We often hear about embedded finance when brands and non-financial firms want to offer financial products or services – similar to banking, insurance, credit and payments – to provide a higher customer experience.
Layer is based on a higher user experience, but with built-in accounting. Its clients include clients similar to Square and Toast, which work with small and medium-sized businesses to offer accounting and bookkeeping functions in their very own products. These larger firms embed Layer tools into their platform so that small businesses can use them.
SMBs can now access the accounting and bookkeeping tools on the Square or Toast platforms they use to run their businesses. This is done as an alternative of using separate accounting software, similar to QuickBooks, to manage your organization’s funds.
Justin Meretab, a former product leader on Square’s Banking team, founded San Francisco-based Layer in 2023 with Daniel O’Neel, a former engineering leader at Wealthfront. Their goal was to create a set of APIs that might enable the platform’s customers to push data from small business customers to the layer. Layer then provides connections to external bank and bank card accounts to retrieve data and upload it to Layer’s general ledger and account system. This allows small businesses to then build a complete picture of all their financial data.
In some ways, a layer is similar to a unit or check, but it is intended for accounting in small and medium-sized businesses reasonably than banking and payroll. In fact, the company intends to completely replace legacy accounting and bookkeeping platforms like QuickBooks, Meretab told TechCrunch.
So did investors laugh at them when they explained how they wanted to replace QuickBooks? Type.
“Many investors we spoke with told us this is a lofty goal considering how much QuickBooks currently dominates the small- and medium-sized business accounting market,” Meretab said. “But they also agree with our core belief that there has been a fundamental shift in the way small and medium-sized businesses do business that now makes it possible to disrupt the QuickBooks moat.”
Meretab further explained that over the past few years, platforms like Square, Toast, and Shopify have develop into the hubs where SMBs run their businesses. These platforms have built deep relationships with these customers and, as a result, increasingly help them manage all their day-to-day operations.
Meretab worked at Square for six years and heard from customers that they wanted to do their accounting directly on these platforms reasonably than using separate tools. He and O’Neel talked to potential customers and learned that building this type of built-in accounting function in-house could be difficult, so they did.
The layer is not alone here. There are several firms that provide embedded accounting for small and medium-sized businesses, similar to Hurdlr and Fiskl. Meretab, nonetheless, said Layer stands out because it focuses on creating comprehensive accounting products, without requiring customers to do much of the work themselves or without even having to understand how accounting works.
The company has a small group of early customers, 4 in fact, who have launched their very own accounting products for small and medium-sized businesses on their platforms. Customers serve a wide selection of small and medium-sized businesses, from truck drivers to medical spas, and collectively work with greater than 100,000 small businesses.
“One of the surprises was that many SMB users found that our built-in accounting views saw a clear picture of their business’s profit and loss for the first time,” Meretab said. “Many people have tried using separate accounting software but found it too complex or difficult to synchronize with their main operating software.”
Layer’s different approach also attracted investors. Better Tomorrow Ventures invested $2.3 million in the company on a pre-seed basis and was joined by a group of executives from firms including Square, Plaid, Unit and Check.
The company plans to use the latest funding this 12 months to expand its services to additional small business software platforms. It may also expand its four-person team to include engineering and operational positions.
“Our goal this year is to significantly grow our customer base, perhaps tripling our customer base, and scale our revenue,” Meretab said.