Marc Andreessen, co-founder and general partner of Andreessen Horowitz
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Amid a sharp pullback in venture capital activity during the coronavirus pandemic, one Silicon Valley start-up is showing what could be a path forward for other new companies seeking funding.
The business, a payroll platform for remote workers called Deel, has secured a $14 million series A round led by Andreessen Horowitz, sources told CNBC exclusively. As part of the investment, Andreessen general partner Anish Acharya is joining the San Francisco-based company’s board.
While the venture capital industry has long relied on in-person meetings to create the trust needed between parties before investing large sums of money, the round was done completely on videoconferencing tools, according to Deel chief operating officer Dan Westgarth.
Venture capital funding in general has dried up as investors have become skittish on placing new bets, particularly for early-stage companies: Funding for fintech start-ups dropped 37% to $6.1 billion in the first quarter, according to CB Insights.
But it probably helped that Deel, founded in 2018 by MIT graduates Alex Bouaziz and Shuo Wang, is a play on the future of work that’s become more timely this year. The company capitalizes on the emergence of businesses with distributed workforces, a trend that has accelerated during the coronavirus pandemic.
Its main product allows clients to easily hire and pay workers regardless of where they are located, using a single software program versus a patchwork of services most companies use for teams around the world, said Westgarth. He joined Deel recently from London-based digital bank Revolut.
“We’ve seen companies that typically hire in a 30 mile radius around San Francisco, New York or Boston replace that with a location perimeter of ‘anywhere,'” Westgarth said in a phone interview. “It’s a function of the pandemic, which taught businesses located in these expensive metro areas that they don’t need employees based there, because remote teams are performing very well.”
Some companies have as many as 10 separate providers to pay teams located in Europe and Asia because labor laws vary by country, he said. Deel also helps workers get access to insurance and other benefits, which may help clients retain employees.
“We allow people to very quickly hire people anywhere without having to worry about local labor law, which is very time consuming,” said Westgarth.
Since emerging from start-up accelerator Y Combinator last year, Deel has picked up 400 clients, most of whom themselves are start-ups, he said.