Factorial in depth: this is how the last Spanish unicorn was created, with Bernat Farrero (Itnig)
This week we interview Bernat Farrero, Itnig’s podcaster. His testing ground, he tells us, until he finds his great project, on which he is now focused: Factorial, the last Spanish unicorn after the $120 million round that closed in October.
We are going to find out how his path to creating Factorial was, the key data of this human resources software, some of which were so key that we had to wait a while to publish this conversation so that they would no longer be secrets, and his ambitious growth plans.
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Interview Bernat Farrero
10:07 In 2016 it is the Factorial birth, which is already quite a unicorn. Tell me: What is it and how does it work? What is the goal you are pursuing and what results is it giving you?
The last round has positioned us quite a bit on the map and since the publication we have grown by 35% the number of demos we do.
Factorial is a meta project, because at that time we had almost 300 people in Itnig between one project and another. We had problems communicating to managers what was happening with their sales team and having a global vision of the company.
There were software solutions for large companies, but no one did it for small businesses. In addition, there was none that did it in such a simple way, that onboarding or training was not necessary, but people open it and it works. Like Instagram or TikTok, but applied to productivity, work and management. That was how Factorial started.
First we started with a small team, making beautiful free holiday calendars and many people began to use us. We realized that people appreciated having an easy app to manage things. After the holidays, we began to control schedules, document management, digital signature, payroll management, finances, space management and we expanded horizontally.
We try to encapsulate all the employee management and the general management of small and medium-sized companies and help them with a tool focused on the person and not on a domain, such as finance software, which has a machine and a machinist. We are trying to change the paradigm and incorporate all the information of the company in all the domains in which we work and we choose what information each one needs. We ended up creating an information system that maps any process in the organization.
Today we have more than 300,000 people using the platform and more than 7,000 companies. We are present in 9 countries around the world and we are growing at an accelerated rate, incorporating between 800 and 1,000 new companies per month.
Our current work team is around 850 people. Something very curious is that I am pro-office and only our technology and product team is remote. All the go to market in Europe is in Barcelona. In the Americas, we have an 80-person office in Brazil, another 80-person office in Mexico, and a small office in Miami.
Of these 850 people, around 400 or 500 are go to market and customer experience. The go to market encompasses marketing, growth and performance marketing. We have a team of around 300, 370 people who make up the CDR team. And the customer experience team, which is approximately 70 people, who accompany the customer over the long term.
We are present in three strategic zones. The first zone is America, with Brazil, Latin America and the United States, the second is Portugal, Spain and Italy and the third is France, Germany and England. These 9 countries represent 50% of the world economy. They are very large countries, with a lot of people, complexity and history, where it is worth focusing because they have a lot of room to grow.
We choose the markets based on the level of market maturity and the level of competition, that tell me the potential for growth, as well as the friction and costs that I have to face to generate growth in that market. That is why we have a mix of different levels of competition, different levels of friction and different capacities for growth, which allows the less competitive markets to finance the more competitive markets and to finance themselves.
Factorial still does not generate money, but all the go to market, the marketing and sales costs, we recover it the same year that we acquire the customer.
27:07 How did you manage the investment strategy? What was your plan to receive the investment with Factorial? Have you ever considered going from investors?
There are people who say: it depends on what market you are in, what is your goal. But for me, when you are going to raise money, you only have one way: win or die and it depends on how aggressive you are. We have been so aggressive that we win or die, there are no intermediate points, but it motivates us a lot to continue growing. Right now, I’m thinking big and trying to help solve a problem in the world and when you consider reaching millions of people, you start thinking about investors.
For the moment, we have no incentive to go public. Our only incentive is to provide liquidity to investors and employees who have purchased shares. We (the founding team) care about growth. Now that we have the resources and we can continue to support ourselves for many years.
34:01 When do you think business will turn positive?
Being positive seems like the normal goal of a company. Interestingly, this is not our goal, but rather it is to maximize the number of companies that use our solution, to be able to change the way of operating and managing in all possible companies and capture the value that we generate as quickly as possible, with the resources that we have at our disposal. If we do not have financial resources in the market, we will finance with the clients themselves. Our investors do not invest expecting our profitability, we have a growth-oriented model.
Our ultimate goal is the conquest of the world. Once everyone uses Factorial, we will no longer invest in growth, but we will generate profitability by a tube and make all partners millionaires.
36:30 How do you do marketing?
Our DNA is based on SEO. We create a lot of content focused on generating value for our buyer persona, from the journey. All the previous investigations that the human resources personnel do on how to make a vacation work calendar? How to make a payroll?, redirects to us.
Once inside our website we have webinar, ebook, popups and landing that lead users to register and then we feed them with valuable content. More than a million people have downloaded things from our website, so we have a large database.
43:13 What was the most difficult interview you’ve ever done?
I recommend the one of Pablo Fernández, from Clicars, which has been one of my favourites. I loved it because I didn’t know him and I was impressed how in just 15 months he managed to build a successful company and sell it, while winning 5 Guinness records for open water swimming.
If I’m honest, I go to the podcast without any knowledge of who the guest is. This brings the advantage that it is a genuine discovery process, but in other cases it has brought me problems, like the time I received a lot of criticism because I interviewed the entrepreneur of Vice, who had won MasterChef and I did not know what it was.
But despite all the podcast I enjoy it a lot and I have never thought of delegating it to anyone. In addition, I feel that it is a kind of commitment to our environment. We are learning things and we have to share them, because other entrepreneurs have not shared them when they started. We always try to give it a technical focus, a scale focus and how we can share with a lot of people.
Itnig is a kind of very important umbrella focused on Spanish-speaking entrepreneurship, but it feeds back a lot to Factorial also. Because we’ve hired a lot of people who are fans of the podcast and a lot of clients come to us from the podcast.
51:53 How much is Factorial billing?
We have to end the year on the 30 million Annual Recurring Revenue, we are getting closer. In our billing model, we charge a service fee that typically lasts 8-10 years.
Our main challenge for next year is to reach the 100 million euros of turnover, that is, more than tripling our billing. If we achieve that, we will be in the top 10 fastest growing companies in the world, although it is increasingly difficult to get so many millions of euros in customers, because there are thousands of new customers every month.
We are more interested in more specialized channels, more niche. We do events, webinars, we have many human resources influencers who generate a lot of useful content for their audiences and to whom we support and give them resources. We don’t like the general mode and do some bus campaigns.
To meet the billing and growth goal, surely we will have to increase the staff, but not at the same rate that we have been doing. Next year we want to maintain the growth rate, but be more efficient in Headcount.
55:43 What is the usual size at which companies consider hiring a solution like Factorial?
Between 100 and 150 employees is the perfect size to start using a solution like ours. However, Factorial can start to be used from 5 employees. We have companies that have more than 1,000 employees and others that have 5.
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