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Australian technology start-up Employment Hero has raised nearly £140mn from investors to help fund its UK expansion, defying a difficult market for fundraising in which fast-growing companies are struggling to attract investor backing.
US private equity firm TCV, whose past investments include Airbnb and ByteDance, is leading the funding round, which values the company at more than £1bn, according to Employment Hero’s co-founder and chief executive Ben Thompson.
The money will be used to build out the company’s presence in London and expand its British client base beyond the 20,000 UK small and medium-sized businesses that use its software to manage everything from payrolls to integrating new employees to recruiting staff, Thompson told the Financial Times.
The decision to choose London as its European base is also a boost to the UK government’s attempt to woo foreign companies as it prepares to host its Global Investment Summit.
“The UK is one of the best places in the world to invest, especially in our thriving tech sector which is only the third in the world to be valued at $1tn,” Lord Dominic Johnson, minister for investment, said in a statement. “Employment Hero’s investment is testament to that.”
Start-ups have been struggling to raise money amid a sharp fall in venture capital funding this year.
Globally, the amount of money raised by companies from venture capital firms fell by more than half to $163.6bn during the first six months of 2023, according to data compiled by KPMG.
Businesses that have been able to secure financing, including US payments company Stripe and fashion retailer Shein, have had to do so at lower valuations than they have previously raised funding at, the KPMG report said.
Founded in 2014 by Thompson, a former lawyer, Employment Hero’s products are used by more than 300,000 companies across Australia, parts of Asia and Europe.
It also offers an app called Swag which helps employees view their payslips, find jobs and apply for holiday.
The company, which has previously raised funding from backers including US private equity firm Insight Partners, plans to help companies pay their employees in real time, which would make staff less reliant on consumer credit.
“Because people are paid in arrears but they have to pay in real time, there is this massive disconnect. The economy runs in real time, so why shouldn’t payroll?” Thompson said.
Employment Hero is also launching a recruitment platform in the UK that uses an algorithm to match employees that use its Swag app with jobs.
“That’s where this capital raise will be so helpful because we want to make Swag a very well-known brand that any employee can create a profile with,” Thompson said.
He said the decision to expand in the UK was taken, in part, as it had a reliable regulatory regime, when contrasted with a more fragmented market such as the US.
“From a regulatory perspective [the UK] it’s not like the US,” Thompson said. “The US is 50 different states, 50 different employment laws.”