548th 1Mby1M Entrepreneurship Podcast with Lloyed Lobo, Co-Founder of Boast.ai (Part 2)

Lloyed Lobo: R&D tax credit is a beachhead for us. My co-founder used to run this at KPMG. He was a manager at the R&D tax credit team. He said that it’s a manual and broken process. At the end of the year, we would go to companies and say, “Give us your shoebox.” But that shoebox is not just your receipts; it’s everything you did in R&D.

It’s very hard for engineering managers and CTOs to remember the work they did in product development that meets this criteria. The four big accounting firms would leverage the R&D tax practice to do digital transformation consulting. Our beachhead is that we’re automating these R&D tax credits. Now we’re sitting on this data. What else can we unlock? Those are the some of the upsell products we have.

Sramana Mitra: Talk to me about what can be had as R&D tax credit. Our world is relatively small companies building products. What can you get as tax credit?

Lloyed Lobo: If you’re in the US with less than five years of revenue, you can get about 10% of your product development spend as a cashback. Let’s say you’re spending a million dollars in R&D, you can get $100,000 in R&D credits that offsets your payroll taxes. That’s a very simple way to put it. Every State has a program, but most States are not refundable. It was the Federal I talked about.

Let’s assume you’re a startup in Canada. The Canadian government gives you 64% of your R&D spend as a cashback. We eat our own dogfood. I’m based in the Bay Area. We have about 70 people in Canada. The Canadian government is very lucrative in terms of R&D incentives. If you’re spending a million in R&D in the US, you’re getting $100,00. In Canada, you’re getting $640,000. Most companies are not even 5% to 10% net profit.

Most startups are zero. If you had to put $100,000 on your bottom line, you’re going to spend all kinds of money to do that. UK, Australia, France, New Zealand, Ireland all have tax credits north of 30%. In a sense, the US has the worst R&D tax credit program.

Sramana Mitra: Let’s talk about your entrepreneur journey. Where did you start? How did this come together? 

Lloyed Lobo: My co-founder and I studied engineering together. We were partners in every project. After engineering, he got in J&J’s engineering leadership program. Then he did a startup that failed. After that, he felt he needed to study accounting. His unique combination of accounting and engineering took him to the tax credit world because it’s not an accounting problem; it’s an engineering problem.

I pretty much only worked at startups. I worked at two venture-backed startups in product and growth. They weren’t successes. I did a couple of other companies. I did Automatically, which was AI for customer service built on top of Zendesk. That failed. Then I did an AI for sales. It was incubated by Bessamer Ventures. That failed. Alex and I got together and he said, “There’s this big problem here. You can use that as a beachhead.”

I was coming from that AI realm. Data is gold here, because no company stitches technical data with financial data. If we’re able to stitch them together, R&D incentives is the first thing. You’ll start unlocking more and more value. That was the mission. We incorporated in 2017. Alex, my co-founder, had a consulting firm. After KPMG, he was doing tax credit consulting. I was a partner in there while I was doing other projects.

We had this market validation. Do something manually before you start building software. The best way is to deliver the service manually and see if customers are happy. We had a number of customers. It was very easy when we incorporated Boast.ai. We moved the customer.

This segment is part 2 in the series : 548th 1Mby1M Entrepreneurship Podcast with Lloyed Lobo, Co-Founder of Boast.ai
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