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COMPANY DEEP DIVE 🕵🏻

Deel, EOR & The Future Of Global Teams

If you switch on ESPN today you will see a lot of noise about a young French phenom, Victor Wembenyama, that just drafted as the NBA’s #1 pick. People are touting the 7’5 Frenchman “the future of the NBA” and “the next face of the league”. A generational—if not—once in a lifetime talent. A month ago another phenom was being mentioned as the future of another sport—one Patrick Mahomes.

If you look culturally, one can look to the rise of influencer Bobbi Althoff. Virtually unknown less than 12 months ago and now one of the fastest growing YouTubers in the world.

Phenom, is derived from phenomenon—a remarkable person or thing. The company we are covering today, Deel, can only be described as a phenomenon. A once in a generational company, moving at Deel Speed.

And just like the best startups of previous generations, they are aggressive. They are relentless in the pursuit of market share, while also being on the forefront of innovation for their customers. Deel are quickly becoming the infrastructure for how business is run. “Full-stack HR & payroll for global teams” as co-founder Alex calls it.

And it’s been a joy to watch. But it didn’t start as an instant success. No one does. It started with an idea, a pivot, a scrappy deck and a few people willing to follow along for the ride. Let’s dive in. This is the story of Deel.

Y-Combinator batch

It’s 2018, in a pre-COVID era, and two college friends, Shuo Wang and Alex Bouaziz, have come up with a plan. The plan is to build a tool to help facilitate easier payments to global freelancers. “When the task is fulfilled, it gets paid automatically” Bouaziz would say recalling the idea. It was blockchain, but not blockchain—smart contracts-esque.

The idea has traction. Traction enough to get Shuo, Alex and their budding startup Deel into the prestigious Winter 2019 batch at Y Combinator. Y Combinator—or YC—was famous for turning Silicon Valley’s best and brightest into the next leaders on the global technology scene.

If you live on planet earth you probably do business with YC alum on a daily basis. Listen to this for a list of names; Airbnb, Coinbase, Stripe, DoorDash, Dropbox, Reddit, Twitch, Brex, Gusto the list goes on. Hell, I live in Argentina right now, and tonight I feel like ordering ramen on Rappi—YC vintage 2016.

But just getting into YC doesn’t mean you’ll be a success. It’s really a place for rapid idea validation. Or in some cases, invalidation. The latter was true for Deel. Highlighted by their last minute pitch, the Friday before Demo Day.

“The essence of the product today is the same. Originally, it was about enabling people to get paid in other countries. What happened though, is we realized there was more to the problem than that. It was compliance, different types of employment, different global structures and so on. We just saw that the entire suite of tools was not built for global teams,“ Alex would say. 

And it proved to be right. Looking at Deel’s original vision on their YC profile page, you can see there were many ways to go about building the future of global teams.

So they did just that. They pitch EOR—an easier, more compliant way to hire globally—on the stage at their YC Demo Day. And the VC landscape went for it. They closed their Seed Round quickly in April 2019, and shortly after, their Series A, which was led by a16z, who “had a market thesis at the time”, as Alex recalled.

Little did they know the world was about to be turned on it’s head. Deel completed the raise ~3 weeks before COVID struck. A once-in-a-hundred-year event that would force the entire world into the realm of remote work.

Reimagining EOR & global collaboration

You could consider the first ‘global teams’ to be merchants and traders throughout history, from the Silk Road to the Phoenicians, dating as far back at 500 BC. The next wave of global collaboration was during the Scientific Revolution.

EOR or Employer-Of-Record is not a new idea either. Quite the contrary. EOR providers have been available for companies to use to employ their global workforce for decades. The problem though, was twofold.

Firstly, they were expensive, charging 'between 10-50% of an employee’s salary. And second—they sucked. They had a terrible product experience. Deel, on the other hand were setting out to make global hiring easy. Not only that, they wanted to make opportunities more equal all across the globe.

Any new-to-market product, usually competes on price, or on quality. Deel was of the opinion they could beat the incumbents on both. So, the stage was set. Now all they needed to go out and do was one thing—execute.

A very COVID blessing

Coming out of their YC batch, Deel were able to get their first traction from friends, family and the YC community. There was traction, enough to be excited about but things were steady, stable and under control.

And, like a lot of other remote work focussed startups—my startup Athyna included—a large part of the process was educating people on the fact that great talent could be found on every corner of the globe. That hurdle was removed the moment Patient One sunk their teeth into some deep fried pangolin in the night markets on Wuhan, China (*unsubstantiated claim) in late 2019.

Deel, almost overnight, went from a new and novel idea for most companies, to an absolute no brainer. The world was forced into remote work, and their biggest objection handled—for good.

If the aim at March of 2020 was “consistent growth”, the aim by June was to just keep up. “We were getting to a point where we were moving from too many inbound and too many demos,” Alex recalled.

And the VC community was watching. Deel would go on to raise their Series B around 3 months later “from a DM on Twitter.”

The frothiness of 2021

Everybody talks about the last VC hype cycle as 2020-2023, but it was really a 12-15 months stretch that did it. The 2021 boom will be forever remembered for the metaverse, Web3, embedded finance and the future of work.

Future of work, had been pushed front row centre thanks to COVID, and anything that had a global employment element was hot. Especially the class of EOR startups—of which Deel, Remote, Oyster and a number of others lead the charge.

And it made sense. While every cryptonaut VC was out throwing money at land in the metaverse, and celebrities were burning piles of cash JPEG of monkeys, the EOR batch was building a sticky business. Real use case, solving serious pain points for big, enterprise accounts. In other words—they were building great businesses. 

Small business and large companies alike, were going to Deel to help build their global team. For an early stage startup, it was managing 10-20 contractors and a few EOR employees, but for enterprise it was taking a large headcount and transferring them across to manage through Deel. And as they grew, so did the solutions for their customers.

With all the fervour and excitement of the 2021 market—a lot of companies were raising at a 100x revenue multiple—it was easy to think that the good times would always roll. They don’t. The market today is very different from what it was it was in 2021. There is startup blood in the streets. And the blood is on the hands of the venture ecosystem.

Every boom and bust cycle there are winners and losers. Some are bold enough to run the risk of raising at crazy valuation multiples, grow into their valuations—and many don’t. They push, and pivot, and scratch, and crawl. And then they die. Deel raised eyebrows when at the very time the market was beginning to fall apart, they raised their final top-up round at a whopping 114x multiple.

In the 90s—the last time you could raise at 100x multiple—we had the dot-com crash. But we had survivors of that cycle. Survivors that include Amazon, eBay, PayPal, Google & Salesforce.

We’d need to flash forward 20 years to know who will be the winners of the 2021 class. Ramp might sneak in, Fireblocks is doing ok. If I had to put my money on one company to come through and be the most successful two decades from now—I’m betting on Deel.

The State of Global Hiring today

Today—more than any other time in history—is set up for companies to thrive in a remote environment. Think about the tools we have today: Slack, Notion, Loom, Jira, Zoom, Figma, Asana. All build to make collaboration easier between teams.

And now, again, more than ever before, founders and executives know that they can hire locally and fight to the death for A-grade talent, or they can hire globally—where the entire world is their talent pool. Not to mention, the obvious economic benefits of hiring globally, where in some cases, you can hire four engineers for the price of one.

Deel—being the amazing stewards of global hiring that they are—recently released their latest annual State of Global Hiring Report. The report showed that globally, Software Developers were the most common role hired for. Not groundbreaking news, but did you know that the next hottest roles were sales, content, product and design?

More interesting data: in 2023 did you know that the US was the largest hiring country on Deel’s platform? Again, not surprising. What is surprising is that Nepal, Sri Lanka and Jamaica were the top 3 US hiring hotspots.

And although there has been a lot of noise made about return-to-office mandates across the world, this genie is not going back in the bottle—remote work is here to stay.

Side note: How Deel expands via acquisition

One thing I have seen with Deel that has been incredibly impressive is their ability to acquire new functionality, and larger market share with great strategic acquisitions. Even these last two weeks they just announced two new acquisitions—Zavvy and PaySpace.

Now, if you go back to that last point—new functionality and market share—these acquisitions are the perfect example. The acquisition of German startup Zavvy, is an acquisition that sets Deel up to be able to offer more functionality to their customers. In this case a much wider range suite of people development tools.

“Deel is all about helping companies get the best out of their global teams, and Zavvy’s AI technology is at the forefront of people management and talent development. It’s a perfect fit”, Alex would say.

PaySpace on the other hand is more about market share. Deel already has a successful global payroll product. But it was limited in it’s infrastructure.

Now, bringing PaySpace under it’s umbrella, Deel is adding a market leader with more than 20 years of payroll and HR experience in 44 countries across Africa and the Middle East. Regions that were not covered well prior to the acquisition. Sounds pretty familiar to the acquisition of APAC payroll provider PayGroup, in 2022. New functionality, market share.

The next player in Big SaaS

Why do I believe in Deel? Well it’s simple, not only are they great acquirers but they ship products and features insanely fast. Let’s take a short stroll down (product) memory lane to look at how we got to where we are today.

Deel started with contractor management, but at the YC pivot, they saw the need for global compliance, and began offering what was their original flagship product, EOR. Shortly after this, I started to notice Deel Shield, a product to help enterprises avoid misclassification risks.

Next, in early 2022 Deel acquired Roots, which set the stage for Deel HR, then August 2022, it was Legalpad to be able to offer Deel Immigration. Then last year in January it was Capbase—a platform for startup incorporation and equity management. Not to mention equipment, background checks, global payroll and Deel AI. I think you get my point here. Deel are expanding their product suite at breakneck speed 

A little birdy even told me that Deel now—through it’s API—is powering the entire backend of some of the largest talent marketplaces in the world. How do I know—because we at Athyna have looked at the same solution.

Another reason why Deel has grown so fast is the fact that it is tackling compliance head on. In times past, companies like Shopify, Reddit, Nike, Intercom, Red Bull would need to go to the painstaking lengths of setting up their own entities in geographies they were expanding into.

Either that or they would: a) hire non-compliantly or b) use an old school, barnacles rusted on provider, who lacks their trust or customer experience required to do business at the highest levels.

Today, over 25,000 customers, from small business to enterprise, trust Deel to be their full-stack, global HR platform.

Playbook

• Move fast. Deel have had a penchant for moving incredibly fast, in all areas of the business. They execute at ‘Deel Speed’ as they are wont to say.

• Scale with your customers. Deel are great at listening to what products their highest value customers need. They are constantly building for them and with them.

• Create a sticky product. Subscription products should be focussed on one metric—retention. Deel does well here. They have created a business infrastructure that is core to the operations of it’s customers, meaning switching costs are incredibly high.

• Hire well and be involved early. Alex joined every recruitment process for interviews for the first “500-700 hires”. “People follow people. If you are joining a company, it’s because you believe in the people building it, and how they see the world”, he would say.

• Strategic partnerships and expansion: Deel has strategically expanded its services and global reach through partnerships and acquisitions, enhancing its capabilities and presence.

• Relentlessness. Alex and Shuo have been aggressive from the start. True blitzscaling. From raising capital, to product development to winning market share. They have had the foot on the gas pedal since day zero.

Future

With the recent acquisition announcement of PaySpace, co-founder Alex, nonchalantly dropped the fact that Deel had crossed over the $500M ARR mark. Incredible stuff.

That’s $500M of ARR in under 5 years of doing business. I don’t have the data, but I’d love to know which other companies in history could boast that in their first half-decade.

The future is bright for Deel. They have a commanding mind-share in their space, and are building out a product ecosystem that is hard to beat. I expect them to be a household name in the years to come, much like the Silicon Valley tech titans of the past.

Fun facts

• Scrappy team to start. Like everyone, Deel started with an MVP squad. Going into YC it was the founders, plus three engineers and one person in content marketing.

• Deel are ranked #5 on Y Combinator private companies list. They are current behind Stripe, OpenSea, Faire and Brex. Not for long.

• World class meme’ing. Deel recently turned the famous ‘this is fine’ meme into a viral, real world sensation and the internet loved it.

• Pets are awesome. A survey found that 1 in 5 remote workers report their pets interrupting video calls. Amazing stuff.

Extra reading & listening

• Breaking Down Barriers Led to Billions, Foundr Podcast - October, 2022

• An inside look at Deel’s unprecedented growth, Lenny’s Podcast - August, 2023

And that’s it! You can find out more about Deel here, to start your global hiring journey.

TWEETS OF THE WEEK 🐣 

Loved this flashback to a babyfaced Sam Altman pitching his first startup. Amazing.

One of your main jobs as a founder is communicating. Storytelling. Here is a short clip from one of the best on what makes a good story.

BRAIN FOOD 🧠 

I’m not a mega-fan of 20VC. I find it surprisingly basic at times. Maybe I am just a jealous hater. Whatever the reason, I found this episode with Brendon Cassidy super insightful.

We send 1.2M outbound emails a week at Athyna—so when someone says outbound is dead—we listen. If you are trying to flex your outbound muscle in 2024 this one should be on your next-up playlist. Episode page here.

TOOLS WE USE 🛠️

Every week we highlight tools we actually use inside of our business and give them an honest review. Today we are highlighting Sidebar - a leadership program I use to accelerate my growth as a CEO.

See the full set of tools we use inside of Athyna & Open Source CEO here.

HOW I CAN HELP 🥳

Here are the options I have for us to work together. If any of them are interesting to you - hit me up!

🌏 Hiring global talent: Check out my startup Athyna.
🧰 Want to outperform the competition: See our suite of tools & resources.
👀 Reach thousands of tech leaders: Advertise with us here.

And that’s it from me. See you next week. 🫡