Zeal Raises $13M to Revolutionize Payroll Infrastructure

Zeal Secures $13 Million in Series A Funding for Payroll Platform Development

Zeal, an embedded fintech innovator, has successfully raised $13 million in a Series A funding round. These funds will be utilized to further the development of its platform, which is designed for the creation of tailored payroll solutions.

Investment Details and Participants

Spark Capital spearheaded the Series A investment, with additional participation from Commerce Ventures and a collective of individual investors. Notable contributors include Jason Gardner and Omri Dahan, both leaders at Marqeta, Vlad Tenev, the founder of Robinhood, and executives Mitch Dauerman and Bob Manne from UltimateSoftware, alongside Namely founder Matt Straz.

This latest investment brings the company’s total funding to $14.6 million, building upon a $1.6 million seed round secured in 2020, as confirmed by CEO Kirti Shenoy.

From Gig Economy Payments to a Comprehensive Payroll API

Originally founded in 2018 as Puzzl, a payment processing startup focused on the gig economy, the company’s trajectory shifted following the need to transition a significant number of 1099 contractors to W2 employee status. The founders, Kirti Shenoy and Pranab Krishnan, were participants in Y Combinator’s 2019 program.

Their search for automated, high-volume payroll processors, such as ADP or Paycor, revealed a gap in the market. Existing solutions lacked the desired functionalities, including daily payment options and customizable earning structures.

Addressing Payroll Modernization

Recognizing a widespread need, they resolved to construct a payroll API. This API empowers businesses to develop their own payroll products, even facilitating the possibility of daily worker payments. Traditionally, organizations have relied on outdated third-party tools and incurred substantial consulting expenses. Zeal’s API aims to modernize payroll processing, assuming payroll liability and streamlining back-end payment operations, according to Shenoy.

Currently, Zeal serves both large enterprises, enabling them to manage worker payments and maintain data within their existing systems, and software platforms offering business-to-business services, allowing them to integrate payroll functionality into their offerings.

A Vision for American Paychecks

“Our core objective is to impact every American paycheck through our tax and payment technology, guaranteeing accurate and efficient compensation for all employees,” stated Krishnan.

This ambition is considerable, given that over $8.8 trillion in payroll is processed annually in the U.S. across 200 million employees, and the nation’s 11,000 tax jurisdictions generate more than 25,000 income tax code revisions each year.

Combating Payroll Penalties with Abacus

Shenoy highlighted IRS data indicating that over 40% of small and medium-sized businesses incur at least one payroll penalty annually. This statistic fueled the development of Zeal’s latest product, Abacus, a gross-to-net calculator designed to assist payroll companies in maintaining tax compliance.

Future Growth and Expansion

The newly acquired funding will be allocated towards team expansion and the reinforcement of compliance protocols, ensuring the company’s continued success with enterprise clients.

“We are witnessing increasing traction with enterprise clients and are processing millions of dollars in payments daily,” Shenoy explained. “Given the historical nature of this sector, companies are seeking a partner capable of delivering rapid results.”

The Future of Payroll: Hyper-Customization

Shenoy anticipates a shift towards increasingly personalized payroll experiences over the next five to ten years. Instead of relying on traditional providers like ADP, companies will prioritize data control and the ability to build integrated payroll solutions within their platforms.

Board Addition and Industry Validation

As part of the investment, Natalie Sandman, a partner at Spark Capital, has joined Zeal’s board of directors. Spark Capital has previously invested in other embedded fintech companies, including Affirm and Marqeta, and Sandman believes APIs can unlock new possibilities within the sector.

Sandman personally experienced the challenges of payroll integration during her time at Zenefits, where the lack of available APIs necessitated manual data transfers and increased the risk of tax penalties.

Customer-Centric Approach and Macro Trends

Sandman praised Shenoy and Krishnan’s dedication to their customers, emphasizing their commitment to balancing speed with a thorough understanding of customer needs in payroll product development.

She observes a broader trend towards audience-driven human resources, where onboarding new employees will increasingly involve integrating them into comprehensive platforms, rather than relying on traditional spreadsheets.

“APIs offer the necessary flexibility for managing wages and deductions,” Sandman concluded. “Payroll represents a critical point of trust between employer and employee, demanding transparency and a robust solution.”