Eurora raises $40M for its AI-based system to automate EU e-commerce shipping compliance

The e-commerce market has boomed in the last several years, and with that so has the appetite of tax collectors to do their bidding: make rules that make sure their countries are getting a cut. That’s spelled more red tape and more customs hoops (and costs) for those shipping and receiving goods, and also delays when there is any kind of hitch. All that has been bad news for the e-commerce market overall.

Today, a startup out of Estonia called Eurora that’s built an AI-based system to help ease all of this along more smoothly in the EU region is announcing $40 million (£31 million) in funding as it finds a lot of traction for its solution, with more than 200 paying customers globally. Those numbers are projected to go up: in Europe alone, by 2026 there will be more than 260 billion parcels delivered annually.

Connected Capital, a firm based out of Amsterdam, led the round, with previous backers Change Ventures and Equity United, and Eurora’s founder and Marko Lastik, also participating. (The company had only raised a modest $3 million in four years before this.) Eurora is not disclosing its valuation but the round is one of the biggest Series A rounds for a startup out of Tallinn to date.

Eurora has been around since 2018 but it’s really come into its own in the wake of the Covid-19 pandemic — an interesting detail in itself, considering how so much of the e-commerce story in the last few years has been about how companies boomed during the pandemic and because of direct changes in how people were living and operating.

The event that’s really spurred a lot of its business has been that e-commerce, already on a growth trajectory, accelerated after 2020 due to that pandemic, and catching up to that, in the EU, regulators last July (2021) made a series of changes to how e-commerce items imported from abroad — specifically ending a €22 import VAT exemption, and putting in place new trading regulations between the EU region and other countries, not just China, but also the U.S. and even the UK.

Goods are now no longer protected to any value ceiling and are now taxed based on their final destination (not point of import). This was in part to make sure that funding was being recovered where it was due, but also, in classic EU style, to create what they see as a more level playing field for domestic (EU-based) sellers.

The issue with all this is that it’s essentially been a de-simplification of the previous system. Each country has different sales tax codes, and different items have different classifications, and now there is more paperwork for those sending and taking receipt of items to attend to, and usually more money to be collected. All more complex, and ultimately resulting in delays and likely non-compliance that might catch up with those companies in the longer term.

Eurora’s approach has been to build a platform that operates as a kind of AI-based tax maven, more technically referred to as a “VAT intermediary.”

“If you are buying online, the tax and duties are [often filled out] wrong. Our machine makes sure it’s right,” said Lastik in an interview. “Everything going before and after declaration is right. This is a machine. You no longer need to ensure you have every parcel declared correctly.”

The company says that it’s worked with 22 scientists that have contributed to building its platform, which uses big data to help track and trace the origin of packages and make sense of how customs forms, which might indicate something as vague as “tool”, are an electric or manual tool, what kind and from what materials and the purpose and so on. It then assigns a product-specific HS code, calculates VAT and duty, creates customs declarations and more — all of which a customer can integrate with their other accounting and shipping software by way of APIs.

It claims to be able to process 5,000 requests per second with up to 96% accuracy.

“We are excited to lead the investment into Eurora and actively support the team in scaling the platform globally,” said Shaffy Roell, an investment manager at Connected Capital, in a statement. “The founder and the full management team have impressed us with their quality, domain expertise, and vision for the company. We have seen a clear push from regulators to improve transparency and reporting for the increasing number of goods that enter through customs. We believe that Eurora has built a truly unique AI/ML-based platform, significantly improving compliance while reducing package delays and lowering costs for e-commerce parcels shipped into Europe.”