Last week, Sydney-based startup Deputy bagged a whopping $111 million in a deal touted as Australia’s biggest Series B ever.
But what was it about this startup that attracted so much interest? And how did this founder win his investors’ hearts, minds and money?
The investment was led by Silicon Valley venture capital firm IVP, and also included repeat investment from OpenView, which led the startup’s $33 million Series A round last year.
New Aussie investment also came from Equity Venture Partners and Square Peg Capital.
Founded in 2008 and bootstrapped for its first eight years, Deputy is an employee management tool designed to simplify scheduling, rostering and workplace communication.
Deputy co-founder and chief executive Ashik Ahmed tells StartupSmart that, since the Series A raise, the HR solutions startup has grown from about 80 people to more than 200, tripled the size of its executive team and more than doubled its customer base.
“We’ve been really able to scale the business in terms of what value we’re delivering,” Ahmed says.
Part of this growth has been down to Deputy’s ability to respond to new legislation and awareness around workers’ rights, Ahmed says.
In Manhattan, for example, new legislation came in last year, meaning workers must receive schedules two weeks in advance, and ‘clopening shifts’ – those where employees are expected to close up in the evening and reopen again first thing – are restricted.
“Businesses were completely caught off guard,” Ahmed says.
Being founded and scaled in Australia meant Deputy was well placed to come to the rescue, as it were.
“Australia has some of the most complex labour laws in the world. When you can solve pain in Australia, you can solve it anywhere,” Ahmed says.
The growth opportunity
When it came to embarking on this monumental Series B raise, it wasn’t only Deputy’s growth that piqued investors’ interest.
Speaking to StartupSmart, Square Peg Capital co-founder Paul Bassat – who also previously co-founded Aussie employment platform Seek – says he saw the investment as the opportunity “to give the business the firepower to build what could be a huge opportunity”.
First and foremost, however, what won him over was the team, and Ahmed himself.
“[Ahmed] is a superb leader”, he says.
“He has built an amazing culture, it’s a really great sense of ownership, passion and energy.”
But the startup also has a great product, Bassat says, and it’s this product, plus a good user experience and the power of virility that has “allowed them to really grow into a significant business”.
Thirdly, there’s “the size of the market opportunity”, Bassat says.
“The growth opportunity in front of them over the next few years is really, really significant.”
Ahmed himself attributes a lot of the startup’s success so far to the potential size of the market he’s tapping.
According to the co-founder, there are some 2.2 billion hourly-paid workers, globally.
“It’s a very complex problem to solve for the whole world,” he says.
“There hasn’t been anyone making it happen.”
The platform can be adapted to work for businesses of various sizes, and in different geographies, he adds – and it’s already proven to be internationally scaleable.
Passion and product
Needless to say, the attractiveness of the proposition was not lost on many potential investors.
In fact, for this raise, Ahmed says he didn’t approach any investors at all; everyone came to him.
Since the Series A, “every day I had phone calls”, Ahmed says. However, it wasn’t until September this year that he met and presented to a group of VCs.
There was a lot of interest, he says, but for Deputy, the decision came down to “who really understands what we’re about; who shares this passion of what we want to do?”
Eric Liaw, general partner of IVP, who is joining Deputy’s board, is “someone who is spiritually aligned with me”, Ahmed says.
“His own parents came from small business. He understands the challenge, and it’s a passion he really shares – making small businesses successful.”
Also, having Square Peg on board is “very validating”, Ahmed says.
“Having that local support is really valuable … we plan to be an Australian company for a long time,” he adds.
“At the end of the day, getting involved with a VC is almost like a marriage,” he says.
“It’s not a case of the money – there’s no shortage of money in the capital market.”
Bassat also openly acknowledges that over the past two years “we’ve been selling to [Ahmed] more than he’s been selling to us”.
“Even before we knew much about the company, we were really excited by the way he articulated the vision, his calmness, self-confidence, this big vision he had, and the product-centric way they’ve gone about solving the problem.”
For other founders looking for investment, the message here is that success comes from the person, the passion and the product.
“We look for founders who are really, really passionate about solving the problems, and have the mindset and capability to turn ideas into very significant businesses,” Bassat says.
And while investors will look at a company’s figures, especially for later-stage companies, generally it’s more about the people, the vision, the team they’ve built and the market opportunity, Bassat says.
“It’s not that we ignore the numbers, but they’re secondary,” he adds.
If the other aspects are right “we think those things take care of themselves.”