ScaleFactor, the accounting and finance platform for small business, is suspending a majority of its operations due to the coronavirus (Covid-19) pandemic.
Blaming “headwinds created by the current economic climate”, ScaleFactor has laid off half of its workforce and is retaining a portion of its team to help its current customers move over to new service providers.
ScaleFactor raised a total of $100 million in funding, including a $60 million Series C round led by Coatue.
Other investors include Bessemer Venture Partners, Canaan, Broadhaven Ventures, Firebrand Ventures, Vulcan, Stripes Group, NextPlay Capital, Citi Ventures, and Flyover Capital.
ScaleFactor will return a portion of this capital back to its investors. The company will be providing all employees with a minimum of 12 weeks severance pay and will cover healthcare through the end of 2020.
The fintech was originally founded in 2014 as a cloud accounting firm for small businesses. It grew quickly in its first three years by bringing financial and accounting advisory to small businesses at an efficient price point.
“Our original mission since Day One was to make small businesses more likely to succeed,” said ScaleFactor founder and chief executive officer Kurt Rathmann. “We saw that large companies were disproportionately advantaged when it came to tools and data, and we set out to solve this massive problem.“
“Our goal was to level the playing field by making back office software that was both affordable and insightful for small business owners. I believe we were on a path to unlocking real disruption in the accounting industry, however, our delivery timeframe just wasn’t a match for the current economic climate.“
ScaleFactor’s first product, launched in late 2017, was a bookkeeping orchestration software that rides on top of QuickBooks and Xero to make managing books less time-consuming for the business owner.
Additional platform enhancements such as integrated bill pay, payroll processing and expense management were added over time to provide business owners a one-stop-shop for managing their financials.
In February, ScaleFactor announced plans to create a marketplace offering, redoubling its focus on its core software business.
But despite early signals that this was a viable move, significant Covid-19-driven disruptions to the small business landscape in the intervening four months have delayed that evolution and put mounting pressure on the company’s cost structure.
“I want to offer a heartfelt ‘thank you’ for every ScaleFactor employee and their respective contributions over the years,” said Rathmann. “This is a significant setback, but not the end of our journey. While we may not be moving forward with ScaleFactor in its current form, our drive to revolutionise small business accounting will continue well into the future.”