Personio has developed a standard software for the personnel management of small and medium-sized companies.
Munich Personio is one of the highest rated German start-ups. In the increasingly difficult financing environment, the HR software specialist has now raised a further $ 200 million. The company’s valuation increased to $ 8.5 billion.
“This is a strong signal that investors are convinced of the sustainability of the business model,” founder Hanno Renner told Handelsblatt. Also and especially in uncertain times, the companies invested in software in order to digitalize the personnel processes and thus make the processes more efficient.
Personio has developed a standard software for the personnel management of small and medium-sized companies. The goal is to become a kind of SAP for HR managers in companies with up to 2000 employees. Personio sees 1.7 million companies in Europe as potential customers.
In the second part of a Series E financing round, Renner raised an additional $200 million. Last fall, it had been $ 270 million, the valuation at that time was six billion dollars. The new round was again led by Greenoaks.
Currently, investors are taking a much closer look in view of the global uncertainties. The days when financing rounds were self-running because too much money was on the market are over.
Sustainability of the business model is crucial
At the moment, discussions with potential investors are no longer primarily about whether a company like Personio is now growing by 100 or 120 percent, Renner said. The sustainability of the business model is crucial. On the basis of the current financing, Personio can become profitable at any time despite the strong growth.
Other companies are currently having a harder time finding donors. Global investments in tech start-ups fell from $ 10.3 billion to eight billion in the first quarter compared to the previous quarter. “In any case, the market is likely to be characterized by uncertainty and shocks for two to three quarters,” says Alicia Fuller, a start-up expert at Silicon Valley Bank in New York.
The US venture capitalist Sequoia recently drew the scenario of a “Survival of the quickest”. Only those companies survived for months that get their costs under control the fastest. In Germany, a number of start-ups such as the banking provider Kontist and the express delivery service Gorillas have already announced job cuts.
For start-ups, this means that the financing rounds are no longer a matter of course. But that doesn’t mean that nothing works anymore. “We are still observing high investment amounts and successful exits,” Carsten Rudolph, Managing Director of the BayStartup investor network, told Handelsblatt.
There are now many funds in Germany – some of them, such as the HTGF and Earlybird, are just freshly equipped with capital. “However, the requirements with regard to measurable company development and sound planning will increase; valuations are also under pressure.“ For start-ups with a convincing business model, financing will continue to be possible.
Healthy financial cushion
At Personio, investors have so far continued to place their trust in the business model. In total, the company has now raised $ 720 million. “We haven’t spent a large part of it yet, we have a healthy cushion,” says Renner. This is reassuring for employees and customers. “We don’t have to make bad or wrong decisions because we are under financial pressure.“
Last year, according to industry estimates, the company’s sales more than doubled to a mid-double-digit million amount. Renner is convinced that he will be able to sustain the three-digit growth rates for a long time to come.
Investors believe in the story. “Personio’s product has become an indispensable tool for small and medium-sized companies in Europe that are just recovering from the challenges of the pandemic,” said Greenoaks founder Neil Mehta. Especially in economically uncertain times, companies would have to make their processes more efficient. Personio is “one of the world’s best “software as a Service” companies with its rapid growth, a sustainable business model and an exceptional management team”.
With the fresh capital, Personio wants to further develop the technology. Recently, the company had also dared the second takeover and acquired the software specialist Back Technologies for a low double-digit million amount.
Back automates personnel processes and merges channels such as e-mail, WhatsApp and Slack. With the technology, for example, classic employee inquiries on salary topics can be answered automatically via Slack or teams using artificial intelligence or forwarded to the right place.
In the longer term, Personio is aiming for an IPO. “That’s the clear medium-term plan,” Renner said. However, you can wait for the right time here and also check other options. There is no exit pressure on the part of the investors: the early investors have been on board since 2016, but many venture capital funds have a time horizon of eight to ten years for their investments.