From Zero to Employment Hero

In a startup In a world where seed rounds predominate and much beyond small million-dollar Series A raises are virtually (but not entirely) unheard of, these rare megabuck financing rounds stand out for precisely that. small a little more today than a year ago.

With this in mind, Employment Hero, an Australian recruitment, HR and payroll platform, today announced that it has raised AUD 263 million (USD 167 million) in a Series F funding round, making the Sydney-based scaleup a fully registered member of the unicorn club (in US dollars), and the nine-year-old company achieved a valuation of AUD 2.13 billion (USD 1.37 billion) – a 75% increase from its Series E round valuation of AUD 1.25 billion (USD 791 million) last year.

“Bigger than Atlassian”

Co-founder and CEO Ben Thompson said the company has the ambition to become one of Australia’s largest technology exporters and plans to expand its current footprint, which sees it process $85 billion in payroll annually for around 300,000 small and medium-sized businesses.

“We want to be recognised as an Australian company with a global reach, with ambitions of being the largest startup ever to come out of Australia,” Thompson told TechCrunch.

Bigger than Atlassian, the $50 billion collaboration and productivity software giant?

“Bigger than Atlassian,” Thompson shot back.

The company has raised a total of A$650 million ($411 million) since its inception, with the latest Series F round attracting lead investor TCV, a US investment firm that has previously backed companies like Meta, Spotify, Netflix and Airbnb. Existing investors Insight Partners, AirTree, Seek and OneVentures also participated in the round.

More specifically, the round was led by TCV’s London office, a clear indication of Employer Hero’s intentions to inject fresh cash. Thompson said the company plans to double its UK headcount to 180 over the next year and expects it to be its largest market within a few years.

“While we are relatively unknown in the UK, we already have 20,000 SME customers and 200,000 workers earning there every month,” Thompson said.

All the work

Employment Hero Founders: Ben Thompson (CEO) and Dave Tong (CPTO). Image credits: Employment hero

Founded in 2014 by Thompson and Chief Product and Technology Officer (CPTO) Dave Tong, Employer Hero initially began as an integrated, cloud-based HR and payroll platform with a job board, roster management, and related nuances—perhaps in the mold of HiBob or Personio—companies that have recently achieved fairly high billion-dollar valuations of their own. In the intervening years, Jobs Hero has expanded into all sorts of tangential tools, serving as what it calls a “fully autonomous solution for SMBs to recruit, pay, and manage” their workforces.

The company has also moved into the employer of record (EOR) role through Global Teams, which it launched mid-pandemic, helping companies manage their globally distributed workforces, similar to Deel or Remote. In effect, Employment Hero takes on the legal and administrative responsibility for a company’s workforce wherever it is located.

Employment Hero’s main markets where the full product range is available include Australia, New Zealand, Singapore, Malaysia and the UK, although the EOR product is available in 180 countries. As you might expect, Employment Hero also serves as EOR for its own internal employment status, and the company has grown from less than 200 employees pre-pandemic to approximately 925 fully remote employees today, spread across 19 markets.

“We started full distribution, remotely first, on February 13, 2020, when we had a case of Covid-19 in the office and had to go home — and never went back,” Thompson said. “And it was great, we just embraced it.”

Employment Hero dashboard. Image Credits: Employment Hero

Swag factor

Employment Hero also has what it calls a “super app” in the form of Swag, which covers every aspect of a person’s financial life — inside and outside of work. This includes a built-in digital wallet, debit card, cashback offers, online discounts and more. Many of these features can be used independently of the main Employment Hero platform, meaning any consumer can open a Swag account. This includes those who are actively looking for work, with the recently launched SmartMatch feature matching job seekers’ profiles with jobs listed on the Employment Hero platform.

“We create micro talent pools so that any employer on our platform can log in and see that they have a pipeline of people who are interested in working for them and specific roles they would like to fill,” Thompson said. “So if someone quits tomorrow, they will already have a talent pool. If he has to replicate the role tomorrow because he’s growing rapidly, he’ll already have a talent pool. This completely changes the way companies will recruit in the future.”

Gift card. Image sources: Employment Hero

If your company is also an Employment Hero customer, employees can use the Swag app in a variety of ways, including: to access timesheets, manage leave requests and read company alerts.

“We realized that ’employment’ is more than just being employed in a job,” Thompson said. “It’s how people find and manage work, how they get paid, how they spend and save. This means we want to make sure that individual employees have a ‘super app’ that not only helps them find a job better, not only helps them manage their work better, but also helps them get paid.”

Swag App. Image credits: Employment Hero

Like almost every other company, Employment Hero is fully embracing generative AI. This week, the company introduced “Hero AI” to give employees answers to some of their most frequently asked questions and even give shout-outs to team members while Hero AI handles the details of the message.

Hero AI is based on OpenAI’s large-scale GPT language models (LLMs) (although it does not integrate with ChatGPT itself) and extracts information from customers’ own data sources, such as company policy documents.

Heroic artificial intelligence. Image credits: Employment Hero

Unsung Hero (of Employment)

Earlier this year, one of Jobs’ rivals, Rippling, raised $500 million at a whopping $11.25 billion valuation, albeit as part of a hasty response to the Silicon Valley Bank (SVB) debacle. That, combined with other recent big raises from companies like HiBob, which announced another $150 million last month, suggests a thriving sector.

However, Thompson suggests Employment Hero may not be getting the recognition it deserves.

“We feel like we’re the Australian underdog… you read about Rippling, HiBob and those companies, and it’s like a coming of age,” Thompson said. “We want to be known for being global and the biggest, but we just haven’t been recognized as that.”

However, there are unavoidable similarities between Rippling and Employment Hero. The former chased ever-larger segments of the corporate payments stack, from spend management to global payroll and beyond. Interestingly, it recently launched in the UK, which could quite realistically push Employment Hero into action. But Thompson insists his latest news has nothing to do with that.

“Absolutely not. Our actions are driven by our own mission to make employment easier and more valuable for everyone as quickly as possible,” Thompson said.

What’s more, Thompson points to Swag as one of the primary ways the Employment Hero aims to separate himself from the pack.

“The combination of a consumer app with an employer platform is unique and puts us in a really compelling position to help employees as much as we help employers — and no one else is doing it,” Thompson said.

A quick look at other industries reveals other success stories in an otherwise barren funding landscape. London-based Quantexa, which provides AI to help banks thwart fraud, doubled its valuation to reach unicorn status with a $129 million funding round in April. Elsewhere, a16z-backed chatbot startup Character.AI closed a massive $150 million Series A round at a $1 billion valuation — two months before it launched. Then there’s Boston-based Gradiant, which hit the magic $1 billion mark for its AI-powered wastewater management platform.

But these are generally outliers. The word “unicorn” today—at least in the context of company valuations—is now more closely associated with what it was originally intended to describe: something rare. The data shows that the number of unicorns in the first quarter of 2023 is down 89% from its peak in 2021, when 163 new unicorns were born in 2021. everyone only for the last two quarters of this year.

The fact is that employment is something that affects almost everyone on Earth, and SMEs—Employment Hero’s primary market—are a significant contributor to the global economy. Data from the International Labor Organization (ILO) suggests that SMEs contribute more than 50% of GDP in most OECD countries, rising to 70% in some markets. And that’s why Employment Hero, Rippling, HiBob, and the like continue to raise big bucks at big valuations—far more than “HR,” the catch-all term under which such platforms are usually lumped together.

“We don’t look at it as HR, we look at it as employment – that there’s a process of finding a job, managing the job you have, managing your time and how you get paid for it, how you interact with your employer and making sure that every you can spend the dollar you earn in the smartest way and with the most purchasing power,” Thompson said.

Looking to the future, “Employment Hero” also has bigger aspirations, and Thompson wants to change the way people earn money. Currently, companies on the Employer Hero platform can offer employees InstaPay, which essentially gives them early access to money they’ve already earned – so instead of waiting until payday at the end of the month, employees can claim up to half of their earned wages upfront for a small fee. However, Thompson is considering a move to real-time pay, which means the established norm of “pay in arrears” (i.e. working two weeks or a month before you get paid) will be replaced with something that works in a little more real time. And this is where we see Swag changing the game in the future.

“The daily wage is coming — it’s not there yet, but what we’re getting at is giving people the ability to get paid every day,” Thompson said. “The way people associate work and money is changing completely now — our goal is to combine the flexibility of part-time work with the quality of employment. Swag is going to change the global financial system.”