A New Unicorn: Spain’s Factorial Wants to Double Down in Brazil

The startup secured a $120 million Series C led by Atomico with GIC, Tiger, CRV, K-Fund and Creadum

Co-founders at Factorial.
October 11, 2022 | 06:00 AM

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Bloomberg Línea — Challenging a scenario where data provider CB Insights shows that 18 unicorns emerged globally in the third quarter of 2022, compared to 136 during the same quarter of last year, Tiger Global nailed a new billionaire startup: Spain-based HR platform Factorial.

The startup secured a $120 million Series C led by Atomico, a European investor that currently has $4 billion in assets under management, at $1 billion valuation. GIC, the Singaporean sovereign wealth fund, also joined the round alongside all previous investors Tiger Global, CRV, K-Fund, and Creadum, that followed so they wouldn’t be diluted.

Jordi Romero (CEO), Bernat Farreto (CRO), and Pau Ramon (CTO) founded Factorial in Barcelona six years ago. Experienced in building software, they started to think about how to apply software to human resources processes, which, according to Romero, people management is a thorn in an organization’s side.


Factorial designed a platform in which users don’t have to handle integrations, synchronization, and data. “It should be easy to use so that we could have the company fully engaged with the software and we could offload a lot of work from HR managers, which are typically overwhelmed,” said Romero, in an interview with Bloomberg Línea.

Rather than traditional software that is remunerated through licenses, in a SaaS (Software as a Service) model, Factorial charges a subscription and has a price per employee per month, depending on the plan of that customer it can start in R$ 20 ($3.84).

As the company grows and uses more products it can grow the subscription.


“It aligns the company’s interests with our interests. So if we were selling upfront the company would have to take a very big risk with lots of money and maybe they don’t like the software or it doesn’t work. Now with this modality, they take a very small risk, because we are taking the risk. If it works, over time we both win. They didn’t have the risk to invest massively upfront and we have a long relationship that can expand over time.”

Currently, Factorial has 7,000 customers across nine markets (six in Europe, Mexico, Brazil, and the US).

Rule of 40

The market usually applies the rule of the 40% ratio to evaluate software companies’ business performance. The rule of 40 relates to growth/profitability and preaches that the combined growth and profit margin should exceed 40%. It means that either a company should have a growth rate of 40% and 0 profitability or, 30% to 10%, and there it goes.

Asked about how this rule applies to Factorial, Romero says the startup is way ahead of 40%. “Our growth right now is 270%. Although we are not profitable, we have a very good outcome in this metric. We have our own rule of 40, which is the rule of 100,” he said.

The CEO sees that if Factorial grows at only 100% it can become a profitable business. If it grows faster than 100%, as it is now with 270%, it loses money. So that is why they looked for new investment, as Romero believes it is worth growing as fast as the company can and covering losses with venture capital.

“Because then we have a much bigger business and we can keep compounding existing business profitability from that point. And now in this hyper-growth moment, it’s worth capitalizing on the growth opportunity that we have.”


While Series C onwards has slowed funding in Latin America, according to LAVCA (Association of Private Capital Investment in Latin America), the executive says there was “an expectation reset” regarding valuations.

“We are very aware of what is happening in the market and we see that comparing in the traded stocks from the companies that are in Nasdaq or NYSE. But we saw that a company that grows very fast in a very large market with healthy unit economics, with good metrics, is still very valuable for venture capital investors.”

Brazil will receive the greatest slice of the pie

Romero says Brazil is by far the fastest-growing market for the Barcelona-headquartered startup, so it will receive the greatest part of the new investment round. “It’s a very large market. It has particularities around HR, it’s a unique market that you need to be fully aware of in terms of regulation and operating businesses. If we invest in localizing for this market, I think there is a huge opportunity.”


Factorial has over 80 people in Sao Paulo’s office, which opened this year. In Mexico, there are about the same number of staff, but the office started last year. “We are really bullish on our growth in Brazil, we are hiring aggressively, at least doubling for the next few months, from the customer, software, developers, designers, and marketing people.”

-- The title was corrected to clarify that Tiger participated in the round, but did not lead


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