The world of HR services is experiencing consolidation as larger players acquire smaller startups to enhance unit economics and provide comprehensive solutions for customers. In the latest news, Deel, the $12 billion HR business based in Paris, has acquired Zavvy, an AI-based “people development” startup from Munich specializing in personalized career development, training, and performance management.
Deel, known primarily for its payroll and HR services for distributed workforces, will integrate Zavvy’s services into its existing platform, emphasizing a shift towards working with both distributed and non-distributed workforces. Additionally, Deel plans to incorporate more AI technologies across its expanded portfolio. The existing Deel HR tool, previously free for organizations with up to 200 users, will now be available for all existing customers regardless of their size.
Deel boasts a diverse customer base of 25,000 organizations, including major tech companies like Reddit, Shopify, and Klarna, as well as renowned brands like Nike, Forever 21, and RedBull.
Zavvy, which raised $4 million in 2022 from investors like La Famiglia and PitchBook, had an estimated valuation of nearly $16 million at that time.
Although financial details of the acquisition remain undisclosed, sources indicate that the acquisition price exceeded Zavvy’s valuation. Zavvy was not actively seeking a buyer; in fact, Deel initially approached them with a partnership proposal before proposing acquisition.
Deel’s recent success includes achieving annual recurring revenues exceeding $400 million and turning profitable since September 2022. With over $600 million in funding, the company does not anticipate additional fundraising in the near future and contemplates an IPO in the 2025/2026 timeframe.
Founded just five years ago at Y Combinator, Deel’s focus on payroll solutions and contract management for remote workforces aligned well with the evolving concept of the “future of work” amid the pandemic. The company raised over $600 million from top-tier investors between 2020 and 2021, including mutual backers with Zavvy like La Famiglia.
The impact of the pandemic prompted a new tech ecosystem catering to remote work, facilitating Deel’s growth. However, recent years have seen adjustments to the remote work economy to adapt to current realities, such as companies reverting to in-person work or implementing stricter cost controls.
Despite market challenges, Zavvy continues to thrive, particularly among SMBs and mid-market customers. The founders expressed excitement about collaborating with Deel, citing the alignment of their products with a larger business and the accelerated growth opportunities that come with it.
Joining forces with Deel will significantly enhance Zavvy’s ability to assist businesses, leveraging Deel’s scale and expertise in IT services procurement. Despite Deel’s size, the founders noted that it maintains a fast-paced startup mentality, offering a dynamic environment for growth and innovation.
