As startups increasingly embed payroll into their software products, Check, a three-year-old startup that provides software tools for digitizing payrolls, announced Wednesday that it has raised $75 million in a fresh funding round.
The Series-C investment round was led by payments platform Stripe along with fellow repeat investors Bedrock, Thrive and Index. This latest round leaves Check with a total of $119 million in funding and a $725 million valuation.
While longtime frontrunners like ADP Workforce and Paychex dominate the increasingly fragmented payroll market, startups like ServiceTitan and Homebase look for alternatives. These are the kinds of companies Check serves. “We work with platforms serving small businesses to help them build, launch and scale payroll products that they’re offering to their small business customers,” Andrew Brown, Check cofounder and CEO, tells Forbes. “Ten years ago, our customers didn’t exist.”
Stripe’s early investment has proved a boon for Check, which emerged from stealth a little more than a year ago. Both companies describe themselves as “a platform for platforms,” with Stripe assisting businesses accept online credit card payments and Check providing the ability to integrate payroll systems into management tools. These parallels make Check compatible with Stripe’s sales, legal, compliance and engineering teams which help support the startup, Brown says
Just so, Check is a natural fit for Brown, who sold his first startup, Oyster, an eBook subscription service, to Google in 2015. Brown’s parents are labor and employment lawyers and he grew up absorbing the conversations that came handy when he decided to set foot in the payroll industry. “My parents have a better appreciation than most for what can go wrong in payroll,” he tells Forbes. “Their initial words were ones of caution, of ‘hey, if you’re going to do this make sure you do it right.’”
They’re not wrong. Making sure employees get paid correctly and on time is crucial, now more than ever. In a tight labor market shifting towards remote work and with workers switching careers amid the Great Resignation, the slightest mishap could cost an employer. “The last thing a business wants to do is mess up payroll because it shakes the confidence of the employee base of a company,” says Scott Orn, chief operating officer at Kruze Consulting, a startup accounting and tax firm.
Despite more businesses adopting a digital presence, there are still small businesses and agencies that do payroll on pen and paper and innovation hasn’t entirely penetrated the sector. “Check will enable a new group of competitors for the traditional payroll providers,” Orn tells Forbes.
Check will use this latest funding round to double its current team of 100 employees. Brown says he aspires to offer more than just the table stakes to payroll startups that become Check’s clients. Through its clients, Check’s technology reaches four million employees across 250,000 small businesses. That’s 5% of small businesses in the market, Brown says, and he hopes to use the funds to scale its business and capture a larger share of the market.