Agentic AI and E-Invoicing Drive Avalara’s Next Chapter

Hey everyone, welcome back here to our coverage of Avalara CRUSH North America. We're in the Omni Hotel in Fort Lauderdale. Love coming.

It's nice to be home. My next guest is Greg Chapman. Greg runs the flagship here.

And I'm going to let him tell you about it. But Greg, also, more than anyone I've spoken to to date, really knows where all the bones are buried- I do ... in history.

Yeah, he's got some history here at Avalara. I'm the OG these days. The OG.

That's a good word for it. Oh, it's unbelievable. The OG of Avalara.

I think it stands for old goat. Greg, first of all, welcome to TechShop TV. Thank you.

It's great to have you on here. Great to be here. I hope I didn't embarrass you at all.

No. You didn't embarrass me. Give us your story intertwined with the Avalara story.

Yeah. I've just been kind of fortunate. I got into the tech world eons ago with a software startup in the CRM space.

I've been just kind of fortunate. I've had good long runs with a startup and then Amazon, and ton of fun stories from the Amazon days. And now I've been with Avalara.

Primarily, my first 10 years were on the consulting side. We were going out and doing big deals with kind of our partner ecosystem. Mm-hmm.

Worked for a guy named Marshall Kucheryk, who, in the Avalara world, he's a bit of a legend. And so Marshall and I became very close to that. " And so I then, about four years ago, moved over again to Brighton- Really?

in the UK, and lived for another couple of years overseas with my wife. And at the end of that, came back. And when I came back, I transitioned and handed over the partner responsibilities to a person by the name of Meg Higgins.

And so then I became what I do today, although Meg just left, I took over partner again. But I'm the GM of our core business, and our definition of core is really the 96% of the revenue for us. So we calculate and- That's pretty core.

Yeah. And we file the returns, and I'm responsible for those core services. We do a bunch of other things, and some of those are in the core, but that's generally what I do.

I care, take our main business, and then on the side, do a little bit of activity with some of our newer things like e-invoicing. I still run our international, and caretaking partner right now as well. So got a couple balls in the- Couple of hats.

Couple of hats. It's the only way to do it, man. So there you go.

Sorry for the long answer. Well, sure. No, it's a great answer.

But- Manish Arm's life, though, man ... I mean, listen, I couldn't agree more. I've been just super fortunate.

I've always just tried to work with good people, and I've been fortunate. I've been lucky. It's a good word.

So it's been fun. It's been a good ride. I was at a Cisco event I was at last week or the week before.

They all start running into each other. Had a very similar conversation with a person who was probably a little younger than you and I. Yeah.

And after telling that story, because I have a similar kind of story where I just happened to be in the right place at the right time. But I felt a little Forrest Gumpish. Yeah.

Like Forrest- Exactly. You know. Sitting on the old bus stool, just kind of telling the story.

Yeah, telling the story. Yep. But it's a great life, man.

So you're back in the US, though? I am back in the US. I moved back a couple of years ago- Mm-hmm ...

to go over the core business. Right. And the title is GM, EVP and GM, which basically means I drive the strategy and the direction of the product.

And then I work with our head of product, Jamie. I work with all the different folks, Danny Fields, and all the different folks across the organization to make sure we're doing- Maverick and Goose. Maverick and Goose.

Did you see that this morning? Oh, I interviewed them in their booth. Oh, in their deal?

Yeah. They always get the gear, though. They got their bomber jackets.

" They're like- Totally ... " Yeah, exactly. Well, yeah, Danny's got the purse strings, so either way.

Yeah, Danny, I felt the leather. It was nice. Oh, yeah.

No, those aren't fake. No, those are not fake. Those are not fake.

But that being said, so Danny and Jamie come to you and they say, "Hey, you know this 96% of the revenue you're responsible for? " Yeah. Right?

It had to send a shiver down your spine, no? It's super interesting. So that's exactly what it was.

It was more Hugo on the board came to us and said we had to agentify this thing. If you go back and you just look at Avalara, Scott back in the day told this story of we used to do 100 returns with 100 people, or some very low ratio of returns to people that we had. And now today, with the same 100 people, we do millions and millions of returns.

So Avalara is a story of continually looking for technology that helps us to automate and drive scale. And we've been doing versions of AI for a long, long time. Whether it's going across, Danny's got all the hyperscalers, and we've got a lot of uptime.

But the idea of doing scale to collect content. To do tax, you have to collect content worldwide. We've been using bots and different types of technology.

So AI has been a part of it. It wasn't called AI, but AI has been a part of our thinking, whether it's facilitating filing more returns, whether it's getting more content more effectively and efficiently, whether it's driving more certificates of... All this stuff was that, but it was SaaS.

It was this subroutine that was happening behind which, no matter what anyone says, it's the same thing. We're still getting API calls in milliseconds that gives accurate tax determinations worldwide today. That's never going to change.

The agentic side of it that is changing is this idea of we're in the background now proactively looking after customers' interest as it relates to compliance. Which is, that to me is the shift, is with people watching and managing and making sure that it's done right, those folks are in the background now just making sure that all that stuff is done right. In the past, that's a reactive thing.

You're audited. And when you're audited, all of a sudden you go back and you're like, "Oh, you know what? We didn't have that tax code mapped correctly.

" Now, all of a sudden, we've got these agents, if you will, in the background looking at that stuff. And then you start to look at, well, how do you do it? What does that do?

And you have all sorts of examples on the research side, where they are identifying different changes in the tax law globally. You have on the returns side, you can see anomalies with returns. All this stuff in the past either would've required people to do the work to identify the problems, or they would've gone and they would've been filed, and you get audited and there's a problem.

So for us, the agentic stuff is a subroutine, just managing all of those things to make sure we do it better, safer, faster. And ideally, you're picking up a bunch of those mistakes, you're making the adjustments so that you're off making tax less taxing. So it's an evolution of it, but it works really well for the tax industry, for sure.

What I found really interesting is there are a lot of people out there who say, "Sales tax, well understood, well settled. Oh yeah, Avalara, they're the gold standard. " What am I going to get out of it with putting agents into place?

But it's also a poster child. I'll tell you what you're going to get out of it. You just explained what you're going to get out of it.

Danny and- Jamie ... Jamie explained what you're going to get out of it. There's always room to do it better, faster, cheaper.

Yep. That's right. I think the other piece of this, though, is look, Greg, we've been around the block.

This is 96% of my revenue. How do I keep growing that business, but it only becomes 50% of my revenue because I just grew another line that's- That's right ... another 50%.

And how do you do it efficiently? So the story of the returns is the same story of all of the stuff that you do and much bigger. Yep.

So how do you take that same 100 people and now instead of doing a couple million returns, you're doing the whole enchilada. So there's an efficiency side of this, and then there's a we just enable folks to do a lot more with more accuracy and less error, and it's just a good story if done right. Yep.

So I guess this begs the question then, which is if we're sitting here next year, year after- Where do you see, where did the big growth come from? Internationally, there's something called e-invoicing. Mm-hmm.

You get outside of the United States- Yeah ... and I've spent a fair amount of time outside of the United States, and there's something called the VAT gap. Yeah.

And what that means is all sorts of revenue flows overseas, either within the EU, country to country, or outside of the EU. But there's been for years the ability to accurately calculate VAT, value added tax- Sure ... and do that.

And the VAT gap is billions and billions of dollars. And so what jurisdictions and countries have been doing for a long, long time, Brazil and Mexico leading the way, is they said, "You know what? " In Brazil as an example, it's called Nota Fiscal.

But it's the same thing. It's called e-invoicing. So e-invoices are flowing all the time, business to business, to conduct business around the world.

E-invoicing is now becoming mandated throughout the world. And to understand the story of Avalara is to understand that in our world, we started with this crazy thing called sales tax. 22 years ago, we had this idea that instead of manually calculating tax in the 50 states and the complexity of that, we're going to put together services that's going to do it for you.

And it was the flywheel that allowed us to grow into returns and all the other stuff we do today. I would suggest to you it's the same opportunity with e-invoicing. So in a year from now, what I would tell you is that e-invoicing has grown, and we get that same flywheel effect where folks are using us to help with that mandatory regulation around, France just did it, Germany's following, then Spain, and Europe, but helping those companies there.

And then all of a sudden they're saying, "Hey, I've got to file a return in Japan," or, "I've got to file a return in Korea," wherever it is. Same thing we've done with sales tax. It's the same thing.

Here in the United States, we're calculating sales tax for you- States and jurisdictions ... yeah, in Florida and different places. And all of a sudden you're like, "Well, I'll just file that return for you.

" It's the same thing. We'll do the VAT returns. We'll do the cross-border for you.

We'll do your 1099 in the United States. So that is the second flywheel I would suggest to you for Avalara. And that in a year from now is what we're going to start to really glom onto as a growth engine for Avalara.

Excellent. I think it's a great strategy. And with agentics, you could do it in half the time it took you to do the sales tax piece.

It's a fantastic agentic story. Again, there's tremendous complexity. There's a lot of business to business.

You got to link up systems, whether it's leveraging one of these acquisitions we just made with Asuri, which helps us to agentically... And you can do point to point integrations now with technology. It's amazing.

What used to take literally months and years takes days these days. Days. I know.

It's fantastic. And so all of a sudden, instead of people getting fired, they're doing other things, right? And that's the same opportunity with e-invoicing.

And in places like Brazil where it's super mature. Like you buy a hot dog on the street, that's an e-invoice and going to the government. Really?

You literally-- It's amazing, the depth it is. And if a place like Brazil can figure it out, globally, it's going to be a thing. Here in the United States, it will be a thing at some point.

And so I think that's a big opportunity, and that will represent the growth, which is international. There's a lot of runway in the sales tax in the US side. But outside of that international, it's an e-invoicing game and then a cross-sell from there.

I love it. Hey, man, we're about out of time, but Greg, personally- This was fantastic ... it was a great conversation.

I love telling the stories, as you know. Well, this was a great- We were talking, we got to go out on your boat? Like- You know what?

If you're down here, let me know. Oh, listen, I am going to look for you out. If it ever stops raining here.

Yeah, the weather hasn't exactly been... I haven't been on my boat in about a month. Yeah.

Well- Every weekend, it's rainy. I'm going to come down here in January. That's when we're going to go on the boat.

That's when you come. And that's a good time. Actually, we get a lot of southeast wind, which is the right wind here.

There you go. And yeah, it's fine. There we go.

Any time, man, look me up. All right. Listen, thank you very much.

Greg Chapman- It's been a lot of fun ... EVP GM for the Avalara Tax Service. There you go.

Good work. There you go. You're watching Techstrong TV.

We'll be right back.