Sphere, an AI-driven tax compliance software company, has raised $21 million in a Series A funding round led by Andreessen Horowitz (a16z). The company automates tax collection, registration, filing, and remittance for businesses expanding internationally. This funding comes as global expansion becomes increasingly complex for businesses due to rapidly changing tax laws and regulations.
The Problem: Global Tax Compliance is Broken
Founder Nicholas Rudder initially built Sphere after facing the challenges of international tax compliance while running an edtech marketplace. Marketplaces, unlike traditional businesses, are often liable for taxes on all sales made through their platform, not just their own revenue. This creates a massive administrative burden when expanding into new countries. Rudder realized that existing compliance infrastructure hadn’t kept pace with globalization.
How Sphere Works: AI and Automation
Sphere targets Series B to IPO-stage companies with global customer bases. The core of its technology is a proprietary AI engine called TRAM (Tax Review and Assessment Model). TRAM codifies tax rules across jurisdictions, determining taxability with supporting citations. Sphere then integrates with billing platforms like Stripe and Campfire to pull transaction data, calculate tax exposure, and automate filings.
Key Features:
- Automated Registration: Sphere helps companies register for tax obligations in over 100 jurisdictions directly through its platform.
- Real-Time Tax Calculation: Its AI model calculates tax liability for each transaction.
- Automated Remittance: Sphere generates tax returns, debits customer accounts, and pays authorities directly.
Competition and Differentiation
Sphere competes with established players like Anrok and Avalara, as well as Stripe’s tax services. However, the company differentiates itself by offering a fully integrated, end-to-end compliance solution. Unlike some competitors, Sphere doesn’t hand off complex geographies to consulting firms. The AI-powered automation allows it to manage the entire process in-house.
Funding and Future Plans
The $21 million Series A will fund further development of Sphere’s infrastructure, expand its AI and engineering teams, and build out international sales. Y Combinator (YC) and Felicis Ventures also participated in the round.
“I want this product to be the indispensable tool that finance teams look to when they want to expand into a new market,” said Rudder.
Sphere aims to become the go-to solution for all forms of transactional compliance, simplifying the burdens of international expansion for businesses. The company’s ability to automate complex tax processes positions it well to capture a growing market as more businesses expand across borders.
