$35 Million: Tiger Global and Avid Ventures Invest in London Payroll Solution

Payroll administration is one of the most difficult tasks for any business, but especially small and medium-sized enterprises. Pento, a startup that has developed payroll automation software to make the process easier, has raised $35 million in a Series B funding round co-led by Tiger Global Management and Avid Ventures.

Tiger Global made its first investment in a London-based firm, Pento, with this one. Avid has previously invested, as have other prior investors General Catalyst, Seedcamp, and LocalGlobe. It also follows six months after the company raised $15.6 million Series A financing led by General Catalyst at an undisclosed valuation. The business would not reveal the valuations of either round since it is “a big step up” from its Series A value.

Jonas Bøgh Larsen and Emil Hagbarth Rasmussen founded Pento in 2017, and it has since amassed $53.4 million in funding. The goal of the company is to assist businesses “get out from under” “burdensome outsourcing and outdated software.”

According to Pento, its SaaS solution fully automates the payroll process, allowing payroll managers and finance teams to avoid relying on spreadsheets, PDFs, e-mails, and manual checks. The Payroll Optimizer claims to cut payroll time by up to 80% for its clients by giving them “more control and insight” into their monthly pay run. It does this by automatically handling everything from tax calculations to payments, as well as reporting requirements, allowing any size business “to run their payroll in minutes instead of days.”

It can’t be a coincidence. According to Bøgh Larsen, the company’s revenue has increased “10 times” in the past year. While we don’t know from where, the firm reported that it has had “consecutive record-breaking months of growth” since raising Series A funding. Its offerings include identity verification, payment processing, and fraud protection for merchants. It’s also signed a number of “significant” new clients, including the United Kingdom’s Starling Bank, as well as partnerships with Personio, Hibob, and BambooHR. Pleo and Cuvva are two other customers.

In general, Pento works with hundreds of SMEs and mid-sized businesses with 30 to 500 employees each year; this has been increasing recently. The firm makes money by charging customers a set monthly fee using its SaaS business model.

Although it has global ambitions in the future, Pento’s main focus is on its native market of the United Kingdom and Europe, where payroll outsourcing is valued at almost $6 billion and is anticipated to grow at a rate of 4.4% each year. According to Pento, there are around 20,000 small and medium-sized businesses in the U.K., as well as 4,000 mid-market firms that could be interested in outsourcing their payroll operations.

“This represents an opportunity to transform payroll automation for nearly 10 million employees within the U.K. alone and a $1+ billion annual revenue opportunity,” Bøgh Larsen said.

Pento will use the funds raised to expand into new European nations and pursue product development, service expansion, and partner integrations. It also naturally plans to make some hires.

Pento provides infrastructure through its partnerships and integrations with existing accounting software, HR solutions, and pension providers, in addition to its SaaS offering. It’s also working on an open payroll API that’s now in beta, with the objective of letting any company automate additional elements of their operations, such as time recording or shift planning. The new API will also allow workers to share pay and benefits data with third-party applications and services, allowing them to validate their income to credit bureaus and other financial and HR organizations.

“We built Pento having seen firsthand just how broken the current payroll processes are, and our continued success showcases just how strongly forward-thinking companies are asking for tools to fix this,” said Bøgh Larsen.

Payroll is a highly competitive market that includes competitors such as PayFit from France, ADP, and legacy services-heavy payroll outsourcing firms. According to Pento, the company’s main differentiator is that it offers a payroll-only solution with an integrations-first approach, meaning it works with other tools/products (such as HR, cost management, and accounting) rather than building its own.

Addie Lerner, founder and managing partner at Avid Ventures, said her firm has grown increasingly enthusiastic about the “n of 1” market space for Pento to become a pure-play payroll automation leader in Europe.

“We continue to hear positive feedback from the market on Pento’s strategy of focusing on payroll only rather than payroll plus HR,” she wrote via email.

If the company can establish itself as the infrastructure layer for HR and compensation through the development of its soon-to-be-released open API, Lerner predicted, it will be more entrenched in its customers’ payroll and HR processes.

“It could then leverage its strategic positioning of managing payroll for its customers and being in the critical flow of payroll payments to monetize a suite of ‘Pento for Employee’ products including financial offerings such as lending, KYC, and more,” she said.