Every year, tens of thousands of companies work with auditors to prepare an audit. It consists of a lot of back and forth, data collection, and waiting on both sides. It takes four months, on average, while teams of professionals, that have been historically underserved by technology, manually gather and sample a fraction of the underlying data. At the end of it all is a mission critical document and auditor attestation. We believe that AI can make the process a better experience and save time for both end customers and auditors all while reducing costly error rates and increasing audit quality. We’ve spent the last two years watching AI fundamentally shift the economics of knowledge work, and to us, audit is one of the largest domains that is underserved by these advancements, but ripe to reap the benefits of them.
Audit is a $50B+ market in the US alone, employing over a million professionals, who have been underserved by technology. Nobody has seriously asked what it would mean to use technology to reimagine the audit experience and audit quality from the ground up, and as a result the end product and the user experience has not meaningfully evolved.
Today, we’re thrilled to announce that Lightspeed is leading an $85M Seed & Series A in Modus, the company building the world’s first AI-native accounting firm.
Why Audit? Why Now?
We consider the industry is built on several attractive attributes – a highly important business process, a recurring product, valued and longstanding relationships, high degree of expertise and trust and in some cases a software-like retention profile. The firms providing these services are built on people:senior partners managing relationships, managers running engagements, and associates and analysts executing through manual data work. Capacity and the ability to serve work today is a function of people alone – to grow, you hire six months in advance and hope staff stay motivated through a grueling busy season year-over-year.
Due to the complex nature of the workflows and market structure, we’ve seen middle market audit has spent decades without catalysts for change. It’s also a space where bringing about change, especially via technology, is not to be taken for granted. Accounting more broadly has been undergoing a secular consolidation trend for decades now, and in our view, the window for a new entrant to establish itself is narrow and the execution bar is high. We believe there can be a better service delivery model, enabled by AI, that can drive higher client satisfaction, higher accountant satisfaction, higher quality work and higher growth all in the same breath – that is the challenge that motivates the team at Modus.
The Team and Product That Earned Our Conviction
Arush Jain, Pranav Pillai, and Vinay Kasat met at the University of Pennsylvania and all established careers in their own domains before coming together to build Modus. What struck us about them was how precisely their backgrounds map to what this specific business requires — which is rarer than it sounds. Across our three founders and the advisors they’ve brought on board, Modus has a blend of deep accounting domain experience, first principles AI engineering expertise, M&A expertise, and operational / growth rigor.
The team has flown to audit firms across the country and sat alongside frontline auditors for months to learn the work firsthand. Modus’ engineers are engaged and eager to learn audit processes from the experts and partner with auditors directly to uncover and unlock the largest bottlenecks side by side. The team is thorough – and moves fast: within 48 hours of our first meeting, our teams had connected across three times across three cities. That pace told us something and has rung true every week since in building the technology Modus hopes to use in partnership with accounting firms across the US.
Why Acquisition-First Wins
We believe creating and selling software to audit firms is one of the harder go-to-market motions in enterprise, and we’re convinced that truly transformational technology in this space can only be built by iterating with auditors day in, day out where everyone is working toward the same shared goal. We also believe that the software itself isn’t necessarily the most exciting opportunity – it’s unlocking the people with the customer relationships to fundamentally transform the growth profile and unit economics of an audit firm.
That’s why Modus aims to acquire interest in the firms it works with rather than selling to them from the outside. Modus partners holistically across purpose built technology, growth orientation, and M&A optionality to offer the best customer experience, a step-change in product quality and a home for top audit talent
As of today, Modus has deployed seven AI workflows inside their first acquired firm, covering specific parts of an audit workflow end-to-end. Those workflows represent approximately tens of thousands of hours saved per year for both auditors and customers. That freed capacity in turn creates incremental sales opportunities and the ability to drive growth and structurally improve the unit economics of delivering an audit, tax engagement, or otherwise.
The Bigger Prize
Modus is building toward a firm that wins on a better value proposition: faster delivery, higher data coverage, and a client experience that hasn’t really existed in this industry before.
We’re proud to lead this Series A and support a team that has the talent, the mindset, and the specific mix of skills needed to go after something this ambitious. The capital will fund additional firm acquisitions, continued product development, and team growth.
Authors
