‘We don’t need to raise capital to grow’: Factorial CEO Jordi Romero

0:02This podcast is brought to you by HSBC Innovation Banking, connecting you with what's next. Hello and welcome to the Sifted podcast. I'm Amy, Sifted's editor, and this week I'm joined by Jordi Romero, CEO and co-founder of Factorial. Jordi, last time I saw you, you were wearing lederhosen. And you were wearing a tracht, the typical Bavarian outfit, or with some pretzels, correct? Exactly. If you're wondering, we were at a conference in Munich where they highly encouraged everyone on stage to be in traditional German guard. But Geordie is Spanish and Factorial is very proudly Barcelona based, which we will be getting into.

0:41And I actually visited Factorial's office a very long time ago when I think I was Sifted's only employee and Factorial had about 12 employees. So we've both been on quite a journey since then. So Factorial began life as HR software. It's since expanded to do all sorts of things that a business might need, like expense management, product management and many other things. and it now has over 1 ,300 employees, over 13 ,000 business customers and a unicorn valuation. Earlier this year, Factorial raised its latest round of funding, which was an 110 million euro debt funding round from American VC heavyweight General Catalyst, topping up an earlier round of funding from them to fuel further expansion.

1:26So we're going to get into what that expansion might entail, how Jordi and team have got on on the journey from 12 to a thousand plus employees, and Jordi, how you plan to keep growing so quickly without breaking too much. Welcome to the podcast. Thank you very much, Amy. That was a great introduction. And apologies if you hear dogs barking in the background. We're very dog friendly and there's a lot going on. We're also changing offices, so you might hear a lot of noise around me. So Factorio has been on a bit of a growth spurt in this year in particular. You've gone from a 1 ,000 to 1 ,300 employees in just six months.

2:01What's spurred on that growth spurt? So I think it matters a lot to understand in which part of the economic cycle and tech startup. So we are influenced by what the investors do and also what our customers do. So we saw in 2022, basically, the whole venture world started collapsing. And luckily, we had raised a lot of money. We had become a unicorn and we had a lot of money in the bank. we decided to deploy growth, but progressively started adopting a more sustainability mode where we wanted to make sure that this cash would last forever. We were not in a hurry to become profitable, but we wanted to get closer and closer to that.

2:392024 was a year in which we managed to go from burning a lot of cash to continuing to grow without burning the cash. And then in 2025, we realized we still pretty much had all of the cash from our CEC fund raised in 2022. We were quite efficient, so we felt very confident in stepping onto the pedal again and hiring hundreds of people and basically accelerating our growth rate, which is something that's very hard the larger you get, but it's the current mode we're on. And what are you hiring those people to do? So we're hiring all over the place. The biggest team by headcount is sales and go-to-market in general.

3:13So we have a lot of SDRs and account executives, as well as a team that supports them. We're also hiring a lot in the product and engineering team. It's hard to parallelize in one single product, but a tutorial roadmap has evolved into covering a lot of problems for SME and mid-sized companies. So as you mentioned before, we started mostly focused on HR and there was a limit to how much we could parallelize building time management solutions, recruitment solutions, talent development solutions. But as we expanded into also finance management and talent development, we were able to parallelize, build more teams around those areas.

3:47And I imagine adding 300 people in six months hasn't been easy. Like, what do you have in place to kind of help you recruit that many people, onboard them, you know, ensure they know their way around the office? You know, we all know that just having new people join the team is hard work. How do you make sure that that in itself doesn't kind of slow down the business in the short term? And you mentioned a key word, which is office. So we're actually mostly office based. Almost all of our team comes to the office every day of the week. And our biggest office is in Barcelona. We have a couple of smaller offices in other cities, but we're having to find this talent wherever they are, relocating them to Barcelona and then onboarding them and also scaling the physical space that we have to work as a team.

4:32We're in the middle of a transition to a new, much bigger building actually right now this year. It's going to be a progressive transition. The biggest challenge is obviously all the hiring managers that you have. I realized that our bottleneck always was the middle management. So I spent a lot of 2024 identifying these gaps, areas where some of the middle layers of Orchard were weaker, and making sure that we would find the right people with potential and develop them or hire somebody externally and reorganize the teams. Once that is in place, everything else takes care of itself. We have great software.

5:04Obviously, we use Factorial for all of our people operations and all of our onboarding and knowledge centralization. but it is still a team effort. So as long as you have the org chart without any major holes in the middle and higher levels, it's doable. So when you say it was important to bump up that mid-level management, is that so that those people are empowered to hire into their own teams or why was that layer so important? So that layer is very tricky because we're a company that's growing very fast, that's reaching a certain scale, which is in Europe. There are not many companies in Europe that are going from 100 to 100 of annual revenue building software.

5:44So we cannot really just find an experienced person that has been there, done that in Europe. We can find them in the U.S. sometimes, but then the cultural challenges are not small. So it takes a particular type of talent that can adapt to a totally new continent and style of working and type of talent. So we worked a lot on identifying the right attitude and the right personality that these leaders that were successful at Factorial Hub, and then working in developing potentially internally or finding them externally. I realized that some of our best hires didn't come from SaaS companies. They came from totally different industries, but we identified some similarities in terms of the economics or the fast scale or the type of talent that they will need to deal with.

6:26And we were able to identify, convince them that this was the right career move for them and relocate them to Barcelona and make them successful. I think we had a lot of people with the right intention, but not a lot of people that are able to take a company into a fast growing scale motion. This is hard. What we do is pretty hard. It's fun, but it takes a very unique personality to be willing to do the very hard work that is required to grow at this scale. What are some of the attributes that you've realized are really important in those people and those hires? There is one which is, I feel old by saying that, but there is a bit of a challenge also with the generations that we work with.

7:05Our average age is quite young. We have around 30 years old as the whole company because a lot of people in the entry level are much younger than that. It's willingness to work. I think some people maybe got convinced by social media that it's very easy to be successful and to have a dream lifestyle without putting in the hours and putting in the sacrifice. So we've realized that something as basic as being willing to work hard, especially the younger you are, to earn your spot and to earn the responsibility and the scar tissue that is required to be able to make tough decisions later on, you know, we shouldn't take it for granted.

7:43And we can identify that by understanding what people did when they were young. I focus a lot when I interview in the personal choices that people make. What do they study? What do they choose as a side project or hobby? Do they take a leadership role in any organizations they're part of? Do they make sacrifices? Do they abandon projects when they start getting hard? Kind of trying to visualize in their younger selves when they started making their own decisions is, in my opinion, reflecting pretty well what they're going to do in the day-to-day job. And what about, you mentioned a lot of people you need to relocate to Barcelona.

8:19Where are you tending to hire people from and what percentage have actually been moved to Spain? Terrible place to be forced to go to, I'm sure. Well, when you're tired of London, we can have a conversation. but actually I think we've recruited quite a few people from the UK. You know, we need to build on our strengths. Spain and Barcelona, we definitely have a lot of things that we need to work on but it's a beautiful city. The weather's pretty nice. The food's amazing. We have a really rich international community so we use that as a way to attract mostly Europeans. It's much easier for a European to move to Barcelona because everything is a couple hour flight away and, you know, like$100 pound, whatever, to fly back home and visit the family.

9:02We've also hired people from the States, but also when you start hiring experienced people, which is when it's justified to hire from far away, they tend to have families. And then the cost of relocation is very, very big in terms of convincing a bunch of people to move with them. We've done it where it makes sense, but I would say most of our hires come from parts of Europe where the weather, the people, the food maybe are not as nice as in Barcelona. And is that quite a significant cost for you? Do you like help pay for people to move? I'm just, I guess I'm interested in being a business that has that need where like lots of talent isn't just necessarily on your doorstep.

9:37How much does that kind of set you back maybe a little bit? Yeah. It's one of the biggest frictions to not grow faster is the quantity and the quality of talent that we have. We have two reasons to import people. One is because we want the best talent in the world and they might not necessarily live in Barcelona already. So we need to import some of them. But the second is with a global business. So Spain is a relevant but minority percentage of our business. We do a lot of business in France, in Germany, in Italy, in Portugal, in the UK, in the US, Mexico, Brazil, and a few other countries. So we need to hire Germans and Italians and French people to work from Barcelona for their native market.

10:15So we're forced to hire all of this native talent from other countries. And yeah, you need to figure out what point in their life is the ideal point to hire them. It's easy enough for us to convince them, but they're mature enough to be productive soon. We need to have a pretty good value proposition. For example, in our sales team, I would consider one of the best things you want to do is if you want a career in sales, come join a startup lab factorial. We have a very good method to train people in how do you become a very productive, successful salesperson. You're with us for a few years, maybe at some point you move back to your country and you get another job in tech or in another industry, but it's a great way to accelerate your careers.

10:54And obviously, you know, there's the coefficients that is upside that you can benefit from if you participate in a very fast-growing company. And so you are currently expanding quite a lot in some of those countries you mentioned, right? I think Germany, France, and Italy. Why those countries in particular? Like, what do you, what factors go into deciding where to focus your expansion efforts? So we build software for small and mid-says companies to manage their business, as I said at the beginning. And we need, first of all, a lot of businesses. And second, we need them to have enough pain that needs solving, the need for living.

11:29So Germany, France, Spain, and Italy, and Portugal, which is a smaller country, but they all have something in common, which is the compliance and the burden of administration of the governments on running a business is quite high. So the pain that they're experiencing is very high, which means that if we can help them, then the value of our help is a lot. And there are a lot of SMEs, a lot of very healthy companies in this, you know, 20 to 2000 employee segment, which is our, which is the core of our business. It's a really rich ecosystem. There are other countries, for example, the U.S., which is a huge economy.

12:01It's very rich in SME. But the cost of administrating, you know, HR and financial workflows is a little bit less than in Europe. So we'd rather penetrate more the European market because there is more pain to be solved than expanding into some other geos where they're not experiencing as much pain. And one of the things that is really, really favorable about Toriel is that our TAM, our target addressable market is huge. We are industry agnostic. So we work with all sorts of companies, restaurants, VC firms, financial services, hospitals. They all have employees. They all have a lot of administration and bureaucracy that they need to take away from.

12:40And they all want to take better care of their people. So differently, but they all have the same fundamental problems. So we work with every single SME and midsize company we can in the countries where we operate. I mean, you've just said it right. You have just an enormous amount of potential customers and ways the business could develop. So how do you plan out your roadmap? How do you think, like, no, let's just get way more customers in Germany versus, no, let's go into a new geography versus let's add on a new feature to the software? That question you just asked is the trillion dollar question.

13:15It's the hardest thing that we do day to day. And it's a bit of this maybe not very well-known problem of scaling up startups, which is that we need to be founding a few startups every year. So we need to identify a new segment or a new product for the existing segment or a new country that's similar enough to the other ones and find product market fit in that segment, build a team for that segment, decide how much we're willing to fund that new initiative. So we're constantly doing this, which is as hard as starting a company from zero. The difference is you don't go fundraise to a VC, you go fundraise to the leadership of the company.

13:50And we're making budget allocation decisions basically all the time and finding talent that is as good as a founder to discover business in areas where I didn't discover them yet. But this is the secret sauce. How do we do that? Well, we're very rational people. We understand sizes of markets. We understand how many people work in different industries, in different company sizes, in different countries. And then we look at similarities with existing successes of our companies and differences. And then we always try to find enough pain where we know there's money to be made and there is value to be delivered, but not so much pain where it's going to be possible to build value in the first year of operation.

14:31And then eventually incrementally we can go to these very hardcore pain points or countries or industries. There's a lot of fast iteration, working with the market, making mistakes, learning from them, redeploying the talent, redeploying the capital in the things that are working. And is that something you encourage members of the team? Is it like there's a specific business development team that are kind of tasked with continually identifying these new areas, testing them? You know, how does that work internally? Like, how do you, I'm guessing this isn't just you and your co-founders sitting there thinking this up anymore, is it?

15:06This is a bit of a quoting Yoda. Do or do not. Do not try. I think if we had a business development team that was doing experiments and trying to come up with this genius idea for then go and execute, I just don't believe in that model at all. So we have teams with ambitious targets. It probably requires that they do something new to achieve those targets. They cannot just keep doing the same stuff because they'll mostly get the same results and the results expectation is going up. So they're incentivized in trying new things. But the way we experiment is we just do it. So that's why I just hinted at it by saying we redeploy talent and we redeploy capital.

15:46We'll build a team for Portugal and then we'll start selling. And we don't wait and first adopt the product because we're in a business where there's a lot of what we do has to do with the law and the regulation and the taxes. So you need to localize the product. But we don't first send the PM, a product team, and localize the product and then send the marketing team and then send a sales team. We send them all at the same time. They have a shared objective and they learn as they go. As a team of two or three founders would do, one would code, one would sell, one would market. They just don't need to fundraise.

16:21Everything else they need to do exactly as if they were an early-stage startup. And then, you know, we know what it takes to start from zero to one, from one to 10, from 10 to 100. So we give them reasonable but ambitious targets and we're able to reassess. And at some point we say, look, the numbers aren't good enough. So maybe we made the right choice. It's fine. Let's find adjacencies. Let's find other hypotheses where we can do. And then at some point, if the same team continues to fail, then it might be a team problem. but that almost never happens. We end up finding business somewhere. That's why we need very generalist talent, people that are very curious, people that are willing to operate in different countries, speak different languages, do different roles.

17:00So it is a very challenging type of talent that we need, but it works.

17:17as well as what you need to meet those big milestones and get you to the next stage. With a relationship management team who know your sector at your side, international connections at your fingertips and a wealth of tools at your disposal, HSBC Innovation Banking is here to help power your growth and connect you with what's next. To find out more, head to hsbcinnovationbanking.com. And you have, I believe, once grown via an acquisition. You bought a company called Fuel, which was an expense management startup two years ago. Why did you make that choice rather than do that in-house? And is that something you plan to do more of?

17:56So the funny thing is we did both at the same time. We expanded organically and we expanded inorganically via acquisition. And then we merged these two initiatives. And some had pros and cons, and we tried to get the best out of the combination of those. It's basically a way to accelerate. The thing with M &A, and I'm by no means an expert, but I would like to be one because I think it's a very powerful tool once you reach a certain scale. It just accelerates, right? But it needs to be opportunistic. The ideal target is not just they're waiting for you. The ideal target might be there, but they just rate money.

18:30They want to be independent and they're actually starting to compete against. Or maybe one of the co-founders quit or maybe their fundraise goes down and they cannot close. or maybe the CEO gets tired and something happens to them and they want to move on. So it's very opportunistic. So we need to understand who are these ideal targets. And in our case, they are for product, but also for country. So there are companies that do very similar things that we do in countries where we want to grow faster or we want to enter. And then that makes sense for us to make a strategic M &A, a strategic acquisition.

19:03Or there are companies that operate in similar markets, but they solve a different problem that is adjacent to what we do. We can accelerate, like in the case of expenses from HR management, it was kind of evolution from where we started. And it helped us acquire talent, customer base, and a product that was working that would accelerate our development. I wish in the future you are writing a lot about our acquisitions. And is there a team on that? Or is that, again, something that will happen kind of organically from within the business? There is no dedicated team yet, although we're starting to block more and more dedication from existing people in the company to focus on M &A targets.

19:44This is a skill, I guess, like anything else that we need to develop and we're in the process of development. I don't believe in hiring for something that you don't know how to do yourself. So I feel like we, Factorial, myself, my co-founder, my core team need to figure out how to identify and close M &A targets before we go and hire a guru that knows everything about M &A and solves it for us. In general, we've always done it. We've solved it ourselves first and then we knew what to look for and who to hire so that they can do better and at scale. So figure out how to do M &A well is on your list.

20:16What else is on your list of kind of figure this out myself first, then go hire some pro to do it? So it's funny, I just came from admitting about that one point because that's literally how I frame my priorities. We're a very large organization in headcount. So I'm trying to figure out how does AI amplify the productivity and we're a growth company. So we don't want to reduce headcount, but we want to amplify the growth that we can achieve with the same headcount or even a growing headcount. So that is one of the other things that are very, very high up on my to-do list is implementing AI, not in our product, which we're already doing and it's looking incredible, but more in our day-to-day operations.

20:51I was a bit skeptical of some of the hype cycle of AI in the early days. Yes, great summaries. Yes, great emails maybe, but I wouldn't really send them most of the times where we start feeling, okay, shit, this is doing our job better. No, we are. So it's time to have it do the job that we are doing and then have the humans do whatever is the next thing. What do you think are some of the areas that are kind of ripe for being used? I mean, you mentioned earlier, right, that a big proportion of your talent is sales team. Like where there could you be using AI to do the bits humans don't want to do anymore?

21:25So our headcount sales and customer experience, which is how we call the team that looks after our existing customers. So, for example, we have customers that are pretty small and customers that are pretty decent size. We are implementing different tools from AI voice calling agents that take care of all the questions and problems of the small accounts so that the same headcount can dedicate more time to the larger accounts and find more opportunities and growth, etc. While the long tail, which is how we call it, of small accounts can be most of the times taken care of by automation, by AI. That's one big area where we think we can deliver a much better customer experience, much better revenue performance with the same headcount or even growing, but not as fast as it should happen.

22:08In the case of sales, I try to imagine a RoboCop, SDR, PDR account executive where, you know, if you imagine the best salesperson in the universe, what would they do if they didn't have to sleep and eat? So just do that. And there is a lot of research that goes on before a great phone call from an SDI or an account executive. There's a lot of follow-up. There is a lot of pre-work that happens behind the scenes, like pinging via LinkedIn, sending emails, you know, sending some of our latest content or brand campaigns, just making sure that all of this, that the best person would do if they didn't have to go to sleep or eat.

22:43but just have an AI companion do that format. So we're in the process of implementing all of that. Have you had any AI experiments that failed? So we were very careful with customer base because the brand of a business is how you treat your customers. So we've been quite conservative and we've done experiments that didn't see the light of day because we didn't feel they were giving a good enough customer experience and that could potentially hurt a customer. and our goal is to do the opposite of course, is to help the customer and it could damage our reputation. So we didn't release some projects in that space.

23:18Also in our product, we have been building prototypes and even some small releases of AI chatbots and great summarization tools and so on. Some are still up there. They're fine. They're better than if you didn't have anything, but I don't think they live up to the expectations of this magical world where AGI kind of replaces or enhances what humans can do. They're nice to have. I don't think they're very transformative. Now we found a way to implement AI that is really transformative. It's much harder than all of these prototypes that we've all been doing collectively in the software industry in the last couple of years.

23:59But it really impacts the way that users interact with the software and even what is the goal of the software in the first place. We've talked a lot about how the company has grown over time. At what point, at which jump did your role in the company change most dramatically? I mean, as it continues, the first big jump, it'd been many years ago. But when you go from IC, from legal contributor, mostly leading people, but you're still very close to all of the details of the company. So it's easy to lead and get dirty with all the details, all the execution of the company. Up until 100-ish people, I would say I was aware of pretty much everything that was going on in the company.