Use case - P - D'Ornano + Co

Objective

New Investment

Investment stage

Venture Capital

New Business model

SaaS [Horizontal Applications]

Case Study

D’ORNANO + CO. PERFORMED HYBRID GROWTH DILIGENCE FOR A LEADING EUROPEAN GROWTH FUND IN ITS LATE-STAGE INVESTMENT IN A FRENCH PAYROLL SOFTWARE DEVELOPER

The investor wanted to complete a Late-stage investment round in an HR Tech SaaS developer whose platform automates payroll and human resource management tasks. The company had more recently moved into hyper-growth as HR managers embraced digital transformation, particularly as the pandemic forced companies to embrace more remote and hybrid work modes. Successful in its home territory, the company wanted to increase its penetration into broader European markets and expand product offerings to benefit from crossell opportunities on its existing customer base.

Challenge

Despite its hyper-growth, the bulk of its revenue came widely from a single territory, where it faced a competitive landscape. And labor and financial regulations in each expansion territory could be complex to navigate, requiring customization of products for compliance as well as sales strategies. In addition, the ability to crossell current customers to new services was untested. Still, the surge in startups across Europe provided a rich target of managers who wanted tools that could allow them to seamlessly manage administrative tasks. Last, the Company is at the intersection of several Tech verticals which complexifies overall assessment. Traditional due diligence is backward-looking and, for High-growth and Disruptive companies, does not provide comfort on a company’s ability to deliver sustainable growth and create value. Also, because traditional due diligence takes a broader industry approach rather than a more precise business model approach, it can only generate a surface-level view of a company’s financial health with a limited picture of an asset’s strengths and weaknesses to consider in the investment process.

Solution

The investor retained D’Ornano + Co. to apply its Hybrid Growth Diligence for Late-Stage VC product which identifies in a short timeframe any deal-breaking items, secures key aggregates, and that challenges the existence of a clear path to profitability. Going beyond classic due diligence, the firm’s HGD methodology layers Financial, Legal and ESG diligence on top of preliminary business model analysis and incorporates operational data mirroring the company’s economics in the assessment performed. The result is an in-depth analysis performed in record time to satisfy the expectations of an investor assessing a high-growth + disruptive asset in the context of a late-stage deal.

Mission outcome & key client impact

We assessed the target’s resilience through validating:

Its capacity to maintain a year-on-year double-digit growth;
Its ability to increase revenue from its existing SMB customer base by cross selling with new products;
The existence of a clear scalability of its model, since the solution manages sensitive payroll files and must mobilize customer support to avoid any error, which impacts gross margin.

In validating the target’s ability to grow at scale and its level of profitability, we helped our client confirm its investment thesis.

New Business Model

+ Vertical

SaaS [Applications] companies allow end users to access software applications over the internet through the payment of subscription fees. D’Ornano + Co. has historically conducted multiple SaaS [Applications] assignments for global investors.

Simplifying payroll processes, the company sits at the frontline between HR Tech and FinTech. The HR Tech* vertical gather companies developing software to improve HR management operations and hiring processes, including job applications, applicant tracking and screening, performance management, benefits administration, employee engagement and employee analytics. On the other hand, FinTech companies use internet, software technologies, and algorithms to offer or facilitate financial services traditional offered by banks. These services include software that automates financial processes, as per Pitchbook. D’Ornano + Co. has historically conducted multiple assignments for global investors in the FinTech space as well as in the HR Tech space.