As the venture capital market began to decline six months ago, HR software startup Workstream saw a breakthrough. Its hiring tools, designed for hourly workers and powered by text messaging, have regularly attracted business from franchise owners of fast-food chains like McDonald’s and Popeyes. But when clients like Ace Hardware, Jiffy Lube, UPS started using the platform to manage their hiring processes, Workstream investors took notice.
Now, Workstream has raised an additional $60 million in fresh capital to help it expand into even more industries that employ hourly workers. The five-year-old San Francisco-based startup announced the fundraiser Thursday and calls it an “extension” to the $48 million Series B round it raised in August 2021.
Existing investor GGV Capital led the new funding, with participation from other previous backers including Bond Capital, Coatue, CRV and Founders Fund. The capital came with a valuation hike to $500 million from $375 million a year ago, even as extension rounds at increased valuations have become rarer amid the market downturn.
“It’s so obvious that there isn’t enough software designed for hourly workers,” said co-founder and CEO Desmond Lim. Forbes. “There’s a ton of great software out there designed for people who work in the office — Slack, Zoom, Zapier — but it’s not for the so-called ‘deskless’ workforce.”
Lim should know: he’s been surrounded by hourly workers all his life. Her mother worked as a cleaner and some of her aunts and uncles sold newspapers and eggs in their native Singapore. His father remains a parcel delivery man to this day, traveling the same routes after four decades of work. To pay for his undergraduate degree at Singapore Management University, Lim took the money he saved up from tutoring in high school and pooled it with two friends to start a no-frills Thai restaurant where he hired dozens of part-time employees.
For workers like them, Lim thinks the existing tools for hiring and HR aren’t good. Instead of spending their working hours in front of their computers, hourly workers and their managers probably only have their phones at hand. That’s why Workstream’s recruiting tools are SMS-based. Potential employees can apply for jobs and correspond with the hiring manager via text message. For managers, the product speeds up hiring and onboarding by automating parts of the process, like automatically texting candidates to schedule an interview themselves. This is all meant to save time on hiring for positions that traditionally experience higher churn rates than white-collar jobs.
“Already people can search, filter, hire and onboard faster, all the way through texting, through their phone,” Lim said.
Along with co-founders Lei Xu and Max Wang, Lim launched Workstream in 2017. He spent the first few months going door-to-door along the shopping streets of Silicon Valley and was able to land his first deals with business owners. franchises in local Jamba Juice and Subway storefronts. . Quick-service restaurants quickly became the bulk of Workstream’s customers and in October 2020, it hit its first $1 million in annualized revenue.
Sales are now solidly in the “double-digit millions,” Lim said, but declined to elaborate. The growth comes even as the company has refocused in recent months to reduce its level of cash burn – it is now expected to reach profitability in 24 to 30 months, he added. While any business that shifts toward profitability naturally does so at the expense of revenue growth, Workstream’s growth has been dampened by its simultaneous pull beyond the food world. Lim attributes this recent success to a combination of word-of-mouth virality among hourly workers and a beefed-up sales apparatus his company has put in place.
The integration of Ace Hardware, Jiffy Lube and UPS was also key to securing the commitment of GGV Capital managing partner Hans Tung to lead the latest investment.
Tung, no. 6 out Forbes‘ Midas List, initially wrote a small check in Workstream’s 2020 Series A round. But while a dozen investors offered term sheets in the space of nine days during the last funds from Workstream in 2021, he opted out. “We thought it made more sense to work with them more before writing a big check,” Tung said. Forbes.
Now, Tung says attracting Workstream customers outside of food has demonstrated the startup’s potential. “Given the reality of what we’re seeing in retail, there are more jobs to fill and not enough people to fill them,” he said.
Lim said the main impetus for the capital is to further expand the sales and marketing team to reach more potential customers in areas such as retail, hospitality and healthcare. . Workstream currently employs 200 people in total. “The main thing that keeps me awake at night is that although we have done a good job of building a strong team, how can we keep trying to develop this talent, especially with the macro that is rapidly evolving [economic conditions],” he says.