Hudson Bova is the top finance leader at the AI-assisted tax compliance software company Numeral, which playfully dubbed itself “the world’s most boring AI company” on a billboard ad that went viral.
When Bova joined the San Francisco-based startup a little over a year ago, he took the finance reins from a fractional controller: Moving into the routine, and some might say boring, nitty-gritty work of organizing and formalizing the company’s finance function. He spent much of his first year building forecasts, a five year budget plan and putting together comprehensive data packets to help prospective investors understand the company.
“I think the first step for a finance leader to come into this role was really to put definitions in place, develop a standard and really assess the systems to make sure data coming out of the systems are accurate and reliable going forward,” Bova said.
As VP of finance, he now oversees a six-person finance team with two branches: A controllership and accounting function with accounts receivable and accounts payable rolled in as well as a strategic finance arm. The company does not have a CFO.
All of that work paved the way for the company to raise about $100 million in a series C funding round announced last month. One of the key elements of the process was carefully defining the metrics the company used to tell its story to investors.
Bova has a strong background in finance. He joined Numeral from Pilot.com, where he was most recently GM and director of CFO Services for the provider of back-office financial services and bookkeeping. Earlier in his career, he worked in investment banking at Morgan Stanley, according to his LinkedIn profile. He holds a bachelor’s degree in applied economics and management from Cornell University and an MBA from Columbia University.
Finance leaders looking to raise funds need to be prepared for investors who will question and scrutinize metrics as you define them, he told CFO Dive in an interview. “They want to make sure that your definition of [annual recurring revenue] aligns with their understanding of what recurring revenue is, so you want these definitions to be broadly aligned with what you think the market will accept,” Bova said.
It’s not always that simple. Take annual recurring revenue, a favorite metric in early stage software-as-a-service companies which need to give investors a clear picture of sustainable income. Its application varies from company to company, with firms spelling out their definitions in their documents, and there is no generally accepted accounting principles guidance governing it, Bova said.
“You try and put your investor hat on because you obviously want a definition that makes sense and that is defensible that you can report,” Bova said. “If I put this definition in front of an investor they have to say, ‘Oh yeah that makes a lot of sense, and that is a defensible real way of reporting on ARR.’”
At Numeral, the company strived to isolate repeated usage-based revenue streams from isolated one-time revenue, he said. They addressed it by being specific about their ARR expectations for different products.
For example, the company typically charges customers $75 per tax return filed via its system, plus a one-time $150 registration fee. That filing revenue stream doesn’t vary much from one year to the next so it is comfortable forecasting that it will recur. However, Numeral declined to share their ARR data with CFO Dive.
For AI companies, the other part of the preparation for fund-raising is figuring out how to answer one of the toughest questions that fast-changing technology always raises.
“The existential question a lot of investors are asking is, ‘Why won’t AI eat the AI company you’re building?’” he said. “That is a question we got from a lot of investors.”
Bova’s answer goes back to the timing of the company’s founding. In 2018, the U.S. Supreme Court ruling in South Dakota v. Wayfair cleared the way for states to require e-commerce retailers to collect and remit sales tax, CFO Dive sister publication Retail Dive previously reported.
In the last three years, Numeral made early inroads into the growing market to handle all the compliance and tax filings and built relationships with government agencies in every state. Bova asserts that Numeral has “durability” because it has solidified its ties with state tax entities in a system that isn’t easily duplicated.
“States don’t want to work with multiple solutions and we feel like we were one of the select few of those providers chosen to work with across the country,” Bova said.
