Fincha platform that helps companies connect across a variety of HR apps, services and systems, today announced it has raised $40 million in a Series B round led by General Catalyst and Menlo Ventures with participation from QED Investors, Altman Capital and PruVen Capital.
Co-founder and CEO Jeremy Zhang says the new money will be spent on adding coverage for more payroll and benefits systems, expanding into new vertical jobs data and growing Finch’s engineering, product and customer success teams. Zhang claims the company was cash flow positive before the funding round, with sales up 12x since Finch’s Series A last June.
“This funding reaffirms Finch’s leadership position in the employment API ecosystem and fuels our focus on building deeper connectivity and broader coverage,” Zhang told businesskinda.com in an email interview. “Finch’s mission is to democratize access to the infrastructure that underpins the employment industry, unlocking much-needed innovations and creating tremendous economic value for both employers and employees.”
Finch was co-founded in 2020 by Jeremy Zhang and Ansel Parikh, initially to address the challenges lenders faced in processing applications for the Paycheck Protection Program. (Zhang previously worked at Amazon’s robotics R&D division, while Parikh was an investor at Kleiner Perkins.) The goal was to help companies get the financing they needed without having to send payroll PDFs to lenders. to steer. But once Finch launched, Zhang and Parikh realized that there was much more demand for connectivity in the HR software space than that limited use case.
To that end, Finch today enables companies like Vanta, Lendio, Middesk and OpenComp to access more than 200 HR systems by taking what Zhang calls a “multi-factor” approach. Kind of like a “Plaid for HR”, Finch uses APIs and protocols such as SFTP to sync with existing apps and services while providing customers with a unified API.
Image Credits: Finch
“Our direct competitor is the current status quo in the industry, which operates in three main models: spreadsheet uploads, SFTP servers, and internal operations,” Zhang told me in a previous interview. “Applications require HR admins to upload employee information, enrollments, and pay statements. Most of the industry has adopted the transfer of files via SFTP servers, which is more secure than sending employee data via email, but it requires setting up SFTP servers and lacks standardization between companies. As a result, many companies rely on an internal operations team to manually log in and retrieve employee reports or set deductions and contributions.”
A company, on the other hand, can use Finch’s APIs to build dashboards and experiences for onboarding employees, adjusting employee benefits, tracking cost savings and spend, and more. The HR system data processed by Finch is encrypted both in transit and at rest, Zhang claims, and the platform includes several levels of access control for added privacy.
Finch competes with Merge and Flexspring, both of which offer platforms that connect different HR systems to enable data exchange between them. Merge recently closed a $55 million Series B round, highlighting investor enthusiasm for the category. Larger, established vendors are starting to look into it too, with the likes of Plaid releasing a payroll API system for income verification called Checked income.
When asked about the competition, Alex Tran of General Catalyst said (via email): “As early funders of Stripe and Gusto, we have come to appreciate the importance of fintech infrastructure, its evolving nature and use cases around employment data . We are excited to see Finch innovate at the intersection of two areas we deeply care about.”
Zhang claimed that from a growth perspective, there was “positive winds” for Finch due to the high volumes of recruiting activity in 2021 and 2022. It led to high demand and budgets for HR tools, he said; Finch has connected more than 1.5 million employees through its platform. But more recently, Finch’s business has shifted to use cases that are more important to employers regardless of macroeconomic conditions, such as retirement benefits and insurance plan enrollment.
“We had most of our Series A funds still in the bank and this funding extends our runway by several years, giving us a break-even path before considering another fundraiser,” Zhang continued. “The world is moving towards more standardized, open and interconnected data systems. However, the employment infrastructure remains complex, closed and fragmented. Finch’s mission is to democratize access to the infrastructure that underpins the employment industry, unlocking much-needed innovations and creating tremendous economic value for both employers and employees.”
The funding brings Finch’s total amount raised to more than $68 million. Zhang says Finch will continue to hire in all areas of his company through 2023, aiming to grow the company’s workforce from 57 employees to north of 80.
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