Embedded finance is something brands and non-financial companies often hear about when they want to offer financial products and services such as banking, insurance, lending, and payments to provide a better user experience for their customers.
Layer focuses on a better user experience, but includes accounting functionality. Its customers are companies like Square and Toast that work with small and medium-sized businesses to provide accounting and bookkeeping functionality within their products. These large companies will embed Layer's tools into their platforms for use by small and medium-sized businesses.
Small businesses now have access to the bookkeeping and accounting tools within the Square or Toast platforms they use to run their businesses. This is done instead of using separate accounting software such as Quickbooks to manage your business finances.
Justin Meretab, a former product lead on Square's banking team, founded San Francisco-based Layer in 2023 with Daniel O'Neel, a former engineering lead at Wealthfront. Their goal was to create a set of APIs that would allow platform customers to pass data from small business customers to Layer. Layer then provides connectivity to external bank accounts and credit cards to ingest the data and flow it into Layer's ledger and account system. This allows small businesses to build a complete picture of all their financial data.
In some ways, Layer is similar to Unit and Check, but for SMB accounting rather than banking or payroll. In fact, the company aims to completely replace traditional accounting and bookkeeping platforms like Quickbooks, Meretab told TechCrunch.
So when investors explained how they wanted to replace Quickbooks, you laughed them out of the room? of seeds.
“Many investors we've talked to say this is a lofty goal given how much Quickbooks currently dominates the small business accounting market,” Mehretab said. “But they also agree with our core belief that there has been a fundamental shift in the way small and medium-sized businesses operate, making it possible to destroy Quickbooks' moat. ”
The main accounting dashboard is what SMBs see when they access Layer's embedded accounting software within their existing SMB platform. (Image credit: Layer)
Mehretab went on to explain that over the past few years, platforms like Square, Toast, and Shopify have become the hubs for SMBs to run their businesses. These platforms are building deep relationships with their customers and, as a result, are increasingly helping them manage all of their day-to-day operations.
Meretab has been with Square for six years and heard from customers that they wanted to do their accounting directly within these platforms rather than in separate tools. He and O'Neill talked to potential customers and learned that it would be difficult to build this type of embedded accounting functionality in-house, so they did it.
Layers aren't the only thing here. There are several companies that offer built-in accounting for small and medium-sized businesses, such as Hurdlr and Fiskl. But Meretab said Layer differentiates itself by focusing on building comprehensive accounting products without requiring customers to do much of the work themselves or even understand how accounting works. .
The company had a handful of early customers, four in fact, who launched their own SMB accounting products built into the platform. Our customers serve a wide range of small business industries, from truck drivers to medical spas, and we work with more than 100,000 small businesses.
“What surprised us was that many SMB users said that our built-in accounting view was the first time they had actually seen a clear P&L view of their business,” said Meretab. “Many people have tried using alternative accounting software, only to find it too complex or difficult to keep in sync with their main operational software.”
Layer's different approach is also appealing to investors. Better Tomorrow Ventures led his $2.3 million pre-seed investment in the company, with participation from a group of executives from companies including Square, Plaid, Unit, and Check.
The company plans to use the new funding this year to expand its services to additional small and medium-sized business software platforms. It will also expand his team of four people across engineering and business operations roles.
“Our goal this year is to significantly increase our customer base and grow our revenue, including tripling our customer count,” Mehretab said.