Rippling and Deel are currently engaged in heated competition both in the market and in the courtroom, accusing each other of engaging in illegal sales and marketing practices. Meanwhile, another approach to business growth is being demonstrated by Factorial, a Barcelona-based startup. This all-in-one HR platform for small and medium businesses has secured a substantial $120 million non-dilutive fund from General Catalyst, which Factorial intends to invest in its “go to market” (GTM) efforts, the term broadly encompassing sales and marketing expenses.
Factorial, which initially gained traction during the social distancing phase of the COVID-19 pandemic with a free version of their product, quickly amassed more than 60,000 users. After transitioning to a paid model, CEO and co-founder Jordi Romero reported to TechCrunch that the company has experienced a sixfold increase in customers and revenues over the past year, now boasting 13,000 paying businesses. The recently acquired funds will be used to capitalize on this momentum.
The announcement of Factorial’s new funding coincides with a tumultuous period for HR sales and marketing activities, highlighted by a legal dispute between Deel and Rippling. Rippling has filed a lawsuit against Deel, accusing it of collaborating with a spy to obtain confidential customer and sales information. Deel has denied these allegations.
Internally, Factorial is conducting an audit to ensure compliance with its code of practices and confidentiality agreements. The company recognizes the importance of legitimate sales and marketing strategies and plans to utilize the newly acquired $120 million to strengthen its market position without resorting to aggressive competition tactics commonly seen in the SaaS industry.
It is important to note that the $120 million is not an equity investment nor traditional venture debt. It comes from General Catalyst’s “Customer Value” fund, serving as a non-dilutive loan for which Factorial will repay from its gross profit achieved through the acquisition of new customers facilitated by this investment. The equity that Factorial previously raised, including a $120 million round at a $1 billion valuation in 2022, remains intact. This arrangement could potentially lead to future equity funding involving General Catalyst.
According to reports, Factorial has no immediate plans for a significant primary equity raise but may consider a secondary offering to provide liquidity for early investors and employees. Jordi Romero, Factorial’s CEO, explains that General Catalyst’s Customer Value strategy functions similarly to an equity fund without taking an actual equity stake. It offers funding to various startups aimed at boosting GTM operations and monitors portfolio performance akin to equity investments, minus the collateral requirements typical of debt arrangements.
Pranav Singhvi, Managing Director at General Catalyst and the mastermind behind the fund, explained via email to TechCrunch that this method of funding bears no downside risk for the company, as General Catalyst assumes the risk if the GTM investment underperforms. Companies typically awarded these funds are late-stage or public entities that have shown consistent sales and marketing success.
Factorial has now procured a total of $200 million from General Catalyst following an earlier $80 million acquisition in April 2024 under similar terms. Sanghvi revealed that General Catalyst’s assets under management have reached the “10-figure” range through their Customer Value initiative, which continues to allocate hundreds of millions monthly into sectors such as SaaS, direct-to-consumer, fintech, and gaming. He underscored this approach as a potential future model for financing corporate growth.
