How ClearTax won investors like PayPal founder, Gmail creator, and WhatsApp biz head

ClearTax CEO and co-founder Archit Gupta was earlier working with San Francisco startup Data Domain, which got acquired by EMC for US$2.4 billion. Photo credit: Tech In Asia.

The 10 angel investors of Indian startup ClearTax are straight out of a Silicon Valley who’s who.

PayPal co-founder Max Levchin, WhatsApp business head Neeraj Arora, AngelList founder Naval Ravikant, Gmail lead developer Paul Buchheit, Facebook and Uber investor Scott Banister, Airbnb, Pinterest, and Square investor Elad Gil … the list goes on.

It all began when the online income tax returns filing enabler became the first India-focused startup to get into Silicon Valley accelerator Y Combinator. The ClearTax co-founder and CEO, Archit Gupta, then turned to YC alumni for fund-raising, and one thing led to another. “They told me whom to meet and also whom not to meet,” says Archit.

It was a YC alumnus, Sumon Sadhu – a Brit of Indian origin – who syndicated the ClearTax deal on AngelList. Sumon had invested in YC companies Abacus, Zesty, and Urx before ClearTax. “He told me – you need to pitch your company better,” recalls Archit. “You need to explain this, this, and this about the Indian economy first before you talk about your startup. That’s when I realized from an outsider’s perspective what I need to say to make sure they understand the problem we are solving.”

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DIY tax filing for India’s millennials

Photo credit: GSCSNJ.

So now the ClearTax pitch begins by explaining that India’s an emerging economy where the median age is 27. “It requires patience to build a company in our economy,” says Archit. “But if you have patience – which we have – and a product focus, you can get to a whole new place. Sixty percent of our consumers are millennials, who are using our DIY product. People come to our site, upload their Form 16 on PDFs, and 10 seconds later, there is a tax return done for them.”

Form 16 is an employer’s certificate for TDS (tax deducted at source). The problem in India is lack of standardization. Every company has its own variant of Form 16. “If you print something from Wipro, it will look different from the Infosys one,” points out Archit, referring to the leading IT services firms which employ hundreds of thousands of people.

ClearTax prides itself on being able to read 400 different versions of Form 16, automatically. “We had to have real strong machine learning technology to be able to read all of that and not make mistakes with people’s taxes,” explains Archit. “We have algorithms which detect when there’s an error somewhere. And we compare our calculations with the employer’s calculations to make sure you don’t get a tax notice.”

The DIY tax filing on ClearTax is free, but there’s also an expert-assisted paid plan for those who need it. Over 10,000 CAs are on the platform, which one million Indian tax-payers used in the last financial year, more than thrice the number from the previous year. And Archit expects the user base to quadruple to 4 million in FY 2016-17.

Businesses too have started using the platform. Over 5,000 of them are ClearTax clients.

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