Nov 3, 2021

Check: Solving the $150 Billion Payroll Problem

Check has the potential to become payroll's "platform of platforms."

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If you only have a couple of minutes to spare, here’s what investors, operators, and founders can learn about Check.

  • Payroll is massive. It’s easy to forget just how gargantuan the space is. In 2020, nearly $9 trillion in wages were paid out in the US. Payroll providers occupy a position of extraordinary influence thanks to their control over this volume.  
  • Payroll has been largely forgotten by startups. The industry’s largest players have been around for half a century. While a handful of modern players have emerged, the market remains mostly unchanged. That’s because building a payroll product is a test of technical skill, regulatory nous, and extreme patience.  
  • Stripe is not the only “platform of platforms.” Ben Thompson called the payments business a “platform of platforms” because it provided infrastructure to large players like Shopify. Check is doing something similar in the payroll space, giving decacorns like ServiceTitan the ability to offer payroll to their SMB clientele.
  • Check is also a call option on worker reclassification. Though a business like Check can thrive without massive shifts in employee status, it would be a serious beneficiary of any such movements. With continued pressure on gig economy platforms like Uber, Lyft, and DoorDash to make contractors W-2s, Check’s upside may be even larger than imagined at present. 

This is a partner piece, which means it has been sponsored by Check. If you’d like to learn more about The Generalist’s partner program, its incentives, and ethical guidelines, just click here. As an unwavering principle, I will always note partnerships transparently and will only work with companies I consider truly exceptional and worth understanding deeply. 

Money is often best visualized as water. 

When we have it, we are “liquid” or “flush.” When we lose it, we are “washed out.” Money “flows” and sometimes “ebbs.” It moves through banks and platforms like water through pipes, and when we talk about companies like Stripe and Plaid we use the language of plumbing. It is a metaphor that works so well, has fit so cleanly that when someone speaks of “cash flows” it no longer registers as figurative. 

In this world of liquid motion, Check is America’s boldest plumber and most ambitious urban planner. Founded in 2019, the company is taking on one of the great modern financial challenges: trying to fix the broken, byzantine piping of payroll. 

In 2020, $8.9 trillion was paid in US wages. That’s an almost impossible sum to understand, though that makes it no less real. 

It is about twice the GDP of Japan, more than four multiples of Brazil’s, and north of 22x that of prosperous Norway. 

It is three and a half Apple market caps, four and a half Alphabets, and just shy of 10 of the entity formerly known as Facebook. 

It is a figure so absurdly large that only contortion and comparison can help us make sense of it. 

And all of it passed through a decrepit architecture — a leaking, crumbling aqueduct. 

Does anyone like their payroll provider? It is for most, a place of dull pain, an inconvenience that must be endured because it manages something so essential: our money. No sane mind enjoys logging on to a legacy platform heaving under the burden of sixty-year old coding language, riddled with complexities. 

A small but significant mental and emotional tax is levied when we use such systems, and it is repeated across the working population, month by month, as regular as, well...a paycheck. 

Why have such inadequate solutions stood for so long? Why hasn’t the free market and the tech revolution not disrupted the old guard?

Payroll is extremely hard. 

Any entrepreneur crazy enough to take up the challenge needs to assemble a team with both extreme technical skill and regulatory knowhow. Laws differ state by state, and change with political winds. Even these qualities would not be sufficient. Payroll is so deeply idiosyncratic that to get a handle on its intricacies, you need true experts onboard, people that have been in the industry long enough to understand how it works, and how it can be innovated upon. 

You need all of this, and more. 

You need patience and endurance. These are problems that don’t move easily. 

You need intelligence and curiosity. You cannot mend a watch if you are quietly not mesmerized by its gears.

You need a sense of mission and a respect for payroll’s importance. The smallest error can ripple to the wallets of millions 

And you need a sense of humor. The only healthy response to problems that are, persistently, three times harder than you’d expected is laughter. 

Anyone crazy enough to pull such a team together and attempt a solution has a shot at one of the great remaining prizes in the financial system. To be the infrastructure, the aqueduct for a flow of funds that dwarfs nations and corporate giants. To free the time of businesses, and open up opportunities for new entrepreneurs. To change lives in small ways that with time and scale become big ones. 

Check is crazy enough. 

Founded in 2019, the payroll API business has raised $44 million to flip the industry on its head and usher in an age where receiving one’s wages is more than a necessary low-grade headache. Serial entrepreneurs Andrew Brown, Vivek Patel, and Eric Stromberg have already succeeded in building a truly remarkable team equipped with the unusual constellation of talents and characteristics required. 

And already, they are making a difference. 

Large platforms like Homebase and ServiceTitan rely on Check to provide payroll to their small business owner customers, and those under their employ. In the future, we may see it become one of fintech’s largest “platform of platforms,” allowing giants like Shopify, Mindbody, Brex, Ramp and even JP Morgan to offer their own payroll product. 

In short, Check has the chance to be one of the most consequential companies of the next decade. It is worth studying closely. 

Origins: From Oyster to Check

On a freezing February day in 2019, Andrew Brown sat in a dark office. 

Had he bitten off more than he could chew?

It had only been a few months since he’d started thinking about the payroll space but here he was, alone, in the Crosby Street headquarters of venture firm Bedrock Capital, beginning to build a new system. 

It had been a winding journey to reach that point. 

The trio forms

Brown arrived in New York City in 2011, finishing up his Duke computer science degree at Columbia University. He’s been attracted to the city’s burgeoning tech scene, and had snagged a job at Google that would begin that fall. 

But he was restless. Early in college, Brown had started joining hackathons and startup weekends, working on his own products. Though he had yet to start a job in earnest, he already had the entrepreneurial itch. 

In Eric Stromberg, he found a kindred spirit. It was a meeting sparked online. Browsing Twitter one day, Brown noticed that then-Founder Collective venture capitalist, Chris Dixon, had re-tweeted a blog post written by a young Duke graduate, in NYC. 

As Brown noted, “That described very few people at the time.” He reached out, and a friendship quickly formed, stoked by a mutual interest in tech, and a desire to start a business of their own. It would take almost another year for the two Blue Devils to set those dreams in motion. 

Oyster was quietly revolutionary for its time. Best described as “Netflix for books,” the company offered access to more than 1 million digital titles for a monthly fee. In a matter of seconds, users could download a book of their choosing to their iPhone, and read wherever, whenever they wanted. With the iPhone only a few years old, the idea that our smartphone’s might become a reading destination was provocative, and as it turned out, prescient. 

Brown, Stromberg, and third co-founder Willem Van Lancker raised a $3 million seed round for Oyster, with participation from Founders Fund, Founder Collective, Box Group, Sam Altman, and the man who unwittingly kicked off a new co-founding team, Chris Dixon. 

Customers quickly warmed to Oyster, and with funding secured the company started to look for more engineering power. 

They found Vivek Patel. 

Anyone who knows Patel will tell you he’s a true one-of-a-kind. Over a half dozen conversations with Check employees and investors, the same theme emerged when I asked about their CTO: his mind works in mysterious, numinous ways. 

That quality, coupled with his obvious intelligence and talent, convinced Brown and Stromberg they had found the right early engineering hire for their company. Though they didn’t know it at the time, with Patel onboard, a trio had formed that would last close to a decade, with no end in sight. 

Over the next three years, that core turned Oyster into a critical darling and productive business. TechCrunch called it one of the “Best Apps of 2013,” an opinion echoed by The Next Web. Wired spoke of the app’s “gorgeous” design, while a New Yorker profile referred to it as “handsomely built.” Generational authors like Jeff Vandermeer and Teju Cole shared their stories in the company’s lustrous, in-house literary magazine, The Oyster Review.  In tandem, Oyster grew its coffers, reaching $7 million in annual recurring revenue. 

Of course, the company faced a formidable opponent: Amazon. Two years after Oyster was founded, Bezos & Co. released their own book subscription product, the Kindle Unlimited. With a popular hardware device already distributed, and a growing stranglehold over US e-commerce, Amazon leveraged their scale to attack the market. 

Oyster decided to sell. Google acquired the company in 2015 for $30 million, a sum that ensured investors received a tidy return while also giving the team some reward for the value they had created. 

For many, that kind of entrepreneurial success — customer love, critical acclaim, and a multi-million big tech acquisition — might have been sufficient. But Brown, Stromberg, and Patel were just getting started. 

The next chapter

For a few years, all three men worked at Google, but it didn’t take long for them to drift their separate ways professionally. In 2017, Stromberg left the search giant to start a venture firm, Bedrock Capital. Brown and Patel excelled within Alphabet though their work took them in different directions. Though they remained fast friends, the trio had, for a time, dissolved. 

Despite the comfort of life at Google, it didn’t take long for Brown to begin thinking about starting his own business again. 

Toward the end of 2018, he began spending time at Bedrock’s office, kicking around ideas with Stromberg. Brown wanted to do something different this time, something that spoke to his technical talent and strengths as a company builder. 

"What makes sense for me? What am I suited to? What have I learned from Oyster?,” he asked himself. 

As Brown tells it, he had an unofficial checklist for the kind of company he wanted to found: 

  1. A true software business. Though tech-centric, Oyster was really a media company, rather than a software business — just like Netflix is. As Brown remembered it “that was deeply frustrating to me.” 
  2. Serving businesses rather than consumers. Though optimistic, Brown was also pragmatic. While consumer-focused companies (B2C) could reach massive scale — think Facebook and Instagram — it was common for them to go to zero. Selling to businesses (B2B) promised a wider distribution of outcomes.
  3. Developer-oriented. As a computer scientist, Brown loved the idea of building for other coders. In particular, he’d developed a fascination and admiration for API businesses like Twilio and Stripe. Oyster had actually been one of Stripe’s early customers. 
  4. Not for sale. Brown wanted to start a company that could run for decades, and had the market to support long-term, compounding growth. The Oyster acquisition had taught him he wasn’t built for corporate life. As soon as they sold, Brown remembered feeling like he “just wanted to be back in the trenches.” 

It was in talking to one of Bedrock’s portfolio companies that his next idea began to develop. 

The spark

Founded in 2014, Homebase is a software platform that helps small businesses better manage hiring, timekeeping, HR, and compliance. Alongside Bedrock, it counts Khosla, Cowboy, Bain, GGV, and Matthew McConaughey as investors. (Alright, alright, alright.)

More than 100,000 SMBs from pizzerias to barbershops, gyms to dental studios, and pool cleaners to consulting companies use (and love, judging by customer reviews) Homebase. 

But while the company had succeeded in becoming the de facto hub for so many of its customer base’s business needs, there was one core function it hadn’t been able to touch: payroll. 

In conversations with the company’s leadership, Brown learned what a challenge it was for platforms like Homebase to even think about offering a solution. 

Why was that? 

We can turn to an innovation strategy classic to better understand. When adding a new business line, companies often think about whether they should build, buy, or partner. 

As we’ve hinted already, building a payroll product is not something to be taken lightly. It is a multi-year, multi-million dollar effort that requires significant upkeep and attention. Despite Homebase’s success and scale, taking on something of such magnitude would have been a costly distraction with no guarantee of success. Square managed to build a payroll system in-house, but even with a much larger team and deeper pockets, it still took the company years to get right. 

Buying an existing payroll company also didn’t seem to make much sense. Payroll companies aren’t cheap to pick up, and few are as technologically adept as most venture-backed startups. Restaurant POS platform Toast acquired StratEx to enter the space. It proved to be a game-changing move — the company’s recent S-1 filing showed that more than 50% of new customers had tacked on Toast payroll. 

But with StratEx having cost a rumored $50 million to $60 million, and full integration taking the better part of two years, both price and timeline were beyond a company of Homebase’s size. 

That just left partnering. In its traditional instantiation that was a bit uninspiring. Sure, Homebase could spin up a “partner portal” with links to a handful of payroll providers like ADP, Paychex and Gusto, and secure some cut of future revenue. But it was hardly adding a new business line or building enduring value. 

There was, in short, no good solution, no “Stripe for payroll.” That stuck with Brown.

The opportunity

If his discussions with Homebase piqued his interest, further research into the payroll market cemented it. Five characteristics particularly stood out: 

  1. There was the potential to build something big. Today, the market cap of payroll companies stands at over $150 billion, with ten valued at more than $10 billion. (Some are part of larger conglomerates, like Ultimate Software, now part of Ultimate Kronos Group.) 
  2. The market was growing. The payroll software market is estimated to be growing at an 8.3% CAGR between 2020 and 2027. Changes in employment status might accelerate that radically. 
  3. Platforms held a position of extraordinary power. As we’ve discussed, payroll processes trillions of dollars a year and sits between employer and employee, a worker and their money. There is always opportunity sitting at such an influential intersection. 
  4. The market was absurdly fragmented. No payroll company held more than 17% market share. Though exact data is hard to find, modern players reportedly have accumulated between 1% and 2%. 
  5. Existing solutions were unloved. The industry’s leaders had been founded more than half a century earlier and it had begun to take a toll. ADP has a net-promoter score (NPS) of 0 and a market cap of $93 billion. Paychex also has a NPS of 0 with a market cap of $44 billion. 

Your eyes cannot help but light up when you come across a market with this confluence of factors, but Brown was level-headed enough to recognize there must have been a reason the market had yet to be truly disrupted. 

Over the following months, he dug deeper into the space, outlining plans with Stromberg, and continuing customer discovery with Homebase. The more he learned, the more he came to understand just how complicated the space was and how difficult it would be to change. 

When I asked Brown about any moments of doubt, he told me about that dark, snowy February day, sitting alone and wondering if he was up to the challenge he had set himself. 

Thankfully, he was not alone for long. 

The trio reunites

There was no doubt in Brown’s mind who he wanted to build his next company with: Stromberg and Patel. 

Of course, Stromberg was already onboard by then. Bedrock had served as the breeding ground for ideation and he had been a thoughtful contributor as Brown fell further into the world of payroll. 

It was perhaps more serendipitous that Patel was looking for a new challenge as well. Not long after Brown had started to think about building another business, Patel reached out to both Stromberg and Brown to talk about the same thing. It wasn’t long before the three of them were back together, riffing on ideas, and coming up with a plan to tackle the payroll space. 

They soon settled on an approach that was elegant in its simplicity, but would undoubtedly be difficult to pull off. Rather than trying to build a new payroll provider from scratch, their startup would create a best-in-class API for other companies to build on. It was not dissimilar in approach or ambition to what Stripe has done for payments. It was also no accident that it met the criteria Brown had initially set for himself. 

A true software business? Check. 

Selling to businesses? Check. 

Developer-focused with an API-first approach? Check. 

Name? Check, as it turned out. 

For companies like Homebase, Check offered a new path in the build, buy, partner paradigm — a “fourth option” as one employee put it. With Check, you built a solution, but at a fraction of the cost and with significantly less effort. No huge acquisition cost was needed, and platforms kept a much larger piece of the upside than a partnership. 

In March of 2019, Check was officially founded by Andrew Brown, Eric Stromberg, and Vivek Patel. A month later the company closed a $1 million pre-seed round funded by Bedrock Capital. 

The band was back together, and ready to build. 

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Product: Focus and reach

Check is an API for payroll. But what does that really mean?

Let’s take a moment to dig into the company’s product, how it’s changing the payroll space, and the unique considerations it must take into account. 

Who uses Check?

Before we begin, it's worth underlining exactly who Check’s customer is. Earlier on, we noted that Check is a B2B platform working with customers like Homebase. That’s really only part of the picture. 

Check is truly a B2B2B product. It partners with a platform like Homebase, who in turn, sell it to their customers — small businesses.

The result is a rare win/win/win. 

Homebase wins by strengthening its offering. The platform is made more robust, and becomes closer to a true “all-in-one” solution. This, in turn, helps retention and potentially increases average revenue per user (ARPU). If Homebase wishes to, it could make payroll a premium feature, incentivizing a portion of their base to upgrade. 

End customers win because they are given access to a payroll platform tailored to their needs. Since Homebase has control over the front-end, it can add modules and features designed specifically for its user base. Many of these wouldn’t make sense for a third-party player to touch. 

Check wins by monetizing this behavior. Like other API platforms, Check earns its revenue through a usage and subscription-based model. It’s also an extremely efficient form of end customer acquisition. Through just one platform, Check can aggregate hundreds of thousands of end users. 

The elegance of this approach is part of the reason Check has seemingly had so much success securing large clients. In addition to Homebase, the company counts platforms like ServiceTitan, Eddy, and Procare as customers. 

Under the hood

Check refers to itself as “The most robust payroll API platform.” That seems like a fair description. 


Three of Check’s features are particularly important:

  • Tax calculations. Check calculates employer and employee tax across more than 6,000 jurisdictions. It’ll take care of benefits and deductions, and is constantly being updated as rules change. 
  • Payments. Check keeps track of employment classification and makes sure W-2s and 1099s are paid correctly, and on-time. Through the platform, customers can actually tailor money flows to their needs. 
  • Tax filings. This is a big one. Check automatically generates and sends tax forms on behalf of the business, employee, and any contractors. Through the platform, you can submit quarterly and annual filings and track any withholdings.

Beyond these core features, Check also strategizes with partners on how to get the most out of payroll, and contributes to developing a front-end solution. 

To make it easier to get up and running, Check recently released a new feature: “Components.” This library of pre-built components allows partners to add commonly used functionality extremely quickly. Things like onboarding flows, payrolls, documentation modals, and integrations with platforms like QuickBooks are all offered. The effect is a further compression of the development timeline — if Check reduces the development timeline from years to weeks, Components takes it down to a matter of days, in some cases. 

Though Check is still a very young company with more problems to solve, it’s worth reflecting on how much it has accomplished from a product perspective. Every Check employee I spoke to in researching this piece independently reiterated how challenging building a product in the space is. They shared stories of the arcane rules that change from state to state, many that are only known by those that have worked in payroll for decades. It is a series of exceptions and anomalies, exclusions and deviations. 

As Tisha Winfield, one of Check’s payroll experts put it, “Payroll is the edge case.”

Deconstructing payroll

One way to think about Check’s product is as a separation. Third-party providers like ADP or Gusto are both all-in-one and general purpose. Their platform provides both a backend and frontend for payroll and has been designed to serve a wide range of customers from Fortune 500s to Mom and Pop shops. 

Check changes this construction by focusing only on the backend: the payroll-as-a-service API. In the process, it passes on responsibility to partners. 

This set-up allows Check to focus on building a powerful, resilient backend, while customers can tailor the frontend of the platform to their user base.

Jim Kohl, Head of Payroll Operations at Check, spent his career at large players like Paychex and Namely before he joined the startup. As he recounted, those third-party solutions always required customers to significantly compromise. 

“It was always a workaround,” he said. “It’s a really painful process.” 

Speed and caution

It is difficult for a startup to succeed without a sense of urgency. The accepted wisdom is that you need to “move fast and break things” if you are to win. 

Check doesn’t have that luxury. While the company certainly moves quickly, it cannot sacrifice quality and accuracy in the process. That’s because mistakes can have a big impact. 

Engineering Manager Ian Zapolsky commented on the difference between his work at Check and former employer, App Nexus. He noted, in particular, the cost of making a mistake. 

At AppNexus, we used to tell people that when they went on pager duty the worst thing that could happen is that someone wouldn’t see an ad. That’s not the case at Check...If the system goes down, it means real people don’t get their money on time.

Zapolsky noted that even a tiny error — a misplaced number or decimal — could meaningfully disturb someone’s finances. It’s also devilishly hard to fix — because payrolls are immutable, you can only correct your mistake by adding more information, rather than negating a previously made error. (As an aside, Zapolsky noted that this was one of the fun computer science challenges that made working at Check so stimulating.)

That doesn’t mean that Check doesn’t move with conviction and more than a little scrappiness. Zapolsky, a San Francisco resident, remembered how during his first week at the company, he was told he would need to add platform support for California so he could be paid. He recalled how Check’s New York coverage had to be “flexed and broken” to fit the Golden State. 

It was then that he realized how difficult the task he’d gotten himself into was. “[I understood] we’re going to have to do that 48 more times.”

Culture: Bridging the gap

A large part of Check’s success to date seems to be down to its culture. Leadership is spoken of in extremely favorable terms, and the company’s values seem to resonate across the board — in many conversations ideals like “bridging the gap” came up organically and sincerely. 

Check's leadership: Vivek, Andrew, and Eric

Let’s take a look at some players and the values they have instilled. 


The only place to begin is with Andrew Brown. I’ve had the pleasure of knowing Brown for close to a year, ever since he joined The Generalist as a member and became a part of the private community. 

Even in our early interactions, his genuineness struck me. He is someone who is quick to help, wants to see others succeed, and has a subtle, understated intensity. In my conversations with his colleagues and partners, I found this to be a common theme. 

Co-founder Eric Stromberg remarked “Anyone that works with him will tell you that he really cares.” 

That sincerity, though notable, was certainly not all that marked Brown out as an entrepreneur, according to his coworkers. 

Stromberg summarized it most memorably when he referred to Brown as the “LeBron James of startups.” When I asked him what he meant by that, he spoke about Brown’s unique constellation of skills:

Not only is he exceptional when it comes to product and engineering, but he's extremely well-rounded.

In addition to his development chops, Stromberg noted that Brown is a high caliber strategist and business thinker, as well as an excellent communicator. That is allied with a prodigious work ethic, per Stromberg: 

[Brown] has a commitment and intensity to get the job done, that I've never seen in anyone else I've worked with...When he zeroes in on a task, he ensures the job gets done. That's expressed in all ways, big and small.

Stromberg recalled arriving at the office at 7 am one morning to find Brown asleep on the couch. There had been a 6 am launch that Brown had stayed up through the night to manage.

Check’s CTO, Vivek Patel, brings a different energy to the partnership. So unusual is Patel’s thinking that it can seemingly only be captured in metaphor. Brown remembered a friend of Patel’s noting that “a dozen candles were burning in his brain at any given time.” You cannot leave a discussion with Patel without receiving a recommendation for a book you have never heard of, according to Brown. 

Stromberg returned to the reference call he’d taken when considering hiring Patel at Oyster: 

The person [the reference] said ‘Patel is one of the smartest people I've ever worked with. His ability to process information and make sense of it is unlike anyone I've ever seen. It's like he has two parallel processors in his brain and he can work on them at the same time.’

Beyond this distinctive, memorable mental capacity, Patel is also a robust commercial thinker, as well, of course, as an extremely talented developer, with a knack for writing excellent documentation. A trained eye can peruse Check’s API documentation and note as much themselves. 

Eric Stromberg completes the trio. Though his primary role is managing Bedrock Capital, a venture firm with $1 billion under management, Stromberg is an active contributor to Check. As he describes it, he remains part of the conversations one would usually have with a co-founder, and is involved in strategic decision-making and executive hires. Brown noted that Stromberg has been particularly influential when it comes to messaging, positioning, and fundraising.

Leadership is supported by a strong cadre of internal leaders, with experienced contributors across engineering, payroll, compliance, business, and the legal realm. 


Though people define the tenor of a workplace, a company’s values play a significant role. In my investigation of Check, I noticed three particularly pronounced traits: a predilection for tackling hard problems head on, a willingness to eat their own cooking, and a commitment to “bridging the gap.” 

Check would not work if its founders fled from hard problems. But the extent to which the company embraces adversity and complexity is unusual. 

First, we can look at Check’s product. It would have been much easier for the company to create a payroll data aggregation API. Indirect competitors in the space have raised sizable sums to tackle this problem. (There is certainly a market for those products, too.) What Check is doing goes many layers deeper and serves a different purpose. They are not merely collecting information — a kind of Plaid-for-payroll — but actually running a full-stack payroll processing system. This is orders of magnitude more complex from a technical perspective and illustrates a tendency to see difficulty as opportunity. 

Second, we can look at the actions of Check’s founders. To get up to speed on the space, Brown and Patel both received certification from the American Payroll Association. Receiving a “Fundamental Payroll Certification” is not a trivial task, requiring significant studying and robust understanding. 

From day one, Check has also shown a commitment to eating its own cooking. Brown and Patel insisted on paying themselves through their own system — they had to build it to draw their first salary. That has remained the case ever since. Check is its own first customer and as such, understands the customer experience. 

As mentioned, several members of the team referred to Check’s “bridging the gap” value. They explained that this is Check’s way of communicating the necessity for each of the company’s different teams to work in tandem. The engineering team should be in close contact with the payroll team, for example. 

Industry veterans like Jim Kohl noted how unusual this was for incumbents; engineering is often walled off from payroll. Communication is limited to a never ending stream of support tickets and feature requests, meaning the team that best understands the problem is separated from the one building the solution. 

Check operates diametrically. Engineering teams are constantly consulting with payroll and visa-versa. Much of that stems from the respect and empathy the company seems to have for the industry. As Zapolsky noted, “We are explicitly not a company of hotshot tech people trying to turn it [payroll] on its head." 

Risks: Fighting stickiness and the status quo

Check is a little more than two years old. Any company of that age knows that long-term success is uncertain. 

Check is no different. Though the team has executed impressively, plenty of risks remain — perhaps the largest of which is the stickiness of the category

This past weekend I was chatting with a founder of an early-stage startup. When I asked what he thought of his payroll provider, he said, quickly, that he hated it. When I asked if he’d ever switch, he responded just as rapidly, “no way.” 

This is the sentiment of so many in the industry and goes some way to explaining why giants like ADP have held onto their market cap, even when customer satisfaction remains low. It is a nightmare to get up and running with payroll; once you’re set-up, you don’t want to mess with it. 

This could, in theory, make life difficult for Check. If end customers are unwilling to switch to a new provider, Check’s product becomes significantly less compelling. To make this clearer, here’s an example: 

Imagine you run Blue Fox Ice Cream in Brooklyn. You set up your first store, hire your first employees, and select PayZone as your payment provider. 

After a few months, you join Homebase. You need a better way to manage shifts and other benefits and like the platform. Once you join, you see that Homebase offers payroll too (via Check)! 

Would you switch? 

In many cases, the answer will probably be “no.” The hassle may not outweigh the benefits of switching, at least at first. If over time, conversion continues to be a problem, platforms like Homebase may decide not to bother with payroll. 

Though feasible, this doesn’t feel particularly likely. For one thing, Homebase and other platforms are constantly acquiring new customers looking for a payroll system for the first time. In that circumstance, there’s little reason why you would choose a third-party provider like Paychex that is divorced from the rest of your business data and management, when you can use Check embedded in your platform of choice. 

It also doesn’t reflect what is currently happening in the market; Check’s product is already resonating.

Beyond this risk, Check must also grapple with the status quo. VP of Sales, Mike Johnson described this as the company’s biggest “competition.” 

Rather than pursue a payroll integration, platforms may instead choose to tackle other projects first. Though Check has streamlined the process significantly, this is not a “set and forget” addition for a platform. It requires support from growth, sales, and marketing. End customers need to be educated on its benefits. Many businesses do not have the bandwidth to support such a process, or may need to prioritize other more critical initiatives first. 

“It’s your traditional ‘no-decision’ in enterprise selling,” Johnson noted, though he added that stance often changes once platforms better understand the potential business impact. Then “it’s not a question of if they’re going to do it, it’s when.” 

Though the introduction of “Components” is a savvy way of reducing time commitment and effort, to reach its full potential, Check will need to find more ways to flip prospects from “maybe later” to “right now.”

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Future: Eating payroll

With nearly $9 trillion in wages processed in the US alone, Check’s opportunity looks exceedingly large. Over the next few years, we may see the company become payroll’s true “platform of platforms,” act as vital infrastructure for gig-economy businesses managing worker reclassification, and replace big tech’s solutions of choice. 

“Platform of platforms”

In December of 2020, Stratechery author Ben Thompson published what has since become a canonical article. In “Stripe: Platform of Platforms,” Thompson articulated how the payments company had become the financial infrastructure for large platforms like Shopify. 

As we’ve alluded to, Check has a chance to fulfill a similar position in the payroll space. Already the company has stepped into this role for large businesses like Homebase, Procare, and ServiceTitan. By doing so, Check touches hundreds of thousands of small businesses, growing rapidly. 

It is not hard to imagine how that number could reach millions. There are hundreds of platforms that seem well-suited to Check’s offering. 

Why wouldn’t Shopify want to offer payroll to its customer base? The e-commerce platform has shown admirable foresight when it comes to adding financial services through partnerships — payroll feels like an obvious, value-additive extension. 

What about Mindbody? Again, the playbook is clear. Mindbody seeks to be the one-stop shop for its base of wellness practitioners and fitness centers, managing marketing, booking, and many other administrative tasks. Adding payroll would further cement that position. 

The same logic works when applied to fintech companies that serve startups and SMBs. Ramp, for example, has won the business and affection of startups with its savings and spend management platform. It could use that base to offer payroll, further differentiating itself from competitors and more effectively serving clients. 

Similar cases can be made for companies like Xero, Expensify, Brex, and even cap-table management players like Carta.

If Check can secure a few more of these customers and achieve meaningful results, payroll may quickly become a sought-after addition for other leading platforms. 

The Great Reclassification

If you want to, you can see Check as a call option on worker reclassification. 

For a moment in 2020, it looked as if every Uber driver and DoorDash delivery person in California was about to become an employee. In the end, Proposition 22 triumphed, establishing gig-workers as a special class — not quite 1099s, but not W-2s either. For dominant gig platforms, that was a huge win, but the fight is far from over. 

Large sections of the public and political class remain hostile to this model, arguing that anything short of employee status fails to adequately protect and compensate the workers of these platforms. Other nations have taken steps to mandate employment status, with the Portuguese government recently approving a bill to this effect. (It has yet to be fully passed.) This follows similarly-minded moves in the UK and Spain, and the European Union is said to be considering a wider-ranging set of guidelines.

It’s worth noting that while Check is focused on the US for the time being, the platform is extensible beyond American borders. In many respects, international expansion should be comparatively easy ​​— one Check employee remarked that adding Canada would be roughly as difficult as spinning up support for Pennsylvania. The US has a singular gift for financial and legal convolution. 

Stateside, some mobility startups have been proactive in building a W-2 workforce, with scooter-rental company Revel a prominent example. That may be the start of a larger trend. 

If a leading gig work platform were to transition from a 1099 model — either by choice or law — Check would be a natural partner. Companies like Uber and DoorDash are technically savvy and will want to work with a modern, modular payroll stack rather than an outmoded legacy solution. By leveraging Check, these businesses would also have the ability to tailor service to ridesharing or food delivery. 

With 51 million gig workers in the US, and Uber and DoorDash managing 2 million contractors between them, any significant shift could hugely benefit Check.

Renovating big tech

The case above illuminated an additional opportunity for Check: serving tech’s biggest companies. 

Companies like Google and Tesla have long relied on payroll providers that look hilariously out of date, compared to forward-looking customers. Google is famous for building almost all of its software in-house...except for payroll. The company reportedly relies on Ultimate Software, a business founded in 1990, went public in 1998, and has since been rolled into Kronos Incorporated. 

Tesla apparently spent years using Workday, but eventually decided they’d rather build a system in-house. 

While selling into the largest companies in the world is not easy, and servicing them would likely require Check to amass a bigger team first, it feels almost inevitable that such technologically savvy businesses will, over time, gravitate towards the best engineered products that allow customization. 

In ten years time, employees at Google, Tesla, Facebook, and Amazon may receive their salaries from a provider built on Check, or perhaps from those companies directly building on Check’s APIs.

Empowering the long-tail

The power of infrastructural providers like Plaid, Stripe, and Check is that you cannot fully grasp how they will be used, and what new business models they will enable. 

If you had asked Patrick and John Collison in 2009 which kinds of companies would use Stripe, they almost certainly would have referenced e-commerce players. Little did they know that one of their largest, most influential customers would be an on-demand taxi startup founded that same year, and a food delivery business that only arrived four years later. 

By reducing the difficulty of building a payroll product by several orders of magnitude, Check may enable a new wave of startups that leverage this fresh primitive. Already, the team is seeing this kind of behavior play out. 

Earlier this year, Stromberg tweeted that the company was seeing new sector-specific payroll providers emerge, built on Check: 

He went on to add that many of these categories were large enough to support billion-dollar businesses. 

This is the tip of the iceberg. As Check adds to its product and grows its footprint, it may see customers begin to offer all manner of services tethered to payroll, whether that be wage advances, loans, or other financial services.

In a decade, Check may find itself surprised by the business built on top of it. 

When I asked Brown what his long-term vision for Check was, he answered: 

That in a few lines of code, we’ll be able to pay any human being, in any industry, anywhere in the world.

It is a big dream. If Check succeeds, it will have renovated the leakiest piping system in the financial space, permitting money to flow considerably more smoothly. 

The Generalist’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects. Our work may feature entities in which Generalist Capital, LLC or the author has invested.