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Layer - Square alumnus targets QuickBooks with embedded accounting startup

Layer secures $2.3 million to disrupt the SMB accounting space with platform-integrated tools

The world of embedded finance is booming, with businesses across industries integrating financial services like banking, insurance, and lending into their platforms to enhance user experience. Layer, a San Francisco-based startup founded in 2023, is taking a similar approach but with a twist – embedded accounting.

Layer's embedded accounting solution

Layer caters to companies like Square and Toast, which serve small and medium-sized businesses (SMBs). The startup offers a suite of APIs that allows these platform providers to integrate accounting and bookkeeping features directly within their existing products. This eliminates the need for SMBs to rely on separate accounting software like QuickBooks, streamlining their financial management processes.

Justin Meretab, a former product leader at Square's Banking team, and Daniel O'Neel, who previously held an engineering leadership position at Wealthfront, co-founded Layer. Their vision was to develop APIs that would enable Layer's platform clients to transfer data from their SMB customers seamlessly. Layer then establishes connections to external bank accounts and credit cards, pulling in this data to populate its own ledger and accounting system. This empowers SMBs to gain a holistic view of their financial situation.

Drawing a parallel, Meretab compared Layer to Unit and Check, but with a focus on SMB accounting rather than banking and payroll functionalities. The company's ultimate goal, however, is far more ambitious – to replace legacy accounting and bookkeeping platforms like QuickBooks completely.

Layer founders in front of a computer screen, engaged in a discussion or collaboration.

Investor skepticism and a shifting landscape

Investors initially expressed skepticism regarding Layer's aspirations to dethrone QuickBooks, a dominant force in the SMB accounting space. Meretab acknowledged this but emphasized that investors also recognized a fundamental shift in how SMBs operate, creating an opportunity to challenge QuickBooks' stronghold.

Meretab, leveraging his six-year tenure at Square, highlighted customer feedback indicating a strong preference for managing accounting directly within their existing platforms rather than using separate tools like QuickBooks. Recognizing the complexities of building such an embedded accounting feature in-house, Meretab and O'Neel decided to address this gap in the market.

Layer isn't alone in the embedded accounting space for SMBs. Competitors like Hurdlr and Fiskl offer similar solutions. However, Meretab asserts that Layer sets itself apart by prioritizing comprehensive accounting tools that minimize user effort and don't necessitate a deep understanding of accounting principles.

The company has already secured a small but promising customer base. Four early adopters have successfully launched their own SMB accounting products embedded within their platforms. These customers cater to a diverse range of SMB sectors, from trucking companies to medical spas, collectively serving over 100,000 small businesses.

Meretab revealed a surprising finding – many SMB users reported that Layer's embedded accounting interface provided their first-ever clear view of their business's profit and loss. He explained that prior attempts at using separate accounting software often proved to be overly complicated or challenging to integrate with their primary operational software.

Layer's innovative approach has resonated with investors as well. Better Tomorrow Ventures spearheaded a $2.3 million pre-seed investment round, joined by a group of executives from companies like Square, Plaid, Unit, and Check. The company intends to leverage the fresh funding to expand its service offerings to encompass a wider range of small business software platforms throughout the year.

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