February 22, 2023
Why QED invested in Finch
In the latest installment of the series, QED Investors Partner Laura Bock explains why we invested in the $40 million Series B round in Finch, a company that allows applications to retrieve their customers’ payroll, HRIS (human resources information systems), and benefits data and direct payments.
The fintech industry has experienced exponential growth in recent years, propelled forward by a new set of fintech-focused infrastructure providers that give entrepreneurs the tools they need to build. Up until the last decade, financial services innovation was held back, in part, because exchanging data between institutions was difficult.
But financial APIs, like those provided by Plaid for deposits/investments and Spinwheel for debt, have made financial data portable, allowing people to more easily mix and match products from various providers (opting for the best rates, lowest fees, most impressive features, and best user experience) and enabling the creation of a completely new class of products and services built entirely on the kind of financial data that APIs provide.
The importance of financial APIs cannot be overstated: an entire generation of financial management tools, neobanks, and lenders have been made possible as a result. For instance, QED portfolio company and leading personal finances super app Albert could not have been created without these financial APIs.
Despite the world moving toward increasingly standardized, open, and interconnected data systems, several industries do not have a robust API player - creating opportunity for the next “Plaid for X.” We believe that infrastructure enabling access to employment data (payroll, HRIS, and benefits) is the next frontier.
Employment systems serve as sources of truth for all employee records and unlocking the trove of data they hold could transform the HR industry and those that touch it. However, the employment tech stack is hyper-fragmented with tens of thousands of disparate systems for employment data each with their own esoteric and arcane sets of fields, definitions, and protocols and often with separate instances for each sizable employer.
Furthermore, the space lacks access to modern infrastructure to expose the data in a unified manner. This leads to a tremendous amount of brutally time-consuming and manual processes to interact with employment systems. In addition to costing companies time and effort, the lack of APIs is creating a persistent headwind to innovation, holding back new products with better onboarding experiences, real-time insights, and superior user experiences from being created.
Finch, one the companies to most recently join QED’s portfolio, addresses this exact problem - enabling applications to securely and seamlessly access critical information from employment systems. Finch makes it possible for their developer clients to access org-wide directory, payroll and benefits data across 200+ payroll, HRIS, and benefits systems through a single integration. In doing so, they serve as an essential building block for the next generation of business applications across HR, benefits, commercial insurance, and B2B financial services.
For example, Carta uses Finch to streamline employee onboarding and power their Total Rewards compensation benchmarking module. Human Interest - a leading 401(k) provider - has built on top of Finch’s API to automate participant onboarding/offboarding and deductions/contributions management. Strategic finance platform Mosaic is using Finch to unlock data on employee-related costs, which is critical given employees comprise the largest expense for most businesses.
There are many businesses - both startup and enterprise - using Finch to drive efficiency and create new offerings and user journeys.
QED first met Jeremy and Ansel a year ago when they were still a seed-stage company as we were forming a thesis on the employment infrastructure space. Since then we have tracked their progress and also heard from several existing QED portfolio companies who rave about their offering and the new products and experiences they unlock. We have been continually impressed by the execution, vision, and humility of Jeremy and Ansel.
Since the company’s Series A round announced in June 2022, Finch has grown revenue 12x revenue, continued to build out the most robust API in the employment space, and unlocked countless new use cases for their technology. At the same time, they have quadrupled their team to support this growing momentum, infusing the company with more world-class talent including an incredibly strong executive team.
We are thrilled to announce that we are joining General Catalyst and Menlo Ventures in a $40M Series B in Finch. Just as Plaid has opened the door for a wave of fintech innovation, we believe Finch’s platform will pave the way for a whole new category of tools designed for employers and employees.
The team plans to use the capital to extend coverage to more employment systems and expand into new employment data verticals such as benefits administration and new functionality such as automating payroll operations, supporting the company’s vision to make employment connected and programmable. We are excited to partner with Finch on the journey ahead and to see them further become a vital pillar of the global employment ecosystem.
If you are interested in learning more about Finch, please don’t hesitate to email me here.