Khosla Ventures is betting $10M on Ian Crosby, whose first startup, Bench, imploded

Khosla Ventures has invested $10 million in Synthetic, a new startup founded by Ian Crosby. Crosby's previous company, Bench Accounting, ceased operations in 2024. Despite this setback, Khosla Ventures is backing Crosby's ambitious plan to create a fully autonomous AI bookkeeper capable of generating accrual-based financials without human intervention. The product is still in its design phase, and Crosby acknowledges that its full vision might not yet be technologically feasible. However, Khosla Ventures led the seed funding round, with participation from Basis Set Ventures and Shopify CEO Tobias Lütke.

Most investors would shy away from a founder with a recent business failure and a futuristic vision. However, Khosla partner Jon Chu embraces such challenges. He stated that controversy often masks the truth and cited Parker Conrad, who founded a successful nearly $17 billion company after being ousted from Zenefits, as an example. Chu believes individuals have the capacity for growth and learning from their experiences.

Crosby clarifies that he was not directly responsible for Bench's insolvency. He claims the board fired him in 2021 after he declined a $250 million acquisition offer. The board also reportedly disagreed with his strategic direction and his leadership style. Chu admitted Crosby "took a big swing, made a few mistakes." After leaving Bench, Crosby founded Teal, another accounting startup, which Mercury acquired 18 months later. Chu’s due diligence included speaking with executives who worked with Crosby after Bench, all of whom spoke highly of him. Chu believes these experiences allowed Crosby to learn from his past missteps.

Synthetic plans to focus solely on AI and other software startups. Crosby emphasizes the goal of a fully autonomous AI-driven bookkeeping service, contrasting it with most accounting startups that rely on human accountants. He stated, "We're not going to release anything that's not fully autonomous. It's that or bust."

Crosby acknowledges the current limitations of AI models, which can still make significant bookkeeping errors. He uses an analogy of a self-driving car still learning to navigate various streets. While Synthetic's prototype works for a narrow user group, scaling for a broader customer base presents a challenge. Despite these hurdles, Crosby is confident, having secured enough funding to be patient and await further advancements in foundational AI models.