Hanno Renner is co-founder and CEO of Personio, a cloud-based HR management and recruitment solution for small and medium businesses (SMEs). The Munich-based startup has won over $14m in funding since its 2015 foundation–including a $12m Series A round this month. Renner tells Red Herring about the importance of planning far ahead, catering to SMEs and the pros and cons of working in Germany’s third-largest city.
Which lessons did you learn as a result of founding Personio?
We founded Personio in 2015, after the first lines of code were written in 2014. The idea for Personio was developed out of necessity, as one of our shareholders was responsible for HR tasks when he was still with his former company.
He realized how quickly you grow weary of repetitive, administrative tasks and how much time HR managers lose due to complicated excel sheets and inconsistent data. He was looking for a software to solve his problems. While there are a couple of SME-targeted solutions, like Namely and BambooHR, in the US, we realized that Europe is missing a modern solution tailored to the requirements of companies in this market.
I think one of the biggest lessons I had early on was to not only focus on the most pressing problem at the time, but to also already anticipate what problems you will face after you have solved the current issue.
What mistakes have you made along the way, and how has mentorship helped you overcome those mistakes?
A lot of mistakes happened for being too focused on immediate issues and less on the foresight of future ones. We were very lucky that we had the founders of (Munich-based e-commerce firm) Stylight to jointly invest in our seed round funding last year…They specifically pushed us to design an organizational structure, set up mission-based teams and implement a goal setting framework, which we probably would not have done otherwise. Having that in place helped us a lot while growing from seven to over 50 employees in the past 12 months.
What is your one biggest piece of advice to offer fellow entrepreneurs–especially in the HR tech field?
I think a lot of startups in the HR tech space focus on the “sexy” topics (e.g. employer branding, employee engagement) or promote trending technologies such as AI. While I do believe that artificial intelligence at some point will have several valid use cases in human resources, currently there are still a lot of un-sexy but highly relevant problems to solve. Why should a company implement AI-based candidate matching algorithms while vacation days are still requested using printed paper sheets?
– What are the key differences in providing software to small and medium businesses, rather than aiming your solution at the entire HR market?
Personio was designed for companies with ten to a thousand employees for a particular reason. As I explained before, it was born out of the problem that there was no suitable HR solution available to smaller companies. That is the reason why we are very dedicated to make Personio fit to the special needs of these firms.
Small and medium-sized companies usually also have a small human resources team. Unlike bigger companies, where the roles are often divided between recruiters, coordinators and payroll experts, the HR roles in SMEs are mostly generalistic. This means that one single person can be responsible for recruitment, taking care of active employees, payroll and sometimes even employer branding. Due to these diverse everyday tasks, HR managers want a system that combines all these tasks in one and does not require them to log-in to several tools and have data spread out across them.
How has Personio spent its recent funding rounds on, and what are its expansion plans for the future? Is the company active in the UK, or other European markets?
We have mainly invested in growing the team to speed up development of further features and to also support our growing customer base. Regarding expansion our goal is to build the leading cloud-based HR management and recruiting solution for SMEs in Europe. So far, most of our customers are based in the DACH (Germany, Austria and Switzerland) region, but we already have customers in the UK, Scandinavia, France and other European markets.
– How good is Munich as a startup hub? Is there a good enough system of mentors, VC and infrastructure to cater for a vibrant startup scene?
Munich is certainly not as vibrant as European startup hubs like Berlin or London. However, what I like about the scene is that most startups here are very solid businesses. You probably won’t find as many hyped consumer startups in Munich that make a lot of noise without earning a single Euro, but examples such as eGym, Stylight, Celonis or NaVvis have proven that you can build successful companies here.
Regarding mentors, there is a great program from The Center of Digital Technology and Management (CDTM) that helps aspiring entrepreneurs to find likeminded people who support them in learning how to build a company. When it comes to VCs I believe European investors are used to travel by plane to board meetings and therefore it is less important in which city you are located.
The only downside of being in Munich are the higher costs for talent. On the one hand cost of living is more expensive than for example in Berlin. On the other, you compete with many large players such as Google, Amazon, Microsoft and IBM–or more traditional companies like BMW or Siemens–who all tend to pay very well.