Human Resources (HR) Company headed by Alex Boise is becoming the fastest-growing software startup in Silicon Valley history, promising to simplify overseas hiring. However, the company is in the crosshairs of US regulators, who have expressed concern that the company may have ignored compliance standards it is required to adhere to.
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Since launching in 2019 to share, a San Francisco-based startup, is challenging the complex world of international labor law by using its substantial $675 million in venture capital to help other companies with legal and human resources activities in more than 100 countries. Much like the original Uber-Lyft dispute, Deel has struggled to expand quickly, even if that means customers can skirt the rules.
“We’re pushing the boundaries when it comes to global recruitment,” says Deel CEO Alex Bouaziz. “It’s not what people are used to.”
Yours software were an instant success. Deel’s revenue jumped from $1.4 million in 2020 to $169 million last year due to the global shift to remote work fueled by the pandemic. Sales are expected to more than double this year to around US$350 million. In terms of annual recurring revenue, a popular metric in the software industry, the startup has experienced the fastest growth in the industry to date.
In 2021, Bouaziz was on the list Forbes 30 under 30. The following year, he and his co-founder, Shuo Wang, 34, briefly hit the billionaire mark, thanks to a fundraising round that valued him at $12 billion. However, the secondary market valuation subsequently dropped to around $7 billion, resulting in current assets of around $850 million for each co-founder.
In the sights of the American government
The quick action had consequences, however, and Bouaziz set up shop on Capitol Hill, home to the U.S. Congress, to address issues with regulators concerned by allegations that Deel misclassified its own full-time workforce as freelancers. Bouaziz insists it was a misunderstanding and has scheduled two days of intensive meetings to clarify the situation. That includes speaking with five members of the House of Representatives, who co-wrote an open letter in July expressing concern about “serious violations” of labor laws.
“If Deel can’t possibly enforce employee classification laws themselves, and they’re in the business of helping their clients classify their employees, how solid can their advice be?” asked the legislators.
Misclassification of employees was not the only government problem that caused problems. At the beginning of September, the startup came under investigation by the Commodity Futures Trading Commission due to the fact that the American authorities officially charged a client of My Forex Funds with fraud. Bouaziz alleges that Deel cut ties with that client, as well as more than a dozen other similar foreign exchange trading firms, on the advice of its banking partners.
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Some famous clients including Nike d Subway, were unhappy with the situation and asked to remove their logos from the site. However, Bouaziz clarifies that both remain Deel customers.
Bouaziz hired a head of political communications to step up Deel’s lobbying efforts in the US. Instead of reacting to regulations, it hopes to stay ahead of the curve and avoid the fate of companies like Uber and Airbnb, which have suffered significant business consequences after running afoul of regulators.
“The same thing we’re doing today in Washington, DC, we want to do exactly the same thing in Brussels,” he adds. “I think a lot of governments would ideally prefer to work with us than with anything else.”
Creating a Deel
These disruptions are unlikely to significantly reduce demand for Deel services. The workforce is inexorably becoming more remote and global. Boisy is the living embodiment of this shift, dividing his time between his home offices in Paris, London, Tel Aviv and Dubai.
After the failure of the first launch (a video creation app called Lifeslice), he reconnected with former MIT colleague Shuo Wang in 2018. They spent weeks building debt collection software before abandoning it to become an overseas HR platform.
When Covid-19 forced large-scale remote work, Bouaziz and Wang saw a tipping point. With a $14 million Series A funding round in May 2020, Deel has been quick to establish overseas entities. So if a client wants to hire someone in Germany, for example, that person would technically be hired through Deel’s German business.
In the early days, a five-man team nicknamed the Marines was tasked with moving quickly from country to country, uniting local businesses. Speed was vital. If they set up a single-country business too late, Wang says, Deel could lose a geographic market to smaller rivals like Remote ($3 billion valuation) or Oyster ($1 billion).
Deel ended up raising four rounds of funding, increasing its valuation to $225 million (September 2020), then $1.3 billion (April 2021), $5.5 billion (October 2021), and , finally to $12 billion (May 2022).
The difficulties of global labor law
Laws around the world are not entirely clear for companies that hire people on behalf of other companies. Deel is comfortable working in areas that some in the industry consider gray in terms of compliance.
CEO of Slite Platform, Christopher Pasquier, shared that he initially used the startup Deel to hire people as service providers, as hiring full-time employees wasn’t ready yet. He admits that, from a legal point of view, these people should have been classified as wage workers from the beginning. Pasquier points out that while the company may have taken the shortcut, it was an important necessity at the time.
Bouaziz, of course, insists that great success doesn’t come from cutting corners, but simply outrunning your competition with what he calls “Delhi speed.” “If we don’t act quickly, our actions will have real consequences for people’s livelihoods,” he says.
For the most part, he says lawmakers need a crash course on what Deel does and how it can help its constituents. “We’re helping a lot of small businesses get access to talent and we’re helping a lot of people in the U.S. work for big companies overseas.”