How Clarus is saving money for large and small companies alike
For all startups — but especially for the smaller and earlier stage companies — it’s critical to gain every slight advantage you can find. So why are companies all across the country missing out on tax credits that could make a gigantic difference? Helping those companies is the mission of Columbus’s Clarus R+D.
“Our core business is helping entrepreneurs capitalize on tax advantages that were created by the federal government,” said CEO Chris Winslow. “It’s a very widespread program and very popular, but it’s also somewhat complex. Your ability to document and justify your research and development expenses against your costs and allow for a tax credit is a complicated process, and requires you to follow tax code and create a defensible study for yourself. A lot of companies have decided that it’s too much trouble, but we’ve built a sophisticated software platform that allows people to navigate through the process and get a precise and highly defensible calculation.”
Clarus aims to “create a high confidence level” for companies while also helping them claim the maximum credits available. And whether you’re an early stage startup or an established business, their software is likely able to help you free up important funds that can be reinvested in the company. But most companies, Winslow said, aren’t even able to identify those funds — and if they are, they’re unlikely to have the expert help available to take advantage.
“In the industry, most of this is done by tax professionals,” he said. “If you’re a 10-person software startup, claiming these credits is a very valuable proposition, but you’re not going to have anyone on staff who knows how to do it. It’s even likely that your local account doesn’t have any experience there, either. So it’s a very educational process that we take clients through, and the incremental value — particularly for startup companies — is tremendous.”
What’s the difference in getting a few more tax incentives than normal? For a company like the hypothetical startup Winslow described, it could mean increasing staffing by 10 percent with no additional spending.
“For a 10-person software startup building their first application, 80 percent of their payroll expenses are R&D,” Winslow said. “You can take a significant amount of the cost of those employees, apply it back against payroll taxes and cut your expenses right out of the gate. With 10 employees, you could likely hire an 11th with the credit you get back on payroll taxes. So it’s an attractive option for companies like that.”
After spending decades in and out of the Columbus startup scene with a variety of companies in a variety of stages, Winslow is a recent addition to the Clarus team, joining in June. He said the combination of Clarus’ “very straightforward, easy-to-implement” technology and the potential of the market made them an exciting proposition for him.
“This is a very large industry that’s relatively untapped and ripe for disruption,” he said. “There’s research that indicates that well over half of the eligible credits that exist in the marketplace are never claimed each year. But it’s not just about the money. in the FinTech world, I think this kind of platform has a tremendous amount of applicability across other markets. A lot of people focus FinTech on banking and consumer finances, but there’s a large world of things around taxes and credits that have never been attacked from an automation and technology enhancement perspective.”
And as someone who’s spent 30 years amid the Columbus business scene, Winslow said it’s a more exciting time than ever to be headquartered in Ohio.
“What’s really exciting is that we’re founding companies and keeping companies here, and a big part of that is being able to get funding here,” he said. “I’ve run funds and incubators before, and it’s always a challenge to find B- and C-round funding for companies. But right now, thanks to the Third Frontier and other investments, there’s an opportunity for companies to grow organically here in Columbus. Then they keep growing, build more teams and eventually create wealth. We’re seeing the infrastructure in place to grow that wealth.”