Personio, the HR tech company taking the world by storm, has just raised a Series E funding of $270 million at a $6.3 billion valuation. Led by Greenoaks Capital Partners, along with Altimeter, Alkeon Capital, and existing investors Index Ventures, Accel, Meritech, Lightspeed, Northzone and Global Founder Capital, the round adds to significant reserves from Personio’s last funding round in January 2021 and brings their total capital raised to over $500M. This momentous occasion has sparked many conversations about the company’s stratospheric growth, the state of the tech market, and its sustainability long-term. Northzone’s Michiel Kotting shares his unique point of view.
When it comes to building a technology company, we live in incredible times. Access to opportunities has broadened across the globe, and both infrastructure — app stores, cloud computing, API integrations — and behaviour change — more intuitive software, personalised recommendations, integrated into daily life — have enabled the best companies to grow at an unprecedented pace, going after huge markets that weren’t here 10 minutes ago.
As a result, we have seen valuations balloon and investment frenzy intensify; but I want to dive into the underlying ground swell here, the dawn of the age of entrepreneurship, where impressive founders and their teams build pioneering companies in relatively short time frames.
The best example I can think of to illustrate this phenomenon is Personio — the groundbreaking HR software for SMEs. In just six years, Personio has become a staple for mid-sized companies modernising their people organisations. Started by four friends straight out of university — the prestigious CDTM in Munich — it is a great example of what is possible now which was almost unthinkable 10 years ago.
Working closely with them for the past 4.5 years, I’ve had the privilege of witnessing most of this incredible journey up close. Here are a few themes and takeaways I’ve observed.
Finding product market fit for an underserved and challenging market
From the moment Erik Riess and Steve Blank started talking about product market fit, all software-driven businesses have been obsessed with finding it. First, understand your customers well, then keep iterating until you have found the minimum required product for their most urgent needs.
Early on in its journey, Personio decided to make its platform highly customisable, so that the software follows your business rather than the other way around. This enabled it to stake a unique claim on the SME market, which has been historically under-served. Large-scale systems (like Workday, for instance) are too complex and laborious for them to use, and simple tools are not sufficient. Today, it has both huge client satisfaction (resulting in high net negative churn, a core building block of the modern SaaS company) and an enormous addressable market — a true opportunity to be category-defining.
Why Personio’s platform is not just a platform, but a system of reference
Another core element to understanding Personio’s success is that it has set out (and succeeded) to become a platform or “system of reference” for all people operations, like Stripe does for payments. That means it doesn’t try to provide just a point solution (e.g. best recruiting process or sick day tracker), it aims to be at the center of all that involves employees at a company. This is very much a hallowed quality in SaaS software investing.
The team is now a thousand strong, and the culture is still central in everything they do. It isn’t easy to maintain and increase that focus when you double in size every year, but today’s fast growing tech companies do just that. It’s no surprise that the role of CHRO has gained a lot of importance in the past few years — a model pioneered, amongst others, by Katarina Berg at Spotify, who happens to be actively involved on Personio’s board.
Personio plans to hire another thousand people in the next 12 months at an admittance rate of 0.83% (5x more selective than Harvard). That translates to working through 120 000 resumes! It’s a good thing they have a great HR system…
Again, this made it more challenging at the onset but is paying off handsomely today. They started in HR admin and recruiting — two core HR processes — then used that positioning to expand into performance management, payroll, e-signatures, job postings, and more recently, people workflow automation. So when a core HR action, like hiring someone, is initiated in Personio, all kinds of naturally ensuing work flows (setting up IT accounts, assigning a workspace, setting up group communications, etc.) are either fully and semi-automated from the get go, significantly reducing any admin-related frustration for both employees and HR.
This is only possible in the era of modern software, where everything is connected, APIs are smoothly integrated into systems, and no-and-low-code automations are fast emerging. And we’re still very much in the early days of what is possible.
Another perk of being the token HR operating system is that Personio can enable full over-the-top integrations with point solutions through a marketplace model. Need a hospital-specific shift planner that still has full access to all your employee data and feeds back into your payroll system? Personio enables its partners to provide that — that’s the power of a marketplace on top of a well-designed and cleanly integrated platform.
Understanding the power of a carefully hired team and a strong culture
Investing 1.0 tells us that early stage investing is all about market, product, and team. From these, the latter is arguably the most important. Personio is no exception. Even 4.5 years ago, when we fought to lead the Series A, we were struck by the founders’ amazing blend of vision, determination, and openness to learning from whomever they could. We were also impressed by their already strong culture, despite only having 30 people at the time.
Fast forward to today and you see a multi-talented management team with no equal in Europe. Between the early employees promoted from within, who’ve demonstrated a personal growth as dizzying as the company’s growth, and some of the best and brightest minds from outside who bring experience in building equally iconic companies like Zalando, Wise, and Dropbox, Personio has found a winning combination.
Knowing the difference between superficial hype and a trailblazing innovation
A valuation of $6B for a 5 year old company seems mind-boggling to a lot of people, and these kinds of rounds always trigger conversations about hype, inflation, and asset bubbles. The reality is that today’s leading companies do everything faster: they raise more; they build their teams across multiple geographies; they ship product faster; and as a result, they grow revenue at an astounding pace. The fact that these trends are happening across the entire tech ecosystem is why we have added 12 new unicorns over the last 18 months in a variety of industries.
Seeing firsthand how a company like Personio has evolved, I believe that truly remarkable and transformative things are brewing in the current market environment. This is buoyed by massive advancements in tech, specific changes in consumer behaviour and demands, and the emergence of entrepreneurs and executives with bigger ambitions, more formative experiences, and wider access to qualified talent and help.
As a direct result, we are doubling down on the Personios of this world — alongside our respected peers — because we believe that as remarkable as Personio’s achievements are, they are just still the tip of the iceberg.
Congratulations to Hanno and the entire Personio team for what you are creating. Today is a very public recognition of what you are capable of, in addition to the remarkable things we see you achieving every day.