Pave Secures Y Combinator Funding for Startup Compensation Tools

Pave Secures $46 Million in Series B Funding

Pave, a San Francisco-based company specializing in employee compensation benchmarking, planning, and communication, has successfully raised $46 million in a Series B funding round. YC Continuity spearheaded the investment, with additional participation from prominent venture capital firms Andreessen Horowitz and Bessemer Venture Partners.

This latest financing arrives just eight months following Pave’s $16 million Series A closure. The current funding round elevates Pave’s valuation to $400 million, a significant increase from its $75 million valuation recorded one year prior.

Addressing a Critical Need in the Tech Industry

Pave initially set out to address a significant challenge: providing real-time pay measurement across venture-backed technology companies and facilitating a transition away from spreadsheet-based compensation management. While companies like AngelList and Glassdoor have previously attempted to create comparable datasets, Pave possesses a distinct advantage.

The company benefits from a strong relationship with Y Combinator, a leading startup accelerator that incubated Pave and is now leading its recent funding round. Currently, approximately one-third of Pave’s 900 customers are Y Combinator alumni, a number CEO Matthew Schulman anticipates will continue to grow.

Leveraging the Y Combinator Network

“The extensive support from YC, positioning Pave as a leader in the emerging compensation technology sector, will be instrumental in our distribution and data coverage for benchmarking,” Schulman stated. He drew a parallel to the growth trajectory of Brex, another Y Combinator Continuity-backed fintech company.

Schulman estimates that 60% of companies participating in Y Combinator programs utilize Brex’s services.

Potential Platform Risks and YC’s Commitment

While reliance on Y Combinator presents potential platform risks, given the accelerator’s frequent investments in competing ventures, the investment from YC Continuity signals a strong commitment to Pave. Ali Rowghani, Managing Director of the fund and former COO of Twitter, will be joining Pave’s board of directors.

Pave’s Comprehensive Service Offering

Data forms the core of Pave’s operations, underpinning its three primary services. First, Pave leverages market and partner data to assist companies in benchmarking employee salaries.

Second, the platform integrates with HR systems like Workday, Carta, and Greenhouse, providing a comprehensive view of current employee compensation and informing decisions regarding promotions and salary adjustments.

Finally, this data analysis culminates in the creation of formal offers and compensation packages for both new and existing employees.

Data Scale and Business Model

Pave’s current customer base contributes data on over 65,000 employee records. The company employs a freemium model, offering its benchmarking product as a free entry point, while its more advanced services are offered under traditional enterprise software contracts.

Addressing Inequity in Compensation

The realm of compensation is often marked by disparities, contributing to issues like the gender wage gap and pay inequities affecting minority groups.

Schulman emphasizes Pave’s commitment to helping companies move beyond annual diversity and inclusion (D&I) analyses, towards continuous monitoring and improvement. The company intends to develop specialized D&I dashboards to identify inequities and suggest actionable solutions.

Transparency and Internal Benchmarks

“Measurements drive improvement,” Schulman explained. Pave is proactively tracking its own compensation and diversity metrics to promote transparency within its organization and encourage similar practices among its clients.

Currently, 33% of Pave’s workforce identify as women, exceeding the industry average of 28.8%. Furthermore, half of Pave’s executive team and board members are women. The company has pledged to ensure that 50% of its client-facing roles – including customer success and sales positions – are filled by women or individuals from underrepresented groups.

The Pave Data Lab and Data Sharing

While Pave is beginning to share its internal benchmarks, comprehensive diversity transparency remains uncommon in the tech industry. Obtaining company valuations is often easier than accessing detailed information about the composition of historically marginalized groups within organizations.

Pave recently launched the Pave Data Lab, utilizing its dataset to highlight compensation trends and inequities in tech worker pay. However, Pave does not currently mandate that its client companies submit gender and race data for benchmarking purposes, and has not disclosed the percentage of clients who voluntarily share this information.

The company anticipates that increased data availability will drive positive change. Pave’s compensation benchmarking data is now freely accessible to all companies, expanding its data pool and establishing standards within the complex world of compensation.