The United States is facing a shortage of accountants. Fewer new candidates took the CPA exam in 2022 than in 2006, according to the American Institute of Certified Public Accountants. One possible reason why people aren't as interested in this field is the large amount of heavy lifting involved: accountants have to sift through large amounts of unstructured data to perform audits or even just to find answers to their questions.
Kevin Merlini, co-founder and CEO of Materia, left the field for that very reason and is now working to reduce that burden for other accountants.
Materia integrates into a company's existing software and workflow applications, such as Microsoft Excel and Teams, to help break down the silos that exist in accounting firms' troves of unstructured data. So you can automate and augment the tedious and mundane parts of an accounting audit so that accountants can focus more on high-risk areas that need special attention. It also offers a way for accountants to easily search your company's data and documents for answers. The company uses generative ai platforms like OpenAI to process information from a company's documents.
“Professional accounting services have been interesting because they've been almost ignored and neglected, so there's a pretty compelling story to tell there,” Merlini told TechCrunch. “There is also a lot of pressure on companies to improve efficiency. There are many PE acquisitions. There are many forces that are encouraging companies to invest in their efficiency and quality.”
The company is coming out of stealth with $6.3 million in funding. The round was led by Spark Capital with participation from Haystack Ventures, Thomson Reuters Ventures, Exponent Capital and the Allen Institute for ai, among others. The company so far has five clients ranging from the top 100 U.S. accounting firms to the top 15, Merlini said, some of which have implemented Materia across their entire audit group.
However, Merlini's journey to launching Materia was not easy. Although he specialized and obtained a master's degree in accounting, he only lasted about four months as an auditor at KPMG.
“If you study accounting, it's actually quite interesting,” Merlini said. “A way is being discovered to bring together all these complex things that happen in a year and reduce them to numbers that can be compared between companies. But when it comes to being an auditor and doing the work at one of the big four (accounting firms), there is a lot more heavy lifting.”
Despite realizing the industry's problems at the time, he worked in technology for eight years before launching Materia. Merlini was a product manager at amazon for over six years and most recently was at Meta working on their large language models and how those models classified journalism.
However, Merlini always wanted to be a founder and the weaknesses he felt in his short accounting career stayed with him. He left Meta in 2022 to figure out what he wanted to build. He came to Materia because he realized that he could solve the problems that existed in accounting with the advances he was seeing in ai.
“It was clear to me that the large language models represented a huge paradigm shift in what was possible,” Merlini said. “I had a decent amount of friends from university who work in accounting services and I had a pre-existing network there and started making discoveries. What are these big pain points and where do current solutions fall short?
Merlini and co-founder Lucas Adams incubated the company at the Allen Institute for ai in the summer of 2022. When ChatGPT began rolling out that same year, they were able to take advantage of the tailwinds of the ai boom.
The company takes safety and accuracy very seriously, Merlini said. Their agreements with OpenAI and other ai companies prevent LLMs from learning from Materia customer questions. Materia also cites where he gets all his information from. So whether the information appears in an audit or in response to an accountant's question, someone can always verify that it is correct.
The startup has been offering an exclusive service to a select group of companies so far, while Materia has been operating in stealth. Now that it has come out of stealth, Merlini said the company is targeting the top 200 U.S. accounting firms to start with plans to work its way down in the future.
“How exciting the opportunity is, not for us as a company but for professionals,” Merlini said. “One of the reasons there is a shortage of people (in accounting) is that there is a lot of attrition. Until recently, this automation was neither practical nor possible. “We are excited to get started.”
