In August 2024, Skuad, a global payroll and HR startup, achieved a notable milestone with its acquisition by Payoneer for up to $81 million. Founded in 2019, Skuad managed to scale its business rapidly, helping small and medium-sized businesses (SMBs) with international hiring, payroll, and compliance in over 160 countries. This exit underscores several key strategies for startups looking to grow fast and eventually exit through acquisition.
As a new father and someone involved in tech, I can’t help but draw parallels between startup growth and child development. Just like a child’s early learning stages, a startup goes through phases of rapid adaptation, correction, and eventually achieving key milestones. Skuad’s success was no accident—it was a culmination of understanding its market, building the right relationships, and focusing on scalable, impactful solutions. It takes time and pivots. Adapting to your market.
The Blueprint: Focus on Acquirers and Market Fit
One of the most effective strategies for fast growth and a successful exit is aligning with players who may be interested in acquiring your company. Skuad didn’t try to reinvent the wheel; instead, it focused on solving real problems in payroll and HR—domains where potential acquirers like Payoneer already had established interests. Startups need to identify the gaps in the market and fill those with scalable solutions.
Skuad focused on international payroll management—a space that was increasingly important as companies began to hire distributed teams globally, especially post-COVID. By creating a strong product and demonstrating traction, Skuad positioned itself as a valuable asset for a company like Payoneer that was looking to expand its offerings.
Revenue and VC Funding: Accelerators or Necessities?
When Skuad raised $24 million from investors like Beenext and Anthemis, it was clear that venture capital (VC) funding can speed up growth. However, Skuad’s CEO Sundeep Sahi offered a noteworthy insight post-exit: “Don’t chase VC money.” This points to the importance of building a sustainable, healthy business first, rather than relying solely on VC funding to drive success .
VC funding did play a role in Skuad’s expansion, but it wasn’t the only factor in their success. For companies looking for a lucrative exit, VCs can indeed provide introductions, help with deals, and offer strategic guidance. However, the core focus should be on building a product that meets market needs and creating a revenue stream that can stand on its own. Skuad, for example, was bringing in around $10 million in revenue by 2023, which likely played a significant role in their acquisition multiple .
Lessons for 2024 Startups: Can the Model Be Replicated?
Can other startups follow this template to secure a similar exit? Absolutely. The key takeaways from Skuad’s journey are:
1. Focus on Scalability: Build a product that can easily scale across multiple markets. In Skuad’s case, this was providing solutions in over 160 countries, allowing them to service a global market.
2. Target SMBs: While other HR tech competitors like Deel and Rippling focused on larger enterprises, Skuad saw value in the SMB space, particularly in emerging markets. This focus helped differentiate them from competitors and attract Payoneer, which also targets SMBs .
3. VCs Aren’t Everything: While VC funding helped Skuad grow, it wasn’t the main driver of their exit. A sustainable business model and high-growth recurring revenue are far more attractive to potential acquirers than simply raising money. As Sahi noted, building a healthy business trumps chasing VC dollars .
4. Acquisition Readiness: For startups seeking acquisition, it’s important to demonstrate strong market traction, revenue potential, and strategic alignment with a buyer. Skuad achieved this by focusing on the growing trend of international hiring and offering a solution that was easily integrable with Payoneer’s existing services .
Stick to Simple, Scalable, and Your Forte
Startups looking to exit should focus on building scalable, simple solutions that align with market needs and potential acquirers. Skuad’s exit serves as a template: target a clear market, focus on creating value, and stay lean. VC funding can help, but it’s not the only factor. What really matters is building a business that solves problems, scales efficiently, and attracts attention from the right buyers.
With the right approach, startups in 2024 can still achieve significant exits by focusing on simplicity, scalability, and market alignment, just as Skuad did.
Can someone in 2024 replicate Skuad’s model and succeed?
Creating a business exactly like Skuad in 2024 and achieving success is possible, but it requires careful consideration of several factors, including market dynamics, competition, product differentiation, and scalability.
Key Considerations for Success:
1. Market Dynamics:
• Skuad tapped into the global HR and payroll market, which has seen strong growth, particularly with the rise of remote work during and after the COVID-19 pandemic. This market is still evolving, but competition has increased with well-funded players like Deel, Papaya Global, and Rippling.
• The demand for global payroll services is driven by the increase in distributed teams and international hiring, which is a lasting trend. However, for a new entrant, focusing on specific niches like small and medium-sized businesses (SMBs) or emerging markets might help carve out a space in this crowded market .
2. Competition:
• The space is highly competitive, with established companies like Deel raising significant VC funds and gaining substantial market share. In 2024, entering this space means competing not just on product features but also on price, customer service, and integration capabilities with other business platforms like accounting and payments.
• Differentiation could come from offering specialized services, such as industry-specific solutions, compliance expertise, or tailored payroll systems for specific geographic regions.
3. Product Differentiation:
• Skuad succeeded by focusing on simplifying international hiring for SMBs, particularly by providing payroll, compliance, and onboarding services in over 160 countries. A new business needs to offer either a more comprehensive solution or something that makes it easier, faster, or more cost-effective for businesses to manage their global workforce.
• Exploring the use of AI for automating compliance checks, blockchain for secure cross-border payments, or analytics for workforce optimization might offer a competitive edge.
4. Scalability:
• The scalability of your product is crucial. In Skuad’s case, its ability to handle payroll in over 100 currencies across many countries made it appealing to a broad range of customers. Ensuring that your platform is scalable from a technical perspective and flexible enough to handle complex regulatory environments across multiple regions is key.
• Consider leveraging cloud infrastructure and robust APIs to make your product more adaptable and easier to integrate with clients’ existing systems.
5. Funding and Growth:
• Skuad raised $24 million to fuel its growth, which helped it expand quickly. In 2024, VC funding can still play a significant role in accelerating your business, especially if you need to scale quickly across multiple regions. However, as Skuad’s CEO pointed out, “Don’t chase VC money”—focus on building a healthy, profitable business first .
• A sustainable business model, strong unit economics, and recurring revenue streams are crucial. If you can demonstrate these, VC funding can help scale operations, expand into new markets, and improve the product.
Challenges in 2024:
• Increasing Competition: With well-funded competitors already in the market, a new entrant will face the challenge of gaining market share and differentiating its product. You will need to be agile and innovative to compete with companies that already have large customer bases.
• Global Compliance: One of the toughest aspects of the global payroll business is managing different labor laws, tax regulations, and compliance requirements in various countries. This requires deep expertise and continuous updates to remain compliant.
Opportunities:
• Untapped Markets: There are still geographical regions and industries where international payroll and HR services are under-served. By focusing on these niche markets, you could avoid direct competition with the biggest players and carve out a successful niche.
• Specialized Services: Offering highly specialized services, such as compliance with industry-specific regulations or features tailored to fast-growing sectors like tech startups or renewable energy, could help you stand out.
Conclusion:
Starting a business exactly like Skuad in 2024 can be challenging, given the competitive landscape, but it is not impossible. Success will depend on identifying unique market opportunities, differentiating your product from existing competitors, and maintaining a scalable business model. If executed correctly, it’s possible to secure a lucrative exit similar to Skuad’s acquisition by Payoneer.
References:
1. Goh, M. (2024, September 16). Don’t chase VC money: Skuad’s insights from $81m exit. Tech in Asia. https://www.techinasia.com/dont-chase-vc-money-skuads-insights-81m-exit
2. Azevedo, M. (2024, August 7). Fintech Payoneer is buying 5-year-old global payroll startup Skuad for $61M in cash. TechCrunch. https://techcrunch.com/2024/08/07/payoneer-is-buying-5-year-old-global-payroll-startup-skaud-for-61m-cash
3. Gunderson Dettmer. (2024, August 8). Gunderson Dettmer represented Skuad in $61M acquisition by Payoneer. https://www.gunder.com/en/news-insights/client-news/gunderson-dettmer-represented-skuad-in-dollar61m-acquisition-by-payoneer
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