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Why are VCs Investing in The Office of the CFO?

Over the last decade, the amount of capital deployed worldwide by venture capital investors and the number of start-ups receiving funding have grown substantially. Just in the first half of 2021, Global venture capital funding shattered records as more than $288 billion was invested worldwide. That’s up by just under $110 billion compared to the previous half-year record that was just set in the second half of 2020.



Venture capital is affiliated with some of the world's fastest-growing and most powerful companies. For example, among publicly traded firms worldwide, seven of the top eight firms by market capitalization in May 2020 had been backed by venture capital prior to their initial public offerings: Alphabet, Apple, Amazon, Facebook, and Microsoft in the United States, and Alibaba and Tencent in China.


So, why are VCs investing in the office of the CFO? Because Finance forms the backbone of any business. Here are some examples of shining up-and-coming companies that sell to finance departments, as well as what their VCs had to say about them.


Venture Funding Hits High In Finance


DataRails

DataRails, the financial planning and analysis (FP&A) platform for Excel users, announced early March 2022 that it has raised $50M in Series B funding. The company’s third investment round in the past 12 months, which was led by Qumra Capital, follows a 5x growth in revenue in the past year, positioning DataRails as the market leader in FP&A software for small and medium-sized businesses. The round brings total venture funding to $103.5M and provides clear validation of DataRails superior product-market fit.


DataRails allows teams to enjoy the flexibility and power of Excel, but with the benefit of a cloud-based centralized database allowing real-time consolidation of disparate financial and operational data from across a company. This eliminates hours of manual gathering and consolidation of data for staple reports including budgets, P&Ls, balance sheets, and month-end reporting. Based on AI and Machine Learning capabilities, the DataRails’ solution provides real-time financial consolidation and advanced data visualization, through intuitive and simple implementation.


Sivan Shamri Dahan, Managing Partner at Qumra Capital stated: “DataRails is leading the transformation of financial teams’ operations, empowering teams in every organization with deep business intelligence (BI) capabilities. For the first time, all financial data is uploaded to the cloud, providing continuous agility and content sharing. DataRails has become one of the fastest-growing SaaS companies we have seen and we look forward to partnering with the company as it continues its outstanding market expansion.”


Airbase

Airbase, the most comprehensive spend management platform for small to midsize companies, announced this past July $60M in Series B funding. The round was led by Menlo Ventures and includes new investor Craft Ventures. Existing investors Bain Capital Ventures, First Round Capital, Quiet Capital, Webb Investment Network, and BoxGroup also participated. The round brings total venture funding to $91M and validates Airbase’s holistic approach to solving the spend management problem.


Airbase’s innovative all-in-one spend management platform delivers more control, visibility, and automation to today’s finance teams than any other solution for small to midsize companies. It combines accounts payable automation, software-enabled corporate cards, and employee expense reimbursements. Airbase applies consistent approval workflows across all areas, automates accounting, and provides real-time reporting for all non-payroll spend. Innovative accounting automation results in a faster close, better visibility, and true control. Airbase eliminates the tedious work involved in managing spend and enables finance managers to be strategic partners in the business.

Menlo Ventures' thesis is based on the belief that the CFO and team are more empowered than ever to buy applications—yet they have far too many disconnected apps, are expected to close the books faster than ever, and are required to have high, real-time visibility into the budget and spending of all departments. This is increasingly complex and important, which is why we're seeing a slew of best-of-breed apps emerge to handle these demands, such as Airbase.


Lockstep

Lockstep, the world's first connected accounting cloud, announced last February the close of a $10 million Series A funding round led by Point72 Ventures with participation from Clocktower Ventures and Revel Partners. In addition, they received a $2.5 million investment from Amex Ventures in August, closing out a $13 million Series A funding round.


Lockstep’s email automation sends out reminders of an invoice coming due or remittance information when a bill is paid, saving a massive amount of time and keeping cash flowing. The company also provides online account management and access to allow vendors and customers to see the current statement, manage their accounts, and make payments online. Rather than using siloed personal inboxes and spreadsheets, a shared accounting inbox allows the team to work in one place with search, assignments, tracking, and reporting to ensure nothing falls through the cracks, increasing productivity.

"Lockstep seeks to modernize businesses where it is needed most — accounting and finance departments," Lindsay Fitzgerald, managing director at Amex Ventures, said in a news release. "By connecting accounts receivable and accounts payable departments, Lockstep empowers companies to efficiently control their payments, cash flow, and working capital. We are pleased to support Lockstep in their mission to streamline corporate payments and reconciliation.

"Lockstep surveys show that over 90% of the email addresses accounting departments use for transactions with trading partners have no automation to manage and retain data," said Pete Casella, Partner at Point72 Ventures. "We believe Lockstep can modernize accounting by automating communications and providing online accounts for trading partners, helping companies seamlessly integrate information and eliminate bottlenecks."