Collective, a San Francisco-based platform and advisory team, has successfully raised $50 million in a recent funding round.
The funding was led by prominent investors such as Gradient Ventures, Innovius Capital, The General Partnership, General Catalyst, QED, Expa, and Better Tomorrow Ventures.
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And brings the company’s total raised capital to $82 million. The newly acquired funds will be utilized for product development and scaling operations.
CEO Hooman Radfar plans to expand Collective’s 200-employee workforce by approximately 30% by the following June.
Radfar emphasized that the self-employed market has experienced significant growth during economic slowdowns and challenging periods like the 2008 recession, the COVID-19 pandemic, and the recent headwinds faced by the tech sector.
This investment round demonstrates Collective’s strong positioning and promising growth trajectory.
Collective was founded several years ago by Ugur Kaner, Bugra Akcay, and Radfar.
Radfar, previously a founding partner at Expa Ventures, met Ugur during his time there and enlisted Akcay, their mutual friend, to kickstart the business.
The platform serves as an all-in-one online back office for “businesses-of-one,” offering a comprehensive range of services typically found in enterprise-level finance departments, all accessible through an easy-to-use platform.
Radfar’s inspiration for founding Collective stems from his personal background as the child of immigrants.
Observing the financial choices made by his parents, he recognized the significance of selecting the appropriate business structure.
His father’s decision to form an “S corporation” allowed for substantial tax savings compared to his mother’s sole proprietorship.
Radfar believes that an outdated approach to financial management hampers entrepreneurship and prevents businesses of one from maximizing their net income.
Collective’s goal is to eliminate the need for self-employed individuals to rely on separate tools for various financial tasks, such as payroll, bookkeeping, taxes, and accounting.
Leveraging AI, specifically OpenAI’s GPT-4, the platform automates processes like expense categorization and bank reconciliation.
Additionally, Collective provides tools for executing payroll, filing taxes, and tracking monthly expenses and deductions.
The ultimate aim is to alleviate the challenges faced by freelancers in managing their finances, which according to a poll, is a significant hurdle for 18% of freelancers.
By streamlining financial tasks, Collective enables its members to save time that can be better utilized in providing services to their clients.
With thousands of members across the U.S. and an annual recurring revenue in the eight figures, Collective has ambitious plans to collaborate with Big Tech companies like Google and Meta, offering membership to its services as a contractor benefit.
While competition exists in the freelancer financial services market, Radfar emphasizes that the potential for growth is substantial.
Currently, 39% of the U.S. workforce engages in freelance work, a figure projected to surpass 50% by 2027.
Hyperlocal accountants and service providers pose as Collective’s primary competitors, with a less commonly chosen alternative being DIY tools for formation, bookkeeping, tax, and payroll.
However, given the income levels of Collective’s customers, they generally perceive the “do it yourself” option as less viable.
Gradient Ventures’ Darian Shirazi believes that AI-powered language models will expedite and reduce the cost of operationally-intensive processes.
By applying AI to bookkeeping, accounting, and reconciliation, Collective is uniquely positioned to disrupt the tax and accounting market, leveraging their complex workflows and proprietary data.
In summary, Collective’s recent funding round has injected $50 million into the company, bringing their total raised capital to $82 million.
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The platform’s comprehensive range of financial services for freelancers, powered by AI, aims to simplify their operations and maximize their net income.
With ambitious plans for expansion and collaboration with industry giants, Collective is poised to make a significant impact in the freelancer financial services market.
