Alex Bouaziz, cofounder and CEO of Deel, is armed with metrics that would be enviable to nearly every software startup CEO. Deel, which sells HR software for hiring international employees, started 2021 with $4 million in annual recurring revenue. That number has surged to $295 million as of January 1, he tells forbes. Plus, the company is operating at better than 85% gross margins, and has been profitable, based on EBITDA measurements, since September.
Deel is now formally announcing its latest funding at a $12 billion valuation, though it raised the money in the second quarter of 2022. The modest round, which consisted of $30 million in new primary shares and about $20 million in secondary transactions from employees who held stock, was first reported by Axios back in May. Bouaziz said the raise was done primarily for strategic incentives — chiefly, to bring Emerson Collective, the investment and philanthropic organization of Laurene Powell Jobs, onto the cap table.
“If we can get external investors to validate the valuation, it helps us with a lot of things,” Bouaziz said. “Having a good equity valuation helps us get more and more acquisitions done.” Deel has already used its new price to make multiple acquisitions, headlined by an $83 million purchase of Australian payroll company PayGroup. Nevertheless, Bouaziz said he likely would not have struck a deal if not for the establishing ties with Emerson because he did not need any additional cash. Deel has more than $500 million remaining in the bank from previous funding by investors like Andreessen Horowitz and Spark Capital, he said. He declined to comment on how much Emerson had invested in the new fundraise.
Bouaziz founded Deel in 2019 alongside Shuo Wang, who serves as the company’s chief revenue officer overseeing its sales and expansion into countries around the world. Deel functions as the “employer of record” for a company, hiring foreign employees through Deel Inc. and thereby assuming legal responsibility for those workers. In exchange, customers pay Deel $49 per month per contractor and hundreds per full-time employee.
The startup initially followed a playbook set by Israeli software firm Papaya Global to build payroll and HR tools for companies to hire globally without having to worry about regulations compliance in different countries. Bouaziz said his company took off after he opted to build out the infrastructure for each country to hire its customers’ foreign employees in house, instead of outsourcing those tasks.
We do the very hard stuff. Maybe we should also do the easier stuff instead of letting the Ripplings of the world take care of it.
Bouaziz considers the challenging part of HR software to be figuring out how to operate legally in different countries. For example, he said the company spent two years in a quagmire bureaucratic before being able to launch operations in Taiwan and the Philippines. But Bouaziz credits Deel’s rapid revenue rise to executing on that ambition, which his father Philippe — the company’s chief financial officer — initially considered to be too daunting. “I had to do a lot of convincing because he looked at the idea of having 100-plus entities and employing a lot of people on behalf of others, and he told me I’m fucking crazy,” he said.
In pursuit of that vision, Deel’s business was spurred by the Covid-19 pandemic, which created a lucrative market of companies willing to pay Deel’s hefty price tag to quickly build out a remote global workforce. Bouaziz appeared as the standout on forbes‘ 30 Under 30 list for Finance in 2021. Deal more than quadrupled its annualized revenue over the course of 2022, when it started at $57 million, even as the global economy regressed. It now employs more than 2,000 people, and manages 120,000 people through Deel Inc.
Now, Bouaziz feels ready to corner a broader segment of the HR market, where a crop of startups are increasing butting heads as they expand their product ambitions in bids to justify lofty valuations. To start, the $12 billion company is taking on Rippling ($11.3 billion) and Gusto ($10 billion) with a new piece of software to handle domestic payroll and other simple HR demands. Bouaziz expects the space to consolidate with customers opting to pay one company for all their HR needs — a prediction shared by Rippling’s Parker Conrad — and is hoping Deel will reel in customers by offering its new tooling for free. “If you look at basic HR software, what you’re really paying for is a nice UI on an Excel spreadsheet,” he explained. “It’s pure software, it’s not super complicated.”
Bouaziz does not pull punches when comparing Deel to rivals. “The other companies in our space, like the Papayas of the world, we outpace for execution,” he told forbes. “We do the very hard stuff. Maybe we should also do the easier stuff instead of letting the Ripplings of the world take care of it.”
We’ve raised all our rounds before at 100x. If I had looked at our revenue and growing into our valuation, I would have been shit scared.
Bouaziz has ambitions to make Deel the “Apple of HR,” but will have steep competition from other well-funded companies that, like him and Conrad, are expanding their suite of offerings. Rivals could come to include spend management providers like Brex ($12.3 billion valuation), Ramp ($8.1 billion) and TripActions ($9.2 billion).
Deel is aiming to double revenue in 2023, and reach $1 billion within two to four years, Bouaziz said. He believes Emerson Collective can help it achieve these goals. Already, several other Emerson portfolio companies are using Deel’s product, and the organization has helped connect Deel to non-governmental organizations. “We were really interested in the technology that could bring Silicon Valley-like work opportunities to people who happen to be very talented but are not able to come here,” said Sarah Pinto, a venture investor for Emerson Collective.
As for the high valuation Emerson paid on the round, which came at the tail end of venture’s bull run, Pinto said that in hindsight she’s relieved the company has grown as fast as it did. “The company has always been an outlier in terms of its pace of growth,” she said. “We believe it deserved a premium in terms of [valuation] multiple to account for that.” Still, Deel’s multiple hangs at around 40x its revenue, leaving it more work to do to stack up against fintechs on the public market, where the average price/sales ratio is 7.3x, per the Global X FinTech ETF index.
“We’ve raised all our rounds before at 100x. If I had looked at our revenue and growing into our valuation, I would have been shit scared,” Bouaziz said. “It wouldn’t be crazy to [get to] at 10x multiple.”