The U.S. is facing an accountant shortage. Fewer first-time candidates took the CPA exam in 2022 than in 2006, in accordance with the American Institute of Certified Public Accountants. One possible reason people aren’t as inquisitive about the sector is the big amount of drudge work involved: Accountants need to rifle through large amounts of unstructured data to perform audits and even just to seek out answers to their questions.
Kevin Merlini, the co-founder and CEO of Materia, left the sector for that very reason and is now working to cut back that burden for other accountants.
Materia integrates right into a firm’s existing workflow software and applications like Microsoft Excel and Teams to assist break down the silos that exist in accounting firms’ troves of unstructured data. Due to that, it could automate and augment the mundane and tedious parts of an accounting audit so accountants can focus more on high-risk areas that need special attention. It also offers a way for accountants to simply search across their firm’s data and documents to get answers. The firm uses generative AI platforms like OpenAI to process information from a firm’s documents.
“Accounting skilled services has been interesting since it is nearly underlooked, and has been underserved, so there’s a fairly compelling story to inform there,” Merlini told TechCrunch. “There’s also a number of pressure on firms to enhance efficiency. There are a number of PE acquisitions. There are a number of forces which might be incentivizing firms to speculate of their efficiency and quality.”
The corporate is emerging from stealth with $6.3 million in funding. The round was led by Spark Capital with participation from Haystack Ventures, Thomson Reuters Ventures, Exponent Capital and the Allen Institute for AI, amongst others. The corporate has five customers thus far that range from the highest 100 accounting firms within the U.S. to the highest 15, Merlini said, a few of which have rolled out Materia to their entire auditing group.
Merlini’s journey to launch Materia was not a straight shot, though. While he majored in and got a master’s in accounting, he only lasted about 4 months as an auditor at KPMG.
“When you study accounting, it is definitely pretty interesting,” Merlini said. “You’re determining a method to bring all this complex stuff that happens in a 12 months and boil it all the way down to numbers that could possibly be compared across firms. But when it got here to being an auditor, and doing the work at a giant 4 [accounting firm], there’s lots more drudgery.”
Despite realizing the industry’s problems then, he worked in tech for eight years before launching Materia. Merlini was a product manager at Amazon for greater than six years, and more recently, he was at Meta working on its large language models and the way these models classified journalism.
Merlini all the time desired to be a founder, though, and the pain points he felt in his short accounting profession remained with him. He left Meta in 2022 to determine what he wanted to construct. He landed on Materia because he realized he could actually fix the issues that existed in accounting with the advances he was seeing in AI.
“It was clear to me that enormous language models were an enormous paradigm shift in what was possible,” Merlini said. “I had an honest amount of friends from college that work in accounting services and had a preexisting network there and began to do discovery. What are these big pain points, and where are the present solutions falling short?”
Merlini and co-founder Lucas Adams incubated the corporate on the Allen Institute for AI in the summertime of 2022. As ChatGPT began to roll out later that 12 months, they were in a position to reap the benefits of the tailwinds of the AI boom.
The corporate takes security and accuracy really seriously, Merlini said. Its agreements with OpenAI and other AI firms restrict the LLMs from learning off of Materia’s customer questions. Materia also cites where it gets all of its information from. So whether information appears in an audit, or as a solution to an accountant’s query, someone can all the time double check that it’s correct.
The startup has been offering a white-glove service to a select group of firms to date, as Materia has been operating in stealth. Now that it’s out of stealth, Merlini said the corporate is targeting the highest 200 accounting firms within the U.S. to begin with plans to maneuver downstream in the longer term.
“How exciting the chance is, not for us as an organization but for the professionals,” Merlini said. “Certainly one of the explanations that there’s a shortage of oldsters [in accounting] is there’s a number of attrition. Until recently, this automation wasn’t practical or possible. We are only excited to start.”
