Australian HR and payroll technology startup Flare has closed a $21 million Series B funding round, but co-founder James Windon says the raise is just as much about getting the right investors as it is about dollars in the bank.
The raise was led by New York-based venture capital firm Point72 Ventures, and also includes previous investors Reinventure and BridgeLane, plus newcomers Acorn Capital and Tank Stream Ventures.
It follows a $7 million raise in August last year, which also saw Windon join the team as a late-coming co-founder to focus on the more consumer-focused aspects of the startup.
Founded in 2015 by Dan Cohen, Saul Kaplan and Colin Mierowsky, the cloud-based platform allows employers to manage HR processes including employee onboarding, payroll, benefits and superannuation.
The startup is also in the process of growing its financial wellbeing capability, designed to give employees access to financial education and tools to help them make important financial decisions.
Windon tells StartupSmart Flare has doubled its customer base over the past 12 months and now has more than 100,000 employees on the platform.
“We have a product with a broad appeal, we feel great about the product-market fit. Now was the time to scale that,” he says.
“It was the right partners, the right time, we have a clear road map and the need to build our team,” he adds.
The $21 million raise will be primarily devoted to growing Flare’s workforce, particularly to build the “best technical team in the country”, Windon says.
Currently, the startup has 40 people staff members, but this is likely to double within the next few years.
Flare has an “aggressive but achievable roadmap”, Windon adds.
“We have big plans over the next couple of years.”
A meeting of minds
Although this funding round was led by a US-based venture capital firm, the founders were not specifically looking for investment from overseas. Their focus was more around finding “someone we had an awesome relationship with”, Windon says.
“It’s important to have great partners — people who are on the same wavelength,” he adds.
Point72 partner Pete Casella is also set to join Flare as a board member, and Windon says the team see him as a “thought partner” who understands the motivations of the startup, has aligned values, and can bring both expertise and a network to the table.
“We met Pete and grabbed a beer,” Windon recalls.
“Half way through the first beer it became very clear that we might end up doing something together. It felt like there was a meeting of minds very early on at a macro level.”
The same thing happened with Flare’s Australian investors, Windon says.
“It was clear that we didn’t have to convince them of some of the foundational components,” he adds.
When you’re dealing with VCs, “you’re going to have a challenging time if you have to try to convince them to believe in what you believe in”, he says.
“They’ve probably already thought about it.”
Ultimately, however, the investment wasn’t all about capital, it was about finding investors who are “serious about being a partner in the journey”, Windon adds.
“They’re excited, they’re looking to contribute, and we’re excited about them contributing,” he says.
“Jump on it and drive it”
Having gone through a significant funding round, Windon stresses how important it is to find the right investor for your business. But he also believes founders should keep an open mind about who they meet and how many meetings they take.
“Don’t be scattergun, but you have to be willing to take meetings with folks and bring them along on the journey … cultivate the relationships along the way,” he says.
“You never know who is going to share your vision for the future and be excited about your plans for your business.”
Windon also advises founders to “be relentless”, making sure to “cross all your Ts and dot your Is”.
There’s a difference between being efficient and being comprehensive, and being efficient by cutting corners, he says, but “you want to get back to your business — this isn’t sport — you want to get back to the reason you want the capital”.
“Prepare more information and have more answers to more questions that never get asked,” he says.
Equally, “you need to stay on top of things”. In the capital raising process, there is a point where things change from moving incredibly slowly to incredibly quickly, says Windon.
“When that occurs, you have to be willing to jump on it and drive it,” he says.
“If [the investors] give you five questions, go and answer those questions really fucking well. If they say they want answers at the end of the day, give them answers at the beginning of the day.”
And all of this has to be done in balance with Windon’s first point of meeting a lot of investors. It means founders should consider the right time to “switch from a breadth approach to a depth approach”.
While capital raising can be challenging and stressful, Windon says it can also be a good reflective experience. When you have to explain your business to others succinctly and in a compelling fashion, it forces you to take a step back and look at it from the outside.
“You end up reflecting in a really productive way on what you have accomplished,” he says.