As discussions swirl about gender pay disparities and more information becomes available about salary practices, PayScale keeps on growing. Now the Seattle-based compensation data company has a new financial backer to help continue its momentum.
PayScale today announced a majority private equity investment from Francisco Partners, a 19-year-old technology-focused firm based in San Francisco. The amount invested was undisclosed, but PayScale said it values the company at $325 million.
As a result of the deal, Warburg Pincus, another private equity firm that made its own majority investment in PayScale five years ago, will exit the business.
Since Warburg invested in 2014, Payscale has “made a tremendous amount of progress on any dimension you can imagine,” said PayScale CFO Mark Klebanoff. The company has grown from 100 to 450 employees and bolstered its customer lineup from 3,000 to 8,000 clients who use Payscale’s software to help gain insights into how they should pay their workers.
“Francisco Partners approached the business and with the way these things go, it made sense for Warburg to transition out and for Francisco to transition in,” Klebanoff told GeekWire. “From a business perspective, it’s full speed ahead with a new fiscal sponsor.”
Klebanoff added: “This is a great outcome for all PayScale stakeholders: investors, employees, customers, and frankly, the millions of people who we help have more informed pay decisions everyday.”
PayScale has been around since 2000. It raised about $32 million in venture capital from firms such as Madrona Venture Group and Trinity Ventures before landing the Warburg Pincus deal in 2014.
The company uses analytics, machine learning, and other technologies to “enable the conversation about compensation,” said Klebanoff, who joined PayScale in 2013. It has a database of more than 54 million “salary profiles” and uses proprietary algorithms as part of its methodology.
PayScale CEO Mike Metzger called the company “the clear market and technology leader in SaaS compensation management solutions.” Metzger has led the company since 2004 and is a finalist for the Big Tech CEO of the Year category at the GeekWire Awards.
“The future of PayScale is bright and we look forward to welcoming Francisco Partners into the shareholder base,” he said in a statement.
PayScale crunches various sources of data to help employers figure out what to pay employees, and inform workers how they should be paid. It makes money from small businesses and large corporations including Dish Network, T-Mobile, Macy’s, and others who pay to use its software.
Klebanoff said the company’s data shows that more salary transparency produces more engaged and motivated employees with longer retention and higher performance.
“Employees fundamentally want to believe they are paid fairly,” Klebanoff said. “You can’t create a culture of fairness without shared data and transparency about how pay decisions are made.”
PayScale also has consumer-facing products and produces reports such as “2019 Compensation Best Practices,” and “The State of the Gender Pay Gap 2019.”
Other recent investments made by Francisco Partners include Civitas Learning; Redis Labs; Talentsoft; Bybox; and LegalZoom. The firm has raised more than $14 billion to date and invested in nearly 100 companies. In 2016, it made an investment in Bellevue, Wash.-based company`K2 Software.
“Compensation-related friction continues to affect employers and employees globally,” Adam Solomon, principal at Francisco Partners, said in a statement. “The changing dynamics of the workforce, including the shift from Boomers to Millennials as the dominant cohort in today’s workplace and the entrance of Gen Z, has made it impossible for CEOs to leave compensation to chance.”
PayScale faces competition from sites such as Glassdoor, Indeed, LinkedIn, and Salary.com. The company has additional offices in Colorado, North Carolina, and Kentucky. It is ranked No. 3 on the GeekWire 200, our index of top Pacific Northwest startups.
