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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

November 10, 2014 at 5:10 PM

Bainbridge-based Avalara raises $100 million

The Bainbridge Island ferry must have been riding low on the day investment firm Warburg Pincus came to visit Avalara, bringing $100 million in venture financing for the tax-software startup.

Bainbridge-based Avalara announced the deal today, saying it will use the funding to accelerate its growth initiatives, pursue acquisitions and expand internationally.

For perspective, Avalara’s funding is more than all the software funding deals by venture capitalists in the Northwest last quarter, which totaled $73 million, according to the PricewaterhouseCoopers MoneyTree report.

Avalara has now raised more than $200 million since 2004 and built a global company providing software that helps businesses comply with tax requirements in different jurisdictions.

“We want to define the space, we want to stay out in front of everybody and we’re creating that marketplace,” Chief Executive Scott McFarlane said.

McFarlane said the company’s initial vision for a service that automates sales tax calculations has panned out.

“We just fundamentally knew that sales tax would be automated. It’s sort of like payroll; it’s one of those things that businesses shouldn’t pay any attention to. It should be outsourced,” he said.

“We knew that once we solved that problem, this concept of people doing sales tax and transactional taxes manually, in an electronic world, just wasn’t going to happen.”

New York-based Warburg Pincus now has three active tech investments in the region. Others are A Place for Mom and PayScale, which in April received funding worth up to $100 million from the firm.

“Avalara has secured a leading position in tax software and compliance, bringing new and sophisticated technology solutions to help its customers navigate an increasingly complex regulatory environment,” Justin Sadrian, managing director at Warburg Pincus, said in a release.

Avalara could be coming into position for a public offering or an acquisition, but McFarlane declined to talk about future plans. He said there’s no pressure from its early investors, who were largely friends and family in the region.

“We want to exit on our own terms when we think it’s right, so our biggest goal is to build a business that can do what it needs to do in the marketplace,” he said. “The exit takes care of itself.”

At its headquarters, Avalara now employs about 200 people. It also has offices across the U.S., in London and in Pune, India, that altogether employ more than 800.

The company recently consolidated several smaller Seattle offices into a downtown space, but its headquarters will remain on Bainbridge for a few more years. McFarlane said it will eventually move to Seattle but it won’t happen until sometime after 2016.

Bainbridge was a great place to start and grow, he said, but “ultimately we’ll have to come across the water.”

Comments | Topics: avalara, cloud, Enterprise


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