Accounting start-up Pilot has received a new round of funding from Amazon founder Jeff Bezos. Some other Silicon Valley investors also joined in the transaction.
Pilot is the largest provider of back office services for startups and small businesses in the U.S. The San Francisco-based company closed a $100 million funding round recently that doubled its valuation to $1.2 billion.
The round was led by Bezos’s venture capital firm Bezos Expeditions and hedge fund Whale Rock Capital. Also participating were Sequoia and Index Ventures. Stripe and its founders, Patrick and John Collison, previously invested in Pilot. Former VMware CEO Diane Greene also previously invested in Pilot.
Pilot Founder Interned at Amazon
Pilot’s co-founder and CEO Waseem Daher was an intern at Amazon 16 years ago before he started two other companies. Oracle bought the first one, Dropbos acquired the second one.
Daher likened Pilot’s use case to a problem solved by Amazon Web Services— “Let developers focus on building a business instead of figuring out how to host a website.”
“There’s all of this annoying, tedious, scary and important back-office stuff that you need to do as a small business owner,” Daher told CNBC. “Owners should focus on running a company at scale, and Pilot should be doing the back office stuff for you.”
Pilot’s employees are primarily former accountants. They’re given projects that involve working directly with a small business. These employees assume administrative tasks like payroll, bookkeeping, taxes, and invoicing.
Pilot has partnered with companies including American Express, Bill.com, Gusto, and Stripe. Founder and CEO Daher describes it as “tech-enabled,” but the start-up itself is not a software company. It creates its revenue from subscription fees.
Growth During COVID
Pilot reports that its revenue nearly doubled during the coronavirus pandemic despite small businesses feeling the largest effects of COVID-related shutdowns. The company’s revenue has roughly tripled every year since it was founded in 2017, Daher said.
Daher ascribes the recent growth awareness of automation as more individuals must operate their businesses from home. Plus, more millennials are starting small businesses and are more apt to be more agreeable to outsourcing through a tech platform, Daher said.
“People want to do this virtually. They don’t want to have to go down to Main Street with their box of receipts and visit their accountant’s office,” he said.
This is Daher’s third company with co-founders Jeff Arnold (Pilot’s COO) and Jessica McKellar (CTO). The three met as undergraduates at MIT in the computer club.
Index Ventures partner Mark Goldberg, an early investor in Pilot, first met the group of founders at Dropbox about 10 years ago. And although the SOP in Silicon Valley right now is “focused on using software to optimize for everything,” Goldberg said Pilot is taking the “opposite approach” by adding people back in the equation.
“Nobody starts a company to deal with BS in the back office. You want someone to extract that pain point,” Goldberg said. “People don’t want software, they want peace of mind.”
"People want to do this virtually. They don't want to have to go down to Main Street with their box of receipts and visit their accountant's office," said Pilot Daher.
Pilot is a New “Unicorn”
Pilot is the latest fintech unicorn. In the venture capital world, the term “unicorn” refers to any start-up that reaches the valuation of $1 billion.
The term was first coined by Aileen Lee, founder of Cowboy ventures when she referred to the 39 startups that had a valuation of over $1 billion as “unicorns” in 2013.
A “decacorn” is a term used for those start-up companies over $10 billion, and a “hectocorn” is the term used for a start-up valued over $100 billion. According to CB Insights, there are over 450 unicorns as of October 2020.
The largest unicorns included ByteDance, DiDi, SpaceX, Stripe, Palantir Technologies, and Airbnb. Airbnb is the most recent hectocorn that went public in December with a market capitalization of roughly $102 billion.