Jordi Romero, Founder and CEO at Factorial: Factorial raised $150m at a $2.5b valuation

0:00Jordi Romero:Hello and welcome back to the Scaling Europe show. I'm Seb Johnson. Today we have got some very exciting news from a very great guest. Jordi is joining us. Jordi is the founder and CEO of Factorial, one of the most exciting companies we've built out of Europe in the last 10 years. And today they are announcing some phenomenal news. Jordi, take it away. Well, thanks so much for the invitation, Sepp. Great to be here. We're very excited. Today we're announcing that General Catalyst is investing in Factorial, $150 million, a$2.5 billion valuation. And it's very exciting. Factorial just turned 10 years old.

0:31We were reborn as an AI native company, and we're very excited to see the capital behind it to start growing even faster.

0:38Jordi Romero:It's absolutely amazing news. And as you mentioned, 10 years you've been on this journey. How does it feel to be at this point 10 years in? Well, I would say it feels younger than ever. The energy that AI brought to our world is crazy. It also brought a lot of confusion in the capital markets, that's for sure. But we're happy to see that we came out very, very strong with such a good partner as General Catalyst and the feedback from our customers and the accelerated growth that we've been experiencing for the last few quarters. And why now? Why was the right time to go to the market where it's such a big sum of cash?

1:10So, as you said, we did have a bunch of cash already from the past. We raised our Series C four years ago. We pretty much didn't touch that. We've been able to operate and actually accelerate the growth rate without consuming the capital. Last year, we started seeing the transformation of our product from a software product with so many functionalities to more and more agents that start doing the work for our customers and really multiplying the potential of their headcount. and this year we decided to go all in, decided to raise a bunch of capital to be able to accelerate inorganically. So the main reason why we raised this round is to be able to buy companies and accelerate inorganically the growth of Factorial.

1:53Jordi Romero:That's super interesting. Do you have a view of the type of companies, the location? What are you on the market for? So right now we find ourselves leading across Europe. We are a company that was born in Barcelona. We're very strong in Spain, but also in Germany, Italy, France, Portugal. And we decided to conquer Europe, accelerate as much as we can here. Our customers love the solution. There are a lot of companies that have the problems that Factorial solves. So pretty much going to focus expanding our presence in Europe. That's amazing. And talk a bit about General Catalyst then because they were involved in Factorial before, but only through their, I guess their customer value fund.

2:34Jordi Romero:Now they're kind of taking equity for the first time. what gave them conviction to come in it's been an interesting story with general catalyst actually they did gave us an offer to invest in factorials equity many rounds ago um that didn't happen we we went with a different partner factorial grew a lot and they came back to us and say hey we still love the business even if we're not on the cap table and they um offered what you mentioned the customer value fund which is a way for us to invest in the sales and marketing budget and effectively align the CAC with the LTV because we're a software subscription and we charge monthly to most of our customers.

3:10There is a lot of upfront investment in growing and they helped us finance that gap. And that's been fantastic for the cash flows of the company. So we, you know, developed the relationship with them and improved it over time. And they said, hey, you know what? We would also love to be part of the CAC table of the company to own a chunk of the company. And we really like them. So we are more than happy to welcome them to the CAC table right now. And I think that's one of the things that you'll see General Catalyst do more and more of, which is be a partner of companies from the beginning to all the lifetime of the business.

3:39And we like this long-term oriented mindset. I think this is a very European thing of building companies that survive their founders and they live for generations to come. And I think in that sense, we are very aligned building something that is sustainable and very, very long-term oriented.

3:55Jordi Romero:Can we talk a bit more about the customer value you find just for people who don't understand it? because it's not an equity amount. And as you mentioned, it kind of enables you to invest in marketing and expansion. And they've come back in again, right? They've expanded the amount of capital that they're giving you through that fund. So can you, I guess, give a bit more information about how much more they're giving you and what it enables you to do? Yeah, absolutely. And let me clarify the numbers. So right now we are announcing $150 million equity raise led by General Catalyst. For the last couple of years, General Catalyst has invested up to$200 million in the customer value fund.

4:28And now we're also announcing that we are expanding this customer value fund investing by another up to$440 million. So the equity is the new component. The customer value fund, we're expanding into a very big number, which basically gives us infinite funding to grow as much as we know how to. The customer value fund is a way to finance our sales and marketing. It's non-dilutive. It's capital that general capital raises from their LPs the same way they do with regular equity funds. and they give it to us so we can acquire new customers and then pay back after we collect from our customers. So it is a non-dilutive way to grow the business organically.

5:06And as I said before, align the long-term value of the customers with the CAC. So we don't need to spend our equity cash to invest in acquiring customers. I mean, it's a bit financial, but I hope it makes sense.

5:20Jordi Romero:No, it's probably it. It makes a lot of sense. It's a really interesting model. I guess not a lot of VCs are doing it. Can we talk about the transition that I guess you and the company have been on? I think four or five years ago, you would be very much seen as an HR tech SaaS platform. Now you're very much a AI workforce operations platform. Can you tell us a bit about what that transition means and how that journey has been? Yeah, it's been a lot of fun. I mean, I was born as a software as a service and the cloud started really being a thing in the startup world. So my first company was pitching software and cloud very, very hard.

6:00I think that the industry got to know SaaS very, very well, and we knew how to build it, how to market it, how to price it. And then this incredible revolution happened, where we went from having a technology that can be a companion to users and can give them insights and can allow them to do a little bit of automation of workflows, to having a technology where humans can delegate part of the work and they can have them as a true platform that actually helps them multiply the potential of every human being inside of the company. So for the last couple of years, but especially since last summer, I think with the ascent of harnesses and cloth coat and these full autonomous agentic experiences, we realized this works.

6:44This is really a true value for our customers. At Factoria, we have something very particular, which is we help our customers model all of their compliance data, all of their employee data, their contracts, very, very delicate, sensitive and private information of the business that a lot of users don't feel comfortable exposing to other random AIs that they find online or that they use on their private life. So we said, OK, what if instead of allowing our customers to get their data out of the platform and giving it to another AI, we give the AI directly on top of the data and we build the agents directly in factorial.

7:19So we started with the most common workflows that Factorial helps our customers with, such as time management, clocking in, clocking out, time off request, shift planning for companies like a restaurant or a factory where they need to manage all the shifts of all the workers. Instead of having a glorified spreadsheet, we have a true scheduling agent that helps the shift leader, the human that's managing the location, for example, take care of the entire complexity of people getting sick, people coming in late, people wanting to work extra hours and do this proactively for them. Then we started building it across other domains like performance management, employee feedback, evaluation, career path, compensation, variable compensation, goal achievement and tracking, and even products in the world of the CFO, like expenses and procurement.

8:08So basically, what I'm telling you is like, it makes a lot of sense that there is this database of confidential private data of our customers, this layer of compliance of all the regulations that we have a lot of, especially in Europe, that we are very good at understanding and helping our customers manage, where the agents work directly in it to do the work for our customers. So that's been a lot of work and a big transformation, especially in the way our products are built, in the way our customers interact with Factorial. But the world is ready. The world is definitely ready for this type of partner that is not just a software that you look at once in a while, but it's a true colleague that helps you do this stuff as you focus on hiring the best talent, developing them, motivating them and helping the company grow and thrive.

8:55Jordi Romero:And I guess as the CEO of the company that is taking the company on this journey, and I guess is sort of coming out of the side of it, is there any advice that you would give to other big, I don't know, other large companies that need to go through this transition or are looking at doing this transition? Is there any advice that you would give them to get the business on board, to shift the business? I'm not big on giving advice, but I think our learning has been, And there is too soon and there is definitely too late. I remember very well when Factorial started getting what we call product market fit.

9:33Because as an early stage startup, some companies start scaling a go-to market before they're ready and they're just wasting money and potentially going out of business. Or they wait too long and then somebody else takes a big chunk of the market. I think with the AI, we've experienced this tension of not knowing when to bed the farm before the technology wasn't ready, but also being extremely fast once it was clear. I think once you feel it, you know that it's there for us. It was the development and the maturity of the harnesses and this more agentic experience that I think, to give them credit, Anthropic and Claude Code were very strong pioneers in.

10:15And then very fast understanding what this could mean in the day-to-day of our customers. We spend a lot of time talking to customers about their day-to-day, their problems, attracting better talent, promoting their talent, helping them achieve their goals, helping the company succeed and the people inside the company succeed, talking to CFOs, heads of HR, heads of IT. So understanding what particular problems they have that we are best positioned to solve. And once we have a strong opinion on how we can do that, then going all in. And the biggest challenge is always with people. So helping people understand how big of an opportunity this is and how fast we need to move to make sure that we are there for our customers when they need us the most.

10:58It's communication. It's the type of people you attract. It's being aligned as a company with our objectives and the way we celebrate or the way we challenge ourselves. Like we've always done, I would just say with a level of intensity that I've never in my life experienced before.

11:14Jordi Romero:And big value of$2.5 billion makes you one of Spain's, one of Europe's most highly valued tech companies across the region. When you look across Europe and you look across European tech, what opportunities do you think present itself for Europe specifically?

11:32Europe is, I think, the best place in the world to build a technology company. We have incredible universities and research centers with extremely, like, you know, best in the world type talent. and you see this in the labs, and you also see this in all sorts of technology companies, we have access to the best engineers and the best designers, particularly in Barcelona, in the world. So we love taking advantage of this talent and allowing them to build a career in Europe without having to live for a better opportunity outside. In our case, we're in the world of workforce operations. Workforce operations in Europe are complex.

12:08There are a lot of countries. There's a lot of regulation. There is more history that we need to help our customers with. So I think it gives us an edge and an advantage to actually be natives from this ecosystem, particularly because we are from Spain. I'm from Barcelona and the company was born in Barcelona 10 years ago. It's a smaller country than other geographies, which I think also gives us an advantage of being truly global and multinational early on. And you see this over and over and over where companies founded in smaller countries are much more successful, are going global than companies being born and being born in potentially significantly larger customers.

12:44In our case, again, not just Europe, but Barcelona, inside of Europe, has multiple things to offer. We have a large team. We're around 1 ,700 people right now. And most of those are not from Barcelona, not from Spain. They're actually Germans, they're French, they're Italian, they're Portuguese, they're Britons, they're Americans. They're from all over the world coming to Barcelona. The lifestyle, the weather, the multiculturality, the international vibe that these people feel and live in Barcelona is a huge advantage for them to come here early in their career and then in a fast-growing company with a lot of career development opportunities such as Factorial, they stay here and they grow and get promoted a lot, which gives us a very motivated, very intense team in Barcelona, which maybe for somebody in other parts of the world is hard to imagine, but it's incredible once you come and see it.

13:32Jordi Romero:I think the Barcelona ecosystem is really interesting. I was there for Project Europe like a month or five weeks ago, and I met a lot of people in the Barcelona ecosystem. And it feels like there's a lot of really exciting companies that are cropping up and it feels like a great opportunity for AI companies. And I think you're right about the being global from day one. I'm from London and we've had an amazing run of great fintech companies that have all got to like one, two, three billion, but very few have ever gone international because the UK market was big enough. It's interesting that we've had this mindset where you can just service London financial services or London customer base.

14:08Jordi Romero:And I think you're right that from Barcelona or from other European markets, you have this opportunity to think big and go global from day one. What about Barcelona specifically? You know, it does feel like there's a moment of optimism and momentum in the local ecosystem there. Where do you think that's coming from? it's it's an ecosystem which means it feeds itself um i think barcelona represents diversity it represents engineering it represents design we have architecture we have art we have a lot of history of people crafting making and building and we're just doing it now in the world of technology so historically we have been a great place for inventors uh to to invent if you combine this with the lifestyle and the diversity and international community that we have, we can get extremely strong builders from local ecosystems, as well as extremely strong builders or marketers or sellers or executives from other parts of the world that want to come market and sell the products that have been invented by this community.

15:14And it fits itself. The more of this talent, international talent that gets together and succeeds. It attracts more capital, which means there are more spin-offs. There are companies that get created by former employees of companies like Factore, which attracts more capital, which attracts more talent. And this has been growing for a while. I've been part of this ecosystem since around 16, 17 years ago. And it was almost non-existent. And to the point where now I'm proud to see that we are one of the top spots in Europe where the best teams are not just being started, but actually coming from all over the world to start their businesses here.

15:51Jordi Romero:And you spent, I think, five or six years in San Francisco. Is there anything that you've learned from your time there that you think we need in Europe to kind of instill in our ecosystems, whether it's Barcelona or Munich or Stockholm? A lot, a lot. I was very lucky to spend a few years in Silicon Valley. In my early to mid-20s, that was definitely a formative time. Back in the day, my previous company didn't find VCs for a Series A, you know, that made any sense. There were some VCs, but they just didn't make any sense to me. I think we were able to import the mindset, the ambition, the boldness.

16:28You know, we don't just build products for our local ecosystem. We actually build global products, or we try to, most of us, and hopefully succeed. And that attracts the capital and the talent. And I think outside of the tech community, tech community is very ambitious and it's very strong. I think that what will help the ecosystem develop overall in Europe is the broader society. The fact that we celebrate more the people that are willing to take risks. We celebrate even when people fail, even when people go through a tough time. We don't just push them down, but we hope to help them come back and get another chance is very important.

17:09the way that people perceive risk and failure in Europe I think has a lot to learn from ecosystems like particularly Silicon Valley. US is a big country so I'm speaking mostly about Silicon Valley and now maybe New York and some other cities have very strong tech ecosystems but I think that is something that we can learn from the comment though that I want to make is all the entrepreneurs I met just don't like to complain about their ecosystem, they just think what can they do to make it better? And I'm there with you. You're doing a lot for the European ecosystem. And I also want to do a lot for the European ecosystem.

17:45Let's just build a great success story. Let's just try ridiculous things that make no sense because we think they're the right thing to do. And we are very convinced that if we try hard enough, we'll succeed. And then let's inspire others to make bold decisions, take risks and celebrate when we win and help each other out when maybe it's a tougher time.

18:04Jordi Romero:Yeah, I love it. I couldn't agree more. We just need more risk takers, more acceptability of failure. It doesn't matter if you fail. In the UK, we have this terrible culture of bringing people down who are successful and really knocking people if they fail. In the US, it feels like people just move on and get on with it. You're 10 years into this journey. Where will the company be in 10 years' time, you think? With the rate of change of the current tools available to us, it's so hard to predict. But what we are seeing is that the value we're able to provide to our customers just grew between 10x and 100x.

18:38I'm not sure exactly where, but it's at least 10 times more powerful how we can help our customers grow. Our goal is to help our customers be more successful, grow faster, grow their people, develop their talent, make them happier, more successful, make more money. All of the above grow at least by 10x. Right now, we're seeing such an impact in the people operations, in the talent development, in the HR function, in the IT function, that we have a lot of work to do. So the one thing that I pretty much can guarantee will happen in 10 years is that we'll still be around. Because, again, going back to this, I think, European roots is things compound.

19:16And if we know that we'll be around in 10 years and in 20 years from now, we're able to think long term. We're able to make very big, bold bets that will only pay off once we're really aiming in the long term. And then it will allow us to continue to attract this type of talent that really wants to make a difference. And so our commitment as a founding team and as an overall company is that we'll stick around, we'll make this business sustainable and as impactful as we know how to be. And then I'm sure that the compounding will allow us to achieve amazing, incredible things.

19:53Jordi Romero:And one last question. You are growing at an insane rate. You're hiring for a bunch of roles. What is the one trait or characteristic that makes a great employee at Fractorial? we want people that care very deeply about what they do we don't want mercenaries we want people that want to be proud of their work that will not just trade hours for time but actually want a place to shine and to develop their craft and to be the best engineer the best designer the best sales rep the best marketer the best finance operations person that they can be and and to learn from the best. This usually comes with humility.

20:34People that are willing to be part of the team and that are humble to learn from others and humble to make mistakes and to learn from them and continue to challenge themselves. And people that are very ambitious. The level of drive that you can feel around the office. Also people that are willing to come to the office five days a week. People that are willing to work hard and to do more than they are asked to do because they think is the right thing for the customer, they think it's the right thing for the team. These are very important traits. So as you can see, it's much more about the attitude and the personality than necessarily the hard skills.

21:07The hard skills, they can be taught, they can be learned and people that are curious and humble learn very, very fast. But the way that people present themselves is very important and it's contagious.

21:18Jordi Romero:Amazing. Well, look, congratulations again. This is a phenomenal round for you, the team and the wider ecosystem. So well done. And I look forward to seeing you expand, grow and become even better. Likewise, Seb. Thanks for everything you're doing for the European ecosystem as well. Thank you. I love doing it. Amazing.