The start of 2022 The IPO cohort is starting to take shape. Recall that Reddit recently filed a request to go public, albeit privately. It will be a huge start.
With Samsara closing 2021 and Reddit set to provide fireworks, we might be happy. But there are more deals to come, including Justworks: the HR software company. filed at the end of last week, so we’re going to tear up his S-1 to see what the company has built.
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TechCrunch has covered Justworks on several occasions during its startup life, including when it raised $ 40 million in 2018. The former startup also has closed a $ 50 million round in early 2020, bringing its total known capital raised to just over $ 140 million. Additionally, Justworks CEO Isaac Oates sat down with one of his investors and TechCrunch earlier this year to review this 2018 Series B pitch deck. You can find our notes here.
We also reported more broadly from the Justworks category, for example, when startup Blink raised $ 20 million for a valuation of $ 100 million. At the time, our own Ingrid Lunden noted that HR software for non-tech companies was having a time.
Today we’re going to dig into Justworks’ business, its economic performance, and what it might be worth. Let’s have fun one last time at the IPO this year!
What is a “Justworks”?
Justworks software helps small businesses keep running. What is on offer? Things like payroll, vendor payments, tax returns, unemployment insurance, accounting software, and electronic signature support.
A tool bag that, even at lower price points, allows SMEs to do the basic work of being in business. The tech company also has more expensive plans that include access to health insurance products.
In total, Justworks sells its software per employee, per month, with fixed costs for companies up to 175 employees; past that, the company wants you to call them.
So SaaS focused on SMEs and on HR theme. This classification from Justworks helps us know what questions to ask:
- Is Justworks a pure software company, or does its product require more human inputs that lower its gross margin profile? (In simpler terms, what is the quality of his income?)
- Has the company mastered the churn rate? (Put simply, are SME clients as numerous as venture capitalists have historically warned us?)
- Finally, does Justworks have attractive net retention metrics? (In simpler terms, how far can you sell customers with a limited employee footprint if you charge per worker?)
Is this a good deal?
Yes? However, this is definitely not a traditional software IPO.
The company’s revenue mix contains software revenue and much of the low margin insurance and benefits coverage. And Justworks has a history of profitability that we don’t see often.