Factorial, the Spanish-based all-in-one business and HR management software for small and medium businesses has raised $80 million in a go-to-market investment from General Catalyst. The funding follows on from an oversubscribed series C Funding round in October 2022 led by Atomico.
General Catalyst is a leading venture capital firm that provides early-stage and growth equity investments. It has invested in brands such as Airbnb, Deliveroo, Guild, Gusto, Hubspot, Illumio, Lemonade, Livongo, Oscar, Samsara, Snap, Stripe, and Warby Parker.
With this investment, Factorial will aim to accelerate its growth. Its strategy means that it usually spends cash to win and onboard new customers and recovers the cost over time. The rapid expansion of the company means it is burning through cash but has an eye on longer-term profitability.
The investment will not impact the balance sheet, nor will it dilute the existing shareholdings. Importantly, General Catalyst will own the downside risk as part of this investment. Coupled with the remains of the Series C funding round Factorial can now go all out in the acceleration of growth. It will be able to invest in the product as well as sales marketing and services.
Jordi Romero, CEO and Co-Founder of Factorial commented, “As one of the fastest-growing software companies in Europe, we wanted the ability to keep our growth trajectory without ever needing an equity round. This partnership with General Catalyst is exactly what we were looking for. We can focus on building great products and helping more customers without worrying about fundraising,” said “General Catalyst is one of the most reputable tech investors in the world and that made the process very easy. They understand the quality of the business and the market.”
Invest in success to generate more success
While General Catalyst understands that it is taking long-term risks, it also believes that Factorial has proved its expansion model. After all, spending money on successfully winning and onboarding new customers for a longer-term gain is common for many SaaS firms. The trick is to manage retention and continue growth. In time, the company will be profitable and will repay general catalysts for its investment. The financial terms of the deal were not disclosed though.
Pranav Singhvi, Managing Director at General Catalyst commented, “Having known the Factorial team for years and seen their growth trajectory and the performance of its customer cohorts, General Catalyst strategically chose to invest and turbocharge the company’s go-to-market strategy. This decision aligns with our objective to identify and support innovative ventures with substantial market impact.”
The investment has been done under the watchful eye of Atomico, including board member Luca Eisenstecken, Partner at Atomico. He said, “This investment is a strong testament to the resilient, high-quality business, as well as GTM engine Jordi, Bernat & the Factorial team are building and serves as additional validation of Factorial emerging as a category-leading European technology business.”
Factorial’s CFO, Moran Laufer, commented, “We think the sales and marketing funding is something of a game changer for Factorial. Thanks to General Catalyst, we will be able to accelerate our customer acquisition efforts in a capital-efficient manner, thereby ensuring sustainable, fast-paced growth while effectively doubling the return on equity for our investors.”
Enterprise Times: What does this mean
It would be interesting to know more about the terms of this deal. It appears as though the money is ring-fenced for a specific purpose and it would be fascinating to know how Factorial is managing the investment into its sales and marketing operations. $80 million could go a long way. How many customers is it hoping to win as a result and will this see further geographic expansion from the HR vendor?
Factorial appears to have a presence in Spain, the US, Brazil and Mexico. Will it look to expand further into LATAM or Europe with this investment? In LATAM, it will find competition from SD Worx, the Belgian headquartered HR vendor.
Interestingly, this funding indicates that Factorial is in a strong position. A survey by EY revealed that 63% of PE investors expect a rise in distressed transactions, with SaaS M&A picking up in 2024. General Catalyst appears confident that the Factorial star is rising.
