The Kenyan startup Workpay, which specializes in offering cloud-based HR, payroll, and benefits solutions to businesses operating throughout Africa, has successfully raised $5 million in a Series A funding round. This round was spearheaded by the pan-African venture capital firm Norrsken22 and saw new investment from Visa. Additionally, the funding round attracted renewed commitments from a host of existing investors, including Y Combinator, Saviu Ventures, Axian, Plug n Play, Verod-Kepple Africa Ventures, and Acadian Ventures.
Paul Kimani, the co-founder and CEO of Workpay, has observed that small to medium-sized enterprises (SMEs) have a strong preference for all-encompassing, integrated solutions over the complexity of managing disparate systems. He notes that such preferences are driven by the desire for simplicity and cost savings, as using multiple software solutions for a single department can lead to increased expenses due to individual licensing fees.
In response to this market demand, Workpay, which began as a payroll-centric startup five years ago, has progressively broadened its service offerings. The company has been attentive to the evolving needs of its customers, scaling its features to include additional HR functionalities.
For instance, Workpay’s time and attendance tracking features are particularly valuable to sectors like manufacturing, where precise recording of employee work hours is critical. In contrast, businesses that operate with remote teams are more focused on assessing the productivity of their employees rather than their physical attendance. Workpay caters to this need with its performance management tools.
Kimani, who launched Workpay alongside COO Jackson Kungu, elaborates on the company’s growth strategy:
As our customers’ requirements have shifted, we’ve been motivated to transition from a dependable payroll system to a more expansive suite of HR services. Additionally, we’ve identified a strategic opportunity to incorporate financial services into our HR platform.
With businesses already utilizing Workpay for disbursing employee salaries, the startup is now positioned to offer supplementary services such as medical and vehicle insurance, and to form partnerships that facilitate lending, savings, and investment opportunities. By doing so, Workpay aims to deliver a more holistic solution that addresses the wider spectrum of needs for both its corporate clients and their workforce.
The increasing demand for payroll and HR solutions in Africa is partly driven by the expansion of global companies into emerging markets. This trend was highlighted this month when Payoneer, a New York-based fintech company, acquired Skuad, a Singaporean startup specializing in global HR and payroll, for $61 million. Earlier in the year, Deel, another industry player, took over South Africa’s PaySpace for just over $100 million.
Local African platforms like Workpay, SeamlessHR, PaidHR, and Bento are now facing heightened competition due to these international entrants. Nevertheless, Paul Kimani, CEO of Workpay, perceives the increasing global interest as validation of the market’s vast potential. He is not overly concerned about the competition from these global companies, but acknowledges the extensive work that remains to be done across Africa by both local and international firms.
He points out the complexity of creating a universal payroll solution for Africa, given the unique regulations and requirements of each country. For example, payroll systems in Ivory Coast are different from those in South Africa, and it will take time for global companies to tailor their products to the diverse African market. Kimani believes that, in the short to medium term, the competition from these global entities will not pose a significant threat to Workpay or other local players.
Amidst this competitive landscape, Workpay has been rapidly scaling up. The company has added nearly 500 businesses to its platform in the last 16 months and now serves over 1,000 clients across 20 African countries. This growth has been achieved even as Workpay postponed its expansion into Francophone Africa, which would have expanded its market presence from 20 to 40 countries. Additionally, Workpay reports a 1.5x revenue increase in the first half of 2024 and anticipates doubling its revenue by year’s end.
With the new funding, Kimani plans to broaden Workpay’s financial services, exploring innovative products that enhance the interaction between employers and employees regarding salaries. The company also aims to upgrade its performance management tools with AI to better assist businesses in team management and intends to continue expanding its workforce.
The latest funding round led by Norrsken22 follows a $2.7 million pre-Series A round last year, which included participation from the Norrsken Foundation, and a $2.1 million seed round in 2020. This round also saw continued investment from existing backers such as Y Combinator, Saviu Ventures, Axian, Plug n Play, Verod-Kepple Africa Ventures, and Acadian Ventures. Since its inception in 2019, Workpay has garnered nearly $10 million in investment.
