Global payroll co Deel raises $156m at $1.25b valuation

Alex Bouaziz Credit: Deel

Based in Israel, Deel CEO Alex Bouaziz, a French immigrant, describes the unique global business model of the startup, which has grown fivefold in value since September.

Global payroll solution company Deel has completed a $156 million Series C financing round, co-led by YC Continuity, Andreessen Horowitz and Spark Capital, at a company valuation of $1.25 billion, post-money. This brings to $206 million the total amount raised by the company.

Deel was founded in 2018 by CEO Alex Bouaziz, 27, and chief revenue officer Shuo Wang, both graduates of MIT. After MIT, Bouaziz moved to London and began a doctorate in environmental engineering at Imperial College, London but decided to drop out and return home to Israel, to pursue an entrepreneurial career. He founded the startup Lifeslice, which among other things developed an app enabling friends around the world to produce video clips together. The company did not make the hoped for breakthrough but Bouaziz came away with a very important insight.

"I was working in Israel but the company had engineers in the US, France and the UK. In order to pay them, I had to manually transfer money from Bank Leumi's website. It worked terribly and did not meet local regulations. The entire experience was not good."

Wang had also founded a startup in the US and encountered the same problem. Consequently they teamed up to found Deel, which has developed a platform that allows companies to produce contracts for employees and freelancers in over 150 countries and pay their salaries in local currency, while complying with regulations in each country.

It's not accurate to describe Deel as an Israeli company or for that matter as an American or French company. The company has promoted a globally dispersed business model and has 120 employees in 26 countries, including 20 in Israel but doesn't actually have any offices anywhere in the world."

Bouaziz explains. "To you it sounds perhaps strange but from my point of view it's normal. We hire the best employees in the world on the basis of their talents and not according to the country they are from, or where they are located. We have a CTO and engineering team in Israel, engineers in Brazil and sales people in Chicago. Of course this has disadvantages. I would be delighted to throw a barbecue with all these people or pat people on the shoulder and tell them exactly what I want from them. But this approach allows us to grow much more quickly than we otherwise could, if we were only hiring in Tel Aviv.

Bouaziz is something of a globetrotter. He grew up in France and immigrated to Israel with his parents when he was 16. After studying at the Technion in Israel, MIT in the US and his aborted Ph.D. in London, he returned to Israel to become a startup entrepreneur. He prefers to be interviewed in English, peppered with Hebrew, and still feel he is undergoing the immigration process. His partner Shuo Wang is based in San Francisco but he says, "I plan to continue to manage the company from Israel. I don't need to be in the US in order to manage Deel and I could even do it from Zimbabwe, if I wanted to. I'm a good French Jew and even before we moved to the country, I visited all my life. Israel is my home."

Bouaziz was born into an entrepreneurial family. His father Philippe founded the Prodware Group in 1989 in France. Today the IT group is traded on the Paris Stock Exchange with a market cap of €44 million. After immigrating to Israel, Philippe Bouaziz together with Alex founded Sarona Partners, which includes a tech investment fund, office space, an accelerator and owns the tech website Geektime. Sarona Partners was the first investor in Deel and Philippe Bouaziz is very involved in the startup as a member of the board, and CFO. Alex Bouaziz saiad, "I grew up in a family of entrepreneurs and I saw my father take the company from the garage at home to the stock market, so I have had a good mentor."

Deel has become a unicorn through a phenomenal growth in its valuation. In its financing round last September it was valued at just $225 million so the valuation has increased fivefold in just over six months. Bouaziz said that annual recurring revenue is "over $10 million," meaning that the company has earned a very high multiple in order to become a unicorn. Deel says that it supports over 1,800 businesses and companies and 15,000 salaried employees and consultants worldwide. Over the past quarter $100 million in salaries were paid via Deel's platform.

From Bouaziz's point of view, the company's current valuation is just the start. "We are building a $100 billion company and that is the reason that none of our shareholders has sold their holdings in this financing round. The concept of the business is big everywhere and companies around the world from Israel, America, and Singapore love it. It was a process that previously existed but has sped up due to coronavirus."

Deel is not the only big company linked to Israel competing in the global payroll solution space. Papaya Global, led by CEO Eynat Guez, is also developing a platform for managing global payments and recently raised $100 million, at a company valuation of $1.2 billion. In a dig at Papaya Global, Deel's press release on its latest finance round says, "Deel becomes the biggest Israeli startup in the world in terms of hiring and employing people worldwide."

Bouaziz says, "Papaya is an excellent company but we are a frightening rival. They are a longer-established company in the market than us which began providing services to enterprises before it became more technological. We were born as a complete fintech company. They rely more on local partners that will employ people in the target countries, while our aim is to set up companies and business entities around the world in order not to be dependent on others. There are things that Papaya does better like salary payments to companies that already have a business entity in the target countries, which we don't have. On the other hand, we are stronger in payments to self-employed contractors or employees where there is still no company in the country."

Papaya's vision is to become a salary and human resources management system in the future for enterprises, is that where you are also going?

"I think it will be very difficult to cause organizations to abandon their existing human resources systems. We see things differently and our aim is to empower 100 million people to work for the best companies in the world regardless of their location. We want that with several clicks, you can employ anyone in any place within a day and that by itself can turn us into a $100 billion company. At Deel, we also offer financial services to freelancers such as providing them with access to credit cards regardless of their location, and providing them cash advances and allowing them to join global health insurance plans. These are things that are unique to us."

Papaya Global said, "With revenue turnover that has doubled since the start of the year and has already exceeded $50 million, we are not engaged in who is bigger, but rather to give best value to the customer and employees with a global organizational experience. Papaya began the vision of a global salary platform after 20 years of experience in the field and in recent years has earned the reputation as the 'Salesforce of the Employment Market.' We believe that salaries are a legal and financial process and are engaged in developing technology that empowers the employee's experience in an organization including unique services like options management and global benefits and special solutions for senior employees, in contrast to the approach of 'one standard contract for everybody.' We are happy about any additional service in the global sector. It is an enormous market that will only grow in the coming years. We will continue to lead the sector in terms of broad professional comprehension and developing deeper technological procedures for managing salaries in organizations."

Published by Globes, Israel business news - en.globes.co.il - on April 21, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Alex Bouaziz Credit: Deel
Alex Bouaziz Credit: Deel
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018