Rippling, that rapidly growing startup, has raised $500 million in a funding round led by Greenoaks. The round values the HR and Payroll vendor at $11.25 billion. The amount is unchanged from its Series D financing in May 2022, which raised $250 million.
The round was prompted by the failure of Silicon Valley Bank, with Parker Conrad explaining how it came about in a blog post. With SVB unable to pay clients’ payrolls, Rippling needed to use $130 million of its funds to cover the shortfall for its client’s employees, who would desperately need the money.
Achieving the impossible
It achieved the switch from SVB to JPMorgan, the backup bank, in a very short time, three and a half hours, or perhaps a little more after the Ripling CFO Adam Swiecicki, managed to negotiate an extension to the JP Morgan cut-off time.
While the short-term problem was solved, SVB still had $545 million of client money locked away by the FDIC. Until the money was released, Rippling would need additional funding to cover the temporary shortfall.
Conrad turned to Neil Mehta at Greenoaks, who have invested in each of Rippling’s funding rounds for additional funding. Twelve hours later, with the help of teams from Greenoaks and Rippling and their respective lawyers, Goodwin Procter (representing Rippling) and Gunderson (representing Greenoaks), it was done.
The process demonstrates the faith that Greenoaks has in Rippling, one of the fastest-growing startups with ambitions for further growth. The company already delivers HR and Payroll solutions in Canada and the US. It also offers Payroll for the UK as well. It plans to formally launch in the UK soon and also has designs for Europe. The company competes with ADP and Bamboo in the US and will look to target organisations such as MHR, Sage and Zellis in the UK.
Enterprise Times: What does this mean?
From the blog, it is clear this was a funding round rather than a short-term loan, which might have been all Rippling needed until the FDIC released the various funds from Client accounts. That Rippling was able to pivot quickly to a new bank and obtain such a large fund is impressive and shows the faith that Greenoaks has in the vendor. A loan of that size may have taken too long to arrange, but interestingly, Conrad did not mention that route in his blog.
Rippling will initially use the funding to cover any shortfall with SVB. However, as those funds become available, it will further accelerate the international growth of Rippling, and it will be interesting to see what it invests in.
Enterprise Times asked David Wilson, founder and CEO of Fosway Group, Europe’s #1 HR Industry Analyst, to comment on the funding round. Wilson said, “In terms of their fundraising, the obvious driver was the demise of Silicon Valley Bank and the consequences for them as a financial partner.
“It looks like some of the short-term issues were resolved via switching payment partners and recovery of client funds from SVB. We assume their short-term priority is on resilience in the current changeable financial environment. Still, there is clearly potential to leverage these funds in other growth areas beyond that in the medium term.
“We look forward to seeing how their strategy evolves.”
Another point worth making is that while the valuation remained the same, one suspects that revaluing the company would have taken much longer. Parker is likely to have given up more equity than he would have needed if the revaluation had been done. That is good news for Greenoaks, as it will probably now have a share that is already worth more than it invested.