Wagepoint Raises $2M As Competition Mounts in Payroll Software Scene
Cloud-based software for doling out payroll seems to be the flavor of the season with some investors.
This month, New York-based Wagepoint raised a $2 million seed round led by Extreme Venture Partners, and with participation from Businesses Development Bank of Canada, the Atlantic Canada Opportunities Agency, and angel investors.
The startup was born from a common theme that sending out paychecks can be automated and simplified through software. “A restaurant owner doesn’t go into business to run payroll; they do it to make amazing food,” CEO and co-founder Shrad Rao says.
Wagepoint’s software helps business owners, especially with small and midsize companies, manage payroll tax, payments to contractors, payroll calculations and other services. The software can also process deductions for benefits, but does not cover enrolling employees in health plans.
Wagepoint, which also has offices in Ontario, is one of the latest competitors in this space to raise funding this year.
In November, New York-based Namely raised $12 million and plans to grow its staff. And in October, Justworks, another local developer of human resources and payroll software, raised $6 million. Back in February, San Francisco-based ZenPayroll raised $20 million.
Rao’s startup is trying to carve out some territory in this competitive field. Its software is used by almost 700 companies in the U.S. and Canada, he says. The service is aimed at businesses with 50 or fewer employees, and about 30 percent of Wagepoint’s clients are startups—though some customers have more than 300 employees each. Wagepoint charges its clients based on the number of employees, plus a base fee.
By comparison, some 2,000 small businesses use Justworks’s software. Namely is used by 150 companies, which collectively have more than 20,000 employees.
Rao says his company, founded in 2012 in Canada, can pare down some of the complexity in payroll services while accounting for many differing local and state tax codes. Back in August, Wagepoint setup its headquarters in New York and Rao says the company splits its staff between the U.S. and Canada.
He says larger payroll companies may create different software for each country they operate in, but Wagepoint relies on one version of its software for use across borders. Rao believes his company can be more flexible than its bigger peers, including using the digital currency bitcoin as an optional form of payment.
“They can’t offer things like bitcoin payroll, and they probably wouldn’t,” he says.
Prior to Wagepoint, Rao worked as a financial analyst and then tried his hand heading two other Canadian-born startups. One of them, Sociability, was a social network for people with disabilities. Another startup, Synappp6, was a Web app for scheduling employees.
“Neither one really took off,” he says, “but they gave me experience around product building.” It remains to be seen how Rao will put those lessons to work as Wagepoint tries to scale up.