Muz Ashraf on TCV’s Investment in Employment Hero

We are thrilled to announce that we have led the A$263M Series F round of Employment Hero. Employment Hero was founded in 2014 by Ben Thompson (CEO) and Dave Tong (CPO/CTO) and is headquartered in Sydney, Australia. The Company has emerged as a market leader in Australia on the back of an easy-to-use, cloud-native, and comprehensive HR and payroll offering and is in the early stages of expanding internationally in the UK, New Zealand, and Southeast Asia. The Company’s suite of offerings includes the core HR system of record, recruitment, onboarding, time & attendance, employee engagement, and performance management.

We sat down with TCV General Partner Muz Ashraf to discuss TCV’s investment in Employment Hero and why he believes the company can make employment work better for employers and employees globally:

Q: What is the broader market opportunity for Employment Hero (“EH”), particularly with small and medium-sized enterprises (SMEs)?

Muz: As a firm, we have spent a lot of time looking at SME-focused HR software businesses globally and have always been struck by how massive this end market is. SME businesses make up a significant percentage of most countries’ GDP, and yet their needs have historically been underserved. Many still rely on point solutions and manual processes. Over the past decade, Employment Hero has built a modern, cloud-native Human Resources Information System (“HRIS”) that we believe perfectly suits their needs. It is intuitive and easy to use for both employees and HR teams, and it provides a very broad range of HR functionality in a single platform, including recruitment, onboarding, performance management, employee engagement, and benefits. Other software companies have identified this pain point and scaled well globally, but despite their success, a lot of the market remains greenfield. We see this as a reflection of the size and opportunity of the SME HRIS market.

In addition to the HR functionality, Employment Hero also provides a full-suite payroll offering and, crucially, this offering is localized for each of their markets. The payroll software market is much more penetrated, but in our view, existing payroll solutions leave a lot to be desired. Many of them require extensive manual work collecting, cleaning, and transferring employee data each month, with significant back and forth between companies and their payroll bureaus. This often leads to errors and delays in employees getting paid. In contrast, Employment Hero’s payroll solution integrates directly with the HRIS, delivering significant automation and clear ROI for customers. EH is bringing a modern experience to an outdated market.

Q: Why has innovation been slow in this market? Why has this been a persistent pain point?

Muz: We believe there have been a number of challenges that have prevented wider adoption. First, historically there haven’t been many cloud-native providers addressing this SME segment of the market. Instead, the market has been served by clunky solutions, defined by poor UX, painful implementations, and high complexity. The typical SME business is looking for something diametrically opposite and has instead opted to use spreadsheets or other manual workarounds. As one datapoint, a large percentage of Employment Hero’s new customer wins tend to be greenfield customers that were not using a third-party software. EH is able to win these customers by offering a modern solution that is both intuitive to use and provides a broad range of rich functionality.

In Employment Hero’s case, the solution also solves local HR regulations and compliance needs, helping employers solve challenges such as onboarding employees and ensuring overtime hours are paid appropriately. This, we believe, remains a key pain point for SME businesses, who have a hard time keeping up with complex and often changing employment regulations, and is something that not many others have been able to solve in an automated manner.

Q: Can you share the back story of TCV’s relationship with Employment Hero? How long have you known the company? Why is TCV investing now?

Muz: TCV has had a relationship with Employment Hero for a very long time. Our first conversation with CEO/Co-Founder Ben Thompson and the team dates back several years. We have been in touch regularly since and been continuously impressed by the team’s innovation and speed of execution.

In terms of this round, a few things got us particularly excited. First, EH has already built a very strong position in the Australian market and is now starting to show strong traction in a number of international markets, including South-East Asia, the UK, and New Zealand. Success in these markets significantly increases the potential scale they can achieve. Importantly, their solution is deeply localized to each geography.

The second area that got us excited is the product expansion strategy. We love investing in platform businesses where you start to see extensions into adjacent product areas. In EH’s case, they have started to show traction in various adjacent product areas, including pension, global payroll, early wage access, and employee benefits. The speed and quality of the product releases over the last few years has been highly impressive and we see there is clear customer pull for EH to offer even more value within the platform.

Q: Can you share more on the product roadmap? Beyond international expansion, where is Employment Hero investing in growth?

Muz: EH has a very bold vision that extends far beyond the employer-facing HRIS and payroll products. They already have what we believe to be a best-in-class employee-facing application, Swag, which allows employees to manage everything work-related in a single application. For example, they can access their pay-slips, request leave, complete certifications, shout out their coworkers, access benefits, and spend Swag dollars (on real-world goods and services), etc.

Now that they have critical mass among employers and employees, EH is rolling out an integrated jobs marketplace within their existing applications. The seamless UX and new automated matching functionality (AutoEmploy) will make it easier for employers to find new talent and for individuals to find new opportunities, particularly internally. We think this vision is highly compelling. In short, Employment Hero is building a SaaS-enabled network on top of a system of record HRIS business, with the potential to unlock enormous value for employers and employees alike.

Q: Many tech companies have struggled to raise funding over the past year. Why do you think EH has been successful? Is there anything else that distinguishes them, especially in this market?

Muz: Unlike a lot of other companies, EH has always operated in a very efficient and disciplined manner. They never raised at inflated valuations and the team has always been disciplined around operational efficiency, running the business with leading SaaS KPIs. The best companies can and have been raising capital in this environment, and EH’s raise is a testament to the durability and quality of the business that Ben and the team have built.

Q: How do you plan to help the company achieve some of these goals that you have just laid out and continue to execute their vision?

Muz: As a firm, TCV has invested behind several businesses executing the ‘Full Potential SaaS’ thesis; ie., system of record businesses that extend their product set and/or drive additional value across the broader value chain (in many cases by better connecting market participants). We would hope to bring some of that knowledge to bear as EH crafts its own playbook. We have already been helping identify go-to-market (“GTM”) resources and talent to help with the international expansion efforts, including having some of our Venture Partners work closely with the company. We’ll look to continue to roll-up our sleeves to help them succeed in their growth plans.


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