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Sohn: Cota Capital’s Babak Poushanchi picks tax software player

Tom Richardson
Dec 3, 2021

Fresh from picking last year’s 180 per cent gainer Nasdaq-listed and other big winners such as DocuSign three years ago, Babak Poushanchi is back at Sohn in 2021 with another stock pick. This year the Cota Capital founder and tech-focused investor has named Seattle-based tax software business Avalara as his top pick.

“It has been growing its revenues at the rate of 30 to 40 per cent over the past decade and has over 70,000 customers,” said Mr Poushanchi. “The company continues to have a big opportunity ahead of it, with less than 5 per cent market share. The business model is very predictable with over 90 per cent of its revenues as recurring and offers tremendous operating leverage with its 75 per cent gross margin.

Mr Poushanchi said Avalara could grow from a $US700 million ($987 million) revenue business today to a multibillion-dollar revenue business over the next four to five years and argued the shares are a compelling opportunity. He also said Avalara has a dominant market position and the most scalable modern platform among competitor offerings.

“The company is led by its visionary founder and CEO, who’s supported by a strong team that has a track record of success and consistent execution,” Mr Poushanchi said. “We believe that Avalara can successfully grow its business over the next few years and believe that the shares offer a compelling investment opportunity.”

This article was originally posted by The AFR here.

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