Here is why Clear(Tax) clinched a deal with the world's most valued fintech company

Here is why Clear(Tax) clinched a deal with the world's most valued fintech company
  • Stripe participated in the $75 million funding round of Clear, formerly known as ClearTax.
  • The acquisition of Recko and the investment in Clear is a part of Stripe’s expansion beyond payments acceptance.
  • Clear believes that it has found its product market fit and wants to try its hands in western countries like the UK, Europe and Middle East.
Software-as-a-service (SaaS) company Clear, formerly known as ClearTax, bagged $75 million last week from several marquee investors to fulfill its extensive expansion plans. The one name that stood out among all the investors was Stripe, the world’s highest valued fintech startup.

Dublin and San Francisco-based Stripe — valued at $95 billion — is an online payment processing and credit card processing platform for businesses. The company has raised $2.2 billion to date and is backed by tech giant Google.

Stripe made its first investment in India two weeks ago by acquiring Bengaluru-based finance operating platform Recko. Recko automates key steps in the payments reconciliation process that slow most businesses down.

The acquisition of Recko is a part of Stripe’s expansion beyond payments acceptance, the company said in a press release. “With Recko, we’ll automate their payments reconciliation, a critical input into their overall financial health,” Stripe’s Chief Product Officer Will Gaybrick added.

Recko is definitely going to gain from Stripe with access to a much larger user base, but what does Clear have to gain from it? More importantly, what can Stripe gain out of it?


Clear’s horizontal SaaS model allows Stripe to enter several domains at once

Stripe has confirmed that it is looking to go beyond payments and enter other domains of financial services.

Clear’s horizontal SaaS model allows it to work in several domains on financial services all at once, including invoicing, payments, taxes, credit and lending. This company caters to four groups of customers — consumer, small and medium businesses (SMB), enterprises and tax experts such as chartered accountants (CA) or accountants.

Archit Gupta, cofounder and chief executive officer (CEO) of Clear, told business Insider that the horizontal SaaS model allows the company to focus on a larger and more varied set of customers.

The company has launched one product to help small businesses meet their working capital demand and is underway to launch another one soon. “To run so many things in parallel, we needed capital,” the company said.

The Bengaluru-based startup claims to have over 6 million Indians registered on its platform, along with 50,000 tax professionals, 1 million small businesses and 3,000 large enterprises.

The company will use a part of this funding for engineering, product and design to add more products to its umbrella. The company will be looking to expand into the payments and credit side. In a previous conversation with Business Insider, Clear’s cofounder Srivatsan Chari added that it will be looking to acquire more businesses to expand its offerings.

Here is why Clear(Tax) clinched a deal with the world's most valued fintech company

The synergy between the two players gets stronger with Clear’s international plans

Second and the most important part of Clear’s expansion plan is increasing its geographic footprint and Stripe can be a worthy partner here, given its presence across 135 countries across the globe.

Clear believes that its Indian software stack has a global fit and like other SaaS products it wants to try its hands in western countries like UK, Europe and Middle East. Though the company is yet to confirm the markets they would be launching in, the deadline has been set for December 2021.

Gupta told Business Insider that the international markets are much larger compared to India. The company expects the international operation to contribute a major chunk of revenue. India will continue to be a significant contributor but not a majority one, Gupta said.

Commenting on the synergies between Stripe and Clear, Gupta added, “We are very excited to partner and to learn and prosper more learning on both sides. We’ll learn more and after the quarter I will be able to answer this question much more sharply. But excited to learn and discover. They have a great global vantage point and they are very global in their approach, we are learning global.”

“They obviously understand billing very deeply, invoicing very deeply. They understand payments, lending and they got into taxes more recently. I find that the roadmap overlap is amazing. My hypothesis is that we will collaborate much more globally but like I said we’ll be able to answer that question more clearly in 90 days” he added.

Ankur Bansal, co-founder of BlackSoil Capital, in a previous interaction with Business Insider said that it’s almost a given for all SaaS companies, who have found their product-market fit, to think global. Having global customers changes the valuation of a SaaS company “dramatically” and offers much better margins to the company.

Profitability may only be 18 months away

The international expansion plans also flag off Clear’s road to profitability. The company — which claims to be recording a 100% year-on-year growth in its revenue on an annual basis — noted that it will increase the prices of its software solutions by five-six times in India in order to increase the average revenue per user (ARPU).

This will be in addition to launching its services abroad, where price points of software products and customer’s ability to pay are much higher. The combination of the two will make the profit margin on Clear’s product even more higher on a consolidated level.

Clear — founded in 2011 as ClearTax — posted a revenue of ₹60 crore in the financial year 2020. Keeping the 100% annual increase in revenue, the company’s revenue should be somewhere close to ₹120 crore in FY21.

“The financing brings two things — partnership and fuel for expansion. The in depth business is exploding right now. There are massive tailwinds to the business we have built so far. What that means is that India’s digitisation from the government push is very very serious. There have been a lot of COVID-related tailwinds,” Gupta said, adding that companies are getting more serious about digitising.


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