Finch Raises $3.5M to Expand HR & Payroll API Platform

The traditional approach of identifying inefficiencies in existing businesses and creating a new software-as-a-service (SaaS) company to address them has long been a popular method for startup ideation. However, a potentially more fruitful strategy for the next wave of companies may involve locating areas where data is inaccessible, disjointed, or both, and then developing an API to unlock that information.

This concept is exemplified by companies like Noyo, which aims to streamline health insurance data and secured $12.5 million in funding in September, as reported by TechCrunch. Similarly, Finch, a recent graduate of the Y Combinator program, is focused on providing access to HR and payroll data.

The investment round was spearheaded by General Catalyst, with participation from several industry leaders, including the founders of competing startups Ramp and Brex, as well as Digits. Finch initially aimed to raise $1.5 million but ultimately secured a larger amount of capital.

Finch was established by Jeremy Zhang and Ansel Parikh. Zhang transitioned from robotics research and development at a major technology firm to SmartCar, a company building an API for “mobility applications.” According to Zhang, Parikh previously worked in venture capital, focusing on API-related investments. This background provided both founders with experience in delivering products through developer endpoints, rather than through traditional application-based contracts.

Initially, Zhang and Parikh were developing a platform to enable other businesses to integrate consumer lending into their services. However, the onset of the pandemic and the resulting economic uncertainty dampened interest in expanding credit access to individuals. (Interestingly, Upstart, a fintech company specializing in consumer lending, is currently undergoing an initial public offering, demonstrating the rapid shifts occurring across various industries.)

A partner company’s desire to facilitate PPP loans for small and medium-sized businesses (SMBs) prompted them to investigate the data requirements for such a project, ultimately leading to the creation of Finch.

Finch provides access to payroll and HR data through an API, offering a complimentary version to attract developers and a premium version with pricing options including pay-as-you-go and subscription-based models.

Finch’s relative youth is a noteworthy characteristic. The company launched a landing page in April and began coding the project in July, representing a remarkably swift progression from inception to market engagement. Currently, Finch is experiencing 50% month-over-month growth in both revenue and the number of “employers connected,” a rate of expansion that appeals to investors.

To better understand the potential applications of Finch’s API, I sought insights from Zhang. He identified three primary areas where Finch could be impactful: financial software, the lending and insurance sectors, and the expanding market for HR and benefits software.

In each of these areas, access to a reliable “source of truth”—specifically, HR and payroll data regarding employees and their employment status—would enable more informed decision-making. For example, job tenure could be a factor in assessing creditworthiness, HR services require accurate employment information, and financial applications designed to assist or replace CFOs need to understand current staffing levels.

Nevertheless, Finch faces significant challenges. Its founders discovered the complexity of the payroll and HR systems landscape. Developing an API that supports the extensive number of systems required by its target market will demand considerable time and resources. While the additional capital raised will undoubtedly be helpful, the sheer scale of the task ahead will require substantial effort.

The company reports that it currently supports the systems of 1.4 million employers and plans to increase that number tenfold within the next year. Finch’s funding round mirrors that of BuildBuddy, another Y Combinator graduate and SaaS company, which also exceeded its initial fundraising target, securing over $3 million.

Currently, Finch has a team of six employees, with Zhang anticipating growth to 15 or 20 by the end of the following year.