There is a new kid on the block in the HR SaaS world, and it speaks with a charming Catalonian accent. Factorial, founded in 2016 (so, maybe not that new) and based in Barcelona, has just raised $16 million. The round was led by CRV, a U.S.-based early-stage venture capital firm that insists it “invests in people before ideas.”
In a blog post announcing the raise, Factorial points out that this round is Spain’s largest in 2020. Good on them, though the giant asterisk that is the year 2020 kicks a little dust on this accomplishment. The company’s founders say international expansion is a top priority with the new funding.
The round brings Factorial’s total funding since launch to $18 million. To put things in perspective, one of the companies that Factorial presumably will be taking on, Gusto, has raised $200 million to date. As of last year at least, Gusto had a $3.8 billion valuation. Factorial has not disclosed its valuation.
Other companies standing in Factorial’s path include legacy behemoths like ADP and Paychex, as well as other newer challenger SaaS brands like BambooHR, Workday, Zenefits, PeopleHR, the aforementioned Gusto, and countless others.
Breaking Through in a Fragmented Market
So why does Factorial, and more to the point, its investors, think it can break through in such a crowded field?
Well, for starters, Factorial has enjoyed some success since its launch. The company said its revenue grew eight-fold in 2019.
The company also has a specific focus on HR management vs payroll processing, which is the bread and butter of many of its competitors. Its software was built for non-HR professionals at smaller companies to handle sophisticated HR functions.
In a statement provided to TechCrunch, Factorial investor Reid Christian, General Partner at CRV, said the following.
“Factorial was built for the users, designed for the modern web and workplace. Historically the HR software market has been one of the most lucrative categories for enterprise tech companies, and today, the HR stack looks much different. As we enter the third generation of cloud HR products, with countless point solutions, there’s a strong need for an underlying platform to integrate work across these.”
Growing Penetration of Payroll/HR SaaS
While many HR players are chasing the U.S., and global, small business HR market, there remains some available market to work with. Back to Gusto, which, as noted, has raised gobs of money and ramped up to 100,000 customers and beyond. Regardless of which number you use to size the U.S. SMB market, 100,000 customers is just a drop in the bucket. However, with so many players chasing the SMB market, penetration is growing.
Localogy measures small business adoption of SaaS tools for business operations through its Modern Commerce Monitor tracking story. We just released Wave V-1 of the study, the full summary of which is available to Localogy members.
The latest MCM wave shows that 40% of SMBs use SaaS to handle some portion of their payroll/HR operations, making it one of the more deeply penetrated categories. 
