually awarding and I never look down upon anyone who chooses to do that. But for me, I just felt that I finished my undergraduate early, I was a graduate student at Stanford. En route to getting my PhD, I stopped after my masters and joined Facebook whole time.
Pujun Bhatnagar
But really I was starting to get to a point where I was pretty decent at my job. But that allowed me to think, and I really worried about the opportunity cost of if I were not to take this step, would I regret it if I was on my deathbed? So you know how I’m sort of like this? I’m a weird individual where I think I have a lot of potential in me and maybe that’s maybe like, time would humble me. But also I just add this massive fear that if I do not apply myself, all this potential is going to waste. Which made it quite honestly a very easy choice to leave because Facebook is not going anywhere. All these, like, FAANG companies are not going anywhere. If I were to fail, I can always come back.
Pujun Bhatnagar
But what kept me up at night is if I do not take the plunge, I will regret it.
Brett
I hear a lot of founders talk about that and reducing or minimizing regret. So that makes perfect sense to me. Let’s talk a bit more about the early days of the company. What the first, let’s say, three to six months look like. I think.
Pujun Bhatnagar
I want to be honest with you. And it was a lot of chaos in the best way possible. So at the time, like, I quit my job at Facebook, I moved to Massachusetts to be at MIT, and that’s where I met my Co-Founder, Barkin. Really, it was all about getting in front of as many business owners as possible and testing hypothesis. There are different ways of tackling any given problem. You should always be married to a problem that you’re trying to solve, but you should not be married to the solution that you come up with to solve that particular problem. So I think it was a lot of customer discovery. It was a lot of going around, understanding and segmenting. Who is our user base? What are they currently using? Why are they frustrated? Why are they happy?
Pujun Bhatnagar
Where is that blank space in the market where you can build a billion dollar, if not a trillion dollar company? And really teasing that piece apart? Honestly, I think while I could do a better job, one thing that I did from the get go was we had this massive spreadsheet of 15 adjacent ideas that we wanted to build in. And we just did, I think, 300 to 500 interviews to essentially like to figure out what we wanted to build. And then our third Co-Founder, who was actually a mentor of the company, Jeff Gibson, he’s a second time Founder. He later became a friend of the company as well.
Pujun Bhatnagar
And he really like what this conversation that started as a customer discovery and he becoming a friend, he really was really gracious with his time and that allowed us to figure out where are the holes in the market. So he had spearheaded the data platforms, Atlassian. And Atlassian had done a massive integration with Avalara and then for his previous startup, monetize. Now, he had talked to all the competitors in the space. So by him being very gracious with his time and resources and his insights and us applying a very methodical approach, were able to figure out how we want to position Kintsugi. I’m happy to talk more about that, if that’s helpful.
Brett
Yeah, let’s dive deeper into that.
Pujun Bhatnagar
I think the biggest understanding that we found, Washinghouse, like all the players in the market, Avalara, it was a big company, but not necessarily a good company. As I was saying, they were kind of caught with their pans down with the changing regulations, because if you have a sales tax engine that is powered by engineering, you can change the code and you can very quickly iterate to catch up with the different rules that are coming out. But if you don’t have an engineering product and some of the other competition in the space, they try to build it like an agency, where they programmatically pull in the data and then they ship the data out to India, Vietnam, Philippines. And while there’s nothing wrong with that, it’s very much a services kind of business.
Pujun Bhatnagar
We decided to basically like flip the script and flip the table on it on the problem space and say, we are going to build a sales tax engine that is empowered by AI, where with three clicks and three minutes, we’ll be able to show your sales tax liability and exposure versus our other competitors in the space. They take two to three weeks to just onboard a customer. And that was, I think this was the hard work of park and Jeff and I coming together and really figuring things out and really also understanding how we’ll approach the customers.
Pujun Bhatnagar
So we are the only software in the space which actually has a get started button on the website and where people can actually, seven clicks or three minutes, they can get onboarded and see their sales tax liability within ten minutes without talking to a sales personnel. And that’s a really streamlined process of getting the person onboarded and providing them value even without collecting their credit. Cardinal there’s no onboarding fee, nothing associated. And then we get into this fear of, ok, how do we convert them into paid clients and whatnot? But really we truly believe in providing value to the customer first.
Brett
Is that how you’re acquiring most of your customers, then? Are they just coming in through that and booking directly or what’s the acquisition engine look like?
Pujun Bhatnagar
I think the acquisition engine is a lot of it is like the product led growth. Plus, I think given that we are trying to approach this problem differently, we have done a lot of hard work on improving the website, providing educational material about sales tax, and really creating value for the end businesses before trying to extract any acv or any amount of money from them. Because one of the other things that we found was a lot of these businesses who were using Shopify and stripe, they would turn on sales tax collection and then they would erroneously think that these different e commerce or ERP platforms were filing sales tax for them. But all that was happening in the background was they were just collecting sales tax and they were really sitting on a massive liability. I’ll give you a concrete example, Brett.
Pujun Bhatnagar
For e commerce, more often than not the margins are so super thin that really if you want to make an exit, that’s the only way to get a large payout. And typically that payout happens when you get a five to six x multiple on your current revenue. But the other thing that we found out was when these e commerce businesses were trying to get sold to larger players, sales tax would come up time and time again. And this was the number one way where larger companies would basically reduce the amount that they were willing to pay to these startups to acquire them.
Brett
That makes sense. What about building trust with users? So when it comes to things like tax filings, that’s very scary to get that wrong. So I’m sure it requires a very high level of trust to really use the platform. And trust is something that startups tend to lack because they’re new, they’re not established. What have you done to really build that trust in the market?
Pujun Bhatnagar
So I think a couple of things and I want to say that like trust is something that is not just built and forgotten, it is something just like success. It’s always rented and you have to prove that you deserve people trust day in, day out. With that ethos in mind, what we do is everything that we show on the website can be exported by a click of a button into a CSV that any CPA can audit. In addition to it, we offer what is called the Kintsugi guarantee for all our premium clients that if by any chance, and knock on with this hasn’t happened yet, if we show the wrong value, then we cover sales tax penalties up to the contract value that the customer is paying us. And in addition to it, we also partner with audit firms.
Pujun Bhatnagar
And this is a robust program that we are currently very actively investing on. Where if larger clients want to buy sales tax audit insurance, we can also provide that for an additional fee. And really, like Brett, while other companies, they withdraw money from your bank account three weeks prior to making your sales tax payments. We actually, instead, we believe in transparency through and through. So we are soc two type two compliant, and we show each and every transaction on a jurisdiction level how much we paid to each jurisdiction and it comes out of their direct bank account. So we do not sit on that pile of cash, which could be hundreds of thousands of dollars. And these are some of the little decisions that we have taken to make sure that transparency is like front and center of Kintsugi.
Pujun Bhatnagar
But that being said, I think this journey is just getting started. So we are constantly looking ways to improve and refine our offerings, which is why I think we have made heavy investments in R and D. Meanwhile, other companies run like agencies. We spend, I think, 65% to 70% in R and DA to be able to build these features where if somebody wants to audit our reports, they are able to programmatically do that. Please.
Brett
What does the company name mean?
Pujun Bhatnagar
Yeah, I think there are two different lenses about which how you can look at the company name. One is really the problem that we are trying to solve. I think sales tax compliance currently in its current shape is broken. And we are the company who are bringing these different pieces together and using our integrations and our platform, we are joining them with gold. And that’s why it’s called Kintsugi, the japanese art of repairing pottery through gold. This is because a lot of like other sales tax compliance providers, what they do is they are only limited to the Shopify ecosystem or the stripe ecosystem. And therefore they lack a 360 view of a business’s revenue. And by first principle, they’re not able to compute the right amount of sales tax. Right, because businesses oftentimes have omni channel sales.
Pujun Bhatnagar
So they might be doing wholesale sales, they might be selling on Shopify, they might be selling on different avenues as well. So bringing that information together is what? And giving a comprehensive view of the sales tax liability. On a personal level, I must confess, building this company was perhaps the hardest thing that I have done in my life. And I don’t think a lot of founders talk about how lonely and how hard the journey is. Where at a time I felt, especially for the first two years when I was working on this, and it was just the founders where I was broken and I had to put pieces of my life together in order to bring this company into its current form.
Pujun Bhatnagar
And so it’s an homage to the struggle that I have gone through to remind myself of, yes, times are really good right now, but let’s not forget the struggles. And when, Pujan, you personally had to put these pieces of your life together and make something that’s more precious than its arts.
Brett
I think there’s a lot of founders that can also relate to that. And you’re right, it is a very lonely journey with lots of ups and lots of downs. Now, I want to switch gears and talk a little bit about fundraising as we move to wrap up this interview. I know that you’ve had a crazy last couple of months, so talk to us about fundraising and everything that you’ve learned throughout this journey so far.
Pujun Bhatnagar
I think really, like look just like anything, there are good VC’s out there are bad VC’s out there. I think ultimately raising funds on a pre seed level boils down to three things. The size of the market product, market fit, or how are you attacking? How is your solution unique to other solutions out there and the Founder market fit. So if you view the issue of fundraising through these lenses and have strong answers for that, I think you’d be able to fundraise. That being said, I think when were first fundraising, SVB collapsed. And that was an experience that I don’t wish on my worst enemies. But I think when you think about fundraising, you should always keep four to six months budgeted where at least one of the co-founders would be devoting 100% of their time to it.
Pujun Bhatnagar
And by the end of it you would be successful. But you just have to be patient. For us, our fundraising journey was as follows. I started working on the startup in September 2021. We incorporated the company December 2022. We raised pre seeds September of 2023, where in the two years leading to the pre seed fundraising, I was doing sales tax by hand for ten different companies just so that I could understand really the ins and outs of what needed to be built. We started writing really our first line of scalable code after pre seed fundraising. Before that was all MVP. And then we had the product. And because we had taken the time to really uniquely understand the problem space and what needed to be built.
Pujun Bhatnagar
I’m happy to share with you that ever since were publicly available, we have been doubling in revenue month over month. So we raised our series a back in March April. And very recently we have more cash injection coming in at two x the valuation of what we raised our Series A at. And that is just a testament to you. Look from the outside and you feel like Kintsugi is on an exponential growth. But really people do not realize how much hard work it takes to really understand the market, really figure out what is your unique way of coming in and really hammering down on engineering and product. So a massive shout out to both Jeff, my Co-Founder, and Barkin, my other Co-Founder. And now we are seeing the fruits of our labor.
Brett
If we think ahead to the next twelve months, what’s your top priority? Or what would you say are the top priorities?
Pujun Bhatnagar
I think a lot of the things that we have done so far, so went from a team of three to a team of 47 in ten months. I think we are doubling down on hiring because there is product market fit. Clearly we have quadrupled in revenue ever since we raised our Series A as well. So clearly we are growing. I think we are just focused on growth and really getting and building that team of Avengers who can take this product to the next level. That means hiring the best kick ass salespeople, hiring kick ass people who can, who know how to set up operations at scale, doing customer support. And really, I think the next twelve months we are focused on is how do we ten x our revenue, if not more?
Brett
Final question for you. Let’s zoom out three to five years into the future, what’s the big picture vision look like?
Pujun Bhatnagar
I think the big picture vision looks like is we are in three to five years. I want Kintsugi to be a unicorn and more. And I want the people who are involved in this journey of building Kintsugi as something that they are proud of their legacy. And also, really, I want to emphasize this, every person that has chosen to join Kintsugi, I will always be eternally thankful from the bottom of my heart. And really, like, I think building a startup, having any kind of career, whether you’re an engineer, whether you’re in operations, whether you’re in customer support, you know, there are times when you’re wronged. And I want to build a culture where by working at Kintsugi, people are bringing pieces of them together and going on this healing journey and building something that is bigger than the sum of their parts.
Brett
Amazing. I love the vision. And we do have another podcast called Unicorn Builders that interviews founders who built billion dollar companies. So whenever you’re ready to come on that show and once you’ve hit that milestone, make sure to get in touch. We’d love to have you on there as well.
Pujun Bhatnagar
Sounds good. I appreciate you making the time for me.
Brett
No problem, man. Thank you so much. This has been a lot of fun. I’ve really enjoyed the conversation. I know it’s going to be a big hit with our audience. Just to wrap up, we have one final question. If founders listening in want to follow along with you and your journey to build this company into a unicorn, where do we send them? Where should they go?
Pujun Bhatnagar
They can just go to just kaikinsugi.com, that is trykintsugi.com. And if you go to that URL, forward slash. Brett, if they are founders themselves and they want to try our product, they’ll be getting 25% off forever. Deal.
Brett
Amazing. That’s always appreciated. Thank you again for taking the time.
Pujun Bhatnagar
Thank you. All right.
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