Unicorn startup Papaya Global nearly quadruples its valuation, eyes an IPO

An Israel-based workforce management software maker, Papaya revealed Saturday that it had raised $250 million in Series D funding valuing the company at about $3.7 billion.

Insight Partners led the round, and was joined by new investor Tiger Global, as well as existing investors Greenoaks Capital, IVP, Scale Venture Partners, Bessemer Venture Partners, Alkeon Capital, Workday Ventures, Access Industries, and Group 11.

“We are bringing change to a world that hasn’t changed much,” says CEO Eynat Guez, noting the company has exploded as large to medium-sized organizations that have largely managed payroll manually, with pens and paper, have moved online. “This is the new normal, the new way to manage your global workforce.”

Offering payroll management, onboarding software, and workforce analytics, the company started the year off with $20 million in annual recurring revenue, and is expecting to reach $100 million by the end of 2021. That comes after revenue tripled in 2020.

While interest in HR software is nothing new—especially as companies have globalized and sought help managing workforces outside of their home base—the coronavirus created an explosion in the space. That’s in part due to the fact that the pandemic triggered a sea change in the labor laws across national lines. In Italy, for instance, layoffs were banned, leaving global companies scrambling to comply. Newer HR software makers like Papaya track compliance regulations in different countries, lightening the burden on individual companies to follow every change.

While ADP (founded in 1949) is the dominant player in the space, it’s facing challenges from new upstarts. Others include Deel, which also became a unicorn earlier this year, as did payroll management company Remote. Notably, Deel recently acquired Zeitgold, a German company, leading many to wonder if there is more consolidation to come in the industry.

The blunt and simple answer from Guez, when asked if she plans to make acquisitions, is “yes.”

Guez sees this round as the company’s last before an IPO, though also hedged her answer, noting she also thought her previous round of funding would be the last. “We do plan to go public,” she told me. “It will be in two years time—within 24 months—for sure.”

Pay equity

Along with this round of funding, Papaya is also unveiling a new product that tracks pay, retention, and more based on diversity and age.

It pushes the company into the realm of pay equity tech, in a space that startup Syndio is perhaps currently the best well known for. Backed by the the likes of Golden State Warriors Star Stephen Curry and Bessemer Venture Parntners, Syndio allows business to track compensation in their workforces. It’s raised about $33 million over its lifetime.

While pay equity disclosures have historically been a back-burner issue for corporations—some have even fought against disclosing the figure to the public—there’s been a cultural and regulatory shift in recent years. While the #MeToo movement and the murder of George Floyd made some companies focus more closely on their own diversity efforts, some regulators have accelerated the shift as well. The U.K. in 2017 for instance said companies with 250 or more employees would have to publish their gender pay gaps.

“It is becoming mandatory and becoming a norm to track and make sure there is a fair payment policy and that it is diverse,” says Guez.

Beyond ensuring pay equity, with the product, Papaya is hoping that companies will be able to use the tool to flag early signs of wrongdoing too. For instance if there is a group of women leaving the company all at once, that could point to a bad manager or a case of sexual harassment.