Exclusive: Reducto, AI document parsing startup, raises $24.5 million Series A led by Benchmark April 25, 2025 |
I’ve long been fond of Arthur C. Clarke’s famous third law: “Any sufficiently advanced technology is indistinguishable from magic.”
In Reducto’s case, the founders took that principle literally when they settled on a name for the company.
“We had this notion of wanting to build magical tools for developers,” said Adit Abraham, cofounder and CEO of Reducto. “We had a list of names that were magic-adjacent. Reducto was one of them, and we picked it. Weirdly, it works with what we do, but it wasn’t at all intentional.”
The name Reducto is derived from a Harry Potter incantation, for a spell that blasts objects into smaller fragments, or even dust. And that’s a version of what Reducto does—the startup specializes in document ingestion, taking massive, complex documents and parsing them accurately.
“The main reason why people end up using us is for accuracy,” Abraham told Fortune. “We do a multi-pass approach to not just take out the outputs, but also find errors.”
Reducto, founded in 2023, recently raised a $24.5 million Series A, led by Benchmark, Fortune can exclusively report. First Round Capital, BoxGroup, and Y Combinator, all existing investors, participated in the round, which brought the company’s total capital raised to nearly $33 million. (Reducto’s $8.4 million seed round, led by First Round, was in October 2024.)
Liz Wessel, partner at First Round, said that the market for Reducto is broad and growing fast: “Industries like finance, healthcare, tech, and legal consistently face challenges converting complex documents into accurate inputs for LLMs,” she said via email.
It’s the wide variety of use cases that’s key to the company’s future. The startup’s customers include Airtable, Scale, and an undisclosed Fortune 10 company.
“For large Fortune 500 companies, most of their accounting and finance processes are still done with paper—paper checks, paper confirmations, invoices,” said Benchmark general partner Chetan Puttagunta via email. “The workflow around this can’t be digitized, can’t be AI-enabled until the underlying documents are processed accurately for LLMs.”
And for AI startups serving enterprises, Puttagunta added, “their customers are demanding that they be able to meet them where they are today—which means they have to be able to process documents intelligently.”
Vanta, an AI compliance unicorn, has been using Reducto to power a number of customer experiences. The product is accurate and sticky, said Ignacio Andreu, Vanta senior manager of engineering, AI, via email: “Based on our evaluations, alternatives like Gemini models, while potentially cheaper, don’t yet match Reducto’s accuracy,” he told Fortune.
Abraham and his Reducto cofounder Raunak Chowdhuri met as students at MIT, and cut their teeth in AI spending time at Google and Nvidia, respectively. They’ve also leveraged their experience with computer vision in building Reducto, building tech that has the ability to understand handwriting, checkboxes, and other subtle markings. In some sense, Abraham says, the models are able to “see” documents the way a human might, and is an indication of where we’re headed overall.
“For my era of tech people, this is by far the most transformative period that has ever existed,” said Abraham. “We’re not far off from having intelligent systems—or agents, whatever you want to call it—reasoning on every important process, from doctor’s office intake, to your financial records, insurance claims, all of it.”
In short, a step towards small, everyday magic.
See you Monday,
Allie Garfinkle
X: @agarfinks
Email: alexandra.garfinkle@fortune.com
Submit a deal for the Term Sheet newsletter here.
Nina Ajemian curated the deals section of today’s newsletter. Subscribe here.
|
|
|
VENTURE DEALS
- Fora, a New York City-based travel platform, raised $60 million in funding. Thrive and Insight Partners led the $40 million Series C round and were joined by existing investors Forerunner and Heartcore Capital. Insight Partners led the $20 million Series B and was joined by Forerunner and Heartcore Capital.
- Overture Life, a Palo Alto-based fertility treatments automation company, raised $20.6 million in funding from Overwater Ventures, GV, and Khosla Ventures.
- SquareX, a Palo Alto-based browser detection and response company, raised $20 million in Series A funding. SYN Ventures led the round and was joined by existing investor Peak XV Partners.
- Deep Infra, a Palo Alto-based AI model inference services provider, raised $18 million in Series A funding. Felicis and Georges Harik led the round and were joined by angel investors.
- Manifest, a Westport, Conn.-based software supply chain security solutions provider, raised $15 million in Series A funding. Ensemble VC led the round and was joined by AE Ventures, Overmatch VC, Leap435, and existing investors First Round Capital, XYZ, and Homebrew.
- RepAir Carbon, a Tel Aviv-based carbon capture company, raised $12 million in Series A extension funding. Taranis Carbon Ventures and Extantia Capital led the round and were joined by Ormat Technologies and Repsol.
- Isembard, a London-based software-powered manufacturing company, raised $9 million in seed funding. Notion Capital led the round and was joined by 201 Ventures, Basis Capital, Forward Fund, angel investors, and others.
- Augur, a San Diego-based AI-powered threat prevention company, raised $7 million in seed funding. General Advance led the round and was joined by others.
- Amplifier Security, an Atlanta-based AI-powered and user-engaged security platform, raised $5.6 million in seed funding. TechOperators led the round and was joined by Cota Capital, WestWave Capital, angel investors, and others.
- Kollegio, a Palo Alto-based AI-powered college counseling platform, raised $2.8 million in seed funding. Reach Capital led the round and was joined by JFFVentures, ECMC Group, and Tuesday Capital.
|
|
|
PRIVATE EQUITY
- Blue Point Capital Partners recapitalized Restoration Systems, a Chaska, Minn.-based building facades and parking ramps repair and restoration services provider. Financial terms were not disclosed.
- Mission Critical Group, backed by Emerald Lake Capital Management, acquired DVM Power + Control, a West Chester, Pa.-based electrical distribution equipment manufacturer. Financial terms were not disclosed.
- Tropolis, backed by Unity Partners, acquired The Somerset Group, a Rochester, Mich.-based medical malpractice insurance company. Financial terms were not disclosed.
OTHER
- Tonic.ai acquired Fabricate, a Sparta, N.J.-based AI-powered synthetic data generation tool. Financial terms were not disclosed.
- Zencoder acquired Machinet, a San Francisco-based AI coding assistants developer. Financial terms were not disclosed.
PEOPLE
- AIX Ventures, a San Francisco-based venture capital firm, added Jason McBride as a partner. Previously, he was at M12.
- Breyer Capital, an Austin-based venture capital and private equity firm, added Morgan Cheatham as a partner and head of healthcare and life sciences. Previously, he was at Bessemer Venture Partners.
|
|
|
Thanks for reading. If you liked this email, pay it forward. Share it with someone you know: |
Did someone share this with you? Sign up here. For previous editions, click here.
To view all of Fortune's newsletters on the latest in business, go here.
|
|
|
|
