Railz: Accounting Data-as-a-Service

A crucial, disruptive infrastructure layer for the next generation of enterprise fintechs

Originally published on my Substack September 2, 2020

Spreadsheets are one of my bugbears. While intuitive and versatile for straightforward tasks, they are an inferior tool for data storage, analysis, and visualization. Saving vital business data in a crash-prone file format which is altered by the slip of a finger is archaic, especially when we have to pay for the privilege and there exist so many elegant alternatives: S3 for cloud storage, Pandas for data frames, ggplot for plotting, or Keras for neural networks among others. And yet every time I (or anyone else for that matter) need to look at a new business, I start with these hateful applications.

But we have reason to be optimistic. Enter Railz, one of our newest investments in data infrastructure that financial services has been desperately lacking.

Most small businesses use their accounting software as a single source of truth for tracking and planning purposes, yet this data remains static and is generally shared (with investors, accountants, or bankers to name a few) via a spreadsheet attachment in an email after being downloaded from the accounting system. It has been impractical to send the data in any other form because it would rarely be understood by the second party. The explanation is severalfold:

• Businesses choose from a variety of accounting SaaS platforms.
• Accounting conventions vary across businesses.
• There are multiple accounting standards which vary between nations.

This is where Railz comes in. The Company’s technology ingests data directly from accounting platforms, cleans, normalizes, enhances it, and then makes the data available to a third party in a consistent format via their commercial API. Simple enough to explain but incredibly difficult to solve.

Fortunately, Railz has the team to do it. They’ve a multiple time product CEO in Sohaib Zahid who is joined by his Co-Founders Derek Manuge (CTO), and Ron Benegbi (President and CRO). Derek is a PhD level mathematician who led multiple quantitative risk, pricing, and fraud teams at both KPMG and ScotiaBank. He understands the use-case intimately and is one of the few individuals with the necessary expertise to conquer the technical challenges involved.

While there are obvious efficiency gains for tasks like credit underwriting and audit, the potential for new applications is what truly excites us (think about the number of mobile apps that spawned from Plaid). Consider how many business customers some of the largest accounting SaaS providers currently have: Quickbooks 4.4 million, Sage 3.0 million, and Xero 2.0 million, to name a few.

By building on Railz, there’s an opportunity for a new generation of B2B fintechs to provide products and services to these millions of customers. I believe this could be the most impactful fintech platform since Plaid (for more on quantifying fintech platform shifts, see Matt Harris’ terrific essay).

We are thrilled to have led Railz’s seed round and have been joined by some wonderful investors at Entrée Capital, NYCA, and Global Founders Capital. We know the road will have its bumps but suspect the destination will be well worth the hazard.

P.S. If you or anyone you know is building (or wants to build) an application layer on top of Railz to help investors and private companies collaborate with business data, I’d love to talk to you!