As Nicholas Rudder built his last startup, an educational marketplace called ScholarSite, he kept running into the same problem: tax.
“Marketplaces are liable for tax on their entire GMV (gross merchandise value) not just their take rate, so every new country meant a maze of registrations, filings, deadlines, and risk,” Rudder told TechCrunch. “It became a constant distraction. Instead of building the business, I was spending time deciphering international compliance rules I never wanted to become an expert in.”
As he and co-founder Adrian Sarstedt were looking to shut down ScholarSite (later calling it Sphere), Rudder decided to keep the name but turn the product into something new.
“The world was going global, but compliance infrastructure hadn’t kept up,” Rudder said.
In 2023, Rudder alone launched Sphere as a tax software vendor that helps companies stay in compliance as they scale across borders. The company targets Series B to IPO stage companies with a global customer base, Rudder said.
“We help companies collect tax on customer transactions,” he continued, explaining that companies have to collect tax on purchases and remit it to authorities each month or quarter.
Sphere helps “automate registration, calculation, filing, and remittance obligations for companies,” he said. Sphere spent two years in stealth before officially launching, and clients now include the vibe-coding platforms Lovable and Replit, as well as the AI voice company ElevenLabs.
As an edtech marketplace, it raised a $4.3 million seed. On Tuesday, as a tax platform, Sphere announced a $21 million Series A led by a16z.
Rudder says the product takes less than 24 hours to set up. It has integrations into major billing platforms, like Stripe and Campfire, allowing Sphere to pull a company’s transaction data and assess global tax exposure, he said. Calculating the taxability of a transaction is where Sphere’s AI tax review and assessment model engine comes in, he said — or, in other words, TRAM.
“TRAM ingests and codifies the rules in every jurisdiction and creates a set of tax determinations” — like if something can be taxed or not — “along with reasoning and backing citations for that determination,” Rudder, the company’s CEO, explained.
Sphere’s human team reviews and approves the outputs of TRAM and approves them so that it can be pushed into a tax engine that applies tax to transactions in real time.
“That part of the system has no AI so there is zero chance of hallucinations.”
Sphere also monitors how much tax a company owes in what region, and is integrated directly into more than 100 tax authorities in the world, so companies can register for various tax jurisdictions directly through Sphere.
“Once they submit a registration, we send that information to the tax authorities and let the company know when their registration is processed and when they can start collecting tax in that region,” Rudder said.
Finally, Sphere helps with filing and remittance. It automatically generates tax returns and submissions, Rudder said, debits back tax returns to its customers’ bank accounts and pays tax authorities. It’s the product he wanted when he was building his first company.
Others in this market include legacy players Anrok and Avalara.
Although Stripe also has a global tax calculation and collection service, Rudder does not consider Stripe a competitor but a partner.
“Sphere is one of only three tax vendors globally with a native integration to Stripe’s Billing and Checkout products,” he said, adding that the company also has use cases that Stripe doesn’t have, such as being able to fulfill the end-to-end compliance life cycle.
Rudder described his funding process as “unintentional.” He said he was looking to raise at the time, but knew he needed to move fast to execute on his ambitions.
“When we met a16z and heard what they’d done for similar companies in the compliance and fintech space, we knew they were the right partner,” Rudder said.
Marc Andrusko, a partner at a16z, said the VC firm first met Rudder back when he was working on ScholarSite. “While we didn’t get all the way to a term sheet for that business, it was clear Nick had the horsepower, grit, and drive needed to be an exceptional founder,” Andrusko told TechCrunch.
A few years later, Andrusko said the team started hearing whispers about how promising a new company called Sphere was becoming. “It took all of five minutes to put together that it was Nick’s new business post-pivot, and we immediately reached out to get the update.”
One aspect of the business that impressed Andrusko was how integrated Sphere was into local geographies.
“Whereas both legacy players and many of the more recent venture-backed startup competitors often hand customers off to third-party consulting firms to manage certain geographies, Sphere took the time to build integrations into local rails plus AI automations that allow it to facilitate the entire sales tax compliance process completely end-to-end,” Andrusko said.
YC and Felicis Ventures also participated in the round. The fresh capital will be used to build out more infrastructure to connect with more local tax authorities; expand its AI and engineering team, and build out an international sales team.
“I want this product to be the indispensable tool that finance teams look to when they want to expand into a new market,” Rudder said. “Not just for indirect tax, but for every form of transactional compliance they may not even realize they’re exposed to.”
This piece was updated to clarify that Sarstedt is no longer at the company.
