“HR Startup Deel Secures $12 Billion in Acquisition of Zavvy to Enhance Consolidation Strategy”

Consolidation is afoot in the world of HR services, with larger players snapping up interesting, smaller startups en route to more robust unit economics and providing one-stop shops for customers looking to cut down on suppliers. In the latest development, Deel — the $12 billion HR business out of Paris — is scooping up Zavvy, a Munich-based AI-based “people development” startup building tools for personalized career progression, training, and performance management. Finally, Deel will also make its existing Deel HR tool, which was free for organizations of up to 200 users, now “free” for existing customers regardless of their size. Originally Deel approached Zavvy with a partnership proposal before making an offer to buy it outright. By Zavvy’s and Deel’s accounts, the former company has not found it hard to build its business in a tighter market.

Consolidation is underway in the HR services industry, as larger players acquire smaller startups to achieve stronger unit economics and offer all-in-one solutions for customers seeking to streamline their supplier list. One example of this trend is Deel, the $12 billion HR firm based in Paris, which has recently acquired Zavvy, an AI-powered “people development” startup from Munich.

Deel, known for its payroll and other HR services designed for remote workforces, will now integrate Zavvy’s tools for personalized career advancement, training, and performance management into its existing platform. This is a strategic move for Deel as it expands its focus to support both distributed and non-distributed workforces. The company also plans to incorporate more AI technology across its suite of services. Plus, in an effort to better serve its existing customers, Deel is making its Deel HR tool, previously only available for organizations with up to 200 users, now free for all customers regardless of size.

Deel boasts an impressive customer base of 25,000 organizations, including big players like Reddit, Shopify, and Klarna, as well as notable brands and retailers like Nike, Forever 21, and RedBull.

Zavvy, on the other hand, had raised $4 million in 2022 from investors such as La Famiglia (now merged with General Catalyst), with PitchBook estimating its valuation at just under $16 million at the time.

The financial details of the acquisition have not been disclosed, but sources confirm that the purchase price exceeded Zavvy’s previous valuation. Interestingly, Zavvy was not actively seeking a buyer. The company’s founders shared that the acquisition came about after Deel initially approached them about a potential partnership before making an offer to acquire the company outright.

Deel’s move comes on the heels of a highly successful period for the company. CEO and founder Alex Bouaziz revealed to TechCrunch that Deel has already generated annual recurring revenues of over $400 million and has been profitable since September 2022. With a current capital reserve of $600 million, there are no immediate plans for additional fundraising, ultimately leading to potential IPO plans in 2025 or 2026.

Despite its recent success, it’s important to note that Deel only launched five years ago through Y Combinator. The company’s initial focus on developing payroll and hiring/contract management solutions for remote workforces perfectly aligned with the “future of work” ideology that emerged during the COVID-19 pandemic. Over the course of 2020 and 2021, Deel secured more than $600 million from 75 top-tier investors, including a shared backer with Zavvy, La Famiglia. (More on Deel’s remarkable fundraising journey can be found here, here, here, and here.)

But as the pandemic evolved, so too did the needs of the remote workforce and the companies serving it. Some organizations have abandoned remote work, while others have faced personnel reductions, forcing these businesses to closely manage their budgets and expenses.

Despite this shifting landscape, Zavvy has managed to thrive. When asked about their current business performance, co-founders Joshua Cornelius and Mehmet Yilmaz shared, “Zavvy is doing great. We’re seeing rapid growth with SMB and mid-market customers.” In fact, the company was on track to secure a Series A round of funding before Deel’s acquisition offer surfaced.

While successful on its own, Zavvy’s founders recognized the benefits of aligning with a larger company as they continue to develop their suite of products. “We were thrilled when we realized that joining forces with Deel would significantly accelerate our ability to help businesses,” Cornelius and Yilmaz said. They also noted that although Deel is a much larger company, it still maintains a startup-like pace and atmosphere.

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Zara Khan

Zara Khan is a seasoned investigative journalist with a focus on social justice issues. She has won numerous awards for her groundbreaking reporting and has a reputation for fearlessly exposing wrongdoing.

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