Epoch Integration co-founders secure funding to simplify tax prep with Blackspark

The team that sold Epoch to BlackBerry is back to offer something better than “upload and pray” tax solutions.

Toronto-based FinTech startup Blackspark has secured $593,000 CAD in seed financing to fuel the development of its tax preparation platform.

Blackspark aims to fix what co-founder and CEO Ray Tavares describes as a “broken [tax filing] process that leads to inefficiency and excessive costs.” The company is led by the team behind Epoch Integration, which was acquired by Research In Motion (now BlackBerry) in 2006.

”The biggest pain point for these stakeholders in tax preparation is getting data from customers in an orderly, standard way.”
-Ray Tavares, Blackspark

In an interview with BetaKit, Tavares said he sees an opportunity to offer something better than existing “upload and pray” solutions, many of which rely heavily on manual entry and back-and-forth communication to standardize customer data.

After developing the customer data intake side of its platform to help address this issue, Blackspark has raised fresh capital to fuel the development of its calculation software to prep and automatically file returns, which the startup hopes to roll out for the upcoming 2021 tax season.

Blackspark’s all-equity December seed round was led by Tavares, and saw participation from return investor Joe Rooney (partner at Toronto’s Ewing Morris & Co. Investment Partners) and six new undisclosed angel investors, including one who previously worked with the company’s team at Epoch. The new capital brings Blackspark’s total funding to $1.88 million.

“We didn’t want to go out for VC funding too early,” said Tavares, who emphasized that Blackspark plans to have its tech and full solution ready before bringing in bigger investors and raising a larger amount. “We wanted to make sure that we stay closely knit with friends and families and angels and not give up too much of the company to get to this point where we can really use that [kind of] funding to scale.”

Blackspark was founded by Tavares and Managing Director of Client Services Vic Arora — a registered CPA and CA — in 2010. Tavares and Arora previously co-founded Epoch Integration with Wally Trenholm, while Blackspark CTO Charles Baptiste worked with Epoch as director of software development.

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Epoch provided IT instrumentation and monitoring for the back-end BlackBerry enterprise server system — the software RIM deployed within large organizations. According to the Blackspark CEO, the tools Epoch built were “much-needed” by RIM’s customers, so much so that RIM decided to bring them in-house by acquiring Epoch in 2006.

Following this exit, Arora did consulting work for Big Four accounting firms, then got into the idea of doing payroll compliance from a multi-jurisdictional perspective, launching Blackspark.

Blackspark got its start focusing on payroll compliance, building up a paid customer base of Fortune 500 and multinational companies before deciding to pivot pre-pandemic after realizing that its tech could be better applied to “a larger market.” According to Tavares, “that’s what led us into consumer tax.”

“We had a lot of contacts in the tax industry, especially here in Canada because of Vic’s background, but also because of our work in payroll and tax compliance,” said Tavares. “And so we started really talking to those people … and pretty much unanimously, the biggest pain point for these stakeholders in tax preparation is getting data from customers in an orderly, standard way.”

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According to Tavares, when tax data is not standardized, “it’s horrendous.” Non-standardized data requires “a lot of back-and-forth” communication between tax prep professionals and taxpayers and manual entry.

Tavares claims that most existing solutions like H&R Block involve taxpayers sharing their data with tax prep professionals via some sort of dropbox. This approach places a burden on taxpayers to determine what information is relevant.

“I call those solutions upload and pray,” said Tavares. “They dump it all in this folder … and then they pray, they pray that they haven’t overlooked any detail that they need, they pray that they’re going to get a competent and responsive professional on the other side, that’s actually going to take that information and do the return properly. And then, lastly, they hope and pray that at the end of the tax season, they’re not going to get a huge inflated bill for all of these mundane and routine tasks the tax professional had to do to sort through the information.”

Joe Rooney believes Blackspark has the potential to “revolutionize” the tax industry.

According to Tavares, “you’ll never achieve true automation on a large scale that way — it’s fundamentally impossible because the data is not in a format that can enable the automation.”

“My decision to invest was based on the experience of the team and their unique perspective on difficult problem in antiquated industry,” Rooney told BetaKit, adding that he believes Blackspark has the potential to “revolutionize” the tax industry.

Blackspark first launched its paid, patent-pending tax prep solution in early 2021 for the 2020 tax year. Thus far, Blackspark has built the up front part of its system, the component that collects data from taxpayers in a standardized way. After last tax season, Blackspark began working on the “second phase” of its offering: its own calculation software, which will take that data and prepare and file tax returns automatically.

“That’s where we are now,” said Tavares. “Hopefully we’ll be finished in time so that this tax season, we will do the whole process, automated, from beginning to end.” Blackspark aims to have its full platform ready “by mid to late March.”

For now, the startup’s focus is on Ontario, which Tavares highlighted represents a sizeable market on its own with roughly 13 million electronically filed tax returns per year. Blackspark is testing out its solution by selling directly to consumers to start, before executing a planned shift over to a business-to-business model, and expanding across Canada and potentially into the United States.

Feature image of Vic Arora and Ray Tavares, courtesy Blackspark.

Josh Scott

Josh Scott

Josh Scott is a BetaKit reporter focused on telling in-depth Canadian tech stories and breaking news. His coverage is more complete than his moustache.

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