Factorial raises $16M to take on the HR world with a platform for SMBs

A startup that’s hoping to be a contender in the very large and fragmented market of human resources software has captured the eye of a big investor out of the US and become its first investment in Spain.

Barcelona-based Factorial, which is building an all-in-one HR automation platform aimed at small and medium businesses that manages payroll, employee onboarding, time off and other human resource functions, has raised €15 ($16 million) in a Series A round of funding led by CRV, with participation also from existing investors Creandum, Point Nine and K Fund.

The money comes on the heels of Factorial — which has customers in 40 countries — seeing eightfold growth in revenues in 2019, with more than 60,000 customers now using its tools.

Jordi Romero, the CEO who co-founded the company with Pau Ramon (CTO) and Bernat Farrero (head of corporate), said in an interview that the investment will be used both to expand to new markets and add more customers, as well as to double down on tech development to bring on more features. These will include RPA integrations to further automate services, and to move into more back-office product areas such as handling expenses,

Factorial has now raised $18 million and is not disclosing its valuation, he added.

The funding is notable on a couple of levels that speak not just to the wider investing climate but also to the specific area of human resources.

In addition to being CRV’s first deal in Spain, the investment is being made at a time when the whole VC model is under a lot of pressure because of the global coronavirus pandemic — not least in Spain, which has a decent, fledgling technology scene but has been one of the hardest-hit countries in the world when it comes to COVID-19.

“It made the closing of the funding very, very stressful,” Romero said from Barcelona last week (via video conference). “We had a gentleman’s agreement [so to speak] before the virus broke out, but the money was still to be wired. Seeing the world collapse around you, with some accounts closing, and with the bigger business world in a very fragile state, was very nerve wracking.”

Ironically, it’s that fragile state that proved to be a saviour of sorts for Factorial.

“We target HR leaders and they are currently very distracted with furloughs and layoffs right now, so we turned around and focused on how we could provide the best value to them,” Romero said.

The company made its product free to use until lockdowns are eased up, and Factorial has found a new interest from businesses that had never used cloud-based services before but needed to get something quickly up and running to use while working from home. He noted that among new companies signing up to Factorial, most either previously kept all their records in local files or at best a “Dropbox folder, but nothing else.”

The company also put in place more materials and other tools specifically to address the most pressing needs those HR people might have right now, such as guidance on how to implement furloughs and layoffs, best practices for communication policies and more. “We had to get creative,” Romero said.

At $16 million, this is at the larger end of Series A rounds as of January 2020, and while it’s definitely not as big as some of the outsized deals we’ve seen out of the US, it happens to be the biggest funding round so far this year in Spain.

Its rise feels unlikely for another reason, too: it comes at a time when we already have dozens (maybe even hundreds) of human resources software businesses, with many an established name — they include PeopleHR, Workday, Infor, ADP, Zenefits, Gusto, IBM, Oracle, SAP, Rippling, and many others — in a market that analysts project will be worth $38.17 billion by 2027 growing at a CAGR of over 11%.

But as is often the case in tech, status quo breeds disruption, and that’s the case here. Factorial’s approach has been to build HR tools specifically for people who are not HR professionals per se: companies that are small enough not to have specialists, or if they do, they share a lot of the tasks and work with other managers who are not in HR first and foremost.

It’s a formula that Romero said could potentially see the company taking on bigger customers, but for now, investors like it for having built a platform approach for the huge but often under-served SME market.

“Factorial was built for the users, designed for the modern web and workplace,” said Reid Christian, General Partner at CRV, in a statement. “Historically the HR software market has been one of the most lucrative categories for enterprise tech companies, and today, the HR stack looks much different. As we enter the third generation of cloud HR products, with countless point solutions, there’s a strong need for an underlying platform to integrate work across these.”


By Ingrid Lunden

Rippling starts billboard battle with Gusto

Remember when Zenefits imploded, and kicked out CEO Parker Conrad. Well, Conrad launched a new employee onboarding startup called Rippling, and now he’s going after another HR company called Gusto with a new billboard, “Outgrowing Gusto? Presto change-o.”

The problem is, Gusto got it taken down by issuing a cease & desist order to Rippling and the billboard operator Clear Channel Outdoor. That’s despite the law typically allowing comparative advertising as long as it’s accurate. Gusto sells HR, benefits, and payroll software, while Rippling does the same but adds in IT management to tie together an employee identity platform.

Rippling tells me that outgrowing Gusto is the top reasons customers say they’re switching to Rippling. Gusto’s customer stories page lists no customers larger than 61 customers, and Enlyft research says the company is most often used by 10 to 50 person staffs. “We were one of Gusto’s largest customers when we left the platform last year. They were very open about the fact that the product didn’t work for businesses of our size. We moved to Rippling last fall and have been extremely happy with it” says Compass Coffee co-founder Michael Haft.

That all suggests the Rippling ad’s claim is reasonable. But the C&D claims that “Gusto counts as customers multiple companies with 100 or more employees and does not state the businesses will ‘outgrow’ their platfrom at a certain size.”

In an email to staff provided to TechCrunch, Rippling CMO Matt Epstein wrote “We take legal claims seriously, but this one doesn’t pass the laugh test. As Gusto says all over their website, they focus on small businesses.”

So rather than taking Gusto to court or trying to change Clear Channel’s mind, Conrad and Rippling did something cheeky. They responded to the cease & desist order in Shakespeare-style iambic pentameter.

Our billboard struck a nerve, it seems. And so you phoned your legal teams,
who started shouting, “Cease!” “Desist!” and other threats too long to list.

Your brand is known for being chill. So this just seems like overkill.
But since you think we’ve been unfair, we’d really like to clear the air:

Rippling’s general counsel Vanessa Wu wrote the letter which goes on to claim that “When Gusto tried to scale itself, we saw what you took off the shelf. Your software fell a little short. You needed Workday for support”, asserting that Gusto’s own HR tool couldn’t handle its 1000-plus employees and needed to turn to a bigger enterprise vendor. The letter concludes with the implication that Gusto should drop the cease-and-desist, and instead compete on merit:

So Gusto, do not fear our sign. Our mission and our goals align.
Let’s keep this conflict dignified—and let the customers decide.

Rippling CMO Matt Epstein tells me that “While the folks across the street may find competition upsetting, customers win when companies push each other to do better. We hope our lighthearted poem gets this debate back down to earth, and we look forward to competing in the marketplace.”

Rippling might think this whole thing was slick or funny, but it comes off a bit lame and try-hard. These are far from 8 Mile-worthy battle rhymes. If it really wanted to let customers decide, it could have just accepted the C&D and moved on…or not run the billboard at all. It still has four others that don’t slam competitors running. That said, Gusto does look petty trying to block the billboard and hide that it’s unequipped to support massive teams.

We reached out to Gusto over the weekend and again today asking for comment, whether it will drop the C&D, if it’s trying to get Rippling’s bus ads dropped too, and if it does in fact use Workday internally.

Given Gusto has raised $516 million10X what Rippling has — you’d think it could just outspend Rippling on advertising or invest in building the enterprise HR tools so customers really couldn’t outgrow it. They’re both Y Combinator companies with Kleiner Perkins as a major investor (conflict of interest?), so perhaps they can still bury the hatchet.

At least they found a way to make the HR industry interesting for an afternoon.


By Josh Constine

Refocusing on relocation, Jobbatical launches new offices in Spain and Germany

I’ve been following Estonia-headquartered Jobbatical and its founder, Karoli Hindriks, for years. Part of the vanguard of startups working on infrastructure for digital nomads, the startup has been building the base platform to help global job seekers hire and fire their governments.

As Jobbatical has worked with more and more companies and governments though, it has learned that the friction here is not just finding employment globally for talented individuals, but rather the actual process of applying for immigration and work permits, ranging from forms that must be filed in person to the hours of labor it can take to fill out an application.

“What started to happen was that the relocation part… became something that the clients came back to us and said, ‘Can you do relocation for everyone and not just those coming through Jobbatical?’” Hindriks explained.

Last year, Jobbatical began to refocus its platform on powering relocation for workers at companies, and now its new strategy is coming into focus with the launch of the company’s new offices in Spain and Germany, announced on stage earlier today at TechCrunch Disrupt Berlin.

In the process, the company hopes to not just make the immigration process easier — but also much faster.

“How much time are government officials doing dummy work?” Hindriks asked. “30-40% of the consulate’s time is spent on answering the question of ‘what is the status of my visa?’”

The problem is that feedback in the immigration system is not available to all the players involved. Immigration process agents at companies who handle their workers’ visas have to constantly search around to make sure they are moving each of their cases forward. Managers have no idea when their workers may move, while employees are kept in the dark about their current status, inducing anxiety.

Hindriks’ vision is to help each of these three sides use a “TurboTax for immigration” to streamline the process. Jobbatical now can handle immigration applications in Estonia, Germany, and Spain and hopes to add Finland early next year.

But the more ambitious vision is ultimately to help governments drive their processes faster. Similar to how, say, the U.S. tax agency the Internal Revenue Service offers eFiling, Hindriks sees a future where Jobbatical can help facilitate immigration filings and massively speed up the efficiency of governments around these processes by allowing workers to directly submit applications to the government. She is working with two countries today to create exactly these sorts of digital submission systems.

It’s a space that has heated up in recent years as immigration continues to flow across the world. Boundless, for instance, helps individuals apply for U.S. green cards. Jobbatical is focused on the B2B market, focused on companies with global workforces.

Despite the deep debate in many countries over immigration, the reality is that every country has skills deficits that can be helped with smart and efficient immigration. Jobbatical is one company that may make the system more fair and relaxing for stressed workers looking to build their international careers.


By Danny Crichton

Jobvite raises $200M+ and acquires three recruitment startups to expand its platform play

Jobvite, the company that was once an early mover in leveraging social networks to help source job opportunities and find interesting candidates for openings, is today announcing two big moves to double down on its ambition to build a bigger platform for recruitment and applicant tracking.

The company has picked up an investment of over $200 million, and it will be using the money to acquire three smaller companies focusing on different aspects of the recruitment process: Talemetry (which specializes in recruitment marketing); RolePoint (for employee referrals and in-company moves); and Canvas (a text-based conversational bot to get the screening process started).

Jobvite is not disclosing its valuation with the funding, which is coming from private equity firm K1, but for a little guidance, in an interview, Dan Finnigan, Jobvite’s CEO, said it was a majority stake but nowhere near a full acquisition. (PitchBook’s last valuation of the company, of around $150 million, is very old, dating from September 2014; and it has never been confirmed by the company.)

The combined company will have 2,000+ customers that include Schneider Electric, Lenovo, Santander, PayPal, Genuine Parts, and Panasonic.

Finnigan says that Jobvite’s growth, and investor interest in backing that, is happening in tandem with two changes, one technological and another the evolution in how organizations handle human resources.

Several years ago, many companies — hoping to cut costs — merged together their personnel and recruitment operations, “and recruiting became an afterthought,” he said. That led to companies tacking on, as a kind of minimum viable solution, applicant tracking software but little or nothing else.

But more recently, the war for talent has escalated — not just because unemployment is low but because there are now multiple different opportunities and shortages of suitable people for specific, often emerging skills. In turn, businesses have started to realise “that recruiting is the backbone of every company, and that applicant tracking is just not enough,” he said.

At the same time, there have been evolutions in the technology. While a lot of recruitment software (and the recruitment process) has traditionally been quite fragmented, a move to cloud solutions has provided an avenue for consolidating the process and using one platform to manage it. (Google’s launch of Hire, which lets users manage job applicants using G Suite apps; LinkedIn’s recruitment platform; Zoho and SmartRecruiter are all prime examples of how cloud platforms are being used to build more complete sourcing and tracking services.)

Coupled with this is a rising use of technology like machine learning to remove some of the more mechanical aspects of a recruiter’s job to speed up processes.

Jobvite’s three acquisitions all play into both of these trends. Canvas, for example, uses a bot to source initial information about a candidate to start the screening process before human recruiters step in to take over.

Talemetry, meanwhile, taps into marketing tech to help identify where the most ideal candidates might be in order to better target job opportunities at them, in the form of ads or other kind of content.

Lastly, RolePoint will add a new feature to tap into referrals from existing employees, and to help manage in-company moves.

Finnigan likens the cloud-based platform approach that we’re seeing in the market to the impact Salesforce has had on the expanding concept of CRM. “We know that marketing and sales software have continued to evolve with new features like content marketing, and the same has happened in recruitment,” he said.

“We are excited to be investing in such an innovative set of technologies,” says Ron Cano, managing partner at K1 Investment Management, in a statement. “The talent acquisition industry is critical to our economy and ripe for disruption with outdated software still prevalent. K1’s investment will create the only true end-to-end talent acquisition platform and will provide our customers with accelerated growth in innovation of product features and services.”


By Ingrid Lunden

Zenefits’ Parker Conrad returns to launch Rippling, combining HR & IT tools

Parker Conrad likes to save time, even though it’s gotten him in trouble. The former CEO of Zenefits was pushed out of the $4.5 billion human resources startup because he built a hack that let him and employees get faster insurance certifications. But 2.5 years later, he’s back to take the busy work out of staff onboarding as well as clumsy IT services like single-sign on to enterprise apps. Today his startup Rippling launches its combined employee management system, which Conrad calls a much larger endeavor than the minimum viable product it announced while in Y Combinator’s accelerator 18 months ago.

“It’s not an HR system. It’s a level below that” Conrad tells me. “It’s this unholy, crazy mashup of three different things”. First, it handles payroll, benefits, taxes, and PTO across all 50 states. “Except Syria and North Korea, you can pay anyone in the world with Rippling” Conrad claims.

Second, it’s a replacement for Okta, Duo, and other enterprise single-sign on security apps that authenticate staffers across partnered apps. Rippling bookmarklets make it easy to auth into over 250 workplace apps like Gmail, Slack, Dropbox, Asana, Trello, AWS, Salesforce, GitHub and more. When an employee is hired or changes teams, a single modification to their role in Ripple automatically changes all the permissions of what they can access.

And third, it handles computer endpoint security. When an employee is hired, Rippling can instantly ship them a computer with all the right software installed and the hard drive encrypted, or have staffers add the Rippling agent that enforces the company’s security standards. The system is designed so there’s no need for an expert IT department to manage it.

“Distributed, fragmented systems of record for employee data are secretly the cause of almost all the annoying administrative work of running a company” Conrad explains. “If you could build this system that ties all of it together you could eliminate all this crap work.” That’s Rippling. It’s opening up to all potential clients today, charging them a combined subscription or a la carte fees for any of the three wings of the product.

Conrad refused to say how much Rippling has raised total, citing the enhanced scrutiny Zenefits’ raises drew. But he says a Wall Street Journal report that Rippling had raised $7 million was inaccurate. “We haven’t raised any priced VC rounds. Just a bunch of seed money. We raised from Initialized Capital, almost all the early seed investors at Zenefits, and a lot of individuals.” He cited Y Combinator, YC Growth Fund, YC’s founder Jessica Livingston and president Sam Altman, other YC partners, as well as DFJ and SV Angel.

“Because we were able to raise bunch of money and court great engineers . . . we were able to spend a lot of time building this fundamental technology” Conrad tells me. Rippling has about 50 team members now, with about 40 of them being engineers, highlighting just how thoroughly Conrad wants to eradicate manual work about work, starting with his own startup.

The CEO refused to discuss details of exactly what down at Zenefits and whether he thought his ejection was fair. He was accused of allowing Zenefits’ insurance brokers to sell in states where they weren’t licensed, and giving some employees a macro that led them more quickly pass the online insurance certification exam. Conrad ended up paying about $534,000 in SEC fines. Zenefits laid off 430 employees, or 45 percent of its staff, and moved to selling software to other insurance brokers.

But when asked what he’d learned from Zenefits, Conrad looked past those troubles and instead recalled that “one of the the mistakes that we made was that we did a lot stuff manually behind the scenes. When you scale up, there are these manual processes, and it’s really hard to come back later when it’s a big hard complicated thing and replace it with technology. You get upside down on margins. If you start at the beginning and never let the manual processes creep in . . . it sort of works.”

Perhaps it was trying to cut corners that got Conrad into the Zenefits mess, but now that same intention has inspired Rippling’s goal of eliminating HR and IT drudgery with an all-in-one tool.

“I think I’m someone who feels the pain of that kind of stuff particularly strongly. So that’s always been a real irritant to me, and I saw this problem. The conventional wisdom is ‘don’t build something like this, start with something much smaller’” Conrad concludes. “But I knew if I didn’t do this, that no one else was gong to do it and I really wanted this system to exist. This is a company that’s all about annoying stuff and making that fucking annoying stuff go away.”


By Josh Constine

Disrupting the paycheck, Gusto’s Flexible Pay allows employees to pick when they get paid

People should get paid for work they have done. It’s a pretty simple principle of capitalism, but a principle that seems increasingly violated in the modern economy. With semi-monthly paychecks, the work an employee does on the first day of the month won’t be paid until the end of the third week — a delay of up to 21 days. That delay is despite the massive digitalization of bank transfers and accounting over the past few decades that should have made paychecks far more regular.

Gusto, a payroll and HR benefits provider focused on small businesses, announced the launch of Flexible Pay today, a new feature that will allow its payroll users to select when they receive their income for work already completed. The feature, which must be switched on by an employer, will cost employers nothing out-of-pocket today. The launch is limited to customers in Texas, but will expand to other states in the coming year.

As Gusto CEO Joshua Reeves explained it to me, a kid mowing lawns in a neighborhood has a much more visceral connection to income than the modern knowledge economy worker. Cut the grass, get cash — it’s that simple. He also pointed out, with irony, that terminated employees experience much better payroll service than regular employees: they have to be paid out on their last day of work outside of the standard paycheck schedule. Reeves and his team wanted to offer that flexibility and convenience to every worker.

Flexible Pay allows users to choose when they get paid, outside of typical paycheck schedules

The key to this new feature has been Gusto’s increasing data about small businesses. Gusto now serves 1 percent of all small businesses in the U.S., and it has comprehensive access to its customers’ financial and payroll data. With integrations to time sheet services and proper risk modeling, Gusto is able to predict exactly what salary a worker has already earned, and can front the money at minimum risk to itself.

One major challenge for Gusto was how to reconcile the books of the employer with the irregular paycheck schedules desired by employees. Gusto handles all the logistics transparently, including tax withholding, so that for employers, the paycheck distribution looks and feels “normal” on its books.

That means that Gusto is effectively loaning money to companies, since it is paying payroll in advance. Gusto is funding those loans off its balance sheet today, but over time, the company expects to create a financial facility to underwrite the product.

For Reeves, Flexible Pay is “the right thing to do.” He believes that this new level of flexibility will empower workers to control their financial lives. In the long run, as more users get habituated to the product and its convenience, he hopes that the feature will draw other employers into using Gusto based on employee demand.

The unfortunate reality in the American workforce is that huge numbers of workers live paycheck-to-paycheck, by some counts as many as 80 percent. A bill can come due just a day or two before a paycheck hits, but without cash in a checking account, people often have to resort to predatory financial products like payday loans or high-interest credit cards in order to make ends meet. Flexible Pay is one step in the right direction of fighting for workers to get the money they justly deserve.


By Danny Crichton

Workday acquires Rallyteam to fuel machine learning efforts

Sometimes you acquire a company for the assets and sometimes you do it for the talent. Today Workday announced it was buying Rallyteam, a San Francisco startup that helps companies keep talented employees by matching them with more challenging opportunities in-house.

The companies did not share the purchase price or the number of Rallyteam employees who would be joining Workday .

In this case, Workday appears to be acquiring the talent. It wants to take the Rallyteam team and incorporate it into the company’s engineering unit to beef up its machine learning efforts, while taking advantage of the expertise it has built up over the years connecting employees with interesting internal projects.

“With Rallyteam, we gain incredible team members who created a talent mobility platform that uses machine learning to help companies better understand and optimize their workforces by matching a worker’s interests, skills and connections with relevant jobs, projects, tasks and people,” Workday’s Cristina Goldt wrote in a blog post announcing the acquisition.

Rallyteam, which was founded in 2013, and launched at TechCrunch Disrupt San Francisco in September 2014, helps employees find interesting internal projects that might otherwise get outsourced. “I knew there were opportunities that existed [internally] because as a manager, I was constantly outsourcing projects even though I knew there had to be people in the company that could solve this problem,” Rallyteam’s Huan Ho told TechCrunch’s Frederic Lardinois at the launch. Rallyteam was a service designed to solve this issue.

Last fall the company raised $8.6 million led by Norwest Ventures with participation from Storm Ventures, Cornerstone OnDemand and Wilson Sonsini.

Workday provides a SaaS platform for human resources and finance, so the Rallyteam approach fits nicely within the scope of the Workday business. This is the 10th acquisition for Workday and the second this year.

Chart: Crunchbase

Workday raised over $230 million before going public in 2012.


By Ron Miller

Small businesses love free stuff, so Gusto is giving them free HR Basics

Gusto, formerly ZenPayroll, is the rare startup unicorn that has stayed relatively mum on its product and growth — it’s last press release, for instance, was more than a year ago. The company’s core offering remains payroll for small businesses, and it has been working to expand its customer base across the nation, including have its CEO, Joshua Reeves, go on a tour of the country to visit SMBs in an RV.

One challenge small businesses face though is getting access to high-quality, yet affordable software, particularly in HR. “Small businesses actually get that people are the core more than large companies,” Reeves explained to me. “In a ten person company, you know everyone, your customers are your neighbors, but they never really had access to high-quality software.”

Gusto is hoping to fill that gap, announcing the beta launch of a new product it’s calling HR Basics. The product offers a suite of tools for small businesses to handle the quotidian tasks of HR, including managing vacation time, compiling employee directories, and improving the onboarding of new hires. Most importantly, the product is free, and doesn’t require a credit card or a bank account to sign up.

Reeves believes that Gusto has two purposes: to offer “peace of mind” to small business owners around areas like compliance that can lead to negative enforcement actions, and to provide software that can help companies become “great places to work” that are more focused on community. Reeves is particularly passionate about the latter point. “Even the terminology ‘human capital management’ — humans are not capital, humans are not resources, they are people thank you very much.”

One particular area of focus for HR Basics is around onboarding. Gusto is hoping that it can move all HR paperwork online, so that everything required to officially onboard an employee can be done even before the employee walks into work the first day. With that out of the way, Gusto can then focus on helping companies create the right corporate culture. For instance, the product offers a “Welcome Wall” where other employees can write cheerful and encouraging notes for a new employee to make them feel like they belong at the company from day one.

The Welcome Wall is designed to encourage new employees joining a company

This new product is free for businesses, and Gusto obviously hopes that it creates a funnel of potential customers who will eventually sign up for its payroll service and full HR platform, which charge around $6-12 a month per employee based on the specific plan that a business chooses.

One interesting commitment Gusto is making according to Reeves is that an employee’s profile on the platform will be a lifetime account. If an employee moves from one company to the next and both use Gusto, all of the preferences and other data required to administer HR should work immediately.

That portability mattered less in a world where employees spent decades at a single company, but now that employees often switch employers as often as every year, the repeated savings of time in the transition can be quite significant. Longer term, Gusto sees that sort of portability as critical for facilitating the changing nature of work in the 21st century.

Gusto, which was founded in 2011, is now entering middle age, and the company has 530 employees across its San Francisco and Denver offices according to Reeves.