In the latest sign of the explosive growth of one-person businesses, Collective, an AI-powered back-office platform for solopreneurs, just raised $50 million in funding.
The San Francisco startup provides business formation services, S-election, payroll, tax, and bookkeeping services for one-person businesses and a personal dashboard to manage their finances.
Since it was founded in 2020, the company says it has built a waitlist of nearly 100,000 businesses.
“We need to continue to build the platform and scale our operations to handle the demand,” says CEO and co-founder Hooman Radfar. “The space is growing quite dramatically.”
Investors in Collective include Gradient Ventures, Google’s AI fund, Innovius Capital, The General Partnership, General Catalyst, QED, Expa, and Better Tomorrow Ventures, as well as Ashton Kutcher.
The company has raised $82 million in total and says it has increased revenue by 10x since its Series A round in 2021.
CEO and co-founder Hooman Radfar says Collective will use the investment to accelerate the use of AI in its operations.
Collective is using technologies such as Large Language Models (LLMs) to build AI “copilots” to support its team of tax experts, accountants, bookkeepers, and relationship managers. The professionals can use these copilots to whittle down the time they spend on tasks such as bank reconciliation and expense categorization, allowing them to devote time to other business activities. The tool for expense reconciliation reduces the time required by 90%, Radfar says. For reconciliation, the time spent dips by 70%.
Collective plans to create additional AI tools as it scales up, according to Radfar. “It’s unbelievable how good some of this stuff is,” says Radfar. “It’s going to change the game for us and our members.”
The U.S. Census Bureau has found the number of new business applications has remained high since the pandemic, with 436,048 applications submitted in May 2023 alone in the U.S.
For Collective, investing its funding in AI and other new technologies will provide a glimpse of the future of the one-person business—a future driven by rapidly accelerating individual productivity, according to Radfar.
“This not only helps us make our platform better to serve our members but also gives us a lens to see the future for how our members themselves can create value for their customers,” he says.
Radfar believes that, owing to new technologies like AI, the day will arrive when a one-person or very small business will reach a $1 billion valuation.
“It may seem like science fiction but a smart business owner could rely on a workforce primarily made up of different AI-driven applications and maybe some contractors—and create tremendous value,” says Radfar. James Taylor, a global speaker on creativity, has described the trend toward this type of human + machine collaboration as “super creativity,” and has predicted it will transform the world of work in the future.
Ultimately, Collective aims to expand its services through partnerships to help the self-employed by providing access to benefits such as healthcare and financial services that are hard for the self-employed to access affordably.
The thinking, says Radfar, is “We have thousands of members, so how can we turn that ‘collective,’ if you will, into a tool for the individual who’s in our membership?”
Read the full article here