Tactical, a startup which helps businesses manage — and simplify — cryptocurrency finance, is coming out of stealth today with $2.6 million in seed funding.
Founders Fund and financial automation startup Ramp co-led the rise of Tactic, an eight-person team based in New York City. Elad Gil and Figma co-founder Dylan Field also participated in the financing.
CEO Ann Jaskiw founded Tactic after learning that web3’s founders handled their accounting in spreadsheets. Existing accounting software providers, she concluded, “weren’t built to handle crypto transactions.”
The core of Tactic’s product, Jaskiw said, is helping a CFO or CFO answer the question, “Where did the money go?” at the end of a quarter.
“Right now, for most financial professionals, their crypto transaction audit trail is a debit transaction from Silicon Valley Bank or any bank, on a centralized exchange,” Jaskiw explained. “Like Coinbase tokens, they leave that central spot and then it becomes a big question mark. What we’re seeing is that people are spending a lot of time on manual spreadsheets, trying to track what trades are happening and trying to calculate their profits and losses. It’s incredibly cumbersome right now.”
In general, companies that interact with blockchains struggle to make sense of their fragmented activity, according to Jaskiw.
“They tend to manage multiple wallets across various blockchains and hold funds on centralized exchanges or self-custody solutions like Gnosis Safe,” he said.
This is where the tactic comes in.
Tactic says it is addressing the problem of accounting for a company’s cryptocurrency holdings and on-chain activity by aggregating data from disparate sources to give companies “a complete treasury view of their balances and activities.” His software, Jaskiw said, helps companies automatically categorize transactions and apply accounting logic, such as calculating $USD gains/losses and taxable events. Accountants can then reconcile a company’s crypto subledger with traditional accounting software like QuickBooks.
“No matter what they’re building, it can be any on-chain transaction,” Jaskiw said. “But there just isn’t a cohesive audit trail if you’re a crypto company. So if you have a regular bank account, you have all your ins and outs clean, and you can have more than one bank account, but it’s usually in one place, whereas crypto transactions can span a dozen different wallets or products.”
After speaking with hundreds of companies, Tactic found that decentralized finance or “DeFi” transactions were the most problematic. For example, according to Jaskiw, a single interaction with a smart contract can generate hundreds of “nested transactions,” all of which must be broken down for accounting purposes.
Tactic, he said, has partnered with accounting firms to help interpret accounting guidelines for DeFi-specific activities such as staking, NFT minting, and airdrops.
Since launching in 2021, Tactic says it has signed up “dozens” of clients, ranging from early-stage startups to multi-million dollar companies in industries including NFTs, protocols and DeFi. The company is designing its offering to work with businesses that have “hundreds of thousands” in transaction volumes per month.
“This is a sore spot for everyone,” Jaskiw told TechCrunch. “The larger an organization becomes, the more complex and worse the problem becomes. So that’s where we’re seeing the most enthusiasm for this.”
She also believes that a The common misconception about the crypto space is that many people are trying to avoid regulation. Tactic, Jaskiw said, has found the opposite to be true.
“A lot of companies, specifically private C-corps in the US, are really trying to do the right thing, play by the rules and comply,” he said. “Right now, they just lack some of the tools and guidance to be able to do it efficiently.”
John Dempsey, vice president of strategy and operations at Tactic, says that Tactic makes it “easy” for businesses to transact in cryptocurrencies, “knowing they can manage their financial activity in a clean and compliant way.” Dempsey is a former vice president of products at blockchain forensics firm Chainalysis. a blockchain analysis company that last March closed the a $100 million Series D financing, doubling its valuation to more than $2 billion.
But it’s not just web3 companies that struggle with this problem.
Crypto Is “Fast Penetration” Even In Non-Crypto Companies, According To scott ornCOO of Kruze Consulting, a CPA firm serving startups.
“Crypto is rapidly becoming part of the financial infrastructure of many startups. We are seeing 5% to 10% of our non-crypto SaaS companies participating in crypto transactions; those are SaaS companies that have nothing to do with crypto,” Orn told TechCrunch. “Two years ago, hardly any non-cryptocurrency companies were using cryptocurrencies — that’s incredibly fast growth.”
In the meantime, he added, cryptocurrencies introduce a number of accounting problems that should be solved by software, including the correct recording of transactions in the general ledger, the recording of tax planning information, and the handling of smart transactions generated by contracts.
Crypto transactions can create taxable events, Orn notes.
For example, a company has a contract to be paid a specific amount of crypto tokens, and if those tokens increase in value before the company actually receives payment, that could result in “huge revenue spikes.”
“This could boost a startup’s profitability, which means taxes are due,” Orn added. “And selling crypto assets that have increased in value creates a taxable profit. We’ve seen both of these scenarios, and keeping track of everything manually is difficult in a high-volume situation.”
Founders Fund Director Leigh Marie Braswell said Tactic’s product is “already saving crypto accounting teams days every month.”
“We believe that Tactic has the potential to become a massive player as more companies move to web3,” he added.
Eric Glyman, CEO and co-founder of Ramp, told TechCrunch that his company invested in Tactic based on the belief that “simple and intuitive solutions are needed for businesses transacting with crypto.”
“We anticipate that demand will only grow in the future,” he said.
Glyman also saw what he described as a “strategic alignment” with Ramp’s long-term vision (Note: the company raised its own financing earlier this year at an $8.1 billion valuation).
“Tactic was created with the intention of saving businesses time and is unique in that the platform works for businesses that have high transaction volumes,” he said. “And everything we do at Ramp is to help save companies time and money.”
Tactic plans to use his new capital to develop his product and team.
“We hI haven’t had to do outside marketing or run ads,” said Jaskiw. “We’ve been getting a lot of incoming enthusiasm.”