Ruairi Kelleher spun off his fast-growing fintech startup with $80M in funding to help global companies manage taxes and payroll around the world. His company, Immedis has raised $80M from top-tier investors like Lead Edge Capital and Scottish Equity Partners.
In this episode, you will learn:
- Ruairi’s top advice for other entrepreneurs
- Ideas and listening to the market before launching
- Making acquisitions work
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
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About Ruairi Kelleher:
Ruairi Kelleher is CEO of Immedis and a member of the company’s Board of Directors. He joined the wider Taxback Group in 2012 and was an integral part of the re-positioning and launch of Immedis in 2016.
Ruairi is responsible for the corporate direction, strategy and M&A activity at Immedis, enabling the senior leadership team to drive innovation in international payroll and tax services through our cloud-based solution, Immedis. Since joining the company, Ruairi has worked to share the strategy and vision with employees, clients, partners and the wider global payroll industry to promote a new vision of global payroll consolidation through global tax expertise and integrated agile technologies.
Connect with Ruairi Kelleher:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a very exciting guest, and I think that the story he’s going to be sharing with us is quite remarkable. Everything is starting from spinning off a very exciting business out of the company where he was working previously. The growth that they have experienced is remarkable. So without further ado, let’s welcome our guest today. Ruairi Kelleher, welcome to the show.
Ruairi Kelleher: It’s a pleasure to be here. Thanks a million for having me.
Alejandro: Originally born and raised there in Dublin. How was life growing up there?
Ruairi Kelleher: A lot of times, I really liked Dublin. I had an American mother, so I got to spend quite a bit of time on the West Coast of the U.S. in San Francisco, visiting my grandparents at the time. Outside of the weather, Dublin is a great place to grow up. I still live here today, so I think that tells a lot about it. I’m glad to be here. It’s actually sunny today, and it’s a rarity here. So when the sun does shine in Ireland, it’s one of the best places in the world. If we could just get that all the time, it would be great, but from a living perspective, I think there are very few placed in the world that are as good as Ireland.
Alejandro: I hear you. I’m wondering if having your mother being from the U.S., perhaps that mindset, the American dream, the ambition, and all of those things that maybe you got inspired by it and maybe one day you told yourself that perhaps growing up one day you would have your own business or make a big difference as a business person. Would that be the case?
Ruairi Kelleher: Yeah. I never thought about it exactly like that, but I do look at it like my mother’s father is actually Irish, so it’s a full circle. He went to America after WWII and became very successful in a consulting company in San Francisco. I did grow up around that. You could achieve anything, and the U.S. is a great place to do that for an Irish guy going over there in his early ‘20s and end up with a really successful big consulting company in San Francisco shows the opportunity that is America and that ideology of the American dream is something that’s very true. I think I traveled a lot to the U.S., or I used to travel a lot to the U.S. before the last year, and I look forward to going back again. What does strike me in the U.S. every time I’m there is the entrepreneurship, the ability to grow businesses, to live out the dream. It can be a little bit corny, but actually, it really is true.
Alejandro: Do you think that maybe now, as you’ve been able to compare and all of that, would you say that Ruairi Kelleh maybe in Dublin, things are starting to open up a bit more where you don’t have to be a lawyer or a banker or a consultant, and it’s still going to be well-viewed if you decide to become an entrepreneur?
Ruairi Kelleher: Yeah, it’s definitely becoming more and more so. You’ve got a lot of the big type organizations here: Salesforce, Google, Facebook, Stripe. A lot of the big ones have big headcounts here. From overseas, they come across, and they’re here for tax purposes, but they’re not. They’re here – there are huge headcounts here. They’ve put down roots in Ireland as a European headquarters. From when all you’ve seen is college-backed in early 2000 to now, it’s wildly different in terms of the opportunity. When you look at the graduate rounds, the deal mill rounds of going into the consulting firms, the Big Four accounting firms, and the law firms. A lot of the top talent is looking elsewhere now to get into these different types of organizations. There’s not yet a clear path. It’s interesting. We actually have a system called [0:05:01] that was settled to support that in terms of help graduates find a path into those organizations. I think definitely in Ireland, we are still slower than the U.S. I think we’re still a bit more cautious than the U.S. I think that impacts our venture ecosystem. It’s not as risky as the U.S. and doesn’t have the risk appetite of the U.S. I think we still have a bit to go on that, but I certainly think we’re going in the right direction.
Alejandro: Very cool. In your case, the direction that you took was to go to university and basically studying a combination of business and law. But very early on, you knew that being a lawyer was not your thing, so how did you end up thinking that way?
Ruairi Kelleher: Yeah. I wanted to be a lawyer for various kinds of reasons. What you said earlier about how it was very stable and a somewhat sexy kind of thing to do was to become a lawyer or a banker or accountant. After the first year in law in Ireland, too, your first courses are land law and constitutional law. Both of them put me to sleep very, very quickly. I realized very early that I didn’t have the discipline to do that much reading around subjects that are just not that interesting. Very quickly, I didn’t have the appetite for it and focused more on the business side. I’ve always loved math and problem-solving. Even to this day, we’re talking about a payroll that’s around mathematical numbers, analytics, and solutioning problems, and reading what it is, and global parallelism. That’s something I always really enjoyed was solutioning, and in law, that takes a long, long time.
Alejandro: Absolutely. So then, as a result of that, you graduated; you got into retail, then management consultancy. This landed you eventually working at Taxback, and that’s where you really got exposed to the problem that you’re currently solving with the business that you’ve started. I’d like to hear how that experience was for you, what you were seeing, especially when you went more on the international side, and how was that journey for you, which was pivotal, like an initiation into your becoming an entrepreneur.
Ruairi Kelleher: When I joined Taxback, the business at the time was launching its first B2B product on the tax side. Taxback, all the way from its founder, Terry Clune, founded Taxback back in the mid-‘90s coming out of the university. He’s always been an entrepreneur and still is to this day an incredibly entrepreneurial environment to work in. It’s about seizing opportunities that are big and global when I speak to Terry about what the ambition and the drive are all about. When I came in in 2012, in a typical Taxback fashion, which we found out what they were trying to do was tackle a big market that was dominated by very slow-moving, large organizations. At the time, it was the Big Four accounting firms. What we were going into was assignment management, which is still a very complex piece of tax work that any organization that sends someone overseas has to manage, whether you’re managing tax and payroll and multiple jurisdictions at the same time and understanding how that ends. The customer service was with an accounting firm was less than ideal because you’re dealing with almost two separate organizations even though they may be the same name. In the Big Four, they’re generally independent organizations, so you’re dealing with two different people on two different sides of the assignment. 1) It’s a bad customer experience. 2) It was very costly for the organization. The group had noticed that through doing a lot of individual tax returns for people abroad, seeing the amount of corporates who just couldn’t deal with that, so they ended up paying for it themselves. We launched a product, the Global Mobility product, and we went straight into pitching it against the Big Four and big organizations. I think that’s part of our DNA, and our ethos is to go after problems that are on a global scale and find a solution to utilize the technology. We did that from day one in the tax element of Global Mobility. We won a number of big projects in the very early days, which gave us the momentum to continue growing.
Alejandro: And payroll became quite a substantial thing that it was like a breakthrough moment where the company understood that a spin-off or allocating more time and resources to it was what made sense. Why don’t you walk us through that process, through that sequence of events because the people that are listening, maybe they may be a little bit more used to coming up with an idea and then launching it and giving their notice at the corporation where they’re working. But in this case, obviously, there was an idea that came up, and you were part of it and essentially ended up being a spin-off where you still had the partnership of the company that you were working.
Ruairi Kelleher: Yes. In global mobility tax, one of the key elements is payroll. So to do the withholding of tax for signees abroad, payroll is one of the main attributes to be able to do that. We were running an element of payroll in doing what we were doing. I’ll never forget it. Mark Graham, our Chief Commercial Officer now, and I sat down with Terry in the office one day, and we were mapping out the strategy. We felt that we needed to rebrand our section of TaxBack to give it a more standalone feel because our TaxBack.com at the time was and still is a very successful B2C business, and a lot of it is based on students, tax returns, and the transient workforce. We felt that was confusing to our customer base, and we were pitching to big corporates. At the time, we were talking about renaming a section of the business, but actually, something went bigger. We sat down with Terry. He, like most brilliant entrepreneurs, look at things very simply at times. They take away a lot of the confusion or a lot of the hypotheses. We looked at it, and we had a huge demand for running payroll on a local international level for our big customers. A lot of demand was coming to us to do that for them. Quite simply – I’ll never forget it. We sat there, and Terry said, “Everyone in the world gets paid all the time. There’s a very small proportion which is experts, so why don’t we target the bigger market instead of the smaller market?” Which was a big shift in mentality for us. It was out of our comfort zone because we were, at the time, we were very good at what we did, and we were very good at selling what we did. To somewhat put a pause on that and go in a totally different direction and start from scratch again was a bit of a deep-breath moment for us. When you look back on it, it was absolutely correct, but the international payroll market was completely underserved, no utilization of technology, and the market is massive to go on the tax. I think that shows now in what our customer looks like or out customer size and revenue growth, and it shows we made the right decision.
Alejandro: That’s amazing. I know that once you made that decision, coming up with a name was also an interesting process. Tell us about coming up with the name.
Ruairi Kelleher: Yeah, I had never done it before. I’m trying to remember. It was Mark, Christine, and me. They were on the tax side at the time. We were still trying to figure out who we were and what we were going to be. We hired a [0:13:25] advertising company to do it, and they came back with four options. I was there and voted four to one for a different name than Immedis, but I really wanted Immedis because I like the story behind it. Eventually, I ended up winning because the other one that was voted for was going to cost us 200,000 euros to buy the domain name. So we decided to go with Immedis.
Alejandro: Good stuff.
Ruairi Kelleher: And I’m delighted we did. It’s an interesting process and one that goes deeper than I thought it would.
Alejandro: It always is. You know, most of the time, those URLs are so expensive that it makes sense to come up with something that is a little bit more affordable. That’s for sure. Ruairi, for the people that are listening to get an idea of Immedis and the way that it works and how you guys are making money, what ended up being the business model?
Ruairi Kelleher: We’re an international global payroll platform. That’s what we do. We’ve developed a technology platform that consolidates global payroll for large enterprise companies. In essence, what our main customer profile is, big organizations that have already deployed a global HCN, the likes of Workday, Success Factors, Oracles, are already in the UKG. We integrate with their platform. In most cases, they’ll run the U.S. payroll systems, and then we integrate to run all the rest of the world population through a single platform. So we consolidate the whole operation of a global payroll from input up to the HCN and turn the system all the way through the outputs into the financial management systems, and its employees, pay slips, and manage all of the payment flows, and treasury flows all across the world. We generally are dealing with customers that are in ten countries-plus, and we are over 1,000 people outside of their home jurisdictions, so a lot of big named organizations of the U.S. and Europe is where we’re dealing with them. They are big partnerships that we have, and they’re long-term partnerships. It’s a very important thing for anyone to get paid on time. We continue to invest in the platform, and we’re proud to say that I think the technology we’ve developed is certainly very different in game-changing than the very old-school approach that payroll had for a long, long time.
Alejandro: In terms of raising capital, here you’re talking about investing and allocating resources into a development of the platform. Obviously, that requires money, and everything requires money if you want to build something that is hyper-growth. I guess how much capital have you guys raised to date?
Ruairi Kelleher: The first round, we did 25 million euros and through SEP. SEP is our partner in London and a brilliant partner for us. Just before Christmas last year, we raised $50 million from Edge Capital in New York. Again, they’re a really great organization. [0:16:29] for both organizations? Very different to what are some of the scare stories of venture capital and private equity are so far.
Alejandro: Absolutely. I’m sure that the journey for you has been remarkable, going from ten employees to over 330 that you have today. I’m sure that at some point, that growth may have given you some vertigo of the height and how fast and how quickly you were climbing. How has it been for you because I know that for founders, typically, it’s not an easy journey? People think that it’s easy, but it’s not because you need to grow at the same pace as the company is growing. So how were you able to grow yourself at that same speed?
Ruairi Kelleher: Yeah, two points. Internally, we use the term sustainable hyper-growth. When we went for both fundings, probably the most critical thing we talk about is capability to continue to serve because this market has been underserved historically, and the technology has let a lot of good ideas down because they’re either underinvestment or under a misunderstanding of the domain. It’s a complicated domain, and it requires significant investment and understanding – capability now. From someone who’s come to the commercial background, I would say I now spend the vast majority of my time on the operational and execution side of the business because it’s so important, which plays into how have I grown with really good people around me, I think is the best way to put it. I think the executive team that we have now comes from Mark Graham, the co-founder, with me, Christine Keily on the same side on the tax side. Two of the best of what they do, and Richard Limpkin on the technology side, George Delaney on the finance side, and we just hired Andrew Jasmin as a COO, former head of Facts Services for Censure. We have them in a phrase to hire the best in their fields and to come and support the organization, and that helps me. When I see businesses, some founder-led businesses, or founder entrepreneur businesses, what they really struggle to do is listen, and they struggle to hire talent around them that will put them under pressure. That’s not something that I’ve ever been afraid to do. Thankfully, it’s not something that worries me – so having the best people you can have in that organization. It’s not just 330 bodies. It’s the talent level that comes with that. The team internally, the second I’m talking about it, the Netflix book around talent density. I don’t agree with everything in it, but I think the talent density piece is probably one of the single biggest enablers.
Alejandro: It’s interesting that you touched on listening. I find that listening is everything, whether it’s to customers, to employees, or to investors. Would you mind expanding a little bit more on what you meant with listening there?
Ruairi Kelleher: I agree that listening is so important, especially when you’re in a global organization like we are dealing with global customers and global teams, to help people approach a solution or look for help differs from place to place. So you’ve got to actually listen to understand what the problem is or what the pitch is or what the plan is, so I think listening so you can actually understand. I think context is really important, so understanding the context of someone’s decision or someone’s motivation is really important before you actually make the decision of whether it’s right or wrong. I think being too snappy in your decision-making or being too reactive or too aggressive in your decision-making based on not listening is really bad culture for an organization. I think it puts fear into the organization; whereas, I think listening – as you mentioned, listening to our customers. There are a large number of businesses around the world that think they have the best idea in the world, but they’ve never actually asked anyone who’s going to use it whether it’s the best idea in the world or whether it’s just the best idea in their own head. We do customer forums. We do customer workshops, customer think-ins a lot. We want to know what’s going to make a difference for them as opposed to us prescribing what’s going to be best for them. So, I think both on the customer’s side in terms of evolving your product in that way is critical to listen to the market and to your customers. And entirely from a cultural standpoint during hyper-growth, I think listening is more important.
Alejandro: And on the hyper-growth side, also, you guys have the M&A side that you’ve been quite active on. You closed this acquisition, as well, that I’m sure that helped in taking things to the next level. Unfortunately, as they say, most acquisitions fail because it’s like part of the integration process. But in this case, it seems that things definitely worked out for you guys. Also, it gave you presence in the U.S., but walk us through that journey was and how you ensured that this was going to succeed.
Ruairi Kelleher: The acquisition piece is interesting because when you look at it now, it was a really good decision and a great idea and has worked out well. If you were to look back at the reasoning as to why we did it and what we thought we were going to gain from it and how we were going to do it, back to the theoretical, the actual theory and the actual are very different. I think that’s one of the big learnings. You can come up with all these great ideas, but life gets in the way. Ultimately, Expatica was a partner of our prior, but we knew the team, and we knew some of their customers, but I think how we managed and envisioned the change over to us was a lot more difficult and slower than what we thought it would be, so it cost a lot more money to do it. In terms of our own time, half the time, capital to actually implement the change and migrate the customers and the opportunity costs are greater. And the outcome was probably greater than eventually, we thought it was going to be later on, but I think that first 18 months because it was my idea in the first place, so when I was about the board was it wasn’t always comfortable in terms of how it was going, but we always believed that it was the right decision and that the basic fundamentals as to why we were trying to do it right, but the actual tactical execution of it changed so greatly. That was, again, that stands for people. It’s down to people and culture. The one thing that you don’t know until you work closely with people, it’s not for the right or wrong. It’s their cultural desire in terms of is their vision the same as ours? That was the area we probably took for granted that it was, without question, a deep – the knock-on impact that had on [0:23:32 – 0:23:38] we had a sporting group behind us. I’m thankful we had a good outcome at the end of it, but looking back on it now, when I look back on my notes and my business case, and this is what we’re going to do, and this is what the outcome is going to be, that’s probably worth fixing now.
Alejandro: That’s incredible. On your side, you must have access to a tremendous amount of data as well. From a customer perspective, how have they grown over time? What are some of the insights or some of the things that you’ve seen?
Ruairi Kelleher: We were very lucky. It wasn’t a strategy that we knew COVID was going to come, but the main work that we’re in is big tech pharma and financial services. They’re all very resilient, but specifically in big tech and some of the financial services, specifically in the fund management that we’re in. Fund management, especially, is highly inquisitive. So a lot of our organizations are acquiring a lot of businesses. Seeing how our revenue model is based off of headcounts, those companies grow astronomically. Some can grow 3x, 4x with us just by buying companies over a two to three-year period and grow that quickly. The same in the tech and cyber. Those organizations are growing. Not only on the headcount in the jurisdictions they’re in but growing into new jurisdictions all the time. When we look at the metrics, our average over a three-year period net revenue retention is like 195%, which is until you really get into the details, last year it was an eye-opener and for us to understand that on average, our company’s almost double what we expected our payroll contract to be to where eventually only after a three-year period. So to be able to grow new business out of that 60-70%. Then on top of that, for your underlying business to grow at that rate as well, it gives it a nice mix and a nice rocket underneath.
Alejandro: Absolutely. Imagine, Ruairi, that you go to sleep tonight and you wake up in a world where the vision of Immedis is fully realized. What does that world look like?
Ruairi Kelleher: Our vision is very clear. We want to be the first real-time global payroll and platform in the world, and nobody’s gotten anywhere near us. In our mission, we’ve got the process to a touchless payroll process on a global scale through a single platform and something that has never been done before. Our vision is to be – it’s similar to being the Workday payroll where from a customer user experience and an automation standpoint, we are the undoubtedly #1. When I say that, I mean the undoubtedly #1 for really good organizations. We’re not a product, nor do we seek to be a product at the moment. We do have the capability to do it, but I think where we are right now in the next three years that the enterprise market is big enough. So what I would say internally, if we can be the best at what we can do for the best organizations in the world, then we’re going to be really successful hitting our numbers. We’re on track to hit 100 million in recurring revenue over that three-year period, and that would be a great milestone to hit as well, and that’s all through organic growth.
Alejandro: Organic growth. That’s like the Holy Grail, so that’s amazing. Why don’t you expand on that? How do you guys think about organic growth, and why, and at what point did you make that decision? Obviously, now, people get lost very quickly going into advertising and allocating a bunch of money into that, so how do you guys think about organic growth as you were thinking about strategy?
Ruairi Kelleher: All of our growth to date has been organic. The acquisition back in 2017, which wasn’t really a revenue acquisition, so we’ve gone from basically zero to $35 million in that period of time in contract recurring revenue, and all organically. We’ll finish this year north of more to $50 million. The number to market on that, as an organization, when we started off, we were like most startups a scrappy organization, probably a little bit of gorilla sales and just on the ground and some of the main areas like the Payroll Association, we were very targeted in what we did or in certain webinars for specific buying cohorts. As we’ve grown that out, we’ve built partnerships with Workday, Ceridian, and SAP, and Oracle, so you know the channel sales right now is really increasing greatly. Then the marketing piece, our marketing team now in terms of inbound sales and how much we spend now around digital marketing, etc., with the two caps around has allowed us to do a lot more of it, which has increased our pipeline. And we’ve increased the sales quite significantly. In the first round, our funding was very focused on the capability and execution, and we do a lot of sales through referral. We did, historically, lots of referral sales, and we have a very strong close references, which is tough to get now. We’re now going to be spoken about a lot more, but the commercial team now is 45 people, so we’ve invested quite heavily in that, so we have a mixture of go to market from a direct sales model to marketing on the channel. But back to people, we’ve spent time and money to get good people in there. I think our average deal side, so to hit our numbers, you’re talking 40 to 50 deals a year. It’s not as if we’re under a recurring element – the recurring element of it is really good. I think that’s why it’s so exciting as you continue to turn the dial and the opportunities that are in the market. To me, global payroll is still so on tap, like the grain sale or brown sale is still out there is massive. A high majority of our customers and prospects are consolidating for the first time, so it still shows how much market shares are out there to grow.
Alejandro: Very cool. One of the questions that I have, Ruairi, typically here for the guests that come on the show, is, imagine if you have the opportunity to go back in time. I put you into a time machine, back to 2016 or even earlier when the idea of Immedis really came into perspective. If you had the opportunity of going back in time and having a chat with your younger self, and during that chat, you could give yourself one piece of business advice before launching a company. What would that be and why, given what you know now?
Ruairi Kelleher: Look at the backend of the organization. We grew very quickly, and we continue to grow very quickly, but having someone who understands – a lot of companies will find they’re either product-driven or sales-driven, but understanding the operational side in business is crucial. I would have hired somebody who understood FDNA data and reporting capabilities a little bit earlier than we did. I would advise myself to not always think about the go-forward. Look at what has to come behind it. What is the organizational debt that you have to manage and bring someone in to do it? Bring someone in who is really, really good who sits at the top table to do it, and that will allow you to focus just purely on looking forward.
Alejandro: I love it. So, Ruairi, for the folks that are listening, what is the best way for them to reach out and say hi?
Ruairi Kelleher: Yeah. Obviously, the website, immedis.com. I’m always open to anyone who wants to talk to me at Ruairi@immedis.com. I think it’s one of our core components of our organization where anyone that wants to talk to me can. You can gain a lot from listening, so you don’t always have to take it on board, but it helps, so feel free to reach out to me – LinkedIn, as well.
Alejandro: Amazing. Ruairi, thank you so much for being on the DealMakers show today.
Ruairi Kelleher: Thanks, Alejandro. Pleasure to be with you.
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