The e-commerce market has exploded in recent years, and with it has tax collectors’ appetite to do their bidding: create rules that ensure their countries get a cut. That means more paperwork and customs paperwork (and costs) for those who send and receive goods, and also delays when there is some kind of problem. All of that has been bad news for the eCommerce market in general.
Today, an Estonian startup called Eurora that has built an AI-based system to help facilitate all of this in the EU region is announcing $40m (£31m) in funding as it finds a lot of traction for its solution. , with more than 200 paying customers worldwide. Those numbers are set to rise: in Europe alone, by 2026 there will be more than 260 billion packages delivered annually.
Connected Capital, an Amsterdam-based company, led the round, with participation from previous backers Change Ventures and Equity United, and Eurora founder and Marko Lastik. (The company had only raised a modest $3 million in four years prior to this.) Eurora does not disclose its valuation, but the round is one of the largest Series A rounds for a Tallinn startup to date.
Eurora has been around since 2018, but it really came into its own in the wake of the Covid-19 pandemic, an interesting detail in itself considering that much of the history of e-commerce in recent years has been about how businesses have prospered. during the pandemic and due to direct changes in the way people lived and operated.
The event that really drove much of their business has been e-commerce, already on a growth trajectory, picking up speed after 2020 due to that pandemic, and catching up, in the EU, with regulators last July (2021). ) made a number of changes to the way e-commerce items are imported from abroad, specifically ending a €22 import VAT exemption and trade regulations between the EU region and other countries, not only China, but also the US and even the UK.
Goods are now no longer protected to any value limits and are now taxed based on their final destination (not the point of importation). This was partly to make sure funding was picked up where it belonged, but also, in classic EU fashion, to create what they see as a more level playing field for domestic (EU-based) sellers.
The problem with all of this is that it has essentially been a de-simplification of the previous system. Every country has different sales tax codes, and different items have different classifications, and now there’s more paperwork for those shipping and receiving items to attend to, and typically more money to raise. All more complex and ultimately results in delays and likely default that could catch up with those companies in the long run.
Eurora’s approach has been to build a platform that operates as a kind of artificial intelligence-based tax expert, more technically known as a “VAT broker”.
“If you are shopping online, taxes and duties are [often filled out] wrong. Our machine makes sure it’s okay,” Lastik said in an interview. “Everything that goes before and after the statement is correct. This is a machine. You no longer need to make sure all packages are declared correctly.”
The company says it has worked with 22 scientists who have helped build its platform, which uses big data to help track and trace the origin of packages and make sense of how customs forms, which might indicate something as vague as ” tool”, are they a power or hand tool, what type and materials and the purpose and so on. It then assigns a product-specific HS code, calculates VAT and duties, creates customs declarations and more, all of which a customer can integrate with their other shipping and accounting software via API.
It claims to be able to process 5,000 requests per second with up to 96% accuracy.
“We are excited to lead the investment in Eurora and actively support the team in scaling the platform globally,” Shaffy Roell, associate at Connected Capital, said in a statement. “The founder and the entire management team have impressed us with their quality, domain expertise and vision for the company. We have seen a clear push from regulators to improve transparency and reporting on the growing number of goods coming through customs. We believe that Eurora has built a truly unique AI/ML-based platform, significantly improving compliance while reducing package delays and lowering the costs of e-commerce packages shipped to Europe.”