The Finterview - Fintech Exposed episode 23.
The complexities of tax systems present challenges and opportunities. Our latest podcast episode features an insightful conversation with Ben Borodach, the co-founder and CEO of April.
His company, an AI-driven embedded tax software firm, is revolutionising how 170 million U.S. taxpayers and 32 million small businesses manage their taxes. Ben's journey from a law-focused background to a trailblazer in financial technology is a testament to the dynamic nature of modern entrepreneurship.
This article unfolds Ben's entrepreneurial spirit and April's journey. From his initial leap into entrepreneurship to his strategic pivots and the evolution of April, we explore how he's reshaping the tax experience for individuals and businesses alike. His story is a testament to the power of innovation in transforming complex systems, offering valuable lessons for aspiring entrepreneurs and industry veterans.
Keep reading for the key takeaways from the episode or 🎧 listen to the full podcast here.
How did Ben Borodach develop his entrepreneurial spirit?
Ben's journey to entrepreneurship began unexpectedly during his university years. Raised by two attorney parents, he originally envisioned a career in law. However, his path took a turn when he audited a class called "Ready, Fire, Aim," taught by Larry Lenahan, a professor and venture capitalist. This class, which focused on practical market engagement over traditional business planning, sparked his entrepreneurial spirit. His team won a competition in the class, earning a symbolic investment to start their venture in marketing automation.
This initial success led him to recognise the value of real-world experimentation and learning from mistakes. Despite early achievements and opportunities for further funding, he and his partners decided to pause their venture, prioritising learning over immediate growth.
Subsequently, Ben joined Deloitte Consulting, where he applied his entrepreneurial insights to assist major financial institutions like Citi and AIG. This experience allowed him to understand large-scale business operations and the intricacies of financial services.
Seeking to merge his interest in technology with entrepreneurship, He later joined Teammate, a venture fund focusing on cyber Fintech and health tech. Here, he contributed to developing groundbreaking projects, such as Curve's multi-party computation technology, which revolutionised cryptocurrency security for enterprises.
Ben balanced his university education with his entrepreneurial ventures throughout this journey, a challenging yet rewarding experience. His parents, initially sceptical about his departure from a traditional professional path, eventually recognised and supported his passion for entrepreneurship. Ben's diverse experiences, combining academic learning, consulting, and venture capital insights, laid a solid foundation for his return to entrepreneurship with the inception of April, an AI-driven tax software company.
Transitioning from startup to consulting: surprising insights
Ben's transition from a startup environment to a consulting role at Deloitte brought surprising revelations. Despite Deloitte's vast size, he found that certain groups within the firm operated with a startup-like approach, allowing for flexibility and independence. This environment enabled him to work on niche strategy projects and gain significant experience early in his career, including starting a venture capital fund and exploring mergers and acquisitions with top executives.
The second surprising aspect was his exposure to the inner workings of large, successful businesses. He observed that even these established companies faced significant operational challenges, dispelling the myth of perfect management in big businesses. This realisation encouraged an entrepreneurial mindset, as it showed that all businesses, regardless of size, deal with complexities and challenges.
Borodach's experiences in consulting, combined with his entrepreneurial spirit, led him back towards entrepreneurship. His interaction with successful entrepreneurs and mentors at Teammate, like Yuval Shahar and Vernon, reinforced his passion for building and creating. These relationships provided valuable insights and a sense of calm amidst the entrepreneurial chaos.
The idea for April, his current venture, stemmed from a focused brainstorming session on the needs of the American consumer. The team identified a gap in the market for comprehensive, personalised digital solutions in finance, especially in tax services. Recognising that tax affects millions of Americans and small businesses year-round yet remains a siloed and backwards-looking process, they saw an opportunity. April aims to integrate tax into everyday financial platforms, providing users with a clearer financial picture and better advice tailored to their needs and life events.
Why is the U.S. tax system so complex?
The U.S. tax system's complexity stems from multiple factors. Firstly, the federated system involves federal and state-level taxes, often operating independently. For instance, living in one state and working in another can result in dual tax obligations, complicating the process for taxpayers.
Secondly, the ever-expanding U.S. federal tax law, which has grown 350% over the past three decades, adds to this complexity. The law now encompasses over a dozen million words, reflecting a vast country's diverse economic and social needs.
Thirdly, the U.S. tax system intertwines taxation with various socio-economic incentives and welfare measures. Instead of a straightforward taxation system, it incorporates credits and incentives for families, veterans, and businesses. This integration results in a tax system that is more than just a means of funding the government, further complicating it for the average person.
Practical examples of tax complexity
- Family and business credits: families receive credits for children or disabilities, and businesses, especially small ones, can deduct expenses. These credits and deductions vary, adding layers of rules and conditions.
- Capital gains and investments: the treatment of stock sales and investments, including short-term and long-term capital gains and tax-exempt municipal bonds, varies, adding another dimension to tax calculations.
- Mortgage interest deductions: these deductions depend on the mortgage size and require itemised expenses, which adds another layer of complexity.
This intricate system demands a sophisticated approach to manage and understand, impacting taxpayers at various stages of their financial journey.
The future of April: focusing on U.S. taxpayers
April's primary focus for the next three years is enhancing U.S. taxpayers' services. The company aims to:
- Expand tax coverage: April is broadening its reach to offer national coverage in the U.S., ensuring more taxpayers can access their services.
- Support various tax use cases: recognising the diversity of tax situations in the U.S., April plans to extend its capabilities to cater to a wider range of tax scenarios.
- Enhance year-round services: the company wants to improve its ability to estimate and optimise user taxes, offering more comprehensive year-round services.
- Embedding in financial platforms: April intends to integrate its services into more financial platforms, making tax services accessible in familiar digital environments.
While watching global trends, April is currently focused on the U.S. market, considering its complexities and the vast array of taxpayer needs.
Challenges in addressing overseas U.S. taxpayers
Addressing the needs of Americans overseas presents unique challenges. Tax situations involving multiple jurisdictions require understanding diverse international tax laws. Additionally, these scenarios often need human judgement, which April's automated and digital system is not primarily designed for. This complexity makes it more suitable for accountants and professionals to handle these cases than a fully automated solution.
Influence of investment experience on entrepreneurial journey
Ben's experience in investment and founding roles has significantly influenced his approach as an entrepreneur. This dual perspective has provided him with valuable insights:
- Exposure to diverse business scenarios: his investment background allowed him to observe various companies and founders, learning from their successes and challenges.
- Strategic decision-making: this experience aided him in selecting projects with large market potential and technological shifts, like April.
- Choosing the right team: emphasising the importance of a strong founding team, he highlights his partnership with Daniel, a skilled technologist and co-founder.
- Understanding fundraising dynamics: his investor experience helps him navigate the fundraising landscape and understand what investors seek in a venture.
- Tailoring business strategies: he emphasises the need for businesses to adapt their strategies based on specific market conditions and business models, especially in venture-backed environments aiming for hyper-scale.
- Navigating industry trends: Ben advises against following an industry herd mentality, instead focusing on making strategic, well-informed decisions that align with long-term business goals.
This blend of investment and entrepreneurial experience has equipped Ben with a unique skill set, enabling him to navigate the complexities of building a scalable, successful business like April.
The importance of real-world experimentation
In conclusion, our exploration of Ben's entrepreneurial journey and April's mission reveals valuable insights into the dynamic world of modern entrepreneurship and the complexities of the U.S. tax system.
Ben's path from a law-focused background to becoming a trailblazer in Fintech demonstrates the power of innovation in reshaping complex systems. His story emphasises the importance of real-world experimentation, learning from mistakes, and maintaining a passion for entrepreneurship.
Transitioning from startup to consulting at Deloitte offered surprising insights, showcasing that even large businesses face operational challenges. This experience reinforced his entrepreneurial mindset and contributed to his return to entrepreneurship with April.
The complexity of the U.S. tax system arises from federated taxes, evolving federal laws, and intertwining socio-economic incentives. Practical examples further illustrate the intricate nature of the tax landscape, highlighting the need for a sophisticated approach.
Looking to the future, April's focus on enhancing services for U.S. taxpayers demonstrates a commitment to addressing the complex needs of the American market. Challenges in addressing overseas U.S. taxpayers underscore the importance of understanding diverse international tax laws.
In a rapidly changing financial landscape, Ben Borodach and April are inspiring examples of innovation, adaptability, and a relentless pursuit of simplifying complexity for the benefit of individuals and businesses alike.
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