Finch: Bringing Data Interoperability to the Employment Sector
The fintech industry has grown exponentially in recent years with a next-gen cohort of outstanding entrepreneurs deconstructing monolithic legacy solutions. Driving that wave is a new set of fintech-focused APIs and infrastructure that gives these entrepreneurs the tool kit to disrupt and innovate. What’s possible today was impossible a few years ago, or at least so painful and expensive that it might not have been worth it. Now, if you want to launch a credit card, embed insurance, or even become a bank, the modern fintech stack can make it a reality in a fraction of the time and cost it used to take.
But not all of the building blocks are in place, and therein lies opportunity. One glaringly unserved area was APIs to connect to employment (HR, payroll, and benefits) systems. Those systems were black boxes, requiring a brutally repetitive, costly, and inefficient process to access and creating a persistent headwind to innovation.
Finch, our newest investment in the fintech space, addresses this problem head-on, enabling applications to access critical information from employment systems with beautifully-simple APIs—just as Plaid did for the banking ecosystem.
The challenge was not for the faint of heart. HRIS (aka human resource information systems, which provide the system of record for employee data), payroll, and benefits systems have their own esoteric and arcane set of fields, definitions, APIs, and access protocols. Just as one integration is completed, many different instances of that integration are uncovered—sometimes one for every large employer/customer.
Until Finch provided the scaffolding and connectivity to allow this ecosystem to flourish, this integration hamster wheel was a constant tax and chasm that slowed progress. In contrast, the data liquidity enabled by Finch has led to many new use cases and products designed for employees that emerge every week, from compensation benchmarking to novel ways to afford healthcare to new retirement solutions and more. For instance, Carta is currently building critical components of its own business on Finch, and several other unicorns rely on Finch to power their products.
At Menlo, we love API-first businesses that unlock new ecosystems. They lead to innovation and organic growth as customers succeed with these new applications. We’ve seen this with Particle Health, which unblocked patient data inside EHR systems, and Clarifai, which opened up computer vision to any application. Finch is hyper-focused on building the most straightforward and developer-friendly set of APIs. With Finch, any entrepreneur with a good idea can get up and running as quickly, easily, and affordably as possible.
We first invested in Finch’s seed round in 2020 to work closely with the team and be in a position to lead their A round. And now, we are excited to announce that we are more than doubling down and doing precisely that (leading the A)! Finch has grown 10x year over year and recruited world-class talent from companies like Auth0, Checkr, Coinbase, Braintree, Amazon, and Apple. Jeremy and Ansel have executed exceptionally well: hiring remarkable people, growing like clockwork, and demonstrating superior leadership with a mission-driven mindset. They have delivered on all key milestones they charted, including in areas like product velocity, commercial success, team building, and the number of apps now reliant on Finch. As they’ve scaled, we’ve been impressed by their shared humility and a growth mindset focused on better serving their customers. And frankly, we enjoy working with them—the key to any successful investor/founder partnership.
The best API businesses are derivative options on an entire ecosystem; they grow simultaneously with the whole market. Finch is catching this wave at a perfect time. In 2021, venture investors funneled more than $12.3 billion into global HR tech startups, representing 3.6x growth since 2020 (PitchBook). Finch has hundreds of companies building on their platform, many with decacorn potential. We are excited to partner with Finch on the journey ahead and to see them further become a vital pillar of the new fintech ecosystem.