Paylocity is acquiring corporate spend startup Airbase for $325M

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Paylocity acquires Airbase

Image Credits: Thejo Kote / Airbase

HR and payroll software company Paylocity has agreed to acquire corporate spend startup Airbase for $325 million, the companies announced Wednesday.

The deal is subject to regulatory approval and is expected to close in the first or second quarter of Paylocity’s fiscal year, which would be sometime in the next 30 to 60 days. It is being funded by borrowings under Paylocity’s revolving credit facility.

It’s a decent exit for seven-year-old Airbase, which was founded by Thejo Kote in 2017 to provide software to midsized companies seeking to better manage their spending. Its platform included bill payments, corporate cards, and employee reimbursements, among other things.

The San Francisco-based fintech company had raised just over $100 million in equity funding since inception from investors such as Menlo Ventures, Bain Capital and First Round Capital, among others. According to PitchBook, Airbase was valued at $600 million post-money in 2021 at the peak of the market.

Headquartered in Schaumburg, Illinois, Paylocity is publicly traded and, according to Yahoo Finance, has a current market capitalization of just under $9 billion, with about 40,000 customers. The company in a statement said the addition of Airbase would help it expand its total addressable market beyond human capital management (HCM) and “further into the office of the CFO.”

Kote told TechCrunch the decision wasn’t easy but made sense in the end. 

“Airbase has many years of runway and a clear path to profitability, but I was ultimately convinced by the fantastic opportunity to create a unified HCM and Finance platform for the mid-market — leveraging Paylocity’s size and scale to bring Airbase to a much larger audience.”

A source familiar with the deal who wished to remain anonymous told TechCrunch that the structured deal does not include all of the cash on Airbase’s balance sheet, which goes back to the company, shareholders and employees. Including that, the entire value of the deal is actually “a little less than $400 million,” the source said.

Airbase has just over 300 employees. It is not yet known how many will be joining Paylocity. The company over the years has competed with the likes of Ramp and Brex, with a focus on selling software from its early days. At one point, it said it surpassed “eight figures” in annual recurring revenue (ARR), although the company has not shared exact numbers.

This isn’t the first exit for Kote, who in 2017 sold Automatic to SiriusXM for over $100 million. 

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Teamwork and collaboration in a tech-driven Australian office with stunning Sydney views.

Modal raises $25M to train corporate workers on data and AI

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Teamwork and collaboration in a tech-driven Australian office with stunning Sydney views.

Image Credits: pixdeluxe (opens in a new window) / Getty Images

A few years ago, Darren Shimkus, ex-president of Udemy, had a conversation with Dennis Yang about skills building.

Shimkus was of the belief that building skills in the corporate sector was a difficult, but not intractable, challenge — one that could perhaps be solved with the right technology. He brought it up to Yang, who had been Udemy’s CEO.

“At Udemy, Yang and I solved the ‘access’ problem to learning — anyone at any company can find great video content on the skills they want to pick up,” Shimkus told TechCrunch. “But it turns out that solving access to video isn’t enough on its own.”

One thing led to another, and soon, Shimkus and Yang had a new startup on their hands: Modal.

Modal provides personalized technical skills training for a company’s staff, offering on-demand coaching and a pedagogical approach that groups users into semi-structured online learning communities.

“Our offering assesses every member of a team, identifies gaps in their skill sets, and creates a custom plan for each team member that minimizes the ‘skill risk’ companies face in hitting their strategic goals,” Shimkus explained. “We support all kinds of goals — modernization efforts, digital transformation and even training new employees from an acquisition.”

The upskilling market is a crowded space, occupied by startups like GrowthSpace, Learnsoft, Pollen, Scaler, Workera and others. So how does Modal plan to make a splash?

First, Shimkus says, by honing in on hot trends: data and AI. Modal’s initial set of e-learning courses focus exclusively on these, which seems like a wise strategic choice given today’s market.

“The rise of AI is bringing more visibility to data teams than ever before,” Shimkus said. “Expectations are through the roof, and many teams are realizing they need to rapidly develop their AI capabilities, broad technical acumen and even the business skills of their teams.”

Modal
Image Credits: Modal

Modal’s second advantage is its emphasis on real-world application, asserts Shimkus. As learners make their way through Modal’s courses, the coach with which they’re paired helps contextualize and assist with key concepts, Shimkus says.

“From the perspective of the learner, our inclusion of applied practice and coaching really set us apart from traditional e-learning platforms,” Shimkus continued. “We think our direct competitors are relatively few.”

It seems to be an effective sales pitch. Modal, which only charges companies when a staffer completes a course, has over 100 clients at present, with the majority coming from the Fortune 1000, per Shimkus.

Modal recently raised $25 million in a funding round led by Left Lane Capital, bringing its total raised to $32 million. Now it plans to grow its team to “support incoming demand and expand Modal’s offering to organizations worldwide.”

“We’ve been fortunate that the rise of generative AI has driven a critical need for upskilling in companies — no one can afford to miss out on transforming their teams and businesses,” Shimkus said. “It’s hard in today’s ever-changing workplace landscape to predict what your teams need, meaning most leaders don’t have a reliable way to plan for and improve their team’s skills. Modal is built for this scenario.”