Franklin, which provides tax-compliant hybrid crypto and cash payroll services to startups and businesses, has raised a $2.9 million seed funding round led by venture capital firms gumi Cryptos Capital (gCC) and CMT Digital. Other investors include Arca, Sfermion, Portage Ventures, and Synergis Capital.
Franklin’s payroll software is designed for small to mid-size businesses that want to be able to pay their employees in cryptocurrency. Separate from today’s fundraising news, the company announced Monday that its software now automatically syncs with QuickBooks.
“We’re focused on providing a more flexible payroll experience, which is why we have a hybrid cash and crypto product,” Franklin founder and CEO Megan Knab told Decrypt. “We found that lots of Web3 native teams wanted to be using crypto, but the administrative burden of it—from tax form generation, the compliance side, accounting side—was too big of a burden for them.”
Franklin’s current customers mostly conduct transactions through stablecoins and process crypto payments for employee bonuses, Knab says. Other features offered through Franklin include batched transactions, multicurrency selection, and automated tax filings.
Franklin claims that it can also process U.S. dollar transactions within two business days.
“There are a bunch of rules in the United States about how you can pay your team in crypto, so we bake all those rules into our platform,” Knab said.
“We look at it on a per-state basis—most states require that you pay your W2 employees in a USD-equivalent currency; if you’re paying a contractor the rules are generally much looser,” Knab explained. “So we’ll look at where your company is incorporated, where are the W2 workers and what states they’re in, and we make sure that the payments you’re planning to execute follow the rules of that specific jurisdiction.”
Knab is a crypto accountant who formerly worked as VP of finance at the Web3 marketing agency Serotonin before launching Franklin last spring.
Franklin is the second company to spin-out of Serotonin’s product studio following Mojito, an NFT commerce platform launched in 2021 that Serotonin claims has generated more than $120M in sales for clients such as Sotheby’s, CAA, Pace Gallery, Lyrical Lemonade, and the Milwaukee Bucks.
“Many Serotonin services clients naturally become customers of Mojito or Franklin,” said Serotonin co-founder and CEO Amanda Cassatt. “Companies come to us for help with their Web3 strategies, then once it comes to executing that strategy, they need a software provider.
“We refer business to Mojito wherever that is a fit, for example, with Sotheby’s and Pace Gallery,” Cassatt continued. “When partners come to Serotonin asking about crypto finance and payroll, we refer Franklin because we are confident it’s a solid product built by a competent team.”
Knab did not disclose Franklin’s pricing model but said that it was comparable with existing Web2 payroll platforms Gusto and Justworks.
Angel investors in Franklin’s seed round included Sapphire Ventures VP Jason Brooke and Iladro Sauls, associate at Sapphire Ventures.
Franklin has near-term plans to expand its offerings with crypto-integrated retirement savings accounts and health benefits, and adding compatibility with other layer-2 blockchains. Financial services giant Fidelity began allowing companies to diversify their 401(k) retirement plans with Bitcoin investments last year, but in Nov. 2022 a trio of U.S. senators asked Fidelity to stop offering Bitcoin 401(k) to customers after the collapse of FTX.
“Being able to offer tax-advantaged crypto via a retirement program is something we’re working on a partnership with,” Knab says.