A new financial system of record — our investment in Translucent

Scaling companies is hard. Really hard. Many of the challenges, like finding product market fit, hiring and raising capital are well documented. Some are not, like scaling a finance function.

But this is a huge problem and one we’ve seen firsthand across our portfolio of growing companies. The problems are multifold but a critical one kicks in when a company expands beyond one “entity” (think new location or subsidiary).

Whilst setting up a single entity business has never been easier thanks to cloud accounting platforms like Xero and QuickBooks, these systems don’t do multi-entity well.

Data becomes fragmented (e.g. Datev in Germany and Cegid in France), siloed, and messy given the need for country-specific charts of accounts. Manual workarounds are required for basic tasks like search and consolidated reporting.

And it’s just as the business scales when the finance function should be doing the fun stuff like strategic planning and board reporting that their lives become ever more manual and error-prone.

So what’s a CFO to do? Persist with increasingly clever workarounds or bite the bullet and migrate to a ‘grown up’ ERP like Netsuite (with the inevitable delays, hiring of specialists, and 10x costs)?

Thankfully with Translucent, there may be a better way. A data platform for multinational and multi-entity companies that unifies financial data into a single location where it can be seen, used and edited.

A new financial system of record.

This is a known but very hard problem to solve. It requires (1) a deep understanding of financial mechanics from general ledgers and charts of accounts in multiple markets to different tax regimes and treatment of FX and (2) exceptional product-building capabilities — it’s not as if the office of the CFO needs another SaaS tool.

Thankfully in Michael Wood, we think we’ve found the founder. Michael co-founded Dext, (formerly Receipt Bank) which counts more than 1 million users in over 10,000 accounting firms (acquired by Hg in 2021).