As Nicholas Rudder built his last startup, aneducational marketplacecalledScholarSite, he kept running into the same problem: tax.
“Marketplaces are liable for tax on their entire GMV (gross merchandise value) not just their take rate, so every new country meant a maze of registrations, filings, deadlines, and risk,” Rudder told TechCrunch. “It became a constant distraction. Instead of building the business, I was spending time deciphering international compliance rules I never wanted to become an expert in.”
As he and co-founder Adrian Sarstedt werelooking to shut downScholarSite(later calling it Sphere), Rudder decided tokeep the namebut turn the product into something new.
“The world was going global, but compliance infrastructure hadn’t kept up,” Rudder said.
In 2023,Rudder alonelaunchedSphereasa taxsoftware vendorthathelps companies stay in complianceastheyscaleacrossborders.The company targets Series B to IPO stage companies with a global customer base, Rudder said.
“We help companies collect tax on customer transactions,” he continued, explaining that companieshave tocollect tax on purchases and remit it toauthoritieseach month or quarter.
Spherehelps“automate registration,calculation, filing, and remittance obligations for companies,” he said.Spherespent two years in stealth beforeofficiallylaunching,and clientsnowinclude the vibe-coding platforms Lovable andReplit, as well as theAI voice companyElevenLabs.
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As anedtech marketplace, itraiseda $4.3 million seed.OnTuesday,as a taxplatform,Sphereannounced a $21 million Series A led by a16z.
Rudder says the product takes less than 24 hours to set up. It has integrations into major billing platforms, like Stripe and Campfire, allowing Sphere to pull a company’s transaction data and assess global tax exposure, he said.Calculating the taxability of a transactioniswhere Sphere’s AI tax review and assessment model engine comes in, he said — or, in other words, TRAM.
“TRAM ingests and codifies the rules in every jurisdiction and creates a set of tax determinations” — like if something can be taxed or not — “along with reasoning and backing citations for that determination,” Rudder, the company’s CEO,explained.
Sphere’shumanteamreviewsand approvestheoutputs of TRAM and approves them so that it can be pushed into a tax engine that applies tax to transactions in real time.
“That part of the system has no AI so there is zero chance of hallucinations.”
Sphere alsomonitorshow much tax a company owes in whatregion,andis integrated directly into more than 100 tax authorities in theworld,so companiescanregisterforvarioustaxjurisdictionsdirectly through Sphere.
“Once they submit a registration, we send that information to the tax authorities and let the company know when their registration is processed and when they can start collecting tax in that region,” Rudder said.
Finally, Sphere helps with filing and remittance. Itautomatically generatestax returnsand submissions, Rudder said,debitsback tax returns toitscustomers’bank accountsandpaystaxauthorities.It’sthe product he wanted when he wasbuilding his first company.
Others in this market includelegacyplayersAnrokandAvalara.
Although Stripe also has a global tax calculation and collection service,Rudder does not consider Stripe a competitor but a partner.
“Sphere is one of only three tax vendors globally with a native integration to Stripe’s Billing and Checkout products,” he said, adding that the company also has use cases that Stripedoesn’thave, such as being able tofulfillthe end-to-end compliance life cycle.
Rudder described his funding process as “unintentional.”He saidhewas looking to raise at the time, but knew he needed to move fast toexecute onhis ambitions.
“When we met a16z and heard what they’d done for similar companies in the compliance and fintech space, we knew they were the right partner,”Rudder said.
Marc Andrusko, a partner at a16z, saidtheVC firmfirst met Rudder back when he was workingonScholarSite. “While we didn’t get all the way to a term sheet for that business,itwas clear Nick had the horsepower, grit, and drive needed to be an exceptional founder,” Andrusko told TechCrunch.
A few years later, Andrusko said the team started hearing whispers about how promising a new company called Sphere was becoming. “It took all of five minutes to put together that it was Nick’s new business post-pivot, and we immediately reached out to get the update.”
One aspect of the business that impressed Andrusko was how integratedSphere wasinto local geographies.
“Whereasboth legacy playersand many of the more recent venture-backed startup competitors often hand customers off to third-party consulting firms to manage certain geographies, Sphere took the time to build integrations into local railsplusAI automations that allow it to facilitate the entire sales tax compliance process completely end-to-end,” Andrusko said.
YC and Felicis Ventures alsoparticipatedin the round. The fresh capital will be usedtobuildoutmore infrastructure to connect with more local tax authorities; expand its AI and engineeringteam, andbuild outan international sales team.
“I wantthis productto be the indispensable tool that finance teams look to when they want to expand into a new market,” Rudder said. “Not just for indirect tax, but for every form of transactional compliance they may not even realize they’re exposed to.”
This piece was updated to clarify that Sarstedt is no longer at the company.