SMB HR, Payroll Startup Justworks Readies for IPO at $2B Valuation

Human resources and payroll startup Justworks is selling 7 million shares priced between $29 and $32 apiece in an initial public offering (IPO) that could give the company $224 million at the top of the range at an estimated valuation of $2 billion, according to a Tuesday (Jan. 4) press release and its S-1 filing with the Security and Exchange Commission.

The company plans to list on the Nasdaq Global Select Market under the ticker symbol JW. Goldman Sachs, J.P. Morgan, and BofA Securities are joint lead managing bookrunners.

In a letter in the filing, company founder and CEO Isaac Oates said that Justworks was launched in 2012 to help entrepreneurs reach their full potential by allowing them to concentrate on their businesses while having Justworks handle human capital management: payroll, human resources, benefits and compliance.

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“We are here to support these businesses at the beginning of their journey. The target market for our services is U.S.-based small businesses with less than 100 employees. Collectively, these businesses employ about 40 million people,” Oates said.

He pointed to the small business market as one that is underserved. “Most providers don’t think the juice is worth the squeeze in this market,” Oates said.

Headquartered in New York, Justworks serves more than 8,000 customers nationwide in all 50 states, representing close to 140,000 worksite employees. Justworks aims to update all aspects of people management that small- to medium-sized businesses face every day. The single, all-in-one cloud-based platform is easily scalable and was developed for entrepreneurs and emerging businesses.

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For the last fiscal year, Justworks had a subscription revenue net retention rate of 117%, according to the prospectus. Total revenue for the fiscal year ending in May 2021 was $982.7 million compared to 2020’s revenue of $742.4 million, representing a 32.4% year-over-year growth. Gross profit for 2021 was $106.1 million compared to 2020’s gross profit of $77.1 million.