Why they invested: Deel

This is our fourth essay in the “Why they invested” series, deconstructing the investment decisions behind today’s fastest-growing startups. If you missed previous editions, read more about Zip, Perplexity, and Wiz.

Today is all about Deel, an all-in-one platform for global team onboarding, equipment, payroll, and more. Deel is one the fastest-growing software companies ever. In 5 years, the company scaled to $500M in ARR, working with 25K businesses, onboarding 500K workers globally.

It’s tempting to tell Deel’s story as a company in the “right place at the right time” to capitalize on the distributed work mega trend. As we spoke to their investors (and being investors ourselves at Weekend Fund!), it’s clear to us that Deel is a story about relentless execution. Deel is a company that operates at “10X speed”. They raise fast, hire fast, ship product fast, respond fast. They entered a highly competitive market with a strategic entry point and, shipped product after product, to build out a global-first HR platform.

In today’s post, you’ll hear directly from Deel’s investors on why they invested across their rounds.

First, here’s a snapshot of Deel:

• Founded: 2019
• Tagline: Global-first HR platform
• Capital raised: $679M
• Latest valuation: $12B (May 2022)
• Founders: Alex Bouaziz and Shuo Wang
• Traction: 25K businesses 
• Investors: Alexis Ohanian, Alexandre Scialom, AltaIR Capital, Altimeter Capital, Andreessen Horowitz (a16z), Anthony Schiller, Avichal Garg, BAM Elevate, Ben Lang, Cem Garih, Coatue, Counterpart Advisors, Daniel Gross, Darian Shirazi, Dara Khosrowshahi, Elad Gil, Emerson Collective, Esas Ventures, Firebolt Ventures, Four Cities Capital, Fresh Ventures, Green Bay Ventures, Incisive Ventures, Jeffrey Katzenberg, Jeffrey Wilke, John Zimmer, Justin Mateen, Lachy Groom, La Famiglia, Nat Friedman, Neo, Nick Raushenbush, Pierre Bi, Quiet Capital, Recursive Ventures, Rex Salisbury, Roosh Ventures, Ryan Petersen, Sinai Capital Partners, SVA, Soma Capital, Spark Capital, Terrance McArthur, Weekend Fund, William Hockey, Worklife, and Y Combinator
• Funding history
  • 2019 Pre-seed: $150K @ $2.1M (YC)
  • 2019 Seed: $3.85M @ $12M (17 investors incl. Weekend Fund, Soma Capital, Quiet Capital, Elad Gil, Avichal Garg, and others)
  • 2020 Series A: $14M @ $60M (led by Andreessen Horowitz)
  • 2020: Series B: $30M @ $220M (led by Spark Capital)
  • 2021: Series C: $156M @ $1.25B (led by YC Continuity)
  • 2021: Series D: $425M @ $5.5B (led by Coatue, Altimeter)
  • 2022: Venture round: $50M @ $12B (led by Emerson Collective)

If you only have a few minutes, here’s the TL;DR on why investors invested in Deel:

• The teams’ entrepreneurial DNA and deep understanding of the space. Several investors commended Alex and Shuo as exceptional founders and the primary reason they invested in Deel. The team’s backgrounds combined technical grounding from MIT (where they met), an inside-out knowledge of the global payroll and compliance space, and their ambition to build a large company. Anish at a16z commented on how they exude a sense of inevitability of their success.
• “Brute force” execution in a highly competitive market. Speed of shipping is generally seen as a leading indicator of startup success. Deel baked speed into their culture. Several investors commented on the team’s rapid execution velocity, spanning responsiveness to customer feedback, rapidly iterating on their product, and scaling their operations to hundreds of countries, as one of the primary reasons they invested. Avichal from Electric Capital estimates that Alex and Shuo were in the top 0.1% of entrepreneurs in execution speed.
• Strategic entry point that solved a real problem. Deel entered the Employer of Record (EOR) market by offering a solution for companies to hire international contractors compliantly, bypassing the need for expensive alternatives like opening foreign subsidiaries or using Professional Employment Organizations (PEOs). Investors recognized Deel's entry point as strategic for several reasons: It solved a real problem in the market while tapping into a rapidly growing segment of the EOR market, highlighted dissatisfaction with existing EOR providers, and promised to unlock demand by improving payroll infrastructure for global hiring.
• Placed a bet and capitalized on the rise of distributed work. Deel rode the “right megatrend” with work shifting from a centralized to a distributed workforce. The pandemic served as “rocket fuel” for remote hiring. Deel's focus on building underlying payroll infrastructure positioned them to grow with the "free agent economy” and expand an even larger global employment market.

Disclosure: Weekend Fund is an investor in Deel.

Shoutout to Anish Acharya (a16z), Anthony Schiller (Green Bay Ventures), Alexandre Scialom (Fresh VC), Avichal Garg (Electric Capital), Ben Lang, Brianne Kimmel (Worklife), Itamar Novick (Recursive Ventures), Louis Beryl (Four Cities Capital), Martin Tobias (Incisive Ventures), Rex Salisbury, and Vinay Hiremath for contributing to this post.

The teams’ entrepreneurial DNA and deep understanding of the space

The primary reason investors invested was the Deel founders’ entrepreneurial drive, inside-out understanding of the global payroll space, and ambition to build a large company.

Alex and Shuo have technical backgrounds from MIT (where they met) and “founder DNA” that expressed itself long before they founded Deel. Before starting the company, Alex founded a video creation business and a VC firm. Shuo sold scooters at flea markets and founded an air purification company in Beijing (acquired by iRobot). Alex from Fresh Ventures backed this up with “They also had just that level of "weirdness" that I like to see, and impressive past achievements (both strong technical background from MIT, and had each co-founded two companies).”

The Deel team combined their technical grounding with a deep understanding of the global payroll and compliance space. Anish at a16z commented that “the Deel guys simply knew more about global payroll + compliance than any other team we encountered”.

Investors had different vantage points to the team’s abilities. Ben Lang witnessed the team’s journey through previous iterations. Vinay from Loom saw firsthand their ability to sell to customers over “any means necessary”. Anish from a16z highlighted the “this is happening with or without you” sense of inevitability the team exudes.

The team’s ability to win large customers using any means necessary

“Top reasons 1-3 are Alex Bouaziz. The founder vibe is impeccable. Hustling to sell Deel to Loom relentlessly over text, email, any means necessary. Watching him absolutely bag large customers and score much higher on CSAT against Remote and other major players. I could smell the win and felt like he just had amazingly nuanced answers to all of my questions off-the-top.”

— Vinay Hiremath

The team’s ambition to build a large company

“Ambitious Team: Alex and Shuo's sense of urgency and ambition to build a large company felt obvious on our first call, which is something I always look for. They also had just that level of "weirdness" that I like to see, and impressive past achievements (both strong technical background from MIT, and had each co-founded 2 companies). Finally, they were also international founders, which is often a good fit considering my background.”

— Alexandre Scialom (Fresh Ventures)

Alex’s entrepreneurial family roots and founder “training”

"Chatting with Alex Bouaziz, Deel's CEO/Co-Founder, it was clear to me that Alex was trained from a young age by his dad to become a stellar entrepreneur (Philippe Bouaziz , Alex's dad, is a serial entrepreneur and VC leader in the Israeli startup community).”

— Itamar Novick (Recursive Ventures)

Alex’s “founder DNA”

“I got to see Alex working on his previous iterations, going from the crypto space to a social app for sharing videos. It was clear he was born to be a founder, it's in his DNA. Seeing how fast he moved with Deel, he put on a real masterclass in execution.”

— Ben Lang

A history of shipping

“I’m a fan of Mark Suster’s essay on investing in lines not dots. I got a chance to connect dots after meeting Alex through the Product Hunt community a few years before starting Deel. He launched his first project in 2017, illustrating continued persistence and speed of execution.”

— Ryan Hoover (Weekend Fund)

The team’s inside-out knowledge of the global payroll space

“We've found that studying the history/being more technical is a competitive advantage in many markets, and the Deel guys simply knew more about global payroll + compliance than any other team we encountered."

— Anish Acharya (a16z)

The team’s ability to execute and ask investors for help

“When it comes to execution, founders can learn a lot from Alex and Shuo who not only work harder and longer than their competition. They are world class at engaging investors and their broader network of supporters to solve problems quickly. No ask is too small and no text or call is too late.”

— Brianne Kimmel (Worklife)

The team’s long-term product vision

“In addition to Alex and Shuo’s technological and go-to-market expertise, what really impressed us about the Deel team is their long-term product vision: ultimately, they aim to provide financial services directly to the employees on the platform. Traditionally, employers are the source of wages, benefits, insurance, and many other financial services for their employees.”

— Anish Acharya (a16z), Investing in Deel

“Brute force” execution in a competitive market

Several investors highlighted Deel’s “brute force” execution and their ability to out-execute established players in the market.

Avichal from Electric Capital pointed out that “They just live at 10x speed and built a company that does as well.” Anish from a16z highlighted the sheer amount of product progress the team made in the months he’d gotten to know them. Rex observed that in the 6 months they were tracking the team, it was clear they were executing faster than a lot of their competitors in the space. Brianne at Worklife attributes Deel’s success to “brute force and consistent execution” in “a space with trusted incumbents and no shortage of direct competition.” To back up their speed of execution, investors shared examples of them responding to tweets from customers and emails immediately.

The team’s rapid shipping velocity

“The sheer product progress they made in the months that we spent getting to know the team was extraordinary and shipping a lot has consistently been a leading indicator of great companies for us.”

— Anish Acharya (a16z)

The team’s ability to out-execute competitors

“The primary concern was the competitive landscape, there were several companies started around the same time, so the question was, "is this the right team?". After 6+ months of tracking the various players, it became clear that Shuo and Alex were executing faster than everyone else and had found product market-fit.”

— Rex Salisbury

The team being in the top 0.1% of entrepreneurs in speed of execution

“Alex and Shuo are easily in the top 0.1% of entrepreneurs in terms of speed of execution. They raised fast, built fast, responded to tweets from customers immediately, responded to emails immediately, found great talent quickly and hired them quickly, etc. They just live at 10x speed and built a company that does as well.”

— Avichal Garg (Electric capital)

The team’s “brute” force execution

“Shuo attended SaaS School, my GTM bootcamp, and I ran into Alex multiple times as we were both out fundraising at the same time and from many of the same investors. I believe Deel's success can be attributed to brute force and consistent execution, not white space or even timing. The company started in a space with trusted incumbents and no shortage of direct competition.”

— Brianne Kimmel (Worklife)

The team being highly responsive to customer feedback and shipping products quickly

“Deel is a rare company that listens to customers and ships new products quickly, sufficiently capitalized the business to box out competition, and has swiftly acquired complementary companies to build an all-in-one solution in record timing.”

— Brianne Kimmel (Worklife)

Deel owns their underlying infrastructure

"While it might not be as splashy a headline as: “Fastest growing” or “Best in the world”, Deel never outsources their technology or compliance to third parties. They own and operate all of their infrastructure. This was a calculated choice that Alex made from the beginning, and he’s operationalized it fast! He has built (or bought) every single major block in the HR & payroll value chain – one at a time. This is a big, big deal. Why? Because companies generally loathe their HR and payroll providers. The customer’s experience is mostly miserable: Fragmented, full of friction, and disjointed. And it’s hard (if not impossible) to deliver a ten-fold better solution without controlling the “engine under the hood”. It was clear to me (and more importantly Alex!) from day zero that building the engine was a key to success."

— Anthony Schiller (Green Bay Ventures)

Strategic entry point that solved a real problem

Deel’s initial product allowed companies to hire international contractors compliantly. Before Deel, companies hiring remotely were often forced to open a foreign subsidiary or hire a local Professional Employment Organization (PEO) that employs on their behalf and typically charges ~15 percent of payroll for their service. At best, these options range from expensive to super expensive and entail navigating a complex “rats nest” of currency conversions, taxes, and labor regulations.

By functioning as the Employer of Record (EOR), Deel enabled companies to quickly hire an employee anywhere in the world in “less than five minutes”. This is powered by their extensive network of Deel-owned entities across the world that assumes employment-related responsibilities on behalf of their customers.

Their entry into the EOR market was strategic for a few reasons. Martin from Incisive Ventures noted that Deel's initial focus on facilitating international hires addressed a particularly challenging aspect of EOR while also tapping into a faster-growing segment of the market. It solved a real problem. Itamar from Recursive Ventures highlighted the dissatisfaction CEOs experienced with existing Employer of Record (EOR) companies like TriNet, citing issues such as outdated software, poor customer service and low NPS scores. This dissatisfaction underscored a widespread problem in the market and highlighted the upside of the potential size of the EOR market. This entry point gave Deel enough of a foothold to start building out their full-stack global HR platform that helps companies compliantly manage their entire workforce in just one system.

The problem with paying international contractors pre-Deel

“When we invested in early 2019, Deel was focused on your ability to pay and onboard international contractors. This felt like the right idea at the right time. I believe in the "software is eating the world" thesis and, with everything in the cloud and a new generation of devtools, companies could now build software easily with global teams. That said in 2019 paying your international team was still incredibly cumbersome - it was difficult to pay people, especially in their native currency and there was a rats nest of complex taxes and regulations to solve that were all local.”

— Louis Beryl (Four Cities Capital)

The upside in the EOR market

“At Incisive Ventures we invest in B2B software companies that reduce friction at scale. As a 3x venture funded CEO I had been a customer of TriNet and other EOR companies and had terrible experiences with them.  Old software, poor customer service, terrible NPS scores, basically one of the least favorite vendors of mine and every other CEO I knew.  Even before meeting Deel, I wondered "How big could the EOR market be if the vendors didn't suck? Deel's initial focus was international hires which was a particularly tricky part of EOR as well as a faster growing part.”

— Martin Tobias (Incisive Ventures)

Deel solved a real problem with their initial product

“Real Problem: Originally, Deel was making it easy to onboard, pay, and manage international contractors only (not employees). I knew from personal experience and from other companies I had invested in or was looking at (e.g. Safetywing, Keeper Tax), that it was a real problem for companies and contractors alike.”

— Alexandre Scialom (Fresh Ventures)

The explosive demand for Deel’s offering

“Deel's offering was spot on. I reached out to ten portfolio companies and they all said that they loved it. The need to hire off-shore in Silicon Valley back in 2019 was massive, and many companies were facing the same set of challenges tapping into talent overseas.”

— Itamar Novick (Recursive Ventures)

Deel replaced legacy vendors that needed replacing

“Deel was building a modern platform to replace a legacy provider I had personal experience needed replacing.”

— Martin Tobias (Incisive Ventures)

Placed a bet and capitalized on the rise of distributed work

The Deel platform removes obstacles to companies hiring the best talent, anywhere. Anish at a16z broke down the broader shift from concentrated to distributed work that Deel capitalized on, with geographic flexibility being just one dimension of a broader shift. 

“The historical model was to focus hiring on individuals in your geographic backyard, then provide those individuals with a paycheck, health insurance, pension, and—if they stayed with you long enough—maybe even a gold watch. …We’ve seen a rapid evolution of this model over the last few decades, partially catalyzed by tech companies moving towards a more egalitarian and meritocratic approach when building teams of knowledge workers. Increasingly, these companies focused on hiring the best talent and providing flexibility in everything from what their employees wear (shoes optional!) to how they work (open office designs).”

— Anish Acharya (a16z), Investing in Deel

The pandemic accelerated the arrival of this future. Avichal at Electric Ventures commented on how Deel rode the “right mega trend.” Martin from Incisive Ventures highlighted that “the pandemic was rocket fuel on the demand for remote workers and Deel was in the right place at the right time.” Several investors also highlighted how they foresaw that improving payroll infrastructure would unlock demand on both employer and employee sides of the global hiring market which would grow Deel’s addressable market.

Deel was in “the right place at the right time”

“While my fundamental decision was based on my personal need for a better vendor, the timing turned out to be perfect.  The pandemic was rocket fuel on the demand for remote workers and Deel was in the right place at the right time. While starting with international hires, they have recently expanded to hire US employers on their superior platform and I expect they will continue to take share from the legacy providers as their platform is simply better (less friction)."

— Martin Tobias (Incisive Ventures)

Deel built for the “free agent economy” future

“I have been a big believer in the "Free agent economy" for a long time. It's a market that has been developing consistently for the past decades, with companies and employees alike looking for more flexibility, and software making the change possible. Deel was already growing 20%+ month over month in 2019, addressing the contractors market only. When Alex and Shuo told me they would focus on compliance and launch EOR, I knew they'd accelerate. COVID happened, forced the entire world to work remotely, and accelerated Deel's growth even more. But I believe the company was already on the right track.”

— Alexandre Scialom (Fresh Ventures)

Deel rode the right mega trend

“Having been in crypto, we could see the rest of the world coming online to do high-skilled work and wanted to get paid by companies not in their home region. But it was exceedingly hard to do this. Deel realized that the world would move towards hiring wherever there is talent and wanted to ride this megatrend. The world was gradually moving towards remote work and COVID dramatically accelerated this trend.”

— Avichal Garg (Electric capital)

The rise of remote work made timing right

“TLDR; Remote work. Sometimes the technology shifts are nuanced and complex. Sometimes the biggest changes are obvious and it is about finding the best team w/ the best execution.  The growing importance of remote work (and hiring global talent when prices for engineers in SF were skyrocketing) was very very clear when we did the deal and became even more obvious after the onset of the pandemic.”

— Rex Salisbury

Investing in non-obvious futures

“Product Hunt has been a distributed team since I founded the company in 2013. At the time it seemed so clear to me that more companies would hire globally in the future. That was a very non-consensus POV at the time. Our investment in Deel was certainly team-driven but also a bet on the growth of this market. Of course, we had no idea the pandemic was coming just over a year later, dramatically accelerating this shift.”

— Ryan Hoover (Weekend Fund)

Deel built for the “building of software was going global” future

“This was a great idea at the perfect time. We had just seen new payroll and onboarding solutions in the US with Gusto and Zenefits and Alex and Shuo were MIT engineers with both a global vision and the experience to make this happen. Moreover, the building of software was going global to simultaneously drive costs down and quality and speed of delivery up. Although it seemed complicated, with the right entrepreneurs you could see that this could succeed and if it did the opportunity, if successful, was truly enormous. I was all in at the very first meeting and really glad I was.”

— Louis Beryl (Four Cities Capital)

The remote work future Deel is building for is here to stay

“Remote work taking off in the pandemic. Obviously, I was seeing the inside of a lot of enterprise companies completely shift their communication ops to accommodate remote-first async Collab. Remote work was something that was here to stay well past the pandemic, and I just knew Alex had the endurance to blow past multiple walls for a very long time to be the biggest player standing in the long run when it came to global HR and payroll compliance.”

— Vinay Hiremath

Better payroll infrastructure unlocked the international hiring market

“Market Ready to Be Unlocked: My assumption was that creating the payroll infrastructure that makes it easier for companies and contractors to work together could unlock a lot of demand on both sides. There were also opportunities to expand to adjacent markets (1099s, and full-time employees).”

— Alexandre Scialom (Fresh Ventures)

Deel made a remote work future possible

“In 2019, I wanted to build a modern firm that changed how people work. Deel was one of the first tangible examples of a company that could fundamentally make remote possible and bring meaningful job opportunities to talented workers outside of Silicon Valley. Deel was not only an early investment, the company was a catalyst and proof point for me to start Worklife pre-pandemic and before remote work became the default for companies of all sizes.”

— Brianne Kimmel (Worklife)

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Until next time,
Ryan and Vedika from Weekend Fund