The promise of a “paper-less office” has been around for a long time. It was first coined by librarian and academic Frederick Wilfrid Lancaster in 1978. Forty-four years later, the quest for a fully digitized and automated data entry process remains.
Now, technology called Intelligent Document Processing (IDP) exists that is helping organizations to digitize and automate unstructured data originating from various documentation sources, including images, pdfs, word processing files, online forms, and more. And it’s a large global market expected to grow from $1.1 billion in 2022 to $5.2 billion in 2027, according to MarketsandMarkets Research. Yet most companies today still require a high degree of manual data entry.
One company, Rossum, hopes to change that dynamic and further free office work from the drudgery of manual data entry. Founded in Prague, Czeck Republic in 2017 by AI PhD students Tomas Gogar, Petr Baudis and Tomas Tunys who dropped out of university to start the business. This founder’s journey story is based on my interview with Tomas Gogar, Rossum CEO and Forbes 30 under 30 member.
“This space of document processing was totally behind. So, we decided to disrupt that,” says Gogar of his and his fellow co-founders’ decision to leave academia and start a business.
Why leave the world of academia for the start-up world? “There were two reasons. I'm an impatient kind of a person. And in the space of machine learning that we were in, we had limited access to the kind of resources you find at Google or Facebook. So I was motivated to find those resources. And the other one was, I really wanted to work with my other co-founders. They are extremely smart,” says Gogar. To solve the problem and work together, the three PhD students had to start a company.
“We sat down and we said, ‘The problem we are solving is incredibly hard. And it will probably cost hundreds of millions of dollars to solve it from the R&D perspective. But if we manage to build a product that’s helpful to customers, we can get the money from the first version to fund further R&D’. So we wanted to build this R&D growth loop,” says Gogar.
Rossum combines advanced data extraction capabilities with a low-code, cloud-native platform that automates significant amounts of manual work across a company’s document processing workflow.
The founders picked the name “Rossum” for the company in recognition of the play "Rossum's Universal Robots" by Czech writer Karel Čapek. “It’s the first instance where the word Robot was used. So, we picked this name because it has a connection to our Czech roots, but it's also so tightly connected to AI,” says Gogar.
Though Gogar had spent most of his career in academia earning his Bachelor, Masters and working toward a PhD from Czech Technical University in Prague, he had been thinking about ways to solve the drudge work of manual data entry ever since he was 12 years old when he was enlisted by his mother for her dental practice to manually input data for invoices. He and his co-founders spent years in building machine learning and AI algorithms to help automate the process of data entry through their academic research.
The trio had already had some experience working together on a couple of businesses and thought that they would have what Gogar refers to as their “unfair advantage” in building this business because each had already spent years researching the problem at the University. However, they found that experience with AI in an academic setting and building a business are two different things.
“If you're building an AI service, you need to have data. The more customers you have, the more data you have, the better algorithm you can have. So, I remember I was literally walking around Prague, visiting different companies, asking them if they would share a couple of invoices,” says Gogar.
At first the only invoices they could get were Czech invoices, but they planned from the beginning to build a global company. So, they needed to build their algorithms in a way that made it easily trainable across all different languages. While the need to start with just Czech data seemed like a disadvantage at the beginning, it turned out to be a big advantage because it forced them to build the software in a way that made it easy to add languages and document types.
“This turned out to be a huge advantage when we landed deals with companies like Siemens and Bosch, because they were looking for a solution that can operate globally. And this would never happen if this company was started out of the U.S. or out of Germany. Those markets are big enough that you build software differently, you build it for a specific market. The fact that we started out in a very small country forced us to build it differently. And it's our current advantage,” says Gogar.
As luck would have it, companies like Siemens build their shared service centers for accounts payable processing for Europe in the Czech Republic, where the population is well educated and they can easily find people that speak German and French, along with a high number of expats.
Rossum landed Siemens as his first customer by offering to open the system for them as a test case. But when they processed invoice documents for them, Siemens didn’t believe they were not doing it manually because the results were too good. “So, they ran a second POC (proof of concept), now with higher volumes, and we proved to them that there was an order of magnitude better results using our software than when they processed the invoices themselves,” says Gogar.
Rossum was incorporated in the U.K. but has headquarters in both London and Prague. They chose the U.K. because the Czech Republic didn’t have the laws and infrastructure to support start-ups.
Today the company is growing fast, with 5X year-over-year growth over the past 12 months, with some 250 employees. In addition to its first customer Siemens, it now services over 150 customers including Bosch, Veolia, EY, Adyen, Cushman & Wakefield, BDO, Suez, PwC and many others who are using the platform to exchange and process documents such as invoices, purchase orders, quotations, financial statements and customs declarations.
As a result, the firm has attracted $109.5 million in venture funding to date. Its most recent funding round raised $100 million led by General Catalyst in what was Eastern Europe’s largest Series A funding to date. Previous investors include LocalGlobe, Seedcamp, Miton, Elad Gil and Ryan Peterson, founder of Flexport.
“We really think that people shouldn't spend their time on this tedious manual data entry, no matter the size of the company. I don't think this should be for the Fortune 500 only. I think this should be accessible to every business,” says Gogar.
The company’s current customer base is typically a mid-sized company, but it’s recent fund raise is allowing the company to invest in the infrastructure to pursue more enterprise customers. “As a start-up we have limited resources, so we need to focus on that step by step. We started in the mid-market and now we are expanding heavily towards enterprises. And the last one will be the SME market,” says Gogar.
Gogar grew up in a small town outside of Prague and worked in his mother’s dental practice from the age of 12. He met his co-founders while attending Czech Technical University in Prague while they were working on their PhD’s, which they never completed and left school to form Rossum.
But the Czech Republic did not have much of a start-up culture or easy access to venture capital. The idea that start-ups are built on sweat equity and risk is a foreign concept with the Prague business community according to Gogar. “People are not used to that. You start a company, and you tell people, ‘Hey, we wanted to have an ESOP, everybody should be a shareholder, but people were not used to that. So, we are among the first companies here that are pushing for it,” says Gogar.
The company’s first angel investors encouraged Gogar to go to Silicon Valley and experience the start-up culture there for himself, as well as to go through the pitch process for venture funding. “They told me ‘Hey, Tomas, you should go to Silicon Valley to see how it is done. So, I went there, and I must admit I was overwhelmed. I felt like everybody is so smart. I went to Pitch Nights and failed miserably,” says Gogar.
Gogar’s experience as a Czech PhD student taught him to be very conservative when writing grant proposals. But no VC wants a conservative vision of the future. They expect exponential growth. “This was like a cultural shock when I started to pitch in the U.S. and Silicon Valley. I was not good in fundraising. So I went on a mission to find some customers instead,” says Gogar.
He had the good fortune to pitch Flexport and its founder Ryan Peterson, which resulted in small deal. Peterson not only became a customer, he became an investor and introduced Gogar to Elad Gil, an investor and advisor to companies including Airbnb, Airtable, Coinbase, Figma and Flexport. Those early investor relationships would later help Gogar open the doors to significant venture funding. “Coming out of Prague, it takes time, but we actually managed to get to the Silicon Valley network through the success of the product itself. I didn't manage to do that pitching investors,” says Gogar.
As for the future? “We don't want people to spend their lives typing in data. This really tedious work should disappear. I believe we should be able to solve 90% of the problem and the final 10% will be hard, but I believe we should be able to do that,” concludes Gogar.
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