Last spring, corporate ID startup Middesk was helping small businesses apply for Paycheck Protection Program (PPP) loans as lockdowns induced by Covid-19 troubled the entities. While the founders of Middesk couldn’t predict this use case when they launched the business in 2018, helping these organizations verify their identity to secure these loans fits perfectly with the startup’s mission to help. small businesses to more easily access necessary services and manage regulatory risks.
Founders Kyle Mack, CEO, and Kurt Ruppel, CTO, came up with the idea for Middesk when they worked at a startup with a similar flavor, Checkr, which verifies the identity of gig workers for clients like Lyft. and Instacart. Each time they took on a new client, the process of verifying the company’s legitimacy was arduous. “This created a long lead time for newly formed and smaller businesses,” Mack said. Forbes. “[Our] The idea was to create a product that would make it very easy for small businesses to access all the services they need when there is a regulatory component.
Middesk’s flagship identity product is used by banks and financial services companies like Plaid to help small businesses more easily obtain services like a bank account or credit card. While traditional databases in this space can date back to the 1800s, Middesk provides a more up-to-date database of potential business clients, including incorporation documents and tax identification numbers of over 75 million. ‘companies. Middesk’s revenue increased fivefold last year, Mack says, though he declined to share details. This growth prompted the startup to raise a $ 16 million Series A led by Sequoia with participation from Accel and Y Combinator, bringing its total fundraising to $ 20 million.
Sequoia, which also funded Middesk’s seed cycle, believes the company will define a new category within the business infrastructure around verification and trust, said Partner Stephanie Zhan. Forbes. After Covid, Sequoia doubled down. “Small businesses are the heart of the US economy. There are over 30 million in the United States, but many are struggling to access the financial resources they need to work together, ”Zhan said. “We believe there is a huge opportunity ahead to create a whole new category around corporate identity.”
In addition to fresh funds, Middesk announces the launch of a new product that will help businesses more easily register tax accounts with state governments; it currently operates in 35 states. Macks says this service is particularly critical now with many employees working remotely. If a business hires someone in a different state than where it is headquartered, it needs that state’s tax account before that new hire receives a paycheck. “Each year, about 50% of annual net job creation comes from new businesses and small businesses,” says Mack. “We see this really great opportunity emerging from the pandemic. We believe that many companies will hire employees in a new state. “
Covid-19 has highlighted the need for resources to help small businesses, which have grown despite the pandemic. More than 4.3 million new businesses filed with the Internal Revenue Service for 2020 employee identification numbers, up 18% from 3.5 million in 2019. Middesk was able to help 200 000 businesses in 2020 and has already surpassed that total in 2021, with Mack setting its goal of helping 1 million customers by the end of this year.
“There are currently two to three times as many new businesses created compared to the monthly average for years,” says Mack. “There’s this huge wave of entrepreneurship coming out of Covid and we’re making sure we can help them. “