The headline in The Economist earlier this year read: "New business formation in America goes bezonkers."
That kind of says it all, but behind it are metrics like this: The number of new businesses being formed from the second half of 2020 through May 2021 was the highest level dating back to at least 2004, when the National Bureau of Economic Research started tracking such statistics.
That means a whole lot of business filings, not to mentions countless founders and owners learning the ropes. And Austin-based ZenBusiness Inc. is capitalizing on it. The startup, which helps people form businesses, manage back office operations and comply with regulations, has been on a tear, and announced Nov. 8 it raised a massive $200 million funding round to help it catapult to a new level.
The new funding round was led by led by Connecticut-based Oak HC/FT, which specializes in fintech. Others investing included SoftBank Vision Fund 2, as well as earlier investors Cathay Innovation and Greycroft. The new round gave ZenBusiness a $1.7 billion valuation, making it Austin's latest startup to earn unicorn status. It has now raised $275 million in total venture funding.
Founder and CEO Ross Buhrdorf said the company plans to use the investment to add new offerings to its platform, including the introduction of a credit instrument, and to continue its hiring spree.
ZenBusiness currently employees more than 250 people, up from 150 a year ago when it raised its $55 million series B round. Of the total, about 160 are based in Austin. But the company has no office — it's entirely remote.
"We're continuing to grow and hire as fast as we can," Buhrdorf said. "I don't know if we're the fastest growing company in Austin, but we've got to be close to that."
The nine-figure funding round adds to a banner year for Austin venture capital. Through the third quarter, companies based in the Austin area reported raising about $3.8 billion across 265 deals, according to PitchBook/National Venture Capital Association — already well surpassing the record $2.25 billion raised in 2020. Companies with nine-figure raises in Q3 were Icon Technology, which scored $207 million, and Elligo Health Research, which raised $135 million in conjunction with an M&A deal.
ZenBusiness, founded in 2017, sees its remote nature as an advantage in hiring.
"This gives us access to more and more high quality people that want to work for a company that they can be guaranteed is always going to be a remote company," he said.
Its fundraising efforts were also largely remote.
"We did this all remote like we did with the previous raise," he said. "The lead from Oak HC/FT came down to Austin, and we met at my house in downtown Austin. It has become the de facto corporate headquarters because we don't have a corporate office."
While nothing perfectly replicates face-to-face meetings, Buhrdorf said he's a fan of operating over video calls, especially for fundraising.
"I prefer it because I don't have to live on an airplane for three months or live on the West Coast or East Coast for three months," he said. "But I'll tell you, it's permanently shifted. This is just another example of how the world has permanently shifted, in that you can do this all remote. Our company's 100% remote, so it's second nature for us to use video to do everything."
Its newest remote assist comes from billionaire entrepreneur Mark Cuban, who lives in Dallas. ZenBusiness brought the "Shark Tank" host on as its spokesman on a two-year deal.
"We sat down and we said, 'Gosh, who would be the best spokesperson we could think of?'" Buhdorf said. "And the team came up with Mark Cuban. I reached out to Mark in my network, and we had some conversations. He loves the product and is sold on it, and he's using it with his companies, and that's where it started and ended. It's just that simple."
The startup is a public benefit corporation, a distinction that requires it to consider impact on all stakeholders and have a well-defined mission. The company says more than 40% of its employees are women, and that 40% of managers are women. It also notes that 35% of employees self-identify as a non-white race/ethnicity.
ZenBusiness declined to share revenue figures, but the company noted its platform has grown more than 400% since March 2020, and it has helped 200,000-plus people with business formations.
"You don't get a unicorn round valuation without having fantastic growth," Buhrdorf said. "We've just had this rocket ship-like growth, which is a result of being in the right place at the right time with the right solution."
Buhrdorf is no stranger to building a unicorn startup. He's one of the co-founders of HomeAway, the short-term property rental company that was acquired by Expedia for $3.9 billion in 2015. He sees some parallels between the two businesses.
"Like HomeAway, we're creating a new vertical," he said. "The service industry is the major sector in the global economy, and we provide everything in that sector to get a company up and running and making money — launch, run and grow their business. We provide all of the marketing, the website, email, domain, and a big part of what we do is the whole fintech solution: invoicing, banking, merchant accounts, expense tracking. It's this curated solution, all in one spot ... where folks don't have to worry about this headache-inducing paperwork or back office stuff. We handle that for them."
An earlier version of this story incorrectly identified the company's status as a public benefit corporation.
