Basis's Matt Harpe: Why AI Won't Replace Accountants — It'll Make Them Richer

Matt Harpe (0:00)

I do think that accounting is extremely important. It's underappreciated. And I think that this North Star of, hey, we're going to help organizations like Health Systems that I used to work with truly understand how the organization functions and allow them to measure the core goals that they should be tracking against so that they can make better decisions. To me, I do think that's a very important part of how our economy works.

Alex Konrad (0:21)

The US has 3 million accountants and they all have a problem. They're swamped by busy work. An AI startup called Basis wants to help those accountants spend more time on the stuff they really care about, advising clients, getting more work done, and keeping all of us in the good graces of the IRS. Toward that goal, Basis recently raised $100 million at a $1.15 billion valuation. Our guest today is the co-founder and CEO of Basis, Matt Harpe. He says that as the number of accountants shrinks, he can help firms do more with an assist from AI.

Matt Harpe (0:50)

When we started Basis, I think very few companies and certainly very few accounting firms were interested in doing AI for the sake of doing AI. Now, everyone's board, every leadership team is thinking about how do we incorporate AI into what we're doing, but that wasn't true when we started.

Alex Konrad (1:06)

Today on the podcast, we're going to talk about why accounting is the perfect vertical for AI impact, how to recruit top talent in an unsexy problem like accounting, and why Matt thinks he can win where a whole wave of startups didn't succeed. Plus, how Basis can compete as Claude and ChatGBT inevitably move in on its clients.

I'm Alex Konrad, Founder and Editor of Upstarts Media. This is The Upstarts Podcast, our weekly show where we talk to startup founders who punch above their weight to take on the status quo. Matt, welcome to the podcast.

Matt Harpe (1:36)

Alex, thank you for having me. It's a pleasure to be here.

Alex Konrad (1:38)

This episode is brought to you by Rippling AI, the only AI built to give you full visibility into your startup, and the ability to take action across every department. So what is the basis of Basis?

Matt Harpe (1:50)

Great question. So we like to think about Basis as the most accurate and capable AI for accounting. We serve accounting teams across the country. We're currently in about 30% of the top 25 accounting firms and about 25% of the top 150 firms in the country, and we're growing quickly.

Alex Konrad (2:07)

So you started this company with two co-founders in 2023 Was accounting something you were always deeply passionate about, or where does the origin of Basis come from?

Matt Harpe (2:15)

Yeah, so Mitch, I started the company with Mitch in 23 Mitch has some background in accounting. He studied accounting undergrad, and was at an accounting technology company. So he had a fair amount of background there. I have no background in accounting at all. I got introduced in a relatively circuitous manner.

My interest sort of academically was on machine learning topics in healthcare, was focused on a set of mortality trends around the opioid epidemic in the US, ended up doing a whole bunch of work there while I was an undergrad, and then went to the Boston Consulting Group to sort of work on sort of similar methodological type problems in and around healthcare, spent a lot of time working with health systems and pharma companies. Ironically, through that process, ended up getting introduced to accounting. So we oftentimes have to interface with accounting teams. And this actually had nothing to do with what we were working on at the time, but I had a kind of crazy realization in that process, which is that I kind of learned that if you go to any hospital in the US and just ask what I thought was a very simple question, which is how much does it cost us as a hospital system to provide a procedure to a patient? There's really no hospital in America or very few hospitals in America that can actually answer this question.

This is just ridiculous because if you're a hospital, you should have at least two goals in my mind, increase the quality of care for your patients and reduce the cost of care for your patients. If you don't know how much things cost in the first place, you really have no idea if you're actually improving, you're getting better or getting worse at one of your core outcomes over any given period of time. It turns out that at least in our view, this is largely an accounting challenge. The job of accounting is to structure and systematize all the economic activity that happens in and around your organization, so that you can understand that information, that you can do things with what's going on. But there's only so much time in the day, and accountants only have so much capacity. And so the 3 million accountants that we have in the US predominantly spend their time working on accounting in and around what we call the compliance activities. You have to do certain structuring and systematizing to prepare a set of financials to be audited so people can trust what it is that you're reporting to prepare a tax return or a 990 or some kind of governmental filing so that you can participate in our system of taxation. But there's all this other accounting work, some of which gets done but a lot of which doesn't, which involves other forms of structuring and systematizing this economic activity that's actually quite valuable, that can allow you to better understand your organization and different aspects of it and how it may be changing over time and then help you in making decisions about your organization. That just doesn't get done. If we had 30 million accountants, maybe we could go do all that work, but we have 3 million and actually the number is rapidly declining. We have a pretty significant shortage of accountants even to do the work that exists today. And so I became quite interested in this topic in terms of the foundational aspect of accounting and how most organizations operate. And ultimately, the way that our economies organize is that we decentralized decision-making down to these various organizations that are then taking local inputs and making decisions based off of them. And accounting is really the language we use to structure and systematize those local inputs. And so I became quite interested in accounting from that aspect. And then through conversations with Mitch, started to learn sort of the state of accounting technology and the extent to which there were many processes which even at that point felt like some of the emerging abilities of these large models could start to help with. And we felt like it would just become clearer and clearer over time. And so we felt like there was a big opportunity to make accounting a lot more efficient and effective than what it did. But also just to sort of help increase the total volume of accounting in the world. And so that was kind of how I first got introduced to accounting. We started working on some things and then one thing led to the next.