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.