Cloud-based payroll processing startup ZenPayroll has closed on a $60 million Series B round, led by Google Capital. Emergence Capital Partners and Ribbit Capital also participated, along with existing investors General Catalyst, Kleiner Perkins Caufield & Byers, and Google Ventures. This now puts the total raised at $86.1 million at a $560 million post-money valuation for the startup.
ZenPayroll mainly serves the small business market that would otherwise need to process payments and direct deposits manually. It offers an easy-to-use, cloud-based interface that allows it to take on industry incumbents Paychex and ADP.
While Paychex and ADP have upgraded to the cloud in recent years, allowing them to make it easier for their own customer bases to handle payroll online and through mobile platforms, ZenPayroll’s recent raise allows it to take on larger businesses currently served by Paychex and ADP.
“We are also building features and functionality that will make ZenPayroll a better fit for larger businesses, as we have ambitions to help all businesses everywhere, regardless of size,” CEO and co-founder Joshua Reeves said.
…we have ambitions to help all businesses everywhere, regardless of size. – CEO Joshua Reeves
This opens up a very big opportunity in the market for ZenPayroll. This is a $29 billion industry with just over 6 million firms using some form of payroll in the U.S. ADP and Paychex serve a combined nearly 1 million customers nationwide, leaving 5 million firms for the startup to go after, on top of winning business away from the older payroll services.
The startup opened up its API last year, allowing other cloud-based startups such as BambooHR and Zenefits to integrate the payroll services within their own HR platforms. The integration seems to have helped ZenPayroll in gaining more business. It grew 10x in the last year and now serves about 10,000 customers, according to the startup.
This is partly why Google Capital partner Laela Sturdy says she wanted to invest.
“They’re growing at an incredible rate and we’re excited to see how they’ll continue to help small businesses around the country,” she said.
Reeves said this latest funding round was a strategic one that will allow the company to “step on the gas pedal.” ZenPayroll had $17 million capital left in the bank from the last raise of $20 million over a year ago, according to Reeves. He now plans to use some of the cash to go from 60 to 300 employees this year. ZenPayroll will be hiring across the board in engineering, product design, customer care, sales, marketing and business development.
Another big focus for the company will be customer service. The startup is currently looking for an East Coast office space in order to better serve customers in the Eastern time zone. It plans to cover all 50 states, with the inclusion of Wyoming, Delaware and Vermont in the next coming weeks as well.
ZenPayroll intends to keep a strong focus on its small business base of customers as it expands. It recently hired CMO Brett Willms away from Google, where he led Small Business Marketing for the Americas, to do just that.
“The key is cost-effective, scaleable growth,” Reeves said. “I always emphasize that fundraising is an enabler for us, not a destination.”
