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As an early employee, Enrico Palmerino helped bootstrap SmartBooks, a software-enabled accounting business to $3.1 million in revenue. In 2014, SmartBooks ranked No. 700 on the Inc. 5000, with 646 percent growth over three years. Palmerino says the Boston-based company employs about 40.
Now he is the lead investor in botkeeper, a Boston-based startup that has the technology he's betting could replace the kind of book-keeping SmartBooks does--which is basically the same kind of bookkeeping small businesses have relied on for decades. Palmerino and managing director Louie Balasny developed the decision trees on the back end. They contracted out development to a Cambridge software shop, Rabbitsoft.
"I basically realized 80 percent of what we do could be automated," said Palmerino.
Botkeeper's accounting software integrates with Quickbooks, Expensify, Tsheets and other business software, using automation in place of bookkeepers to generate reports on spending and revenue. It handles business' bookkeeping all the way up to a certified public accountant (CPA), who checks in periodically to make sure the bot isn't making errors. The good thing about a bot's errors, Palmerino said, is they tend to be consistent, so it's possible to fix them retroactively. The app is SSAE 16 compliant, Palmerino said.
Botkeeper isn't taking business from SmartBooks, for now, Palmerino said. It's looking for clients at WeWork Boston, where it's based: Startups and others who want weekly, even daily insight into their expenses, but couldn't hire a full-time CFO or bookkeeper.
"We don't want SmartBooks clients," he said. "We're not really in that space. We want to help build out pre-revenue. I think once you get into competing in SmartBooks' space, these guys want more human contact."
So far, botkeeper has about 15 clients, each paying $200 to $400 a month. Palmerino says he believes these particular clients would prefer less human interaction. "Everything's mobile," Palmerino said. "And they don't ever want to talk to a bookkeeper."
Right now, SmartBooks isn't going after the pre-revenue client at WeWork, Palmerino said. But at some point, "It will cannibalize my other business," he acknowledged, "but it's worth doing it to start fresh." Palmerino's first company was a software-enabled lighting designer, manufacturer and installer called ThinkLite.
Much like SmartBooks, botkeeper will be bootstrappable, Palmerino said--to a point where it may raise capital to go and buy CPAs out of their business, replacing the bookkeeping grunt work some CPAs do with their software. That's a model not unlike what Compass, a New York-based real estate software startup, is employing.
I asked him what that does to the 40 employees at SmartBooks. Palmerino said for the roles he's replacing--the human bookkeepers--the impact is muted. "It was hard to find talent at SmartBooks," he said. As far as bookkeeping goes, "People don't study it any more," he said. "And if they do it, they do it part time."
Editor's note: An earlier version of this story mis-stated Palmerino's role at SmartBooks. Due to information that came to light in July 2016, he is now listed as an early employee, rather than a co-founder.
