French startup PayFit announced that it has closed a new $289 million (€254 million) Series E round before the holiday. After this round, the startup reached a post-money valuation of $2.1 billion (€1.82 billion).
The company is building a platform for payroll and human resources as a service for small and medium businesses. It operates in a few European countries – about 150 thousand people are currently paid through PayFit.
General Atlantic is leading the round, while some existing investors are participating in PayFit again, such as Eurazeo, Bpifrance’s Large Venture Fund and Accel.
The startup was in full swing as it raised a Series D round in March 2021. I asked about PayFit’s valuation and how it has changed since Series D.
“It is true that we have never communicated about our evaluation before. Co-Founder and CEO Fermin Zuccito told me, “We have only shared the size of our funding rounds. “I can only tell you that our rating has increased significantly.”
He listed two reasons why PayFit had few problems at a higher rating. First, the company is doing well when it comes to revenue. The startup’s annual recurring revenue increased by 70% in 2021.
Second, there is a lot of money in circulation for the best performing tech companies. He said the current climate is “very favorable”. And I bet a lot of people would recommend taking advantage of the situation.
But let’s try to dissect the PayFit business a little more to see how the company ended up here. PayFit allows you to manage your payroll from a web browser and automate as many steps as possible.
PayFit has a product advantage over other solutions as you don’t need to be an expert and work for an accounting firm to generate payroll. Getting started ensures that you stay committed and hides complexity. For example, if there are regulatory changes, PayFit will update its application logic.
The company also has a huge opportunity in the market. Every company needs a payroll solution And It’s very difficult to switch from one solution to another – it’s the perfect Venn diagram for a SaaS product.
There are currently 6000 companies using PayFit. About 80% of them are located in France. There are other clients in Spain, Germany or the UK most importantly, when someone sets up a company from scratch, many choose PayFit and stick with it.
When you think about it, 150,000 employees get paid through PayFit is not a lot. There are tens of millions of employees in France, the United Kingdom, Spain and Germany. Before opening a branch in new countries, PayFit wants to capture a larger market share in these four markets.
Labor laws vary from country to country, which means there may be different geographic leaders because there is a natural barrier to entry. For example, Gusto and Justworks do well in the US but not in other markets. It will be important to see if PayFit has what it takes to become the market leader in France, UK, Germany and Spain.
Finally, once PayFit has the relationship with the HR specialist or administrator in the client company, it can offer additional services. “We started with payroll, but what we really care about is the employer-employee relationship,” Zuccito said.
PayFit offers various tools for managing leave, facilitating setup, managing schedules and tracking employee expenses. Soon, the company will also introduce a way to handle annual performance reviews in PayFit.
Essentially, PayFit is part of a group of startups that are reinventing package management. The PayFit founder named Qonto and Alan as two companies that also fix backend tools. Qonto offers bank accounts for small and medium businesses while Alan offers health insurance products for businesses.
With 700 employees in Paris, Berlin, Barcelona and London, PayFit now wants to diversify its product offering, integrate with more third-party products and improve customer service. Zuccito said the company wants “to offer small businesses the same benefits you would get by working for big companies.”