Managing payroll and other HR tasks is not necessarily “exciting,” admits Ben Thompson, cofounder and CEO of Sydney-based Employment Hero. But digitizing HR processes gave his team the opportunity to “do a lot more than just software-as-a-service (SaaS) business,” as part of the newly minted unicorn startup’s broader goal of empowering employees.
“This sounds crazy, but we have the ability to restructure the global financial system,” says Thompson in a phone interview. He highlights Employment Hero’s InstaPay function, an “earned wage access” product, which allows employees, for a fixed fee of A$3, to request up to half of their monthly salaries before payday, addressing short-term liquidity issues.
“If wages were paid in real time, as they will be inevitably, employees would not be living paycheck to paycheck,” he adds. “When employment was analog, it would take weeks to process payroll and write checks…now that employment is digital, you shouldn’t be paid in arrears.”
Technology Crossover Ventures (TCV), the Palo Alto-based firm best known for its investments in Airbnb, Meta and Netflix, was sold on Thompson’s vision. TCV led a A$263 million ($166.7 million) in a Series F funding round for Employment Hero.
Participating in the round, which was announced on Thursday, were Employment Hero’s existing investors Insight Partners, AirTree Ventures, Seek Investments and OneVentures. With the fresh funding, which is subject to approval from Australia’s Foreign Investment Review Board, the nine-year-old company’s fresh capital will reach A$650 million. Employment Hero declined to disclose its precise valuation but said it was “just under A$2 billion,” making it a unicorn, a startup valued at over $1 billion.
“The way we see it is, the market Employment Hero is addressing is still quite greenfield,” Muz Ashraf, general partner at TCV, says in a phone interview. “Compared to, let’s say, two years ago or three years ago, it might be more difficult, but still, we just think this is a massive market opportunity…it’s more about converting customers who might have been previously using manual [HR] solutions to more automated and digital solutions. We think that’s a tailwind that will continue to persist now and well into the future.”
Targeting SMEs, Employment Hero provides online tools for businesses to oversee HR-related operations, such as managing payroll, onboarding new hires, upskilling teams and monitoring their performance. The company, which remains unprofitable, claims it works with over 300,000 businesses worldwide. Employees can download Swag, Employment Hero’s self-described “HR superapp,” to view their wages and search for internal job openings, among other functions.
The fresh capital will go towards Employment Hero’s international expansion. So far, Employment Hero operates in Australia, Malaysia, New Zealand, Singapore and the United Kingdom. The company plans to roll out SmartMatch, an “AI-driven recruitment solution,” after its initial launch in Australia last month. As part of SmartMatch, jobseekers can create accounts on Swag to look for opportunities at companies that use Employment Hero.
Still, Employment Hero’s growing pains may include their flagship app’s performance. On the Google Play store, the Swag app is rated 2.6 out of five stars across 100,000 downloads, with reviews citing the app’s slow loading speeds and glitches. Swag is rated higher on the Apple app store, with a rating of 4.5 stars out of five stars across 4,600 reviews.
“We acknowledge some initial challenges on the Android platform having just migrated a large number of users onto the new app, but they have now been resolved,” says a spokesperson Employment Hero. “Swag boasts a 4.5-star rating on iOS, with over 4.6K ratings, reflecting a high level of user satisfaction. We are committed to delivering an exceptional user experience and will continue to work diligently to maintain and improve our app’s performance on all platforms. We appreciate the valuable feedback from our users and look forward to delivering further enhancements to Swag in the future.”
Employment Hero faces steep competition from well-established HR technology giants, such as publicly-listed Workday, which has a market capitalization of $54.6 billion, and BambooHR, which claims to serve over 30,000 businesses worldwide. Smaller, up-and-coming HR technology startups across Asia are targeting local markets, including Manila-based Sprout Solutions, an honoree of this year’s Forbes Asia 100 to Watch list, which raised $10.7 million in a Series B funding round led by Cercano Ventures this April.
In 2021, venture capital firms invested over $12 billion in startups targeting human resources technology, also known as human capital management (HCM) technology, according to a 2022 analysis by Boston Consulting Group. Factors accelerating investment in the field included shifting work norms following the pandemic and a rising gig economy–but during a global slump in venture capital funding, aside from AI and climate technology, investment in HR technology has cooled.
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