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Personio, a small business HR software, raises $270 million on a $6.3 billion valuation and extends into workflow automation

In the last 20 months, HR technology has gotten a lot of attention: COVID-19 has transformed the way we work, and as a result, how we manage people in the workplace has had to adapt as well. Personio, a Munich-based company that has made a huge business out of addressing that issue particularly for small and medium businesses, is announcing $270 million in investment today to help it fuel its next moves, after high demand for its services. Personio’s value has risen to $6.3 billion as a result of this Series E, making it one of Europe’s most valuable companies — HR or otherwise.

The funding is being led by Greenoaks Capital Partners, with new investors Altimeter Capital and Alkeon also participating. Index Ventures, Accel, Meritech, Lightspeed, Northzone and Global Founders Capital — all previous backers — were also in the round. Index and Meritech led the company’s previous round, which was only in January of this year. That Series D round was at a $1.7 billion valuation — meaning the figure has grown by 3.7x in 10 months, a mark of how fast Personio itself has been growing.

Personio today provides recruiting and onboarding, payroll, absence tracking and other major HR functions in an all-in-one platform aimed at European SMEs (typically 10-2,000 employees). It now has 5,000 customers — compared to 3,000 in January. While Personio will continue to grow that range of tools, it will also expand into what CEO Hanno Renner describes as “people workflow automation.”

Essentially, this is about speeding up the process of doing HR-dependent work in other applications that may exist outside of Personio by automatically populating HR information and triggering actions within those apps, which might have otherwise taken much longer to complete manually. This could, for example, involve creating and issuing an employment contract, or turning access to certain apps on or off when a person joins or leaves an organization.

If Personio’s existing platform could be thought of as “the Workday for SMEs” — a suite of HR tools that work together for the needs of SMEs in the same way that enterprises have with their own large, multi-faceted platforms aimed at them — then the automation tools that Personio is now adding might be thought of as the company’s answer to UiPath or ServiceNow for SMEs, using machine learning, robotic process automation and other techniques to take away some of the more repetitive busy work involved in tasks related to HR.

“We’ve been working on it for 12 months, and we now have 5,000 customers that we learn from using our product as it is,” Renner said in an interview. The crux of the issue is about getting software in different silos to work together more quickly, so that when, for example, a contract needs to go out to a prospective hire, foot dragging doesn’t mean the hire might sign elsewhere, or a fired employee can’t still get into a company’s IT system. “HR processes go beyond HR. They involve other functions and departments. Delays not only waste time, they could have detrimental outcomes.”

The pitch for Personio up to now has been that it’s part of the group of enterprise startups that have tapped a lucrative seam of customers, SMEs, by simply building products for them. SMEs as a sector is huge — there are more than 25 million SMEs in Europe alone, accounting for more than 99% of all enterprises — but it is often overlooked, because it is fragmented around a wide range of verticals and interests, with varying IT budgets that are sometimes very small or not there at all.

But digital transformation hasn’t completely overlooked the sector, and so more forward-thinking SMEs have gradually adopted sales, finance and CRM software, and that has “trickled down” to thinking about HR, he said.

Personio now believes that this will also help with its pitch to sell its customers automation. A typical SME, the company estimates, now uses on average some 40 different apps, with many of these needing data from HR systems to work. The idea is that Personio will now be able to provide those connectors to speed up how all of it works.

The company has a lot of growing left to do: When you consider that there are 1.7 million businesses in the subset of SMEs that Personio targets (10-2,000 employees), that is just a tiny percentage of the market.

It means that growth is likely to come to Personio, with or without the newer automation piece taking off, so the funding — raised opportunistically, before Personio needed it — will be handy. What the new technology does give it, regardless, is a window into potentially also providing automation services to SMEs beyond those of HR over time, and so this significant hike in valuation is likely related to that diversification as much as for the bigger opportunity to build more HR inroads into the SME space.

Personio democratizes enterprise capabilities and delivers a step change in productivity, simplifying HR workflows across the full employee lifecycle.All my best wishes to them.

Shishir Gupta, Founder and CEO, StartupLanes

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