How the money flows can provide us with a map of the problems people are trying to solve. Key signals in the noise. The ever-brilliant George LaRocque helps us piece it all together as Founder and Principal Analyst at WorkTech, bringing his perspective and updates on interesting tech investments from around the globe.
Papaya Global announced a $100 million Series C funding round for its global payroll and HR suite, bringing its total raised to $190 million. This deal also reportedly took Papaya’s valuation over $1 billion, making it the latest HR technology vendor to reach “unicorn status.” And if raising a megaround of funding and becoming the market’s latest unicorn wasn’t challenging enough during a pandemic, CEO Eynat Guez also gave birth to her third child. She tells her story, here.
For those not having run global payroll, it’s an underestimated challenge. Tax withholdings, local tax reporting and compliance, and internal operations and reporting stand out as challenges for those employers with a globally distributed workforce. And today, especially as we emerge from COVID, a globally distributed workforce isn’t exclusive to large employers. Small and medium-sized (SMB) companies and middle-market employers can now have teams, offices, or lone employees working from anywhere.
Papaya Global tends to be aligned with the SMB and middle-market employers for whom they provide payroll and an HRIS system and offer an employee of record (EOR) solution. Papaya Global becomes the EOR for its clients that are hiring remote employees in a reported 140 countries. Their value proposition is to keep companies compliant with local regulations and tax laws, mitigating risk while saving the customer time in administration and allowing them to focus more time on running their business.
It’s a model that works well for small businesses that don’t have the infrastructure or resources to support global internal operations and keep up with regulatory compliance. While we haven’t reviewed the pricing for Papaya Global, returns start to diminish on these solutions as companies grow. For example, the very similar professional services organization (PEO) model in the US starts to lose its ROI between 50 and 100 employees based on the cost compared to other solutions available for employers at that size.
The big question for buyers to ask of solutions like this: Do they indemnify the client from risk on compliance?
Papaya Global is in a market with some competition with firms like Velocity Global and omnipresent. For larger employers, the market looks to solutions like Immedis.
The HCM category saw USD $2.59 billion of VC investment in 2020. Payroll tech saw investments of $206 million. $5 billion was invested across all HR tech categories globally in 2020.
UK-based Cutover announced a $35 million Series B funding round for its work orchestration platform, promising to balance work and automation between humans and machines. This brings its total raised to $54.6 million.
“Work orchestration and observability” across the enterprise is the ultimate promise of Cutover. They stress the ability to collaborate between humans and machines/automated processes. HR tech’s collaboration and communication category has been seeing consistent attention from investors since 2018 and was the top category for global HR technology investment in 2020, receiving $822 million.
The category isn’t just getting attention from emerging startups and apps but also from HCM and work tech legacy players. Digital transformation has been accelerated by COVID-19 and includes many HR tech categories, especially in connecting employees and leaders to communicate and collaborate. Expect this increasingly crowded category to see more investment and innovation.
Sign up to get our monthly newsletter and updates about RNN.