The Pitch by Deel — Tel Aviv Regional Final

Hi everyone. How is everyone doing today? All right. A little noise. Not a lot of noise. I'm just going to say so far all the other cities were a lot louder. So, what did you think? Well, I arrived a little late because I had to actually work. No, but no, I thought the pitches were great. I think it's been amazing to see all the different events. And it's amazing to see how Israeli tech stacks up—we've done five countries so far, so six countries so far. So, it's very impressive.

Yeah. Well, for context, I'm the CEO of Deel. We're hosting this amazing competition. We are, for those who don't use us just yet, a global payroll platform. We help companies scale globally. And yes, I was in their shoes. I will say it was a little scarier. This feels a bit homey. It's very cozy. It's very small. Y Combinator Demo Day is something that takes quite a toll on you because there's a lot of people and it's a machine. It's not 35 companies; it's 200 companies. So, it's a lot scarier. The companies here thought they had it hard, but they might not have what to compare to.

Did you, when you were pitching back then, did you ever imagine Deel would be where it is today? No, of course not. You know, I still can't believe where we are. And I still think the fun part is—I think one of the things we've done well and we'll always do is we are a big company but a small company at the same time. You know, the way we think about things is we just want to build. We just want to have great customers and happy customers. So, I think telling you that I had any idea what I was doing back then is probably a lie. And probably even telling you I have any idea what I'm doing today is probably a lie.

Cool. All right. So, we're going to go all over the place, I see. So, we're going fundraising. Okay. Well, first of all, you know, I think fundraising is one of the toughest parts of the job. I think for every entrepreneur in the room, if you've ever raised money, it is, at least in my view, the worst part of the job. You know, I'm an engineer. I like to build. I like to be—we're a fully remote company, so I like to be in my home office and just code up stuff or design stuff or build stuff or talk to customers. Talking to investors is never the fun part of the job, but it's a necessary part of the job. I do think, you know, we've done a pretty good job. We've raised over a billion dollars in capital. So, you know, we've kind of learned over the years on how to do different things. I do think every single stage matters a lot. I think I've said that multiple times, but when companies are very early on, they haven't raised a lot of money. My view is always, you know, as soon as you can get some traction, take as much money as you can so you can go and build a great product until you get to the right product-market fit. Be super efficient and know how you spend money because the money is probably going to get you to—I would even say run your company. Like you don't know if you're ever going to raise money again. And you know what? If you don't, it's actually maybe not a bad idea either. And then eventually when you grow up and when you become a larger business, my view—which has really worked well for me, so if it's useful for you guys—is always consider every single round of equity like you're selling a piece of your company more than you needing money. And if you combine the fact that you're thinking, okay, like I need to run my company super capital efficient, I'm never going to raise money again unless I have to, with well, if you want to buy equity in my company, you're going to have to show me that you're the right person for us. Then you just flip your mindset in terms of how you fundraise and you approach every conversation very differently. So every single time we raised a round at Deel, my thinking was: is it the right people? Is it the right partners? And do I want to sell that part of equity to them? And it worked out all right.

It depends on your industry, right? If you're an AI business, you probably should raise money. But if you're a B2B SaaS that isn't going to get completely destroyed, then you know, yeah.

I mean, I think every entrepreneur makes a lot of mistakes. I don't like to think that way because I think every single mistake we made is what got us here, right? Like you could always go, oh, you know, when we arrived to our Series A, we had raised a seed of $4 million. We spent, I think, $200,000 or $350,000 in total. Could I have not raised? Maybe when we raised our B three months later, preempted—we hadn't even touched the money of our Series A. Could I have not raised? Yes, sure. But like, you know, in French you say with 'ifs' you can remake the world. That's probably the way to think about it. I think when it comes to fundraising, the most important part is not to over—some of my investors would not agree with this because I made their life really hard—but not overplay on the valuation side, but really understand who do you have in front of you? Do you really want to work with them? And are they going to actually be—it's kind of like a marriage, right? Like your investors, at least the investors that invest at that stage, usually know that it's going to take you five to 10 years to get there. And I've been married for four. I haven't even got into that with my own wife. So.

I think that's a pretty loaded question. I think there's a lot of different pieces to that. I think depending on your skill set, one of the things that has become very obvious to me—and I would say the last month and a half has been super fun but actually super intense in terms of what we've built. Maybe you guys haven't seen, but we actually released a standalone AI product yesterday called the KAG, and it's doing insane stuff. It's literally redirecting and fundamentally changing how we operate as a business. That product we built in a month and a half has automated over 100,000 hours inside of Deel. And one of the things I've realized is just the cost of building software has gone down. Right, like whenever we were building—Ben Horowitz is one of our investors, very close to us because we're a big portfolio company of Andreessen. I spend a lot of time with him, and he was always very adamant around like you need to have the best product in the world, right? That's the best way to build a great company—your product needs to be amazing. And I've always been very aligned with this. And I had a conversation with him recently where I said I agree with that, but now actually my mind has changed a little bit because the cost of building software has decreased so much, right? Because you can go so much faster than you could, that being able to go much more horizontal faster is something you should consider. And then going back to your specific question, I think generally AI has changed the game quite a bit in terms of how you should build products. And if you can build a great product that's maybe simple, like a ChatGPT wrapper, then I wouldn't raise too much capital. I would try to get to cash efficiency and pray to the gods that OpenAI and Anthropic don't do the same. If you have fundamental understanding of the world in a way that's very different than your average ChatGPT wrapper, then yes, if you want to be able to compete, that would raise a lot of capital.

There's a few. The first one is I love Mickey. So if you guys know who led the round, it's a fund called Ribbit.

One of the best investors, Nick and Mickey, that I've ever met. The fun stories I've tried to make... I literally, you know what, I've never tried to make anyone invest in my company. It's the only people I've ever tried to make invest in my company since our Series A. I've been pitching Nick for six years because I knew how not only fun but how much deepness and understanding they had in what the world is going to look like tomorrow. And this is the type of partners that I really want to work with. So the first obvious one is I really wanted Mickey on the cap. Actually, you know, we could have probably raised even at a higher valuation if we wanted to, which goes back to my first point. But you know, Ribbit never invests in growth, it's just not what they do. So getting them to the table was very important for me, and even if that meant taking a pay cut in the valuation side. I think the second part is, if you followed our journey, we've raised a lot of capital until 2021. The last round we had raised, I don't remember the exact dates, was 50 million at 12 in 2022. It wasn't per se like a big round, but you know, I think it was important for us to kind of remind the market of the unit economics and the business that we had built. Before, you know, we're over 1.5 billion in annual recurring revenue, been profitable now for three plus years. You know, I do think there is some value into showing the market who we are and what we do from time to time, and press and funding never hurts.

I will say the guys at Y Combinator have better lighting. So, they had it better at demo day. Actually, M&A is a very interesting topic for a lot of companies here because I actually think as you're going to build vertical AI software, because a lot of people are going to do this here by design and riding that wave, I do think there's going to be a lot of acquisitions just because of the expertise that you're all going to build into the vertical that you're going to have as companies are going to want to go and tackle them really hard. We've had a very unique approach to M&A at Deel, and the main reason is pretty quickly, and again I'm not sure it's super relevant to most of the audience here, but pretty quickly we realized that I spent five years trying to deeply, deeply understand payroll and HR. It was going to be really hard for me to spend as much time understanding immigration, all the different... we've done 14 acquisitions, right? So all of these different topics and bringing people to the table that has spent as much time as I had doing payroll doing those was just a way to kind of shorten the gap in terms of how much understanding we have about this. And actually funnily enough, AI has done... I think AI is going to be one of the biggest game changers actually in M&A now that you can migrate customers and codebase so much faster. Like we had built a very unique playbook in terms of how do we migrate those products because the last thing you want is like we've done 14 acquisitions, right? Like kind of like a Frankenstein of different products kind of put together. We always wanted to have something super clean in the back end and one solution. And we've always had that playbook that worked out really well for us. And if you know how to do this the right way, I think you can really leverage acquisitions the way we have. And if you think about Deel today, I think there is easily like seven to eight business lines that are doing 100 million plus in revenue, right? And a lot of that comes from the talent that we've brought from external and from outside.

So one of... it's funny because we've done a few and we've failed some acquisitions. So I have some learnings from that. It's always a very fun struggle because at the same time you want to empower entrepreneurs to be able to build the biggest company they can, and at the same time some people understand that, you know, for example, being part of Deel gets you so much more distribution and you can get in front of a lot more people a lot faster. So it's always this fun dynamics of like when I'm talking to an entrepreneur, like I want them to follow their dream and try super hard, but at the same time like I kind of see where they're going to struggle eventually and I'm like you're better off coming into the rocket ship with us. So the first thing is I've understood is 99% of the entrepreneurs I talk to have no idea how to do math. Like when you tell them, hey, like run your math, like if we were to acquire you at this or if you were to sell at three times this having raised like a two one run or two runs more, how much money actually comes into your pocket at the end of the deal. Most of them actually don't go all the way there and don't really think through dilution as much as they should when they have many offers on the table. The second part is what I've tried to do, and actually learned that from Philippe, is I think the best M&As are done when, and some people have different opinions, but when both sides kind of look back at the deal three, two, five, ten years later and hey, like that was the best outcome for both companies, and that's what we try to get to whenever we're working for an M&A. I think the last piece which has always been super crucial with us is like how does that fall into our product strategy. And you know, for example, right now like we've released an ATS, right? Like it's like an applicant tracking system, it's doing really well, AI first. And like I've had 20 companies in the AI bubble kind of coming up with the exact same idea, the exact same product kind of coming and talking to us. I do think a lot of people are tackling the exact same problem. So I do think right now whoever is going to be smartest about M&A is probably going to have the best outcome out of everyone.

Well, the easy answer for me is I'm actually doing this right now. So, the fun part about Deel is, depends who you ask. If you ask my employees and my teammates, I am the definition and the embodiment of chaos, right? I come in and I disrupt a lot of the work that they do, which is always a pain for them, but you know, usually it's for good stuff. Most of the time it's for good stuff. So I would say that actually Deel is being rebuilt from within as if we were an AI first company. And I think the last few months have really showed me the difference. Obviously I'm very biased, but the difference between a founder company versus an executive company, an external executive company, the pace at which today I'm able to kind of like take a step in and we've done some really big changes internally from, you know, moving from an IC to manager ratio of like 1 to 15, like we're trying out teams of one people. We've built some crazy internal products so good that we actually decided to sell it outside of the Deel ecosystem. So like we've really been able to redefine how the company is being built at a very foundational level. And I think a lot of that has been just transparently like me and my co-founder being able to dive really deep into building stuff ourselves. And one of the cool things is over the last few years I was always told, Alex, the company needs to scale, and maybe I'll regret what I'm saying, but Alex, the company needs to scale, you're a bottleneck on X and Y and Z, like you need to scale yourself. And I think like actually this whole wave has really empowered most entrepreneurs no matter the scale to really kind of come back into the weeds of the company and really changed how like some of the fluff that happens as you grow the business really happens. And I'm having probably the most fun I've had in like the last few years.

No, I have a different approach to this. The thing is it's a lot easier to get a team of 20 people to lean in really hard. It's a lot harder to get a team of 7,000 people to lean very hard, right? So, and my view is like I think there has been, and I'm sure some of you have felt it, like a significant shift in the last two, three months in terms of technology that really happened in terms of what's available to us, right? So my point was not... so we've kind of done something, I actually think we've done a pretty decent playbook where we've gone and we've said okay now every single person, which not every company does, right? Like every single person now has access to cloud and has like X amount of credits that they can spend on a monthly basis and if you need more credits come and ask and we'll get you more. And you know, getting a 7,000 people organization in like a couple weeks to switch from how they operate into that is super complicated, right? But being able to do this and pushing it, it kind of has to be top down. But on the other side like when they do get it, you just get so much more goods out of your team in terms of how much they can ship, how much they can build. And you know, we kind of wanted an approach where everybody's on an even playing field, right? Like I think the best people in the world today are going to be the ones that are the most curious. And the most curious people are not per se like the managers at companies, right? It's often like the IC that's seeing the world in a different way. And it was important for me to kind of like even out the playing field because I want everybody to have a shot at Deel in the future of the company and how we're building. And now that we've done this for a month and a half and we kind of built a lot of the tools around it and because I've been so pushy, you don't really have an excuse anymore, right? So you kind of need to really lean in in terms of how you build. And I think there is no matter which department you're looking at the company, there is no doubt that how we operate has completely changed. And you know, I think it's important to give people a shot to really be part of that. And that's, you know, I could have totally taken a hundred people in the company and just like narrow focus on them, but we really wanted the whole organization to follow through.

Well, for us, I want to see three people connect into the Brazilian pension ecosystem, or I want them to establish 300 plus entities around the world and have some very deep understanding of like payroll and finance and HR. So I think on that front we are pretty lucky where there's just a lot of like genuine infrastructure that's very hard to replicate. Plus, you know, I think we're still, although we're working and we're leaning in very hard, there's still some layers where payroll has to be super accurate. So you wouldn't just yet completely leave it up to AI. I think the second part is, it's a much, much deeper conversation, but you know, a couple of years back we kind of had a view of like what does a system of record look like today, right? Like this big conversation around like what a system of record is, like a Salesforce, like a Deel, right? And how do they... you know, a lot of people think of system of records as like very moaty because when you are a company and you're using a product, well, you know, you don't want to change payroll provider every day, you don't want to change HR provider every day, you don't want to have to migrate employee data from seven years ago and stuff like that, right? And one of the things we did at Deel pretty early on, which actually ends up being really useful for us, is we built API first, right? Because we built a business that is very, I like to say, unbundled and bundled at the same time, meaning I can sell you payroll in Australia or an employee in that country or I can sell you the full stack of HR. We basically built our products so that they fit within the stack of our customers, right? And it was super important for us to not build a closed ecosystem where people are forced into products, but more something that they can actually decide, hey, I want X, I want A, I want B, I want C, right, in a couple minutes. And in that whole process we kind of built a product that is API first. And I actually think the world is going to be... I don't know that, I think the world is going towards a motion where companies are going to start quote unquote vibe coding or building the things that they want to own and they want access to API for the things that they don't want to own. And I think HR is going to be in prime position for that. And we want to be able to say, okay, you want to own performance review, no problem. Here's the APIs to do learning or to do payroll.

No, I have a lot more just so you guys know. And we're... and you know...

Yeah, it's okay. It's okay. I'm prepared.

Yeah. 7,000 people, 120 countries.

So we started like this. So I've never worked in an office. I spent my youth taking the subway 45 minutes way in and 45 minutes way out to go to school. I'm kind of like the engineer that likes to roll out of bed and build. And when we started building Deel, combination of my laziness to go to work with the fact that we couldn't afford engineers in the US or in Israel made it that we hired people from... I think every single company in Israel actually used to hire people in Ukraine or in other places like that. So we're very aligned with that. We just kept that culture of building, hiring globally, and we kept on doing like we never really thought, hey, we need one place, one central location where everybody needs to go. Now, we do give WeWork memberships to people. So if they want to go to... it's very funny because if you go to Paris or if you go to Madrid or actually sometimes even Israel, like you'd go on Slack and you'd see like, oh, people in Deel London say I'm going to the Covent Garden WeWork, and there's like 150 people from Deel. It's basically our office without we really realizing. And I think what we do have offices from acquisitions, like I've had some amazing companies that decided that they wanted to take leases for 10 years. So until I can shut them down, I have an office in Berlin if you ever need.