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Rippling: bank woes and remote work benefit HR start-ups

Catastrophe has a way of drawing attention to infrastructure usually taken for granted. When Silicon Valley Bank collapsed, payment rails that facilitate transactions came into focus. Payroll start-up Rippling is one beneficiary of that attention.

The San Francisco company raised $500mn from investor Greenoaks in a matter of hours following SVB’s failure. The money was needed to ensure clients using its software could pay employees, despite funds being tied up in SVB. Although raised under duress, this was not a down round, though Greenoaks is senior to other equity investors. Rippling’s valuation remained $11.25bn.

The speed with which SVB customers got access to their accounts meant Rippling’s funding was not required. But it provides a useful cushion in an increasingly inhospitable environment. Enterprise fintech start-ups like Rippling made up 80 per cent of all VC fintech deals in the first quarter, according to PitchBook. But deal sizes are shrinking. The median deal was nearly a tenth smaller than the previous year.

Rippling’s steady valuation is a mark of pride too. Compare that to fintech Stripe, which accepted a $45bn valuation knockdown in its last round. Plus, good press around Rippling’s reaction to SVB’s collapse has raised its profile. That is positive for founder Parker Conrad, who left his last HR start-up Zenefits after regulators began investigating the company.

Rippling has raised more than $1bn since it was founded eight years ago. Annual recurring revenue is estimated at $200mn — meaning Rippling is valued at 56 times ARR. Fellow HR start-up Deel, valued at $12bn, is valued at an estimated 41 times ARR, using the latest figures available.

These are heady numbers. But this is a particularly fast-growing part of the software sector, aided by the shift to remote work. Along with Deel, Rippling is considered one of the large tech start-ups well placed to join markets if initial public offerings restart. Companies are on an economy drive and work habits are changing. HR software that can help cut costs will remain in high demand.

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