Exclusive: Reducto, AI document parsing startup, raises $24.5 million Series A led by Benchmark

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.

This story was originally featured on Fortune.com