PayScale, a 14-year-old Seattle Internet company that specializes in compiling compensation data, is receiving an investment of as much as $100 million as part of a recapitalization effort being led by Warburg Pincus. As a result of the deal, the New York-based private equity firm is taking a majority stake in PayScale by buying some existing shareholders’ stock and investing new cash.
“Warburg Pincus looks for businesses that have positive growth, underlying strong economics and proprietary data sets,” PayScale CEO Mike Metzger said in an interview. “We ticked many of those boxes for them. They got super excited about the market we’re serving and the people in that market we’re serving.”
PayScale, which employs 135, plans to bolster its workforce and enhance its products as a result of the investment. The company currently has more than 40 million salary profiles, using that data to help 3,000 business customers make accurate salary decisions. It claims to have the “largest online salary survey in the world.”
The company helps employees figure out how much they should be getting paid in their jobs, and prospective employees determine what they should make. It also helps businesses set compensation ranges for staffers, providing an immediate snapshot of what’s going on in the job market.
Customers using the company’s online tools include Cummins, Warby Parker, Zendesk, Clemson University and Covenant Dove.
Warburg Pincus is well known to those in the Seattle tech community, since it was the private equity firm responsible for taking The Cobalt Group private in 2001.
“At a time when businesses increasingly seek sophisticated analytics about employee compensation, PayScale’s offerings enable its customers to make better, faster and smarter decisions related to attracting and retaining the talent to power their organizations in a cost-effective manner,” said Justin Sadrian, Managing Director of Warburg Pincus.
Metzger noted that Warburg first approached his company about today’s investment.
“If you look categorically, the thing that has happened over the last 2-to-3 years is private equity firms have identified SaaS subscription-based businesses as an opportunity set that maps well with the investment horizon they have,” he said. “We fit into that bucket.”
Metzger said that until this year, he had not really though about PayScale partnering with a private equity firm.
“If you asked me about that five years ago about that, I wouldn’t have articulated it,” he said. “i would have said, ‘We’ll build a business and perhaps people will find it interesting and compelling and want to help it grow faster.’ And that’s the case here today.”
As of 2011, the Payscale had raised about $32 million in venture financing, including cash from including Fluke Venture Partners, Madrona Venture Group, Montlake Capital and Trinity Ventures. Metzger said that Warburg’s valuation was “very clearly” higher than Payscale’s previous funding rounds.
“Without a doubt we compete with Glassdoor for eyeballs, but we do not compete in terms of revenue,” said Metzger. “They sell a set of products that we don’t sell; we sell a lot of products that they don’t sell. They crowdsource for different kind of information than we do.”