Pagarbook: Building a human capital management platform for India’s MSMEs
By Ashish Agrawal and Rachit Gupta
India has the world’s second largest workforce, at 500M. The majority is employed by India’s 60 million small and medium businesses, which are estimated to contribute 30% to the GDP and pay $300B in annual wages. They mostly work in ‘unorganized sector’ jobs in manufacturing, construction and retail, as well as small service firms.
Many blue and grey-collar employees of Indian SMEs have no formal financial or career footprint; as a result, they typically fall outside the umbrella of the formal banking system and have limited career progression opportunities. Their lives stand in sharp contrast to white collar employees who work for large companies in the organized sector and receive regular, full time salaries. Since their payroll is documented, white collar workers have access to banking services, such as savings accounts, loans and credits cards and health insurance benefits for them and their families. Meanwhile, for SME business owners, there is no easy way to manage payroll, attendance, salary advance and benefits for small, seasonal or itinerant workforces.
Pagarbook is building a human capital platform to address the needs of these 60M SMEs and their 400M employees. The founders, Adarsh, Rupesh and Arya, are intimately familiar with this segment, having witnessed the challenges SME owners and employees face firsthand. They grew up in small towns and have seen local businesses struggle to operate and grow. They launched Pagarbook as a lightweight attendance management and payroll app 12 months ago. The app has seen unprecedented adoption and has quickly grown to track attendance and manage payroll for millions SME employees.
Sequoia India is excited to lead the Series A investment in Pagarbook, which partnered with Surge earlier this year.
Pagarbook enables an SME to capture daily attendance of employees and keep track of money paid, through salaries and advances, to them. The software is a freemium offering with the basic version available for free and a paid version with a more elaborate feature set. Over time, we believe the data of employee attendance, payroll and advances will prove extremely valuable to provide financial services to this employee base — bank accounts, earned wage access, loans, money transfer services and health insurance. Pagarbook is already running pilots on several such services.
Emerging markets like India and Indonesia are dominated by SMEs, but the adoption of software in these SMEs was almost non-existent — until now. Millions of SME owners have come online in the past couple of years, thanks to the advent of affordable smartphones and data plans; what’s more, a shift is taking place, with a younger, more digitally savvy generation taking over management of small family-run businesses across India. As a result, SME owners are now much more open to finding and downloading self-serve software to manage and improve their business, which was previously not possible to achieve at scale with feet-on-street sales teams.
We are witnessing strong tailwinds in such SME-SaaS software across functions in India and SEA, which has buoyed demand from services from a range of portfolio companies, including Khatabook for bookkeeping, Bharatpe for payments and Bukukas for cashflow management.
The opportunity to digitize SMEs and bring their employees under the formal economy is a once in a generation category-creation opportunity and we couldn’t be more excited to partner with the Pagarbook founders on this journey.
