Remote payroll startup Deel has acquired fintech Capbase for an undisclosed amount in a cash and stock deal, the companies exclusively announced to TechCrunch.

As its name suggests, San Francisco-based Capbase claims it can update a company’s cap table in real-time as it issues stock, signs deals, and raises money from investors. It then uses this data to build API integrations that can be used to set up bank accounts, payroll, and business insurance. Greg Miaskiewicz and Stefan Nagey founded the company in 2018 and raised a total of approximately $6 million in venture capital from companies such as Better Tomorrow Ventures, Clocktower Technology Ventures, Great Oaks Venture Capital, Village Global and a number of angel investors.

“We trying to make it easier to start a business, raise money and spend equity,” CEO Miaskiewicz said TechCrunch in an interview. Capbase ran a private beta through April 2021 and saw its customer base “grow from 10 to more than 500 in less than 18 months,” he said, but declined to reveal hard sales numbers.

Alex Bouaziz and Shuo Wang launched Remote-First, San Francisco-based Deel in 2019 with a mission to make it happen Companies can hire employees and contractors in other countries “in less than five minutes”. Deel also says it gives companies the ability to pay teams in over 150 currencies with “just one click.” The company raised nearly $680 million in total funding, was last valued at $12 billion, and boasted that it surpassed $100 million in ARR (annual recurring revenue) in March 2022. (The company declined to disclose actual figures, saying only that it continues to grow its ARR month-on-month “at a very strong clip”).

Over the years, Deel has evolved its model, added more features and acquired other startups to expand its offering, including equity-related services for clients in an advisory capacity. For example, it advises them on how to handle their taxable events in relation to employer employee and contractor equity, in addition to handling payroll for those events. With the acquisition of Capbase, Deel plans to couple these services a new product for managing and issuing shares.

In an interview, Bouaziz said that Deel struggled over “where and how to start with equity grants,” with issues such as providing equity to employees and contractors in countries where they don’t have offices and what they must do to comply with local laws.

Interestingly, Capbase was one of Deel’s first customers, and Bouaziz says he’s always “appreciated” it. Miaskiewicz Thinking About Compliance.

So when questions kept popping up from customers about how to provide equity to people in other countries, especially given the different labor laws everywhere, Deel started looking for a solution. In fact, it was a problem it had to solve on its own, especially considering the company “offers the same equity to people regardless of their location.”

“We looked at US compliance and found that this is very, very difficult,” Bouaziz told TechCrunch. “Equity is such an important part of companies that it seemed to us that we should look into allowing other companies to provide it across geographies and at scale.”

Instead of “just doing it from scratch,” Deel chose to work with Capbase.

Simply put, by acquiring Capbase, Deel hopes to reduce the complexity that comes with starting and growing businesses. According to Bouaziz, it was attracted by the fact that Capbase works to help companies form and raise capital in their early days, as well as file compliance filings and grant equity as they mature.

“They provide technology and compliance expertise to help hundreds of companies integrate seamlessly across the US, set up bank accounts and boards, manage cap tables and of course grant equity,” he added. “All of these things complement our efforts to help companies expand more easily, all in one place and compliant.”

Specifically, Deel believes the addition of Capbase will help “do more in the US to support startups and help companies expand globally.” This will no doubt allow Deel to better compete with others in the room.

For example, workforce management platform Rippling unveiled last October a new global payroll product that his CEO Parker Conrad wasn’t shy about admitting that he would compete head-to-head with Deel. At the time, Conrad told TechCrunch the new offering would give Rippling’s US-based customers a more “seamless” way to pay workers around the world – whether full-time or contract work.

One company Deel doesn’t want to compete with, however, is Carta.

“Capbase’s first product is similar to Carta and Stripe Atlas,” said Bouaziz. “We will not duplicate this product. I think cap table management is important, but many companies have built a product around it, and reinventing the wheel isn’t something we really enjoy doing. Entering this market would reinvent the wheel.”

“We really want to Build a product that raises global equity for the record model employer for employees around the world,” he added. “We want to use the internal knowledge that was built up in the USA and produce it globally.”

For Capbase, the offer to be acquired in what was a highly challenging macro environment was more appealing than “continuing the fundraising journey in a difficult economic climate,” he admits Miaskiewicz.

The startup’s 20 employees are all moving to Deel.

Miaskiewicz believes that by combining the strengths of the two companies, Deel will emerge as an even stronger company.

“If you try To sell services to startups or companies that are going to be the next big tech companies, you want to build that relationship and offer them services as early in the lifecycle as possible, because then as you scale, you can build and offer more and more services that you monetize that relationship and build customer lifetime value,” he told TechCrunch.

In the meantime, Deel expects to have a “pretty solid working product” available to its customers — which include companies like Nike, Cloudflare, Shopify, and Subway — by early to mid-February.

“Of course, we will be fine-tuning with global compliance over time as the product becomes more complicated and more tailored to local jurisdictions and laws,” Bouaziz said.

Equity management is clearly a hot topic. On Jan. 10, investment giant Fidelity announced that it had acquired Shoobx, a venture-backed fintech startup, for an undisclosed amount. Shoobx is a provider of automated equity management processes and financing software for private companies “at all stages of growth” up to and including an IPO. Services offered include, but are not limited to, assisting companies in sending offer letters, providing equity to new hires, managing their cap tables, and obtaining a 409A assessment report.