Enrico Palmerino, CEO of accounting automation and outsourced services provider Botkeeper — which abruptly
In a wide-ranging interview with Accounting Today, Palmerino said a significant portion of Botkeeper's business was concentrated in a very small number of major accounting firms, adding that between 30 and 40% of its revenues came from only about 10 different customers. Last year saw a major spike in M&A activity within these top firms, which dramatically shrank both the company's current and potential client bases in a very short time.
"You just would never expect to have the vast majority of those clients all leave at the exact same time with basically no advance warning," he said.
He said this development came as a big surprise. The company had been in active conversations with current customers who were making plans to buy hundreds of more licenses with millions of dollars on the line. Then, right before the renewal deadline, a routine call would bring unexpected bad news: The firm was merging and wanted to get rid of the old tech.
"And [our champions would say,] 'I'm out of here too, my last part of my job is to transition this, and then I'm gone,'" he said.
While the company at first had enough runway to last well through 2026, each time this happened it had a little less. The first wave of cancellations at the end of the third quarter of 2025 was a troubling sign and led the company to consider cutting expenses to bridge the gap, but it was the second wave at the end of the fourth quarter that made the company realize it was facing an existential issue. This affected its ability to draw on its debt facility, which eroded even more runway. Eventually, there was no more room to maneuver and there was no way to avoid what was becoming increasingly obvious: Botkeeper could not survive.
All this happened extremely fast. Palmerino said that from the moment the company began losing big chunks of revenue to when he realized it could no longer stay in business was only eight days, with most of the "chaos and pain" taking place over 72 hours.
"This was landing in [San Francisco] to meet with Xero to talk about special API access — why would you fly there and do that if you even thought this was going to be a thing? — and then, two days later, we're talking about this. And you just couldn't put the structure, the legal, the money together fast enough to avoid crossing into potentially creating liabilities here and doing more damage than good, if for whatever reason, something didn't go according to plan. So that was the worst five days of my life," he said.
He made some last-minute efforts to secure more funding, but there just wasn't time. Previous fundraising had generally taken three to four months; investors need time to sit down with management, to examine the business, to perform due diligence, to comb through the data, and to ask a lot of questions. This usually does not happen fast, and even when it does, it does not happen with the kind of speed he needed.
"It certainly doesn't happen with anyone new in five days. It'd be like asking someone to marry you after your first date. With existing investors, you can usually do rounds pretty quick, maybe 30 days, 45 days if you need to, because they're understanding and know the business. But to put a round together in a couple days and figure out what the pricing is, and then circulate the papers to all the investors and get signoff, that kind of stuff doesn't happen. Time was our enemy," said Palmerino.
Less and less room to maneuver
Not helping matters was the realization that the market had shifted. Palmerino said that, years ago, the mantra was to grow at all costs, so speed was more important than profitability, at least in the short term. But over the years this has fallen out of vogue in favor of companies that can show profitability out of the gate. This creates complications when a company has been built mainly for growth. It also creates a hesitation to fundraise more before the company achieves profitability, which he said Botkeeper was on track to do this year.
"We're charted to profitability. Let's wait to raise until then. And that was the board's plan, because we thought we would get better valuations and we then could decide do we want to raise $1 million, $2 million, $5 million, or do we just not raise for a few more years and keep investing the profits and driving it up and then raise a big round, or do a private equity recap. We weren't out raising. And then the problem was this happened so fast," Palmerino said. "It wasn't like we attempted to raise and failed. We were talking about maybe going out and raising in the next seven months. Not today."
He noted, too, that as a venture-backed company, Botkeeper operated under a different set of financial constraints than the CPA firms that were its customers. While it had successfully fundraised many times before, and had accumulated tens of millions of dollars worth of funding, it still lacked the flexibility to respond quickly to its challenges.
"If you're an accounting firm, how you spend money and grow is very different than if you're a venture-backed company, which is a totally different model. The only way VCs hit the returns they need on their investments is to deploy capital, build technology as fast as possible, get ahead of the market and be right at the forefront. Being first and being second, it's a difference of billions and billions of dollars. So that's the playbook. You've got to engineer fast. You've got to out-perform your competitors. You've got to grow fast," said Palmerino.
He acknowledged that his investors have at least been very understanding. He noted he's been CEO for 11 years, and has successfully raised funding from multiple venture capital firms. If he were doing something wrong, he said, he likely would never have cleared their Series A, B and C rounds, and he would have been removed years ago.
His investors said the same thing.
"[They said] 'We've kept you at the helm for 11 years. You know how many CEOs we've replaced if we didn't think they were doing their job, doing the right things, making the right moves and decisions, and spending the money where it needed to be spent? You would have been long gone,'" he said.
Technological considerations
Palmerino also did not believe technological disruption was a factor. Botkeeper was founded in 2015, years before generative AI hit the scene, and was largely based on machine learning technology. He said AI technology has come far in a short time and there are many things it can do today that could not be done when Botkeeper first started, so the company used people to fill in the gaps.
"I saw in the early days this — 2018, 2017 — we saw other AI companies fall on their face because they trusted their users to train the AI. So instead, we had our people doing reinforcement learning and training the AI and filling in the gaps, and that was working really well," he said.
Palmerino said the original plan had been to use people to train the technology to the point where it could stand on its own. But, looking at the capacity problems the profession was facing, he said the company eventually felt that the outsourced accounting process services would provide even more efficiency, so he decided not to get rid of them, much of which were provided by a large number of accountants in the Philippines along with some specialized on-shore talent. Over time, he added, the company found the combination of tech and outsourcing was very successful.
"These firms would say, 'Hey, I need a resident in-house expert on Botkeeper we can throw our clients at. They can onboard them, get it all set up and configured, then hand them back to us with everything in a neat bow. And, oh, by the way, Botkeeper is now allowing me to take on more clients, so once that person is done with that, I'd actually like to keep them as our onboarding person.' And guess what that means for us? More user adoption, more license growth and expansion, a stickier client who is building their processes around it, and one of our experts on the inside. That's the dream," he said.
With this in mind, while AI technology has advanced far, he does not believe the change in AI technology factored into Botkeeper's demise. If that were the case, Botkeeper would have been steadily losing sales, he said, but Q3 last year was actually a record quarter. Moreover, he believes he was still right to bet on machine learning technology even as generative, and now agentic, AI solutions flooded the market. Generative AI, he said, simply is not up to the task. While it can do many things, and there are many very interesting and exciting applications, he felt doing what Botkeeper does was not one of them.
"The bet we made on technology was machine learning. Generative AI has too many hallucinations, you can't trust it to do good accounting consistently, accurately and continuously improve. So we put our eggs in, I think, the right basket, because I'm watching other ones who are able to get to market quickly with things that look like Botkeeper, but then the performance doesn't improve … And we were constantly improving," he said.
Reflecting on what he would do differently if he could go back in time, Palmerino initially said he would have launched Botkeeper five years later, because the costs would have been a lot lower by then.
But then he wondered whether that would actually have been the case. "Then again, we wouldn't have been the first mover, wouldn't have had the name. We wouldn't have been at the forefront, coming out with the newest thing and then watching people trying to fast-follow. But you also can't predict markets, so who knows what would have happened if we did launch five years later?" he said.
One thing he did learn over the past 11 years is that while being a pioneer is exciting, it can also be risky. And this is an issue not just for himself and his company, but for his customers as well. Accountants, he has learned, tend to be more cautious when it comes to their technology, and so the speed with which he developed Botkeeper may not have made a big difference.
"What I've learned is you can't push the accounting industry to adopt something faster than the industry is naturally going to move," he said. "Because they are stewards of client data and client accounting, they move slowly, methodically and cautiously. And so it doesn't matter how fast the technology advances or changes, it's still going to be adopted slowly. … And so what my experience has taught me is to be less of the brand-new thing and be more pushing out something that's polished, thorough, completed and vetted, over bleeding-edge fringe technology."
