Pento Secures $35M Funding Led by Tiger Global and Avid Ventures

Payroll Management Challenges Addressed by Pento's Funding

Managing payroll represents a significant challenge for businesses, particularly small and medium-sized enterprises (SMEs). The complexities often associated with this process can be substantial.

Pento, a startup specializing in payroll automation software, has secured $35 million in a Series B funding round. This investment was co-led by Tiger Global Management and Avid Ventures.

Investment Details and Company Growth

This funding round marks the first investment in London-based Pento by Tiger Global. Avid Ventures had previously invested, alongside General Catalyst, Seedcamp, and LocalGlobe.

The company recently raised $15.6 million in a Series A round led by General Catalyst just six months prior. While Pento has not disclosed the valuation of either round, they confirm a “meaningful step up” in valuation from the Series A.

Founded in 2017 by Jonas Bøgh Larsen and Emil Hagbarth Rasmussen, Pento has now raised a total of $53.4 million. Their core objective is to liberate companies from cumbersome outsourcing and obsolete software solutions.

Pento's SaaS Offering and Benefits

Pento’s Software-as-a-Service (SaaS) platform fully automates payroll processes. This eliminates the need for payroll managers and finance teams to rely on spreadsheets, PDF documents, email correspondence, and manual checks.

The company asserts that its solution can reduce the time spent on payroll by as much as 80%, providing customers with enhanced control and visibility throughout their monthly pay runs. This is achieved through the automation of tax calculations, payments, and reporting requirements.

Pento enables businesses of all sizes to complete their payroll operations in a matter of minutes, rather than days.

Revenue Growth and Customer Acquisition

CEO and co-founder Bøgh Larsen reports a tenfold increase in revenue over the past year. Since the Series A funding, the company has experienced “consecutive record-breaking months of growth.”

Pento has also onboarded several prominent new clients, including Starling Bank in Britain. Furthermore, they have established integrations with partners like Personio, Hibob, and BambooHR.

Existing customers include Pleo, Cuvva, Honest Burgers, and Beauty Pie. Currently, Pento serves hundreds of SMEs and mid-sized businesses, typically with 30 to 500 employees, and is expanding its reach to larger enterprises with approximately 2,000 employees.

Revenue Model and Market Opportunity

Pento generates revenue through a subscription-based model, charging customers a fixed monthly fee.

While future international expansion is planned, Pento’s current focus remains on the U.K. and European markets. These markets represent a nearly $6 billion payroll outsourcing industry, projected to grow at an annual rate of 4.4%.

The company estimates that there are around 20,000 small and medium-sized businesses, and 4,000 mid-market businesses in the U.K. alone that could benefit from their services.

Bøgh Larsen highlights a potential to transform payroll automation for nearly 10 million employees within the U.K., representing a $1+ billion annual revenue opportunity.

Future Plans and Expansion

The newly acquired capital will be allocated towards expansion into new European countries, product development, service enhancements, and partner integrations. Pento also intends to expand its team.

The company has already increased its workforce from 20 to 70 employees within the past year.

Integrations and Open API

In addition to its core SaaS offering, Pento provides infrastructure through partnerships and integrations with accounting software, HR products, and pension providers.

They have also developed an open payroll API, currently in beta, designed to enable businesses to create custom integrations for automating workflows like time-tracking and shift planning. This API will also allow employees to securely share pay data with third-party applications for income verification and financial services.

Competitive Landscape and Differentiation

Bøgh Larsen emphasizes that Pento was created in response to the inefficiencies of existing payroll processes, and its success demonstrates a strong demand for improved tools.

Key competitors include PayFit, ADP, and traditional payroll outsourcing companies. Pento differentiates itself by focusing exclusively on payroll, with an emphasis on integrations.

Unlike many competitors, Pento prioritizes partnerships and integrations with other tools used by customers – such as HR, expense management, and accounting software – rather than attempting to build all functionalities in-house.

Avid Ventures' Perspective

Addie Lerner, founder and managing partner at Avid Ventures, expressed enthusiasm for Pento’s potential to become a leading pure-play payroll automation provider in Europe and beyond.

Lerner noted positive market feedback regarding Pento’s strategy of concentrating solely on payroll, rather than bundling it with HR services.

Long-term, Lerner suggests that if Pento can establish itself as the infrastructure layer for HR and compensation through its open API, the company could become deeply integrated into its customers’ workflows.

This strategic positioning could enable Pento to monetize a range of “Pento for Employee” products, including financial offerings like lending and Know Your Customer (KYC) services.