Spain’s Factorial raises $80M at a $530M valuation on the back of strong traction for its ‘Workday for SMBs’

Factorial, a startup out of Barcelona that has built a platform that lets SMBs run human resources functions with the same kind of tools that typically are used by much bigger companies, is today announcing some funding to bulk up its own position: the company has raised $80 million, funding that it will be using to expand its operations geographically — specifically deeper into Latin American markets — and to continue to augment its product with more features.

CEO Jordi Romero, who co-founded the startup with Pau Ramon and Bernat Farrero — said in an interview that Factorial has seen a huge boom of growth in the last 18 months and counts more than anything 75,000 customers across 65 countries, with the average size of each customer in the range of 100 employees, although they can be significantly (single-digit) smaller or potentially up to 1,000 (the “M” of SMB, or SME as it’s often called in Europe).

“We have a generous definition of SME,” Romero said of how the company first started with a target of 10-15 employees but is now working in the size bracket that it is. “But that is the limit. This is the segment that needs the most help. We see other competitors of ours are trying to move into SME and they are screwing up their product by making it too complex. SMEs want solutions that have as much data as possible in one single place. That is unique to the SME.” Customers can include smaller franchises of much larger organizations, too: KFC, Booking.com, and Whisbi are among those that fall into this category for Factorial.

Factorial offers a one-stop shop to manage hiring, onboarding, payroll management, time off, performance management, internal communications and more. Other services such as the actual process of payroll or sourcing candidates, it partners and integrates closely with more localized third parties.

The Series B is being led by Tiger Global, and past investors CRV, Creandum, Point Nine and K Fund also participating, at a valuation we understand from sources close to the deal to be around $530 million post-money. Factorial has raised $100 million to date, including a $16 million Series A round in early 2020, just ahead of the Covid-19 pandemic really taking hold of the world.

That timing turned out to be significant: Factorial, as you might expect of an HR startup, was shaped by Covid-19 in a pretty powerful way.

The pandemic, as we have seen, massively changed how — and where — many of us work. In the world of desk jobs, offices largely disappeared overnight, with people shifting to working at home in compliance with shelter-in-place orders to curb the spread of the virus, and then in many cases staying there even after those were lifted as companies grappled both with balancing the best (and least infectious) way forward and their own employees’ demands for safety and productivity. Front-line workers, meanwhile, faced a completely new set of challenges in doing their jobs, whether it was to minimize exposure to the coronavirus, or dealing with giant volumes of demand for their services. Across both, organizations were facing economics-based contractions, furloughs, and in other cases, hiring pushes, despite being office-less to carry all that out.

All of this had an impact on HR. People who needed to manage others, and those working for organizations, suddenly needed — and were willing to pay for — new kinds of tools to carry out their roles.

But it wasn’t always like this. In the early days, Romero said the company had to quickly adjust to what the market was doing.

“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 to me during the Series A back in early 2020. Then, Factorial made its product free to use and found 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 (and that cloud migration turned out to be a much bigger trend played out across a number of sectors). Those turning to Factorial had previously kept all their records in local files or at best a “Dropbox folder, but nothing else,” Romero said.

It also provided tools specifically to address the most pressing needs HR people had at the time, such as guidance on how to implement furloughs and layoffs, best practices for communication policies and more. “We had to get creative,” Romero said.

But it wasn’t all simple. “We did suffer at the beginning,” Romero now says. “People were doing furloughs and [frankly] less attention was being paid to software purchasing. People were just surviving. Then gradually, people realized they needed to improve their systems in the cloud, to manage remote people better, and so on.” So after a couple of very slow months, things started to take off, he said.

Factorial’s rise is part of a much, longer-term bigger trend in which the enterprise technology world has at long last started to turn its attention to how to take the tools that originally were built for larger organizations, and right size them for smaller customers.

The metrics are completely different: large enterprises are harder to win as customers, but represent a giant payoff when they do sign up; smaller enterprises represent genuine scale since there are so many of them globally — 400 million, accounting for 95% of all firms worldwide. But so are the product demands, as Romero pointed out previously: SMBs also want powerful tools, but they need to work in a more efficient, and out-of-the-box way.

Factorial is not the only HR startup that has been honing in on this, of course. Among the wider field are PeopleHR, Workday, Infor, ADP, Zenefits, Gusto, IBM, Oracle, SAP and Rippling; and a very close competitor out of Europe, Germany’s Personio, raised $125 million on a $1.7 billion valuation earlier this year, speaking not just to the opportunity but the success it is seeing in it.

But the major fragmentation in the market, the fact that there are so many potential customers, and Factorial’s own rapid traction are three reasons why investors approached the startup, which was not proactively seeking funding when it decided to go ahead with this Series B.

“The HR software market opportunity is very large in Europe, and Factorial is incredibly well positioned to capitalize on it,” said John Curtius, Partner at Tiger Global, in a statement. “Our diligence found a product that delighted customers and a world-class team well-positioned to achieve Factorial’s potential.”

“It is now clear that labor markets around the world have shifted over the past 18 months,” added Reid Christian, general partner at CRV, which led its previous round, which had been CRV’s first investment in Spain. “This has strained employers who need to manage their HR processes and properly serve their employees. Factorial was always architected to support employers across geographies with their HR and payroll needs, and this has only accelerated the demand for their platform. We are excited to continue to support the company through this funding round and the next phase of growth for the business.”

Notably, Romero told me that the fundraising process really evolved between the two rounds, with the first needing him flying around the world to meet people, and the second happening over video links, while he was recovering himself from Covid-19. Given that it was not too long ago that the most ambitious startups in Europe were encouraged to relocate to the U.S. if they wanted to succeed, it seems that it’s not just the world of HR that is rapidly shifting in line with new global conditions.


By Ingrid Lunden

Remote raises $150M on a $1B+ valuation to manage payroll and more for organizations’ global workforces

For many of us, going to work these days no longer means going into a specific office like it used to; and today one of the startups that’s built a platform to help cater for that new, bigger world of employment — wherever talent might be — is announcing a major round of funding on the back of strong demand for its tools.

Remote, which provides tools to manage onboarding, payroll, benefits and other services for tech and other knowledge workers located in remote countries — be they contractors or full-time employees — has raised $150 million. Job van der Voort, the Dutch-based CEO and co-founder of New York-based Remote, confirmed in an interview that funding values Remote at over $1 billion.

Accel is leading this Series B, with participation also from previous investors Sequoia, Index Ventures, Two Sigma, General Catalyst and Day One Ventures.

The funding will be used in a couple of areas. First and foremost, it will go towards expanding its business to more markets. The startup has been built from the ground up in a fully-integrated way, and in contrast to a number of others that it competes with in providing Employer of Record services, Remote fully owns all of its infrastructure. It now provides its HR services, as fully-operational legal entities, for 50 countries has a target of growing that to 80 by the end of this year. The platform is also set to be enhanced with more tools around areas like benefits, equity incentive planning, visa and immigration support and employee relocation.

“We are doubling down on our approach,” Van der Voort said. “We try to fully own the entire stack: entity, operations, experts in house, payroll, benefits and visa and immigration — all of the items that come up most often. We want to to build infrastructure products, foundational products because those have a higher level of quality and ultimately a lower price.”

In addition, Remote will be using the funding to continue building more tools and partnerships to integrate with other providers of services in what is a very fragmented human resources market. Two of these are being announced today to coincide with the funding news: Remote has launched a Global Employee API that HR platforms that focus on domestic payroll can integrate to provide their own international offering powered by Remote. HR platform Rippling (Parker Conrad’s latest act) is one of its first customers. And Remote is also getting cosier with other parts of the HR chain of services: applicant tracking system Greenhouse now integrating with it to help with the onboarding process for new hires.

$150 million at a $1 billion+ valuation is a very, very sizable Series B, even by today’s flush-market standards, but it comes after a bumper year for the company, and in particular since November last year when it raised a Series A of $35 million. In the last nine months, customer numbers have grown seven-fold, with users on the platform increasing 10 times. Most interestingly, perhaps, is that Remote’s revenues — it’s packages start at $149 per month but go up from there — have increased by a much bigger amount: 65x, the company said. That basically points to the fact that engagement from those users — how much they are leaning on Remote’s tech — has skyrocketed.

Although there are a lot of competitors in the same space as Remote — they include a number of more local players alongside a pretty big range of startups like Oyster (which announced $50 million in funding in June), Deel, which is now valued at $1.25 billionTuring; Papaya Global (now also valued at over $1 billion); and many more — the opportunity they are collectively tackling is a massive one that, if anything, appears to be growing.

Hiring internationally has always been a costly, time-consuming and organizationally-challenged endeavor, so much so that many companies have opted not to do it at all, or to reserve it for very unique cases. That paradigm has drastically shifted in recent years, however.

Even before Covid-19 hit, there was a shortage of talent, resulting in a competitive struggle for good people, in company’s home markets, which encouraged companies to look further afield when hiring. Then, once looking further afield, those employers had to give consideration to employing those people remotely — that is, letting them work from afar — because the process of relocating them had also become more expensive and harder to work through.

Then Covid-19 happened, and everyone, including people working in a company’s HQ, started to work remotely, changing the goalposts yet again on what is expected by workers, and what organizations are willing to consider when bringing a new person on board, or managing someone it already knows, just from a much farther distance.

While a lot of that has played out in the idea of relocating to different cities in the same country — Miami and Austin getting a big wave of Silicon Valley “expats” being two examples of that — it seems just a short leap to consider that now that sourcing and managing is taking on a much more international provide. A lot of new hires, as well as existing employees who are possibly not from the US to begin with, or simply want to see another part of the world, are now also a part of the mix. That is where companies like Remote are coming in and lowering the barriers to entry by making it as easy to hire and manage a person abroad as it is in your own city.

“Remote is at the center of a profound shift in the way that companies hire,” said Miles Clements, a partner at Accel, in a statement. “Their new Global Employee API opens up access to Remote’s robust global employment infrastructure and knowledge map, and will help any HR provider expand internationally at a speed impossible before. Remote’s future vision as a financial services provider will consolidate complicated processes into one trusted platform, and we’re excited to partner with the global leader in the quickly emerging category of remote work.”

And it’s interesting to see it now partnering with the likes of Rippling. It was a no-brainer that as the latter company matured and grew, that it would have to consider how to handle the international component. Using an API from Remote is an example of how the model that has played out in communications (led by companies like Twilio and Sinch) and fintech (hello, Stripe), also has an analogue in HR, with Remote taking the charge on that.

And to be clear, for now Remote has no plans to build a product that it would sell directly to individuals.

“Individuals are reaching out to us, saying, ‘I found this job and can you help me and make sure I get paid?’ That’s been interesting,” Van der Voort said. “We thought about [building a product for them] but we have so much to do with employers first.” One thing that’s heartening in Remote’s approach is that it wouldn’t want to provide this service unless it could completely follow through on it, which in the case of an individual would mean “vetting every major employer,” he said, which is too big a task for it right now.

In the meantime, Remote itself has walked the walk when it comes to remote working. Originally co-founded by two European transplants to San Francisco, the pair had first-hand experience of the paradoxical pains and opportunities of being in an organization that uses remote workforces.

Van der Voort had been the VP of product for GitLab, which he scaled from 5 to 450 employees working remotely (it’s now a customer of Remote’s); and before co-founding Remote CTO Marcelo Lebre had been VP of engineering for Unbabel — another startup focused on reducing international barriers, this time between how companies and global customers communicate.

Today, not only is the CEO based out of Amsterdam in The Netherlands and CTO in Lisbon, Portugal, but New York-based Remote itself has grown to 220 from 50 employees, and this wider group has also been working remotely across 47 countries since November 2020.

“The world is looking very different today,” Van der Voort said. “The biggest change for us has been the size of the organization. We’ve gone from 50 to more than 200 employees, and I haven’t met any of them! We have tried to follow our values of bringing opportunity everywhere so we hire everywhere as we solve that for our customers, too.”


By Ingrid Lunden

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