München Personio is one of the highest rated German start-ups. In the increasingly difficult financing environment, the personnel software specialist has now collected a further 200 million dollars. The company’s valuation rose 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. Even and especially in uncertain times, companies are investing in software to digitize HR processes and thus make processes more efficient.
Personio has developed standard software for personnel administration in small and medium-sized companies. The aim 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 has now raised an additional $200 million. Last fall it was $ 270 million, the valuation at the time was $ 6 billion. The new round was again led by Greenoaks.
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In view of the global uncertainties, investors are currently taking a much closer look. The times when rounds of financing were a sure-fire success because there was too much money on the market are over.
Sustainability of the business model crucial
When talking to potential investors, it is no longer primarily about whether a company like Personio will grow by 100 or 120 percent, said Renner. The sustainability of the business model is crucial. Based on the current financing, Personio could become profitable at any time despite the strong growth.
Other companies are currently finding it more difficult to find financiers. Global investments in tech start-ups fell to eight billion dollars in the first quarter from $10.3 billion in the previous quarter. “In any case, the market is likely to be characterized by two to three quarters of uncertainty and shocks,” says Alicia Fuller, 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 the months that got 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.
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For start-ups, this means that the financing rounds are no longer a sure-fire success. But that doesn’t mean that nothing works anymore. “We are still observing high investment sums and successful exits,” said Carsten Rudolph, Managing Director of the BayStartup investor network, to the Handelsblatt.
There are now many funds in Germany – some of them, such as HTGF and Earlybird, have just been provided with fresh capital. “However, the requirements in terms of measurable corporate development and well-founded planning will increase; valuations are also under pressure.” Financing will continue to be possible for start-ups with a convincing business model.
Healthy financial cushion
At Personio, investors have so far continued to trust the business model. The company has now raised a total of $720 million. “We haven’t spent a large part of it yet, we have a healthy cushion,” says Renner. That is reassuring for employees and customers. “We don’t have to make bad or wrong decisions because we’re under financial pressure.”
According to industry estimates, the company’s sales more than doubled last year to a mid double-digit million amount. Renner is convinced that the three-digit growth rates can be maintained for a long time.
The 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 need 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”.
Personio intends to use the fresh capital to further develop the technology. The company also recently ventured its second takeover and took over the software specialist Back Technologies for a low double-digit million amount.
Back automates HR processes and brings together channels such as email, WhatsApp and Slack. With the technology, for example, classic employee inquiries about salary issues via Slack or teams can be answered automatically or forwarded to the right place with the help of artificial intelligence.
In the longer term, Personio is aiming for an IPO. “That is the clear medium-term plan,” said Renner. But you can wait for the right time and check other options. There is no exit pressure on the part of the investors: the early financiers have been on board since 2016, but many venture capital funds have a time horizon of eight to ten years for their investments.
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