Factorial, a Barcelona startup that has built a platform that allows SMEs to perform HR functions with the same type of tools that are typically used by much larger companies, today announces funding to bolster Its own position: the company has raised $ 80 million, funding it will use to expand its operations geographically – especially deeper into Latin American markets – and to continue to enrich 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 experienced a huge growth boom over the past 18 months and has more than 75,000 clients in 65 countries, with the average size of each customer in a range of 100 employees, although they can be considerably smaller (single-digit) or potentially up to 1,000 (the “M” in SMB, or PME as it is often called in Europe).
“We have a generous definition of small business,” Romero said of how the company started with a goal of 10 to 15 employees, but is now working in what size bracket it is. “But that’s the limit. This is the segment that needs the most help. We see other competitors trying to get into SMEs and they screw up their product by making it too complex. SMBs want solutions that have as much data as possible in one place. It is specific to the SME. Customers can also include smaller franchises from much larger organizations: KFC, Booking.com, and Whisbi are some of those that fall into this category for Factorial.
Factorial offers a one-stop shop to manage hiring, onboarding, payroll management, leave, performance management, internal communications, etc. Other services such as the payroll process itself or candidate sourcing, it partners and integrates closely with more localized third parties.
Series B is being led by Tiger Global, and former investors CRV, Creandum, Point Nine and K Fund are also participating, in a valuation we understand from sources close to the deal at around $ 530 million post-deal. money. Factorial has raised $ 100 million to date, including a $ 16 million Series A round in early 2020, just before the Covid-19 pandemic really took hold of the world.
This timing turned out to be important: Factorial, as you would expect from an HR startup, was shaped by Covid-19 in a pretty powerful way.
The pandemic, as we’ve seen, has dramatically changed how – and where – many of us work. In the world of office jobs, offices have largely disappeared overnight, with people switching to working from home under shelter-in-place orders to curb the spread of the virus and then in many cases even staying there. after these have been lifted as businesses grappling with both the balance between the best (and least contagious) way forward and their own employee’s demands for safety and productivity. Frontline workers, meanwhile, faced a whole new set of challenges in the line of duty, from minimizing exposure to the coronavirus to dealing with massive volumes of demand for their services. In both cases, organizations faced economic contractions, time off, and in other cases hiring spurts, despite not having an office to carry it all out.
It all had an impact on HR. People who needed to manage others, and those who worked for organizations, suddenly needed – and were willing to pay for – new kinds of tools to fulfill their roles.
But it wasn’t always like that. At first, Romero said the company needed to adapt quickly to what the market was doing.
“We are targeting HR managers and they are currently very distracted with time off and layoffs, so we turned around and focused on how we could provide them with the best value,” Romero told me during Series A in early 2020. Then Factorial made their product free and sparked new interest from companies that had never used cloud-based services before but needed to quickly set up something. thing to be able to use it while working from home (and this migration to the cloud has turned out to be much more trendy which has manifested itself in several industries). Those who turned to Factorial had previously kept all of their recordings in local files or at best a “Dropbox folder, but nothing else,” Romero said.
It also provided tools specifically to address the most pressing HR needs at the time, such as advice on implementing leave and layoffs, best practices for communication policies, and more. “We had to get creative,” Romero said.
But it was not all easy. “We suffered in the beginning,” Romero says now. “People took time off and [frankly] less attention was paid to purchasing software. People just survived. Then, little by little, people realized that they had to improve their systems in the cloud, better manage remote people, etc. So after a few very slow months things started to take off, he said.
The rise of Factorial is part of a larger, longer-term trend in which the corporate tech world has finally started to focus on how to use the tools that were originally designed. for large organizations and size them for small clients.
The metrics are completely different: large companies are more difficult to gain as customers, but represent a huge gain when they sign up; small businesses represent a real scale because there are so many in the world – 400 million, representing 95% of all companies in the world. But the same goes for product demands, as Romero pointed out earlier: SMEs also want powerful tools, but they need to work more efficiently and out of the box.
Factorial is of course not the only HR startup to have looked into this subject. Among the broader domain are PeopleHR, Workday, Infor, ADP, Zenefits, Gusto, IBM, Oracle, SAP and Rippling; and a competitor very close to Europe, German Personio, raised $ 125 million on a valuation of $ 1.7 billion earlier this year, speaking not only of the opportunity but of the success he sees in it. .
But the major fragmentation of the market, the fact that there are so many potential clients, and Factorial’s own quick pull are three reasons investors approached the startup, which was not proactively seeking funding when it did. decided to go ahead with this B series.
“The HR software market opportunity is huge in Europe, and Factorial is incredibly well positioned to take advantage of it,” John Curtius, partner at Tiger Global, said in a statement. “Our diligence found a product that delighted customers and a world-class team well positioned to realize Factorial’s potential. “
“It is now clear that labor markets around the world have changed over the past 18 months,” added Reid Christian, general partner at CRV, which led its previous cycle, which was CRV’s first investment in Spain. . “It has put a strain on employers who have to manage their HR processes and properly serve their employees. Factorial has always been designed to help employers in all geographies meet their human resource and payroll needs, which has only accelerated demand for their platform. We are delighted to continue to support the business throughout this fundraising and the next phase of business growth. “
Notably, Romero told me that the fundraising process has really evolved between the two tours, with the first requiring him to fly around the world to meet people, and the second taking place via video link, while he was recovering from Covid-19. Considering not too long ago, Europe’s most ambitious startups were encouraged to move to the US if they wanted to be successful, it seems it’s not just the world of HR that is changing. quickly depending on new global conditions.