While Nicholas Rudder was developing his previous venture, an educational platform named ScholarSite, he repeatedly encountered one major obstacle: taxes.
“Marketplaces are responsible for taxes on their total gross merchandise value (GMV), not just their commission, so expanding into each new country meant navigating a complex web of registrations, filings, deadlines, and potential risks,” Rudder shared with TechCrunch. “It became a constant source of distraction. Rather than focusing on growing the business, I found myself tangled in international compliance regulations I never intended to master.”
As he and co-founder Adrian Sarstedt prepared to close ScholarSite (which was later renamed Sphere), Rudder opted to retain the name and pivot the business in a new direction.
“The world was becoming increasingly interconnected, but compliance systems hadn’t evolved to match,” Rudder remarked.
In 2023, Rudder independently launched Sphere as a tax technology provider designed to help businesses remain compliant as they expand internationally. The company focuses on serving businesses from Series B through IPO that have customers around the globe, according to Rudder.
“We enable companies to manage tax collection on customer purchases,” he explained, noting that businesses must collect taxes on sales and remit them to the authorities on a monthly or quarterly basis.
Sphere “automates the processes of registration, tax calculation, filing, and remittance for businesses,” he said. The company operated in stealth mode for two years before its public debut, and its current clients include platforms like Lovable and Replit, as well as AI voice firm ElevenLabs.
As an edtech marketplace, the company secured a $4.3 million seed round. On Tuesday, now positioned as a tax platform, Sphere announced a $21 million Series A led by a16z.
Rudder claims the platform can be implemented in under 24 hours. It connects with major billing solutions such as Stripe and Campfire, allowing Sphere to access transaction data and evaluate global tax liabilities. The determination of a transaction’s taxability is handled by Sphere’s AI-driven tax review and assessment engine, known as TRAM.
“TRAM processes and encodes the tax rules for every region, generating tax decisions—such as whether something is taxable—along with the rationale and supporting references for each decision,” explained Rudder, who serves as CEO.
Sphere’s team of experts reviews and validates TRAM’s outputs before they are integrated into the tax engine, which then applies taxes to transactions instantly.
“There is no AI involved in this part of the system, which eliminates any risk of hallucinations.”
Sphere also tracks a company’s tax obligations by region and is directly connected to over 100 tax authorities worldwide, enabling businesses to register for various tax jurisdictions through Sphere.
“Once a registration is submitted, we forward the details to the relevant tax authority and notify the company once their registration is complete and they are authorized to begin tax collection in that area,” Rudder explained.
Sphere also streamlines the filing and remittance process. It automatically prepares tax returns and submissions, debits owed taxes from customers’ bank accounts, and pays the tax authorities. Rudder described it as the solution he wished he had while running his first company.
Other notable companies in this sector include established names like Anrok and Avalara.
Although Stripe offers a global tax calculation and collection service, Rudder views Stripe as a collaborator rather than a rival.
“Sphere is among just three tax providers worldwide with native integration into Stripe’s Billing and Checkout products,” he noted, adding that Sphere also supports scenarios that Stripe does not, such as managing the entire compliance process from start to finish.
Rudder described his fundraising journey as “unintentional.” He mentioned that while he was seeking investment, he recognized the need to act quickly to realize his goals.
“After meeting with a16z and learning about their track record with similar compliance and fintech companies, we were confident they were the right fit,” Rudder said.
Marc Andrusko, a partner at a16z, recalled first meeting Rudder during his ScholarSite days. “Although we didn’t reach the term sheet stage for that venture, it was clear Nick possessed the determination, resilience, and drive to be an outstanding founder,” Andrusko told TechCrunch.
Years later, Andrusko said the team began hearing positive buzz about a promising new company called Sphere. “It only took a few minutes to realize it was Nick’s latest project after his pivot, and we immediately reached out for an update.”
One feature that stood out to Andrusko was Sphere’s deep integration with local markets.
“While both established players and many newer, venture-backed competitors often rely on third-party consultants for certain regions, Sphere invested in building direct connections to local systems and AI automation, enabling it to handle the entire sales tax compliance process from start to finish,” Andrusko said.
YC and Felicis Ventures also joined this funding round. The new investment will be used to expand infrastructure for connecting with more tax authorities, grow the AI and engineering teams, and establish an international sales force.
“My goal is for this product to become the essential solution finance teams turn to when entering new markets,” Rudder said. “Not just for indirect taxes, but for any type of transactional compliance they might not even be aware of.”
This article has been updated to note that Sarstedt is no longer with the company.
