SmartHR Raises $13m in series B round led by 500 Startups

SmartHR, a startup helping Japanese employers run HR and staffing smarter has raised a JPY 1.5 billion ($13.3 million) Series B round led by 500 Startups Japan.

Founded in early 2013 and originally known as Kufu, SmartHR is a cloud-based system that helps businesses to manage and streamline their HR processes. Among other things, it is able to automate employee benefit and insurance programs, which traditionally require copious amounts of paperwork and many tedious man-hours to handle. Enterprises sign up for a subscription the the service.

Similar companies elsewhere in the world include US players Zenefits, Gusto, and Namely, said James Riney, head of 500 Startups in Japan.

The money is going to be put to work doubling SmartHR’s headcount to enable it to develop those new features and build a platform. The company hopes to become the digital system of record for Japan, which means it will open its doors to third-party services that can be hosted on its platform. One small pilot, for example, provided business card printing services to HR clients, a synergy that makes sense since the SmartHR system is used to onboard new hires.

The platform play is likely to come next year. For now, it is working on new features requested by customers. That includes allowing for multiple branches/chain stores within the system, a request particularly needed by clothing stores and other high street retailers that have high levels of employee churn.

According to James Riney, head of 500 Startups in Japan “What they’re doing is replacing paper and people, so there’s not any existing software they are replacing. Around 7,000 companies are signed up to SmartHR, including a few companies with more than 10,000 employees.”

SmartHR will also invest in marketing. To date it has promoted its services using online, but it plans to reach new customers through offline channels such as media commercials and exhibitions.

Beyond SmartHR itself, the round is notable on the funding side because it is the first time 500 Startups — a prolific investor with a portfolio of other 1,000 companies — has led a Series B round. Added to that, it did so using a special purpose vehicle (SPV) which, while fairly common in the U.S., isn’t used in Japan.

Among its benefits, an SPV allows a cleaner cap table with one single entity picking up a stake in a startup. Different investors enter the SPV to take their share of that equity.

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