The US is facing a shortage of accountants. Fewer first-time candidates took the CPA exam in 2022 compared to 2006, according to the American Institute of CPAs. One possible reason people aren’t so interested in the field is the sheer amount of hard work involved: Accountants must sift through large amounts of unstructured data to perform audits or even just find answers to their questions.
Kevin Merlini, its co-founder and CEO Materiahe left the field for this very reason and is now working to reduce that burden for other accountants.
Materia integrates with a firm’s existing workflow software and applications, such as Microsoft Excel and Teams, to help break down the silos that exist in accounting firms’ troves of unstructured data. Because of this, it can automate and augment the mundane and tedious parts of an audit so accountants can focus more on high-risk areas that need special attention. It also offers a way for accountants to easily search their company’s data and documents to get answers. The company uses productive artificial intelligence platforms like OpenAI to process information from a company’s documents.
“Professional accounting was interesting because it’s almost overlooked and underserved, so there’s a pretty compelling story to tell there,” Merlini told TechCrunch. “There is also a lot of pressure on companies to improve their efficiency. There are many PE buyouts. There are many forces that motivate businesses to invest in their efficiency and quality.”
The company emerges from 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 Allen Institute for AI among others. The firm has five clients so far that range from the top 100 accounting firms in the U.S. to the top 15, Merlini said, some of whom have rolled out Materia across their entire audit group.
However, Merlini’s journey to launch the Materia was not a straight shot. While he studied and got a master’s degree in accounting, he only lasted four months as an auditor at KPMG.
“If you’re studying accounting, it’s actually very interesting,” Merlini said. “You find a way to bring all these complex things that happen in one year and condense them into numbers that could be compared across companies. But when it came to being a controller and doing the work in a big four [accounting firm]there’s a lot more drudgery.”
Despite realizing the industry’s problems then, he worked in technology for eight years before starting Materia. Merlini was a product manager at Amazon for more than six years, and most recently, he was at Meta working on its big language models and how those models classified journalism.
Merlini always wanted to be a founder, however, and the pain points he felt in his short accounting career stayed with him. He left Meta in 2022 to figure out what he wanted to build. He landed on Materia because he realized he could actually fix the problems that existed in accounting with the advances he was seeing in artificial intelligence.
“It was clear to me that large language models were a huge paradigm shift in what was possible,” Merlini said. “I had a decent number of friends from college who worked in accounting services and I had a pre-existing network there and I started exploring. 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 Artificial Intelligence in the summer of 2022. As ChatGPT went live later that year, they were able to take advantage of the headwinds of the AI boom.
The company takes safety and accuracy very seriously, Merlini said. Its agreements with OpenAI and other AI companies restrict LLMs from learning Materia’s customer questions. Materia also mentions where it gets all of its information from. So whether information appears on an audit, or in response to an accountant’s question, one can always check that it is correct.
The startup has so far offered a white-glove service to a select group of companies, as Materia operates in secret. Now that the secret is out, Merlini said the firm is targeting the top 200 accounting firms in the US to start with plans to move down in the future.
“How exciting the opportunity is, not for us as a company but for the professionals,” Merlini said. “One of the reasons there is a lack of people [in accounting] there is a lot of wear and tear. Until recently, this automation was not practical or feasible. We’re just excited to get started.”
