Justworks Looks to Scale Up Its HR Software Service with $6M Round

For startups that survive long enough to grow their ranks, learning to handle payroll and employee benefits can be an unwanted new headache.

At least that’s what New York-based Justworks has been banking on, and its new backers seem to agree. The company has developed software to simplify various tasks associated with human resources; it also pools the employees of many small businesses into larger groups for procuring insurance plans.

Justworks also tries to alleviate the burden of complying with a regulatory environment that CEO Isaac Oates says is increasingly difficult for small business owners to keep abreast of. “There’s so much that they should know,” he says, “but it’s disproportionate to their capacity.”

Early this month, Jusworks closed a $6 million Series A round led by Thrive Capital and Index Ventures. Oates says his company plans to use the funding to expand the team, particularly in sales and marketing as Justworks looks to grow its customer base. Some 2,000 small businesses currently use the software, he says.

There are plenty of HR management companies that handle similar duties, and enterprise-level software for processing such tasks. Oates says small businesses—startups in particular—want software that is lower-cost and more nimble than the legacy systems that exist. “A lot of the incumbents in payroll and HR outsourcing are having a real hard time keeping up with that,” he says.

Oates says he founded Justworks about two years ago to offer the startup and small business scene an HR management option with the flexibility of consumer software, while also creating a collective buying entity for insurance benefits, 401(k) services, and reporting taxes.

Justworks serves companies that may have as few as five to 20 employees, but also works with larger businesses, Oates says. Justworks spent its first year developing the product, and then last October made the software public for companies to sign up.

In the years prior to Justworks, Oates spent much of his career developing payment processing systems. He got a job at Amazon out of college, working on third-party payment settlement systems for transactions by sellers on the Amazon Marketplace. Oates left Amazon five years ago to start Adtuitive, a New York-based ad business for online retailers and publishers.

Going into business for himself brought new challenges, though, such as offering benefits and doling out salaries to employees. “That’s when I discovered that payroll is still in the dark ages,” he says.

Adtuitive was acquired in 2009 by Etsy, and Oates remained with the company for another three years working on a product that allowed sellers on the marketplace to accept credit cards and payments in different currencies.

When he left Etsy two years ago, payroll problems remained fresh in his mind—and Justworks emerged. “Instead of filing 1,000 different federal returns every quarter,” he says, “we can file one big return that has the employees from the different companies on it.”

Trending on Xconomy