Stay In The Loop

Sign-up for texts from Nik on all things DTC, trending business news, and the best place for Pad Thai.

Text With Nik
Click here to join 15,000+ founders, investors, and marketers for Nik’s Sunday email

This Company Finds $50,000 in Tax Credits for You

I tried it with one of my own portfolio companies, too.

ArticlesNik Sharma

If you run a business, there's one thing that you know keeps the wheels moving better than anything else: cash flow. As a startup, cash flow can get tight, depending on what you're doing — you're spending money on employees, contractors, software, R&D, and so much else to keep the business growing and the lights on, at the same time. But, what if there was just money lying around you didn't realize you could claim?

Every year, the United States sets aside about $150,000,000,000 (that's $150 billion) in tax credits and incentives for companies. Most accountants don't have the setup required to dig in, find these credits, and bring them to you. It's not their fault though, the filings to obtain these credits require specialized training and knowledge. Similar to how AngelList productized the investing process for founders and fund managers, there's a company called MainStreet that helps founders claim the tax credits and incentives they're owed.

In just the last 12 months, MainStreet has helped companies claim over $100,000,000. In fact, when a company first signs on with MainStreet, the average venture-backed startup will realize they have about $51,000 in credits they can claim right away. This year, they'll help companies claim just around $500 million. It's almost too good to be true, right?

I thought it was, so I decided to test it with one of my portfolio companies, Spritz Society. Spritz Society is a delicious wine spritzer founded by Ben Soffer (aka @boywithnojob). I asked Ben if we could run Spritz Society through MainStreet to validate MainStreet, and he agreed.

Ben was on the phone with Nick at MainStreet for about 27 minutes total. He ended up getting about $88,000 in credits from that 27-minute call. Umm, what?!

Spritz Society got a $60,000 Federal R&D Credit, as well as a $28,000 Employee Retention Credit. Two things you'd normally never think of checking for. In addition, through MainStreet, they'll be qualified to get a $35,200 cash advance, that they can pay back at 0% interest over the next 12 months. Depending on when Spritz files taxes, they'll get the $60k then, and the $28k credit they'll receive in January.

Haus, another one of my portfolio companies, qualified for just over $100,000 in tax credits back to them.

Until recently, when MainStreet launched, it was usually only Fortune 500 companies with large government teams who were taking advantage of these credits. So what does it take to earn the tax credits through MainStreet? I'm going to explain the IRS Audit Techniques Guide in 5th-grade language.

Permitted Purpose

A business's R&D activities should aim to improve a new or existing product or process.

Technical Uncertainty

Your business must have a hypothesis to see if something will work or not. You'll likely pass this test if you have initial questions about the feasible application of your product or process.

Process of Experimentation

You need to be running experiments. A/B tests, launching MVPs, iterating on prototypes, etc. Most companies in eCommerce can qualify for this one quickly.

Technological in Nature

If you're building in the worlds of chemistry, biology, physics, CS, electrical, or mechanical engineering, you'll pass this one too.

If you pass all four, which again, most venture-backed companies do, then you'll end up with credits fairly quickly. But, what if you were to get audited?

MainStreet Guarantee

In actuality, less than 1% of startups even begin an audit process, but in the off-chance that you do get audited, you're covered with the MainStreet Guarantee. This means that MainStreet has you covered in accountant fees and associated penalties up to $1,000,000. Why $1M in protection? Because MainStreet stands by the work they do for startups.

What's the catch?

Okay, now you're probably thinking, "Great, so they have this incredible technology to find me money I'm rightfully owed, but how much does it cost?"

Well, if you don't qualify for credits, you don't pay anything. MainStreet's model is a lot like an affiliate program — they get 20% of what they find for you. If they don't find anything, you're not obligated to pay anything, so going to MainStreet.com can only be a good outcome for you.

If you're ready to claim your credits in less than 30 minutes, head over to MainStreet.com today, and Book a Free Onboarding today!