[US] $13m funding for Zeal’s ‘build your own’ payroll product infrastructure

[US] $13m funding for Zeal’s ‘build your own’ payroll product infrastructure
07 Sep 2021

Embedded fintech company Zeal has secured $13 million in Series A funding to continue developing its platform for building individualised payroll products, Tech Crunch reports.

Spark Capital led the Series A, with participation from Commerce Ventures and a group of individual investors, including Marqeta CEO Jason Gardner and CRO Omri Dahan, Robinhood founder Vlad Tenev, UltimateSoftware executives Mitch Dauerman and Bob Manne and Namely founder Matt Straz. Zeal CEO Kirti Shenoy told TechCrunch that the latest round now gives the company $14.6 million in total funding, which includes a $1.6 million seed round in 2020.

The Bay Area company reportedly originated as Puzzl, a payment processing startup for the gig economy, founded in 2018 by Ms Shenoy and CTO Pranab Krishnan. It was part of Y Combinator’s 2019 cohort. The pair had to pivot the company after needing to move some of its thousands of 1099 contractors to W2 employee status.

They looked for payroll processors that could handle high volumes of payroll automatically - such as ADP or Paycor - but found they didn’t match some of the capabilities Shenoy and Krishnan wanted, including to pay workers daily and customise earning components.

To ensure other companies didn’t run into the same problem, they decided to build a payroll API enabling their customers to build their own payroll products and to even be able to pay their workers daily. Traditionally, companies piece together older third-party payroll tools and potentially spend millions of dollars on consulting fees. Zeal’s API tool modernises the payroll process and takes on the payroll liability while managing the back-end payment logistics, Ms Shenoy said.

Currently, enterprises use Zeal to pay large volumes of workers and keep payment data on their own native systems, while software platforms that sell business-to-business services use Zeal to build their own payroll product to sell to their customers.

“Our mission is to touch every American paycheck with our tax and payment technology, ensuring that American employees are paid correctly and efficiently,” Mr Krishnan said.

It is a complex goal; there are 200 million American employees, over $8.8 trillion of payroll is processed annually in the US and the country’s 11,000 tax jurisdictions produce over 25,000 income tax code changes a year.

Ms Shenoy cited IRS data that showed more than 40 per cent of small and medium businesses pay at least one payroll penalty per year. It was one of the motivators for Zeal’s latest product - the Abacus gross-to-net calculator - which payroll companies can use to ensure they are compliant in paying their income taxes.

The co-founders intend to use the new funding to expand their team and strengthen compliance measures to ensure its track record with enterprises.

“We are starting to win more enterprise deals and moving millions of dollars each day,” Ms Shenoy said. “This has been a legacy space for so long, so companies want to work with a provider to move fast.”


Source: Tech Crunch

Embedded fintech company Zeal has secured $13 million in Series A funding to continue developing its platform for building individualised payroll products, Tech Crunch reports.

Spark Capital led the Series A, with participation from Commerce Ventures and a group of individual investors, including Marqeta CEO Jason Gardner and CRO Omri Dahan, Robinhood founder Vlad Tenev, UltimateSoftware executives Mitch Dauerman and Bob Manne and Namely founder Matt Straz. Zeal CEO Kirti Shenoy told TechCrunch that the latest round now gives the company $14.6 million in total funding, which includes a $1.6 million seed round in 2020.

The Bay Area company reportedly originated as Puzzl, a payment processing startup for the gig economy, founded in 2018 by Ms Shenoy and CTO Pranab Krishnan. It was part of Y Combinator’s 2019 cohort. The pair had to pivot the company after needing to move some of its thousands of 1099 contractors to W2 employee status.

They looked for payroll processors that could handle high volumes of payroll automatically - such as ADP or Paycor - but found they didn’t match some of the capabilities Shenoy and Krishnan wanted, including to pay workers daily and customise earning components.

To ensure other companies didn’t run into the same problem, they decided to build a payroll API enabling their customers to build their own payroll products and to even be able to pay their workers daily. Traditionally, companies piece together older third-party payroll tools and potentially spend millions of dollars on consulting fees. Zeal’s API tool modernises the payroll process and takes on the payroll liability while managing the back-end payment logistics, Ms Shenoy said.

Currently, enterprises use Zeal to pay large volumes of workers and keep payment data on their own native systems, while software platforms that sell business-to-business services use Zeal to build their own payroll product to sell to their customers.

“Our mission is to touch every American paycheck with our tax and payment technology, ensuring that American employees are paid correctly and efficiently,” Mr Krishnan said.

It is a complex goal; there are 200 million American employees, over $8.8 trillion of payroll is processed annually in the US and the country’s 11,000 tax jurisdictions produce over 25,000 income tax code changes a year.

Ms Shenoy cited IRS data that showed more than 40 per cent of small and medium businesses pay at least one payroll penalty per year. It was one of the motivators for Zeal’s latest product - the Abacus gross-to-net calculator - which payroll companies can use to ensure they are compliant in paying their income taxes.

The co-founders intend to use the new funding to expand their team and strengthen compliance measures to ensure its track record with enterprises.

“We are starting to win more enterprise deals and moving millions of dollars each day,” Ms Shenoy said. “This has been a legacy space for so long, so companies want to work with a provider to move fast.”


Source: Tech Crunch