Popular expense report startup Expensify has introduced invoicing and billing clients from inside its cloud-based dashboard, the company said today.

Expensify was founded in May 2008 with the promise of offering “expense reports that don’t suck.” It’s main mission is to make the expense report and reimbursement process easier for companies with relatively simple web, iOS, and Android apps. The company has attracted 1.4 million users from more than 200,000 companies to date.

Expensify CEO David Barrett told VentureBeat that this is a “major milestone” for the company because it is the first time it has launched a feature not directly related to expense reporting.

The new feature will compete directly with Freshbooks and Bill.com, two companies known for cloud-based billing. What makes the new feature so handy is that Expensify users can now take expense reports you have created or been submitted to you and can re-bill them as an invoice to clients.

If clients already use Expensify, payment options for invoices and bills are the same as the ones offered for expense reports, including ACH Direct Deposit, PayPal, and even Bitcoin.

“Expensify’s addition of invoicing and bill processing might seem odd to an outsider,” Barrett said via email. “But inside the industry, we’re all jockeying for advantage in a bigger long-term game: becoming the next Intuit.”

San Francisco-based Expensify has raised $6.7 million in funding from investors including Hillsven Capital, Baseline Ventures, SV Angel, and Travis Kalanick.

Image via Expensify

Fifty tech companies, including Microsoft, Apple, and Google, are avoiding $225 billion in taxes by sheltering their assets overseas, according to a recent report in the Bay Citizen of San Francisco.

The shady — but perfectly legal — tax practices of the nation’s leading tech companies have been well-documented, but still continue to provoke debate. So VentureBeat decided to dig into the issue, talking to the companies in question as well as several tax experts.

It took a Senate Permanent Subcommittee on Investigations over a year to come up with its recommendations for tax reforms, which are expected to pass soon. During that time, representatives from tech companies were subpoenaed to explain the methods they used to avoid domestic taxes.

Aside from this subcommittee, should anyone else care? Apple and Google have created products that delight customers and reignited economic growth, so why shouldn’t these companies take advantages of gaps in the tax code?

The question is whether the current tax code still makes sense, especially in a world where Internet technologies allow companies to create value — and recognize revenue — all over the globe.

Tech companies argue that it has not been a corporate tax holiday. In the 2012 fiscal year, Apple paid $6 billion in federal corporate income taxes, which is 1 out of every 40 dollars in corporate income taxes collected by the U.S. government. ”That makes Apple one of the top corporate income tax payers in the country, if not the largest,” said Steve Dowling, an Apple spokesperson, in an interview.

A Google spokesperson added, ”We comply with all tax rules in the countries where we operate,” but declined to comment further. HP and Cisco also could not be reached for comment.

Would we benefit from a ‘neutral’ tax system?

Some lawmakers, including Edward Kleinbard, a former chief of staff for the congressional Joint Committee on Taxation, have argued that a more “neutral” tax system would require tech companies to pay “substantially more taxes,” which seems only fair. While tech companies avoid paying billions, small businesses and U.S.-based retailers are saddled with much higher tax rates. Why should tech companies get special treatment?

Moreover, ordinary Americans will benefit if these revenues were reinvested in the domestic economy.

“The resulting loss of revenue is one significant cause of the budget deficit and adds to the tax burden that ordinary Americans bear,” said Sen. Carl Levin (D-Mich.) at a hearing in Sept. 2012 where representatives from Hewlett Packard and Microsoft testified on the subject.

The federal government recently launched an official investigation, a Senate Permanent Subcommittee on Investigations inquiry that could issue wide-ranging recommendations for tax reform. Sources close to the matter say Apple is the focus of the subcommittee’s investigation, as its accountants have found lawful ways to allocate about 70 percent of the company’s assets overseas, according to SEC filings. The New York Times reports that this inquiry is now drawing to a close.

Other critics suggest that a more fair system would tax companies where they generate value, rather than where they collect revenue. In other words, if a big part of, say, Facebook’s value is its one billion or so users clicking on and liking things, Facebook should pay taxes where those billion users live, instead of where its corporate tax haven happens to be.

The state of Hawaii recently won a tax lawsuit against Expedia and other travel companies on similar grounds, thanks to an excise tax that Hawaii imposes on any company doing business in its state — regardless of where that company is headquartered.

‘Potential for abuse is rife’

The crux of the problem is that most corporate tax laws predate the digital age. Apple and Google hold revenue-generating assets in the form of intellectual property (IP), which are fairly easy to relocate overseas. A downloadable app or iTunes movie could be sold from anywhere.

Tech companies can choose to shift assets to tax havens like Bermuda and the Cayman Islands, to domestic jurisdictions, or both.

A leader of innovative tax strategies, Apple prefers a dual-pronged approach, and avoids paying billions of dollars by managing its finances in Reno, Nev., a state where the corporate tax rate is zero. The company has also accumulated about $40.4 billion in overseas earnings, according to SEC filings from 2012, which cover the previous fiscal year.

“It’s easier for a tech company because their assets are intangible,” explained Jay McIntosh, a former tax partner at Ernst and Young and adjunct professor at DePaul University. He believes that some corporate tax regulations are “arcane” and fears that representatives from tech companies (who have a vested interest in keeping global tax rates low) will have undue influence in the subcommittee’s discussions about reform.

McIntosh pointed to one particular underreported regulation as particularly problematic. APB 23, a rule that was passed in the 1970s, lets U.S.-based multinationals defer recognition of the U.S. income tax that would be paid on foreign earnings — if the company plans to permanently reinvest the money outside the U.S.

McIntosh has argued that “potential for abuse is rife” when it comes to rules like APB 23. “Companies are telling their auditors and the SEC that they plan to reinvest outside the U.S. while lobbying Congress for lower taxes on the repatriation of those earnings,” he wrote in a recent letter to the Economist, in response to a special section in that publication about offshore finance.

What’s more, the definition of “overseas” is so vague as to be nearly meaningless.

Levin’s subcommittee discovered that about 46 percent of the money the firms held “overseas” was actually invested in U.S. Treasury bonds and other U.S. government-backed assets, such as mutual funds and stocks.

To be clear: There’s nothing illegal about what these companies are doing, and it’s a widespread practice.

Google spokesperson Jane Penner provided a rare window into that company’s line of reasoning when she told Bloomberg‘s Jesse Drucker that ”Google’s practices are very similar to those at countless other global companies operating across a wide range of industries.”

Sources at Google and Apple, who asked to remain anonymous, made a similar point that non-tech companies, such as Procter & Gamble and Coca-Cola, also reduce taxes by keeping assets overseas.

In other words: Tax law allows it, and everyone’s doing it. So what’s your problem?

‘We are proudly capitalistic’

Top tech executives justify the corporate tax holiday with the argument that it is a boost to the U.S. economy. Google CEO Eric Schmidt insisted he was “proud” of the company’s existing tax structure, and that its efforts to avoid paying high rates are “capitalism.” He told Bloomberg in December, “We are proudly capitalistic. I’m not confused about this.”

Those companies’ shareholders clearly benefit from the practice: The fewer taxes a company is paying, the more it has left over for profits, and the greater its stock market value will grow.

The trouble, according to some experts, is that tech firms have an unfair advantage compared to other companies.

Tech companies are well-positioned to take advantage of out-of-date tax codes, but most companies do not have the “right set of facts” to replicate this practice, according to Texas-based accountant Wray Rives.

Rives specializes in helping small businesses and tech entrepreneurs at the earliest stages; they don’t have the “complex corporate structure” to maintain a low effective tax rate in the U.S., he said. Rives explained that companies like Google and Oracle have employees working remotely and around the world, which makes it easier to shift payroll costs.

Tax avoidance is also more difficult for large companies that provide physical goods in industries like retail and manufacturing, especially if they operate the bulk of their business in the U.S.

Facing media exposés and subpoenas, tech giants have typically shied away from publicly speaking about their evasive tax practices. Although legal, it does not fit with the image of a socially progressive company.

Meanwhile, the evidence is available in plain sight.

“I was surprised by the cookie-cutter approach in the SEC Filings,” said Matthew Drange, a reporter with the Bay Citizen and Center for Investigative Reporting (CIR), who dug through mountains of 10-K financial statements. He said that tech companies were literally “copying in each other almost line by line.”

Drange’s repeated phone calls to representatives from Google, Apple and Oracle were not returned.

The top five tech culprits, according to the CIR’s report and corroborated by a former IRS official? Cisco, Apple, HP, Google, and Oracle. See below for the details.

(Note: Facebook would rank among the largest Silicon Valley tech companies but is not included on our list because it was too new as a public company to file an annual financial statement in 2012. More on Facebook’s taxes to come in the upcoming Dylan’s Desk column.)

Portrait of a businessman via stockyimages // Shutterstock

Hewlett-Packard‘s acquisition of Autonomy in 2011 would later earn the ignominious title as the worst corporate deal in recent memory.

Today, Autonomy is being investigated for misrepresenting its sales and accounting prior to the acquisition by Britain’s accounting watchdog, the Financial Reporting Council. The regulating body made the announcement on its website today, and reported that would also examine Autonomy’s accounting from Jan. 2009 to the middle of 2011.

Autonomy CEO Mike Lynch (pictured, left) has denied the charges of accounting misconduct. “We are fully confident in the financial reporting of the company and look forward to the opportunity to demonstrate this to the F.R.C.,” he said in a statement.

HP paid $11.1 billion for Autonomy in August 2011, around the same time that it announced it would be shuttering its tablet computer and smartphone products. Even then, the price tag seemed high, given that Autonomy amassed about $870 million in annual revenues.

In November 2012, amid disappointing earnings, HP announced it would write down $8.8 billion of its acquisition of Autonomy — as the New York Times pointed out – admitting that the company was worth 79 percent less than H.P. had paid for it.

HP’s CEO Meg Whitman inherited the messy acquisition, but was on the board when the deal was approved. In the course of a year, HP executives have changed their tune from being excited about the deal to openly disappointed about lower-than-expected revenues.

A spokesperson from the Financial Reporting Council told the New York Times that the investigation may take around a year to reach disciplinary proceedings if evidence of wrongdoing is uncovered.

Top image via wrangler // Shutterstock 

Xero is a public company. It was founded in New Zealand and is active on New Zealand, Australia, and the UK. With this hefty investment, it will attempt to infiltrate the US market, a space dominated by QuickBooks. This investment was led by Valar Ventures, which is backed by Peter Thiel, and Matrix Capital Management. Thiel participated in Xero’s round of $16.6 earlier this year. Of the $67 million, $49 million came in the form of capital, and $18 million came from purchased shares.

Michael Lynch, the founder of Autonomy, is publicly trading blows with HP.

HP acquired Autonomy for $11.1 billion in 2011, but wrote down $8.8 billion of that earlier this month after it discovered what it called “serious accounting improprieties” in Autonomy’s books.

“I utterly reject all allegations of impropriety,” Lynch wrote in an open letter to the board published today.

Lynch is not the only one defending his reputation. The allegations have sent everyone associated with the deal running for cover. Former HP CEO Léo Apotheker, who drove the deal, said he was “stunned” to learn there were issues.

Lynch’s letter has a string of detailed questions about how things could have gone so badly wrong, whether they were known before the acquisition, and how accounting shenanigans could have accounted for $5 billion of that $8.8 billion write-down, as HP alleges. His questions also cast doubt on HP’s management of Autonomy, post-acquisition, and suggest that he has no idea where HP’s allegations are coming from.

“I have been truly saddened by the events of the past months, and am shocked and appalled by the events of the past week,” Lynch concludes.

HP wasted no time in firing back with a brief statement of its own. In a nutshell: We’ve handed this over to the authorities, and have nothing more to say at this time.

“While Dr. Lynch is eager for a debate, we believe the legal process is the correct method in which to bring out the facts and take action on behalf of our shareholders,” said HP’s statement. “In that setting, we look forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury.”

Both parties have everything at stake. HP, which has been flailing lately, is fighting for its life. And Lynch, while he may have a lot of cash in the bank from his successful exit, has his professional reputation on the line.

The gloves are off, folks.

A copy of HP’s letter is below, via AllThingsD, which published it earlier today.

On 20 November Hewlett-Packard (HP) issued a statement accusing unspecified members of Autonomy’s former management team of serious financial impropriety. It was shocking that HP put non-specific but highly damaging allegations into the public domain without prior notification or contact with me, as former CEO of Autonomy.

I utterly reject all allegations of impropriety.

Autonomy’s finances, during its years as a public company and including the time period in question, were handled in accordance with applicable regulations and accounting practices. Autonomy’s accounts were overseen by independent auditors Deloitte LLC, who have confirmed the application of all appropriate procedures including those dictated by the International Financial Reporting Standards used in the UK.

Having no details beyond the limited public information provided last week, and still with no further contact from you, I am writing today to ask you, the board of HP, for immediate and specific explanations for the allegations HP is making. HP should provide me with the interim report and any other documents which you say you have provided to the SEC and the SFO so that I can answer whatever is alleged, instead of the selective disclosure of non-material information via background discussions with the media.

I believe it is in the interest of all stakeholders, and the public record, for HP to respond to a number of questions:

• Many observers are stunned by HP’s claim that these allegations account for a $5 billion write down and fail to understand how HP reaches that number. Please publish the calculations used to determine the $5 billion impairment charge. Please provide a breakdown of the relative contribution for revenue, cash flow, profit and write down in relation to:

• The alleged “mischaracterization” of hardware that HP did not realize Autonomy sold, as I understand this would have no effect on annual top or bottom lines and a minor effect on gross margin within normal fluctuations and no impact on growth, assuming a steady state over the period;

• The alleged “inappropriate acceleration of revenue recognition with value-added resellers” and the “[creation of] revenue where no end-user customer existed at the time of sale”, given their normal treatment under IFRS; and

• The allegations of incorrect revenue recognition of long-term arrangements of hosted deals, again given the normal treatment under IFRS.

• In order to justify a $5 billion accounting write down, a significant amount of revenue must be involved. Please explain how such issues could possibly have gone undetected during the extensive acquisition due diligence process and HP’s financial oversight of Autonomy for a year from acquisition until October 2012 (a period during which all of the Autonomy finance reported to HP’s CFO Cathie Lesjak).

• Can HP really state that no part of the $5 billion write down was, or should be, attributed to HP’s operational and financial mismanagement of Autonomy since the acquisition?

• How many people employed by Autonomy in September 2011 have left or resigned under the management of HP?

• HP raised issues about the inclusion of hardware in Autonomy’s IDOL Product revenue, notwithstanding this being in accordance with proper IFRS accounting practice. Please confirm that Ms Whitman and other HP senior management were aware of Autonomy’s hardware sales before 2012. Did Autonomy, as part of HP, continue to sell third-party hardware of materially similar value after acquisition? Was this accounted for by HP and was this reported in the Autonomy segment of their accounts?

• Were Ms Whitman and Ms Lesjak aware that Paul Curtis (HP’s Worldwide Director of Software Revenue Recognition), KPMG and Ernst & Young undertook in December 2011 detailed studies of Autonomy’s software revenue recognition with a view to optimising for US GAAP?

• Why did HP senior management apparently wait six months to inform its shareholders of the possibility of a material event related to Autonomy?

Hewlett Packard is an iconic technology company, which was historically admired and respected all over the world. Autonomy joined forces with HP with real hopes for the future and in the belief that together there was an opportunity to make HP great again. I have been truly saddened by the events of the past months, and am shocked and appalled by the events of the past week.

I believe it is in the best interests of all parties for this situation to be resolved as quickly as possible.
I am placing this letter in the public domain in the interests of complete transparency.

And here’s a copy of HP’s full statement, which we received from an HP spokesperson today.

HP has initiated an intense internal investigation into a series of accounting improprieties,
disclosure failures and outright misrepresentations that occurred prior to HP’s acquisition
of Autonomy. We believe we have uncovered extensive evidence of a willful effort on
behalf of certain former Autonomy employees to inflate the underlying financial metrics
of the company in order to mislead investors and potential buyers.

The matter is in the hands of the authorities, including the UK Serious Fraud Office, the US
Securities and Exchange Commission’s Enforcement Division and the US Department of
Justice, and we will defer to them as to how they wish to engage with Dr. Lynch. In
addition, HP will take legal action against the parties involved at the appropriate time.

While Dr. Lynch is eager for a debate, we believe the legal process is the correct method in
which to bring out the facts and take action on behalf of our shareholders. In that setting,
we look forward to hearing Dr. Lynch and other former Autonomy employees answer
questions under penalty of perjury.

For Leo Apotheker, the former HP chief executive who spearheaded the company’s $11.1 billion acquisition of Autonomy, the news that HP had to write off $8.8 billion over accounting irregularities with the subsidiary must have hit hard.

Apotheker, not surprisingly, is receiving much of the blame for not properly vetting Autonomy. During HP’s earnings call today, current CEO Meg Whitman said “the two people who should have been responsible for the problems are gone” — referring to Apotheker and former chief strategy officer Shane Robinson.

But in a statement to the Wall Street Journal, Apotheker seemed surprised by Autonomy’s financial irregularities, and noted that the “due diligence process was meticulous and thorough” for the deal. While he vows to offer assistance to HP, his statement also cleanly skirts some responsibility on his part:

I’m both stunned and disappointed to learn of Autonomy’s alleged accounting improprieties. The developments are a shock to the many who believed in the company, myself included. But I also share the sentiment of HP’s current leadership and continue to believe in Autonomy’s market potential, as its core software expertise remains sound.

Looking back on the acquisition, which closed in Sept. 2011, the due diligence process was meticulous and thorough, and included two of the world’s largest and most respected auditing firms working on behalf of HP. Since Autonomy was a public company in the UK, much of the process relied on public financial reports — accounting statements approved, filed and backed by Autonomy’s leadership, board and auditors.

According to HP, the accounting issues it discovered pre-date its acquisition of Autonomy. As such, it’s apparent that Autonomy’s alleged accounting misrepresentations misled a number of people over time – not just HP’s leadership team, auditors and directors. In fact, the alleged improprieties apparently came to light only after an internal whistleblower raised the issue in the spring, well after my departure.

I will make myself available, however I can, to assist HP and the appropriate authorities get to the bottom of this.

Apotheker, who also served as SAP’s CEO for two years, was widely criticized during his reign for not understanding HP’s core business. He pushed to kill the company’s WebOS hardware just a year after the company bought Palm for $1.2 billion, and he also brought up the idea of spinning off HP’s PC business. HP ended up open sourcing Web OS, and current CEO Whitman squashed plans for breaking out its PC division.

Photo: HP

HP barely squeaked by analyst expectations in its fourth quarter earnings, but the bigger news today is that the company was forced to take a $8.8 billion charge over accounting irregularities with its enterprise software outfit Autonomy.

Yes, that’s after HP paid $11.1 billion for UK-based Autonomy last year, and it’s on top of the $8 billion goodwill write off the company announced back in August. Altogether, HP announced almost $17 billion worth of charges this year over companies purchased by past CEOs.

The company said the Autonomy charge was over “serious accounting improprieties” — and I’m sure this isn’t the last we’ve heard of this story. It could have been worse, if HP was completely unaware of the accounting issues, or if it tried to bury the story, investors would have even less faith in the software giant.

Update: In a later statement on the Autonomy situation, HP said that it launched an internal investigation after a senior-level member of Autonomy’s management team came forward and noted that there had been “a series of questionable accounting and business practices at Autonomy prior to the acquisition by HP.”

And for the kicker, the accounting issues may have led to HP paying a lot more for Autonomy than it was actually worth. From HP’s statement: “As a result of that investigation, HP now believes that Autonomy was substantially overvalued at the time of its acquisition due to the misstatement of Autonomy’s financial performance, including its revenue, core growth rate and gross margins, and the misrepresentation of its business mix.”

On its earnings call with investors this morning, HP chief executive Meg Whitman said “the two people who should have been responsible for the problems are gone” — referring to former HP CEO Leo Apothekar and chief strategy officer Shane Robinson. She later added that HP’s internal investigation is ongoing, and it has also turned over the case to the SEC in the U.S., and the Serious Fraud Office in the United Kingdom. While a solution will likely take some time, Whitman said the company will figure out a way to make it up to investors.

On the bright side, HP’s earnings per share for Q4 were $1.14, slightly up from analyst estimates of $1.12 per share. Revenues were $30 billion for the quarter, down 7 percent from a year ago, and around $500 million less than what analysts were expecting.

Here’s HP’s official statement on the Autonomy fiasco:

HP is extremely disappointed to find that some former members of Autonomy’s management team used accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy’s acquisition by HP. These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management’s ability to fairly value Autonomy at the time of the deal. We remain 100 percent committed to Autonomy and its industry-leading technology.

Photo: Devindra Hardawar/VentureBeat

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Accounting software businesses Xero has launched a new Android app to make accounting more mobile and real-time than ever in our increasingly fast-paced business exchanges.

Xero offers its customers well-designed accounting software in the cloud for small and medium businesses. While Xero isn’t hugely popular in the U.S., it is listed on the New Zealand Stock Exchange and has more than 100,000 paying customers around the world. The company is most popular in New Zealand, Australia, and the U.K.

“Xero aims to be the accounting solution for today’s small business owner,” said Jamie Sutherland, Xero president of U.S. operations, in a canned statement. “iOS users have benefited from Xero Touch, and now it’s Android’s turn.”

The two primary things Xero for Android hopes to help customers with are:

• No more delayed invoices — Create invoices on the spot right from your phone, as inventory functionality makes it fast and easy to itemize invoices. With customer contact details available in the app, new invoices can be emailed right away and overdue invoices can be followed up on with a call and re-sent with just a few taps.
• No more lost receipts — Gone are the days of crumpled expense receipts lurking in pants and purse pockets. Users can snap photos of receipts that are then instantly uploaded into their accounts. Expenses can be submitted right from their phone.

Xero has raised $33.2 million in capital to date, from investors including Peter Thiel, Craig Winkler, and Sam Morgan. Its latest $16.6 million round was focused on expanding into the U.S.

The company additionally released several statistics about mobile business users that help illustrate why its app could be important to small businesses:

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

FreshBooks launched an iPhone app today so businesses can balance their books on the go.

The announcement states that the app adds the “any time, anywhere ability to create invoices, record expenses and track time on projects.” My initial reaction was “why would you want to?” However, upon a deeper examination, I realized that rather than encouraging workaholism, it in fact is a tool to keep work at a manageable level.

For both employees and administrators, it’s easy to let accounting materials stack up into a daunting pile of paperwork or a stuffed inbox. The new mobile version enables professionals to create invoices, document expenses, collaborate on time sheets, and organize expenses and process payments as they happen. This can prevent backlog and a miserable end-of-month spent catching up.

With the app, freelancers can continuously update their hours and business travelers can file expense reports from the back of a cab or after a client dinner. Business owners and accountants can process things whenever it is convenient, as opposed to only in the office.

All the data is stored and secure and can be integrated with over 70 partners, like Zendesk and Google Apps. While third-party developers have used its API to make FreshBooks mobile compatible in the past, this is the first app developed and designed in-house.

Since its founding in 2004, the company has provided cloud accounting services to over 5 million users worldwide. It is one of the most popular online bookkeeping products on the market, primarily competing with Intuit’s QuickBooks Online. FreshBooks is based in Toronto.

If you’re hankering for more funding news throughout the day, you can subscribe to our Deals Channel RSS feed by either clicking the red RSS icon at the top of this page or adding the Deals Channel feed link to your favorite reader. And as always, send funding news our way at tips@venturebeat.com.

Mocavo grabs funding for its family tree

TechStars 2011 alum Mocavo has raised $4 million in its first round of funding in a bid to help people find their ancestors through its search engine. The funding comes from Foundry Group. Seth Levine, Foundry Group’s Managing Director, will join Mocavo’s board.

Wave Accounting nabs $12M

Small business startup Wave Accounting has raised $12 million in its second round of funding, the company announced today. Wave, which offers free accounting software for small companies, says managing “the books” is a complicated and dreaded task that isn’t any easier thanks to desktop accounting software. Social+Capital Partnership led the round. Charles River Ventures and OMERS Ventures also contributed.

Big data, big money for Palantir

Data analysis company Palantir has raised $56 million in its latest round of funding, through two unknown investors, according to an SEC filing today. Palantir has seemingly been very successful with its tools that analyze all sorts of data.

Bitly may have new funding in the works

Four-year-old link shortening service Bitly is reportedly working on raising a $20 million round and launching a few new products. The link shortening service also offers enterprise link analytics. So far Bitly has raised $15 million from a laundry list of investors including Ron Conway, SV Angel, and AOL Ventures.

Fotolia wins $150M

Fotolia received a $150 million growth equity investment from leveraged buyout firm Kohlberg Kravis Roberts and Co. The company claims to be the leading stock photography site in Europe.

HomeMe raises $5M

Russian home shopping site HomeMe has raised $5 million in funding. Mangrove Capital, ABRT, and AddVenture led the round for the Moscow-based company.

Vox Mobile gets funded

Vox Mobile grabbed a $7.5 million investment to help manage mobile devices for businesses. The company also helps train employees on how use mobile devices. Edison Ventures led the round and Permal Capital also participated.

Appcelerator raises $3M

App development platform Appcelerator has closed a $3 million funding round, The Next Web reported. Presidio Ventures led the round. Appcelerator helps companies build device-specific apps.

ModCloth grabs $25M funding round

Clothing and home decor site ModCloth has raised $25 million in funding. The site offers vintage inspired clothing and accessories. Norwest Venture Partners led the round.

Woman with shopping bags image via Shutterstock

---

Big Data and Predictive/Real-time Analytics startups: Are you looking to jumpstart development & accelerate market traction? Sign up for the SAP Startup Focus program to receive technology, support, resources and community to help you develop new applications on SAP HANA, a cutting edge database platform. Get started here, and enter promo code “VB2013″ on the form.

---

Wave, which offers free accounting software for small companies,  feels that managing “the books” is a complicated and dreaded task that isn’t any easier thanks to desktop accounting software.

“I experienced the pain first hand of trying to run your books and I really despise all those back office tasks,” said co-founder Kirk Simpson in an interview with VentureBeat. “[I wanted to] simplify the administrative tasks that small businesses despise.”

Simpson thinks high-end accounting software is so complicated that most business owners need to spend far too much time learning how to use it. He created Wave as a simpler solution that clueless business owners could use to manage their accounting.

“There’s a disconnect between small businesses owners who hate doing this and yet they are being asked to pay hundreds of dollars to pay for desktop and cloud [accounting] software,” said Simpson.

Competition in this space ranges from high-end offerings like Salesforce, Zoho, and NetSuite, to cheaper and free services from Kashoo and Outright. Wave bets on its completely free offering and super-simple design to help it stand out. Wave makes it money solely from advertising services to its customers.

Social+Capital Partnership led the $12 million round. Charles River Ventures and OMERS Ventures also contributed.

Wave Accounting is based in Toronto, Canada. The two-year old company has raised $19 million in funding in the last 18 months, since its launch.

Man with financial chart image via Shutterstock

Bills, invoices, and bank statements are straddling the online and paper worlds, making organizing finances a messy task. Finovera is launching today in an attempt to collect these bills and make people trust accounting in the cloud.

Consumers receive more than 15 billion bills and statements every year, but fewer than 5 percent of these statements are delivered electronically, founder Purna Pareek said on stage at DEMO Spring 2012 in Santa Clara, Calif., today. “This is a massive burden for consumers.”

Finovera users are able to connect their financial and utilities accounts to the service, even if those accounts don’t have an online counterpart. Finovera is able to grab statements from the past 12 months and give you an analysis of your spending. Should one of these accounts not be connected to the Web, Finovera will contact the institution and retrieve the statements for you. The company is focused on families, who often have a number of big receipts, tuition bills, credit card balances, and mortgage payments to organize.

Finovera founder Purna Pareek

Competitors such as Manilla and Doxo do exist, but they do not aggregate offline accounts. Pareek even goes so far as to say that his service and Mint are complementary because of Finovera’s ability to access institutions that don’t have an online presence.

What Finovera is really going up against is fear, however. Many people are still uncomfortable keeping all of their financial records completely online. The concerns are simple: What if there’s a power outage? What if Finovera is hacked? These questions will stand in the way of customer adoption.

A panel of experts, in a post-demonstration discussion, said that Finovera is tackling a big enough consumer problem that it could potentially standout from competitors with a single compelling feature or a fresh user experience. Plus, the company could get some lift and distribution if it were to form partnerships with bill providers, RightScale CEO Michael Crandell said.

The company was founded in 2011 and has thus far raised an undisclosed amount from its founders as well as angel investors. Finovera is located in Milpitas, Calif. and has six employees.

Finovera is one of 80 companies chosen by VentureBeat to launch at the DEMO Spring 2012 event taking place this week in Silicon Valley. After we make our selections, the chosen companies pay a fee to present. Our coverage of them remains objective.

Cloud dollar signs image via Shutterstock

UPDATE: Groupon’s share price is now down more than 15 percent for the day.

Groupon’s stock has been falling since it revealed on Friday that it was revising its first quarter earnings to reflect a larger than expected loss. With its spotty accounting history, Groupon is now a juicy target for securities lawyers representing investors, who believe the company may be liable for the losses their clients have suffered since Friday. The stock is currently down about 12%.

When it filed to go public with the Securities and Exchange Comission, Groupon’s accounting raised some red flags and the company eventually revised its financials with the SEC before its IPO. Considering all the scrutiny, the news on Friday that it’s auditor, Ernst & Young, said the newfound errors revealed  ”material weakness in internal controls” piqued the curiosity of lawyers.

“When you do a registration statement there’s extensive due diligence so you would think this was uncovered at the time,” Jacob Zamansky of the New York-based law firm Zamansky & Associates, which represents investors, told Deal Journal.

Groupon blamed its new losses on higher than expected returns from the holiday season. But frequent VentureBeat contributor Rocky Agrawal argues that the company should have seen this coming a mile away.

Well, for starters, it’s not a coupon company nor a marketing company. At its core, Groupon’s U.S. business is a receivables factoring business, as I wrote last year. They give loans to small businesses at a very steep rate (the price of the discount plus Groupon’s commission). They get the money to fund these loans from credit card companies such as Chase Paymentech. Groupon is essentially a sub-prime lender that does zero risk assessment. And as word continues to spread about what a terrible deal running a Groupon is for many categories of businesses, the ones that will choose to run Groupons are the ones that are the most desperate.

Unfortunately for shareholders, their stock, unlike Groupon’s deals, cannot be so easily refunded.

“ZenCash helps you manage your payment plan of attack and manages the plan for you,” said ZenCash founder Brandon Cotter in an interview with VentureBeat, ”[With ZenCash] you don’t have to be the bad guy, you can let someone else do the dirty work.”

Startup owners and freelancers usually rely heavily on payments from their customers and clients to keep themselves in the black. ZenCash founder Brandon Cotter found that many startups and freelancers he talked to were encountering problems with getting paid, so he sought to do something about it.

ZenCash offers services that reward clients for making payments and go after those that don’t. The company will send out thank you notes and/or gift cards to customers who process payments on time. For customers who delay payment, ZenCash will make phone calls, send letters, and eventually send your dispute to a collections agency on your behalf. Each service has a price attached to it, and you pay per phone call or email sent out. If your invoice has to go to a collections agency, ZenCash takes a percentage cut of the payment amount.

The service integrates with existing accounting software such as Clio, Harvest, and QuickBooks. ZenCash accounts are free for now, but because Intuit charges for access to the QuickBooks API, the company may charge a subscription fee in the future.

Cotter started ZenCash because as a business owner, he found it a hassle to devote time to resolving payment disputes. He also realized that many businesses want to maintain positive relationships with clients and didn’t want to get involved with payment disputes and collections calls.

ZenCash faces competition from accounting services such as Freshbooks that can send out payment reminder emails. Freelancers can get support from sites such as Elance, which will facilitate payment disputes between contractors and clients. And of course, startups can make calls, send out thank you cards, and contact collections agencies themselves.

The company’s founders have invested $500,000 to launch the company. ZenCash is made up of a team of six, scattered across the U.S. and Europe. Its main headquarters is in Dallas, Texas.

---

Big Data and Predictive/Real-time Analytics startups: Are you looking to jumpstart development & accelerate market traction? Sign up for the SAP Startup Focus program to receive technology, support, resources and community to help you develop new applications on SAP HANA, a cutting edge database platform. Get started here, and enter promo code “VB2013″ on the form.

---

Jamie Sutherland

Xero, an online-accounting service for small businesses, announced today it has received $16.6 million in its latest round of funding. PayPal co-founder and early Facebook investor Peter Thiel participated in the round.

“Xero was started by a few entrepreneurs who struggled to get the right financial information to make business decisions. They set out to build accounting software that caters to small business and accountants,” said Jamie Sutherland (pictured right), Xero’s President of U.S. Operations in an interview with VentureBeat.

Founded in 2006 in New Zealand, Xero gives business and independent contractors an online dashboard that they can use to manage expenses, invoicing, and bank transactions. The service is for all types of businesses, including small retail stores, one-person operations, and larger companies. Xero also offers tools for professional accountants to run their businesses.

The service emphasizes ease of use and a clean design to help anyone manage their business expenses. Xero gives small businesses and their financial advisers the ability to view the same information at the same time so they can collectively make smart business plans. There are three pricing levels available starting at $19 per month for one-person businesses, and up to $39 per month for larger teams.

Peter Thiel has previously invested in the Xero, and this new round comes from Thiel’s New Zealand venture fund Valar Ventures. Thiel is a well-known tech investor and startup founder who co-founded PayPal and has invested in Facebook, Yelp, Yammer, and LinkedIn.

“This money will be used to accelerate our U.S. growth, and execute our business,” said Sutherland, “We have a team of six in San Francisco and [with the funding] we will be expanding our team.”

Xero was founded in New Zealand in 2006. Globally, Xero has more than 170 employees, including a team of six at its United States office in San Francisco. The company boasts more than 60,000 customers in more than 100 countries. This latest funding round was led by Peter Thiel, Sam Morgan of Fairfax Media, and Craig Winklerthe, former co-founder of MYOB. Since its founding, Xero has raised $70 million.

It all started at Floyd’s Coffee in the Old Town section of Portland — which, ironically, was running the very first Google Offer. I had planned to spend the day there to understand what customers thought of Google Offers, how many people came in and how they interacted with the staff. At that point, I’d spent very little time looking at the space. That day, Groupon put out its first S-1. The company is now poised to go public tomorrow with an initial share price of $20.

The first analysis I read, by a supposed expert in the local space, raved about the company. He essentially pulled all of management’s talking points and put them in the story. I knew the company was nowhere near as good as the picture he painted, but I didn’t know how bad it would turn out to be.

Five months later, I’m more convinced than ever that this is a terrible company for investors, small businesses and ultimately for consumers. Unless the company substantially changes its business model, investing in Groupon will be like investing in a leaky bucket.

Among the significant challenges I see:

• The daily deals business is past its peak. The best days for the classic Groupon are in the past. With its 3Q results, Groupon has largely proven that once it slows spending on marketing, growth stops. In its most established markets, Groupons sold are down more than 10%. In Boston, the number of merchants featured in 3Q is down a whopping 20 percent. Some look to Asia for expansion, and sure, Groupon can expand there. But the share of revenue it gets to keep in Asia is substantially lower than in the U.S. and Europe.
• The only area where Groupon seems to be able to innovate is accounting practices. New product lines like Groupon Getaways and Groupon Goods are retreads of long-established e-commerce categories. Groupon’s entries in these categories show zero innovation. In many cases, they are turning back the clock 10 years. In 2011, I shouldn’t have to call to make a hotel reservation.
• The future is all about targeting and self-serve. Smart businesses don’t want to blast a spam message to everyone in a region who might want a cheap massage. If I ran a spa, I’d want to reach people within 5 miles of my business who weren’t already customers and who regularly spend money on spa services. I want qualified customers, not those who are “once and done.” And I certainly don’t want to discount to people who would pay full price. The Groupon daily deal model doesn’t support this. Once you target to this level, the volume and revenue on each deal is too low to support a sales force. The Groupon army that some people view as a moat will turn out be an anchor.
• The future is mobile. People will search for, purchase and redeem offers on mobile devices. Google and Facebook have a huge advantage in mobile. They already have hundreds of millions of people using their apps. Although Groupon Now is an OK product, it has little distribution. To be a player in this space, Groupon would have to buy distribution. It will essentially have to pay to re-acquire customers. Then it has to hope that those people will change their usual behavior and go search in a separate app. Google’s launch today of its Android Offers app should terrify Groupon investors. Google could include Offers as a pre-load in Android. Or it could surface the offers into Google Maps — something that people already use.
• The management team seems to be incompetent. They made up new accounting metrics. They ignored quiet period rules. They used a restaurant in their roadshow as a reference, apparently without checking to see if the restaurant would say positive things. (The restaurant didn’t.) Management told employees they could sell on the day of the IPO. (They can’t.) They asked me to name confidential sources in exchange for access to the Groupon building.

All of that said, I’ve put in my request with my broker for shares in the IPO because Groupon has scientifically engineered its IPO to inflate share prices. Its float is one of the tiniest in the last decade. Most likely this thing will have a nice pop tomorrow.

If Groupon’s stock skyrockets tomorrow, it doesn’t mean I’ve been wrong about the company. But in the unlikely event it tanks, it’s a big sign that I’m right. (I realize that this might sound like the kind of thing that Groupon’s accountants would say, but it’s true.) We’ll need to wait at least 9 months to really know.

Maybe Groupon will find a real business model in that time.

I’d like to thank a few people whose help has been invaluable in all of my Groupon coverage: Jonathan Gaw, Ed Ketz, Mark Rogowsky, Brian Roemmele, Conor Sen, Semil Shah and Rick Summer. They’ve read early drafts, provided valuable insight into areas that I’m not an expert in and helped to keep me in check.

On the media side, I’d like to thank Dylan Tweney, Heather Kelly and Mo Marshall at VentureBeat; Herb Greenberg and Juliet Mendez at CNBC; Emily Chang, Cory Johnson and Diane Anderson at Bloomberg West; and Erick Schonfeld at TechCrunch.

Rocky Agrawal is an analyst focused on the intersection of local, social and mobile. He is a principal analyst at reDesign mobile. Previously, he launched local and mobile products for Microsoft and AOL. He blogs at http://blog.agrawals.org and tweets at @rakeshlobster.

Here’s a video of Agrawal discussing the Groupon IPO on CNBC.

This story originally appeared on Agrawal’s blog.

Top photo: Don DeBold/Flickr.

Related articles

• How Groupon’s accounting changes hide what’s really going on at the company (venturebeat.com)
• Groupon’s tricky S-1 math (venturebeat.com)
• Who gets hurt if Groupon collapses (venturebeat.com)
• Weak technology weighs down Groupon’s sinking ship (venturebeat.com)
• Groupon will IPO in 2 weeks at an $11.4B valuation (venturebeat.com)
• When Groupons are bad for small businesses (venturebeat.com)

ACSOI, or adjusted consolidated segment operating income, is a metric Groupon used to show income while excluding certain expenses such as marketing. The unusual measurement raised eyebrows, since it is not a standard measurement utilized by most public companies’ accountants. The practice was a faint echo of novel metrics used during the height of the dot-com craze, such as “eyeballs” instead of revenue.

According to AllThingsD’s unnamed sources, Groupon could amend its filing as early as Monday.

Currently the filing reads, “We believe Adjusted CSOI is an important measure for management to evaluate the performance of our business as it excludes certain non-cash expenses and discretionary online marketing expenses that are incurred primarily to acquire new subscribers.”

Groupon was recently under fire for comments by executive chairman Eric Lefkofsky, resulting in a change to the filing.

Groupon also recently acquired a relatively mysterious company, Zappedy, for $10.3 million.

VentureBeat called for comment from Groupon. We will update the post when we hear back.

This series is brought to you by TurboTax Home & Business Edition – Guides You to Your Biggest Tax Refund. As always, VentureBeat is adamant about maintaining editorial objectivity. TurboTax had no involvement in the content of this post.

Got tax questions related to starting a new venture, running a fast-growing business, or working in the technology sector? Ask away. VentureBeat’s Ask the Accountant series will get expert answers.

A reader asks:
If a business is registered in one state, and the owner of the LLC moves to another state, does the LLC need to be reestablished in the new state?

We passed the question on to Doug Collom, vice dean of Wharton San Francisco, where he runs the business school’s West Coast operations and serves as an adjunct professor, teaching a class on startups and venture capital. Here’s his answer:

An LLC, like any corporation (such as the usual Subchapter C corporation), can serve as the form of business entity in any state. If the business operations being run out of the LLC should expand, or if the LLC members want to take the business to a different state than the one where the LLC is organized, as a general premise there is no requirement to reincorporate. Depending on the kinds of activities that the business is conducting in its new location, it may be necessary to qualify with the secretary of state’s office of that state, as well as that state’s franchise tax authority, in order to conduct business there. But the original “situs” of incorporation will be respected, and there will be no requirement to reincorporate.

That being said, depending on the kind of business that is expanding or relocating, it would be a good idea to check out in advance the laws of each state that may pertain to the business. This may influence the decision on how or whether to conduct business in that state.

From now through April 15, VentureBeat will be taking your tax and accounting questions and getting you expert answers. You can send us a question by email, leave one in the comments below, or reach us by Twitter or on Facebook or Quora.

---

Big Data and Predictive/Real-time Analytics startups: Are you looking to jumpstart development & accelerate market traction? Sign up for the SAP Startup Focus program to receive technology, support, resources and community to help you develop new applications on SAP HANA, a cutting edge database platform. Get started here, and enter promo code “VB2013″ on the form.

---

This series is brought to you by TurboTax Home & Business Edition – Guides You to Your Biggest Tax Refund. As always, VentureBeat is adamant about maintaining editorial objectivity. TurboTax had no involvement in the content of this post.

As April draws near, our thoughts turn to taxes. More than a bit unwillingly, for most, because the workaday parts of running a business can distract from building the great products that drew us into this world.

But getting the operations of your business right can be key to success — and getting them wrong can be a painful, if not fatal, distraction.

So from now through April 15, VentureBeat will be taking your tax and accounting questions and getting you expert answers. You can send us a question by email, leave one in the comments below, or reach us by Twitter or on Facebook or Quora.

Not that there’s just one answer to the questions of how you structure, run, and reap rewards from your business. Some tax subjects are cut-and-dry matters of law. Others vary by situation. So we’ll be hosting conversations here and elsewhere. It’s the least we can do to make paying your due a bit less taxing.

Got a question? Leave a comment or send it by email.

Profitably is one of 70 companies chosen by VentureBeat to launch at the DEMO Fall 2010 event taking place this week in Silicon Valley. After our selection, the companies pay a fee to present. Our coverage of them remains objective.

Profitably is dubbing itself a champion of small businesses at the DEMO conference. Why? It’s providing revenue and profit insights for those businesses, and in the process, the company’s founder said it’s “picking a fight” with corporate analysis platform-makers like SAP and Microsoft.

Traditional business intelligence and analytical platforms used by big corporations are too expensive, unwieldy and time-intensive for small businesses, even though smaller companies could benefit from the accounting and business insights those platforms provide, said Profitably CEO Adam Neary.

Profitably works with Intuit’s Workplace, a collection of apps that manages, among other things, expense tracking, documents and accounting. The company’s software uses Intuit to connect to a business’s QuickBooks data, then sifts through it to glean insights about inefficiencies and opportunities. The software, which Neary calls “dead simple,” doesn’t require businesses to cleanse or reorganize data in order to analyze it — it accounts for variations and idiosyncrasies in a company’s accounting practices.

Neary built his career advising Fortune 500 companies on where they were making and losing money – and realized a lot of the problems faced by big companies apply to mom-and-pop shops, too. So he started the company, which has three employees, in New York six months ago. The site’s traffic has grown since April by 65 percent per month, and Profitably has signed up over 100 clients for its beta launch.

The company has raised $325,000 to date, of which $25,000 is Neary’s personal investment. The remaining $300,000 comes from a seed round led by North Bridge Venture Partners with angel investors David Tisch, Mark Birch and David Honig.

http://c.brightcove.com/services/viewer/federated_f8/980795693

---

Big Data and Predictive/Real-time Analytics startups: Are you looking to jumpstart development & accelerate market traction? Sign up for the SAP Startup Focus program to receive technology, support, resources and community to help you develop new applications on SAP HANA, a cutting edge database platform. Get started here, and enter promo code “VB2013″ on the form.

---