Deel's 00M Secondary Transaction: A Step Closer to an IPO

2025-02-04

Deel, the rapidly growing HR tech unicorn, has recently secured a significant secondary transaction worth $300 million at a valuation exceeding $12 billion. The company has also posted impressive revenue growth, hitting an annual revenue run rate (ARR) of $800 million in 2024. With these milestones, Deel is positioning itself for a potential IPO, while also attracting fresh investment from high-profile players. However, there are complications on the horizon, including a lawsuit that could potentially impact its plans. In this article, we break down the details of Deel’s recent developments, the significance of the secondary transaction, and the company’s future prospects.

Deel’s Recent Developments and Growth
Deel has secured two major investors: General Catalyst, an American venture capital firm, and Mubadala, the sovereign wealth fund from Abu Dhabi. Both invested $300 million in Deel through a secondary transaction, where shares are sold by existing shareholders rather than the company itself. This secondary transaction was carried out at a valuation of $12 billion, consistent with the company’s previous fundraising round in 2022.

Despite the modest size of its 2022 fundraising round ($50 million), Deel’s valuation skyrocketed from $5.5 billion to $12 billion in just six months. Deel has raised a total of around $680 million over the years, excluding the recent secondary transaction.

As Deel continues its growth trajectory, the company also welcomed two independent board members: Francis deSouza, former CEO of Illumina, and Todd Ford, veteran board member and joint President/CFO at Coupa Software. These strategic appointments reflect Deel’s preparations for future expansion, including a potential IPO.

Alongside these investments, Deel has posted an impressive $800 million in ARR, reflecting a 70% year-over-year growth from 2023. The company also revealed that it has been profitable for two consecutive years, strengthening the speculation that Deel may go public as early as next year.

Founded in 2019 by Alex and Philippe Bouaziz,

What Undercode Says:

Deel’s recent $300 million secondary transaction is more than just a sign of investor confidence—it reflects the company’s strategic positioning for the future. A valuation of over $12 billion is a powerful statement, highlighting Deel’s growth and the trust investors place in its model. Deel has managed to secure substantial investments despite a relatively small fundraising round in 2022, suggesting that its business model and revenue growth are seen as extremely promising. With $800 million in ARR and a 70% growth rate, the company’s revenue trajectory is certainly impressive and strengthens the belief that Deel is not only a leader in HR tech but could potentially become a major player in the broader tech space.

The secondary transaction, however, raises questions. Secondary transactions are often a way for early investors and employees to cash out, and while the company does not directly benefit from the funds, the transaction can be seen as a potential indicator that Deel’s early backers may want to realize gains before an IPO. This could mean that Deel is getting closer to the IPO finish line, especially with its current revenue growth and profitability. The move also highlights Deel’s ability to attract new investors from high-profile firms like General Catalyst and Mubadala, which is significant not only in terms of capital but also in the credibility these investors bring.

The involvement of these major investors also speaks to Deel’s potential for continued success. General Catalyst’s reputation in funding high-growth companies, combined with Mubadala’s global influence, indicates that Deel is expanding its reach and solidifying its position on the global stage. These investors may also bring more than just capital—they could provide strategic guidance and help Deel expand into new markets.

Despite these optimistic developments, Deel’s path forward isn’t without challenges. The ongoing lawsuit alleging money laundering and violations of U.S. sanctions related to transactions with Russia could create legal complications. Although Deel denies the allegations, the presence of such lawsuits could affect the company’s ability to go public without delays or setbacks. This legal matter will likely be closely watched by both investors and regulators, and how Deel manages this could have significant implications for its IPO plans.

In terms of its IPO, Deel seems to be in a strong position financially, with its ARR and profitability suggesting that it has the foundation for a successful debut on the stock market. However, any regulatory hurdles or potential legal issues, such as those raised in the lawsuit, could delay or complicate its plans. A successful IPO could position Deel as one of the leading tech companies to go public in the coming year, especially given its expansive global presence and innovative approach to workforce management.

Overall, Deel’s trajectory appears solid, but the company will need to navigate potential challenges and continue executing on its growth strategy if it aims to maintain this momentum and achieve its IPO goals in 2025. As of now, Deel’s prospects remain strong, with a carefully planned board expansion and robust revenue growth signaling a promising future for the company and its investors.

References:

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