The world’s leading payroll software provider Deel is among a few companies ready to extend an olive branch to victims of the United States’ second-largest bank catastrophe in history – Silicon Valley Bank (SVB). Deel will be channeling $120 million of its funds to support startups’ payroll needs following the sudden downfall of SVB.
Deel and Andreessen Horowitz Combine Efforts, Extending A Lifeline To Startups
Deel resolved to collaborate with Andreessen Horowitz (a16z) and Y Combinator to provide much-needed support to their customers. Andreessen Horowitz and Y Combinator are investors in Deel.
As reported earlier on Monday US regulators including the Federal Reserve (Fed), have resolved to take decisive actions to protect the integrity of the financial system and protect the consumers in the wake of the messy implosion of Sam Bankman-Fried’s FTX exchange.
The Fed announced and assured investors that depositors of the Silicon Valley Bank—both insured and uninsured would get full protection. This move by the top regulator offered collective relief across the tech ecosystem.
SVB mainly catered to clients in the tech ecosystem due to its technological prowess. For now, investors can rest easy knowing their interests are taken care of. Regulators are also looking at ways to assist banks in times of distress and prevent their untimely collapse.
“We’ll see what happens, you can never be fully certain. But in the meantime, we’re ready with our customers, and customers right now, and whatever we can do to help we’ll be there,” Deel co-founder and CEO Alex Bouaziz said in an interview with TechCrunch.
Deel had no exposure to SVB due to its presence in more than 100 countries. The global payroll software provider boasts 450 bank accounts in addition to in-house treasury management.
“It’s amazing that all depositors will be made whole. Until tomorrow morning when all the funds will be available, founders need to stay cautious and stay alert to ensure all employees get paid,” Bouaziz added.
According to the Deel CEO, the main purpose of the $120 million lifeline fund is to ensure that businesses are able to run payroll for the subsequent two cycles with zero or “minimal interruptions.”
Deel has provided a form that businesses can use to apply for the funds, which can be channeled to support both employee and contract payrolls for existing customers in addition to selected new customers.
Bouaziz told TechCrunch that this move is mainly to lend a helping hand to struggling firms. However, he clarified that Deel will “be very selective” to ensure they get good terms.
“We freed up some of our cash because it’s our responsibility to help other companies, but we have to be very selective because we’re already in the payroll system, we have ways to achieve good terms,” Bouaziz explained.
Prior to the official announcement, individuals and companies across the nation were attempting to assist startups in meeting their payment obligations. With the confirmation of government assistance, these efforts can now serve as a contingency plan in case any issues arise before Monday.
The specifics of Deel’s monetary proposals are not currently known, hampering the ability to contrast them with the cash from SVB that will reportedly become available to entrepreneurs starting this week.
Deel’s CEO maintains that the goal is not to make money but to offer help to those who are affected and are likely to struggle. Moreover, it would help the payroll software provider “earn trust in the market.”
“The goal here is not for us to make money. It’s more to help people and genuinely earn trust in the market as a payroll leader,” Bouaziz said.
What Are Other Payroll Providers Doing in The Wake of The SVB Collapse
Deel is not the only payroll provider willing to help businesses navigate the tough economic times and SVB’s downfall. Remote and Brex have all announced plans to continue to pay customers who may have suffered a liquidity crunch due to the bank’s exit.
“For all employers and employees employed through Remote affected by SVB, regardless if they are able to fund payroll in time for March payroll,” Remote announced on Saturday, promising to run the payroll as usual for affected companies.
A tweet by Marcelo Lebre, the co-founder and COO of Remote echoed the same sentiment in a tweet, assuring employees that they can still get their salaries as usual in the event their employers cannot meet the payroll demand immediately.
“If your employer that is employing you through Remote is not able to pay for March payroll immediately, as they don’t have access to their funds, Remote will still pay your salary,” Libre said in a tweet.
Brex has revealed that it received $1 billion in interest and is now attempting to raise capital for an emergency credit line this weekend. The CEO, Henrique Dubugras, has not disclosed how much capital has been secured for the credit line.
However, he has stated that he is currently engaged in back-to-back calls to acquire funds. It remains uncertain how this fundraising strategy may have altered following the recent update from the regulator.
Deel’s Bouaziz argued that this is not an easy position to be in, but the primary goal is to “help people.” The company has since its inception in 2019 raised almost $680 million, bringing its valuation to $12 billion. Despite the harrowing economic conditions, the world over, Deel reckons it has been profitable since September 2022.
Deel’s Financial Position
JP Morgan Chase and Citibank are some of Deel’s “primary banking partners, “although as mentioned earlier, the company has over 450 bank accounts across more than 100 countries. Earlier this year, the fintech-turned-Human Resource firm announced a key milestone of $295 million in recurring revenue.
This revelation meant Deel had achieved ups of 417.5% in growth from approximately $57 million at the end of the previous year – 2021. The payroll software provider claimed to have 15,000 customers at the time including leading firms like Nike, Reebok, Subwat, and Forever 21 among others.
So far, Deel has grown to cater to the needs of 18,000 customers. To prove its financial capability, Deel completed an acquisition deal on Capbase. The value of the deal was yet to be disclosed but it was paid for in stock and cash.
In early Q1 2022, Deel added over $300 million to its balance sheet in a funding round that elevated its valuation to over $3 billion.
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