Enterprise

Deel, the $12B HR startup, acquires Zavvy to step up consolidation play

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Image Credits: Manuel Breva Colmeiro (opens in a new window) / Getty Images

Consolidation is afoot in the world of HR services, with larger players snapping up interesting, smaller startups en route to more robust unit economics and providing one-stop shops for customers looking to cut down on suppliers. In the latest development, Deel — the $12 billion HR business — is scooping up Zavvy, a Munich-based AI-based “people development” startup building tools for personalized career progression, training, and performance management.

Deel, which was founded in Paris but is now based in San Francisco, has made its name mainly with payroll and other HR services aimed at distributed workforces, will bring Zavvy’s services onto the same platform as its existing services — a nod to the company shifting focus to work more with distributed and non-distributed workforces. It plans also to start incorporating more AI across that wider portfolio. Finally, Deel will also make its existing Deel HR tool, which was free for organizations of up to 200 users, now “free” for existing customers regardless of their size.

Deel has some 25,000 organizations as customers, ranging from Big Tech players like Reddit, Shopify and Klarna through to big brands and retailers like Nike, Forever 21 and Red Bull.

Zavvy had raised $4 million in 2022 from investors like La Famiglia (which is now merged with General Catalyst), and PitchBook estimated that its valuation at that time was just under $16 million.

Financial terms of the deal are not being disclosed but sources tell us that the acquisition price was at a premium to this valuation (i.e., more than $16 million). Zavvy was not looking for a buyer, Zavvy’s founders said. Originally Deel approached Zavvy with a partnership proposal before making an offer to buy it outright.

Deel’s deal is coming on the heels of a strong run for the company. Alex Bouaziz, the company’s founder and CEO, told TechCrunch that Deel is now seeing annual recurring revenues of over $400 million and that it has been profitable since September 2022. It’s unlikely to be looking for more fundraising anytime soon with more than $600 million currently in the bank, he said. IPO plans are still a ways off but likely to be in the 2025/2026 timeframe, he added.

Hatched at Y Combinator only five years ago, Deel’s focus to date — on building payroll solutions and hiring/contract management for distributed workforces — dovetailed nicely with the “future of work” theme that gripped the world when COVID-19 hit. Between the spring of 2020 and the end of 2021, the company raised more than $600 million from some 75 top-tier investors, including at least one backer that it shared in common with Zavvy, La Famiglia. (You can read about that massive fundraising run here, here, here and here.)

But if one clear impact of the coronavirus pandemic was the emergence of a new tech ecosystem catering to a rise in remote work — Deel’s growth very much being a strong product of that — then the last couple of years have definitely been a story of how that economy has had to right-size to the realities of today.

Some companies have nixed remote working, some have laid off workers, and organizations are trying to manage costs much more strictly to stave off economic pressures.

By Zavvy’s and Deel’s accounts, the former company has not found it hard to build its business in a tighter market.

“Zavvy is doing great. We’re seeing rapid growth with SMB and mid-market customers,” co-founders Joshua Cornelius and Mehmet Yilmaz said in an email to me in response to the question of how business was going. They said they were heading toward a Series A when Deel came knocking.

But they also admitted that it’s more advantageous for Zavvy and its products to be aligned with a bigger business, considering the size of Deel now and the wider trend in IT for how services are procured.

“We got really excited when we realized how joining forces with Deel would drastically accelerate our ability to help businesses,” they said, adding that even if Deel is bigger, it is “fast” and “still feels like a startup.”

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