DataSnipper, a software startup that automates critical tasks for accountants and auditors, has raised an additional $100 million in venture capital in a deal that values the six-year-old company at $1 billion.
The round, which gives DataSnipper a coveted unicorn’s horn for reaching the milestone valuation, says a lot not just about the current appeal of any investment with a whiff of artificial intelligence about it. It’s also a harbinger of the likely impact AI will have on accounting, and on professional services more generally.
Index Ventures is leading the latest Series B funding round. Insight Partners previously invested in the company in September 2022. Before the 2022 round, DataSnipper had been funding its growth from its own sales. The company says it’s profitable, a rarity for AI-oriented software startups.
DataSnipper’s products help accountants extract data from databases and documents of all kinds, including receipts and invoices, and then link specific data to cells in Excel spreadsheets and other software that accountants use to prepare auditing work papers and financial statements. This is how accountants can essentially show there is evidence for the numbers in their spreadsheets.
The company already uses AI to do some of this data extraction and to automate some of accounting tasks, such as trying to reconcile numbers in financial accounts, with the sales receipts from cash registers. But DataSnipper is also launching an AI-based, chatbot-like assistant that will help clients ask questions in natural language, for instance about where in documents certain evidence can be found.
There’s an acute shortage of trained accountants, especially for audit work. The accounting profession has been hemorrhaging experienced professionals as baby boomers retire—in fact, it is estimated that three-quarters of certified public accountants (CPAs) are currently at or near retirement age. And too few younger people are joining it. Just 67,000 people took the CPA exam in 2022, the last year for which figures have been published, which is 7,000 fewer than the American Institute of CPAs forecast and the lowest number since the current version of the exam launched in 2006.
This is a problem not just for accounting firms. Auditors are essential to the modern economy. They verify financial statements, check internal controls, look out for fraud, and certify that supply chains comply with a dizzying array of regulations and rules for fair trade and fair labor practices.
The situation is so dire that many smaller accounting firms have pulled back from audit work. Meanwhile, some U.S. states, such as Minnesota, are considering loosening qualification training requirements for certified public accountants in an effort to allow more people to qualify faster.
In this environment, tools like DataSnipper are seen by accounting firms as a way to retain the staff they do have, sparing them from some of the time-consuming and tedious tasks they must perform that contribute to accountants burning out.
The same effect is likely to play out in many other professions, according to economists, who note that for decades, the gap between the hours worked by nonprofessional workers and professional workers in the U.S. has been growing. In the 1960s, the number of hours worked per week by white-collar professionals and blue collar workers was similar, with both working close to a 40-hour week. But since then, the gap has widened, with more than a quarter of professionals now working more than 50 hours weekly, even though blue collar hours have remained mostly stable.
This implies there is more work for those professionals to do than they can accomplish in a standard 40-hour workweek. It also means that fears about AI eliminating the need for lawyers, consultants, doctors, architects, and other qualified professionals are probably overstated. Economists such as MIT’s David Autor and Erik Brynjolfsson at Stanford University say AI could help lower the cost of some of these services, leading to yet more demand. And while AI might make each worker more efficient, it’s unclear if those efficiency gains will be enough to enable professional firms to reduce overall headcount.
How AI can speed up auditors’ routine tasks and make them less onerous can be seen at Baker Tilly, among the world’s 10 largest accounting networks. It’s using DataSnipper to automate much of what Karen Larsen, a partner in Baker Tilly’s professional practice group, calls “ticking and tying.” This is the task of checking off that there is supporting documentation for every number in a document and then tying a citation to a specific piece of data that backs up that number to the spreadsheet. It is what a lot of junior auditors end up spending countless hours doing. “It is what you dread when you first come into the profession,” Larsen says.
With DataSnipper handling this task, which it can often accomplish in just minutes, Baker Tilly’s accountants are freed up to do more high-value and fulfilling work, such as advising clients on how to structure transactions to achieve a certain tax treatment.
“This is not about reducing our workforce in any way,” Larsen says of Baker Tilly’s use of DataSnipper. “This about providing opportunities to challenge people, excite them, and it is going to hopefully help retain them.”
DataSnipper is currently being used by all of the Big Four accounting firms as well as the internal audit and accounting teams at Frontier Airlines, Siemens, and Hilton Hotels.
Vidya Peters, DataSnipper’s CEO, says the company is increasingly expanding its target customers beyond traditional financial statement preparation, financial audit, and tax teams, to teams that audit supply chains or carbon footprint accounting, or ensure compliance with myriad regulations.
Several companies, including tech giant SAP, specialized accounting software company Wolters Kluwer, and companies such as MindBridge Analytics and AuditBoard, offer software tools to help accountants and auditors, some of which are also starting to incorporate AI-driven features. But Peters says DataSnipper finds it is most often competing with manual processes that many audit teams still use.
The size of this market opportunity attracted Index to DataSnipper, Hannah Seal, the Index partner who led the round, says. “Audits are a huge market that is pretty underserved, still mostly served sort of manually through Excel,” she says, adding that this makes the audit market ripe for disruption. She also noted that while DataSnipper has mostly sold to accounting firms, there is even more potential to sell to corporate internal audit and accounting teams.
Peters says that DataSnipper, which currently employs about 130 people and is based in Amsterdam, will be able to use the new funding to expand faster to new geographic markets. It already has an office in New York but is planning further offices to serve the Asia Pacific market and Latin America.
