Prosaic co-founders Rowan Oulton (left) and Nick Houldsworth.
It was one job that everyone was happy for AI to take.
Last year, Nick Houldsworth and Rowan Oulton landed $25,000 in Callaghan Innovation funding, their own savings and AWS start-up credits to develop Prosaic, their app that uses artificial intelligence to automate the process of hunting down GST expenses and income tax credits.
They’ve since signed up pilot customers through three partner accounting firms (Connected Accountants, Fantail Finances and Rightway) and it’s just gone live on Xero’s app store for end users to download, priced at $10 per month.
The founders have started hiring staff, and raised $700,000 in seed money for further expansion.
The sum is modest, but Prosaic has drawn backing from some key names on the NZ tech scene, teeing it up for a much more substantial Series A round that would involve institutional investors.
Prosaic has drawn four local backers:
There are also two overseas investors:
Prosaic’s founders already know their way around start-ups. The pair met while working at Vend, where Houldsworth was chief marketing officer and Oulton lead engineer.
Houldsworth went on to become Xero’s executive general manager of ecosystems (a position that brought him into contact with Wood and McDonald), before becoming involved with multiple startups as an investor and director, while Oulton did a tour of duty at fast-growing Slack.
Houldsworth says Prosaic, aimed at accountants, small businesses and sole traders connects to personal bank, card, and mortgage accounts, using AI to find and code business expenses like home office and motor vehicle automatically. Expenses can now be instantly shared with Xero, thanks to recently introduced direct integration - introduced just last week - or directly with your accountant to claim tax deductions and complete GST returns.
“We don’t yet have a native or direct integration with Hnry, but we’ve developed a way to post expenses into Hnry via Zapier,” Houldsworth said. That involves a couple of extra hops after installing the Zapier app.
Like a host of other fintech firms, Prosaic is keen on open banking - or a series of reforms that will allow third parties to directly access your banking data. Houldsworth says read-only access will be more streamlined and secure.
Today, thanks to “banks dragging the chain” on open banking, as Herald financial columnist Diana Clement put it, various apps have to use so-called screen scraping services as a workaround. Open banking should open the door to making things easier for apps, allowing them to add new features.
Egged on by Commerce and Consumer Affairs Minister Andrew Bayly, the major banks implemented a series of technical and policy reforms in March to help smooth the way towards open banking. Open banking proper should begin after further work due to wrap up at the end of November (with the exception of Kiwibank, which is on a two-year delay).
The process is underpinned by the Customer and Product Data Bill, driven by Bayly and introduced to Parliament in May. Once passed the legislation will allow consumer and small business customers to require entities holding their data - such as a bank - to share that information with certain third-party service providers, such as fintech apps.
But some of the “when” and the “how” is still down to industry self-regulation. Houldsworth says he’d prefer everything to be mandated, as in the UK and Australia, which are ahead of NZ on open banking. Bayly has said he’ll weigh options for further regulation if banks don’t hit their November milestone.
The major banks, which are co-ordinating their open banking reforms through Payments NZ’s API Council, say it’s complex work meshing different systems, and that to rush the process could compromise security.
“[Open banking] has really progressed in the UK and Australia,” Houldsworth says. “In some ways we’ve chosen the hardest market to start in, because New Zealand is the furthest behind.”
It’s a tough time for early-stage firms, with the venture capital industry laid low by high interest rates, and many sole traders averse to buying new software in the midst of an economic slowdown. To boot, new Technology Minister Judith Collins axed funding for the $11m KiwiSaaS programme designed to help cloud software startups like Prosaic, and has cut back Callaghan and (like the Labour-led Government before her) declined to top up the now exhausted $300m, Crown-backed Elevate venture capital fund.
Houldsworth is unfazed. “A recession can be a great time to found a startup,” he says.
Markets are primed for disruption, and Prosaic hopes to lure those doing it tough with the promise that its existing clients are finding an extra $150 per month in savings.
And at the end of the day, the regulatory and political landscape in NZ is by-the-by. Prosaic plans to make most of its money offshore, all going to plan.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
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