Payflow, the financial wellbeing platform that allows employees to get paid on demand, has closed a €6 million equity financing round to continue growing by >100% year-on-year in Spain, Portugal, Colombia and Peru. This round is also expected to allow Payflow to reach profitability.US-based Thomson Reuters Ventures and Spain-based GED Conexo Ventures are the new investors in this round. All major investors from previous rounds (Seaya Ventures, Cathay Innovation, 6 Degrees Capital and Wayra) also participated in the round
Payflow continues to lead the earned wage access sector. The access to earned wage has become a considerable trend in an increasing number of industries. Accessing earned income allows employees to have far greater control over their finances by empowering them to align income more effectively with expenses, helping with better budgeting and supporting their financial wellbeing. Since its inception in 2020, the company has made the leap from Spain to the Silicon Valley through the Y Combinator program. In addition, the company closed the year with a strong position in Spain with over 1,000 clients, including many of the largest companies in Spain and Colombia, including well-known brands such as Telefónica, Claro, Grupo Hospitalario Quirónsalud, Decathlon, Alsa, Alcampo and Grupo Ilunion. All the aforementioned companies have at least 10,000 employees. In addition, Payflow has <0.5% gross monthly churn, with clients loving the solution.
According to Daniel Agromayor, Head of Five Guys Spain & Portugal, “Five Guys Spain is committed to prioritizing our people by consistently introducing innovative initiatives and benefits that enhance our employees' lives, representing a significant investment. Several years ago, we implemented Earned Wage Access across Spain, ensuring that everyone has access to this invaluable tool. This initiative has been instrumental in maintaining employee satisfaction and engagement while effectively reducing turnover costs. We opted for Payflow as they pioneered this innovation for us in Spain.”.
Most efficient on-demand salary fintech in the European Union or Latinamerica
In spite of having more than €4 million of Annual Recurring Revenue, Payflow operates with a team of only 40 employees, making Payflow the most efficient Earned Wage Access company in both the EU and Latam in terms of revenue per employee. In addition, Payflow operates with very high margins for an employee benefits company (>70% margin).
This explains why Payflow is rapidly approaching profitability. In fact, this latest funding round gives Payflow over 5 years of runway.
Benoît Menardo, co-founder of Payflow, justifies this endorsement by saying that "the investment market is looking for efficient start-ups now, which is why we have become best-in-class in terms of financial efficiency. We are unlikely to raise further equity funding in the future. If we do raise more, it will only be because we see an advantage in massively accelerating growth. We continue to grow >100% year-on-year, but we don’t need external funding anymore to maintain these growth rates".
Menardo also commented that “valuations in 2024 are not what we used to see a couple of years ago, the time of 20x ARR is over, we have to be realistic and accept new valuations are fair, in other words, solid growth, margins and burn is rewarded ”
Competitive edge
Payflow boasts over 50 live integrations and the ability to cover >95% of payslips in all four countries where it operates. Avinash Sukhwani, co-founder ofPayflow, elaborates on this competitive edge: “Since our last round, we have signed many partnerships, including exclusivity agreements, with payroll softwares. This has given us an incredible competitive edge and has practically allowed us to eradicate all competition we previously faced. In addition, we became the only player in the benefits segment to offer both salary-on-demand and flexible benefits, the two most popular employee benefits for blue-collar workers”.
Sukhwani is referring to Payflow’s latest product, Flexflow, which allows employees to spend their salary on categories such as food, transport, and kindergarten. Everything employees spend directly from their gross salary allows them to save significant amounts of money in income taxes. The scale-up asserts that this new product is the fastest-growing product right now, with over 200 corporate clients signed-up already. It also fits in the scale-up’s strategy to become the go-to platform for benefits for any company employing blue-collar and frontline workers, an underserved segment of the working population.
Sukhwani explains there is a third factor that has made them more successful than their competitors, “we have been able to adapt to the times better than other start-ups, 2024 is a time when you need to be laser-focused on Unit Economics and controlled Customer Acquisition Costs, we constantly track our financial efficiency vs. best-in-class SaaS metrics and this has allowed us to have a burn rate that is 3x lower today than when we raised our last round in 2022, even though we have 40x more revenue”.
Vision, new investors and future strategy
When asked for future expansion plans, Payflow cofounders stay extremely focused and determined to grow within their current two regions, Iberia and South America. Menardo adds “efficiency doesn’t rhyme with expansion for a reason, we dream of seeing 10%+ of the working population being paid on demand, of having the next generation forget the concept of payday. Today, less than 2% of Spanish workers are paid on demand, and less than 1% in our other countries, while it is over 20% in the US. The opportunity is gigantic and we need focus to win.”
We are excited by the execution of the Payflow team, and the exceptional growth of the business," says Tamara Steffens, Managing Director at Thomson Reuters Ventures. "We envision many possible opportunities with Thomson Reuters, especially in Latin America, where we have a growing presence.
Damien Balsan, co-founder of Conexo Ventures and partner of ged capital-conexo explains , Payflow is at the core of our investment thesis of b2b saas Spanish startups with American roots (Y combinator) that can scale big from their initial European traction in latin america solving real problems like the unaffordable credit rate for blue-collar workers well above 100% per year in some cases