![Flare HR co-founders Daniel Cohen, Jan Pacas and Saul Kaplan plan to disrupt default super.](/web/20160614135918im_/http://www.theage.com.au/content/dam/images/g/n/o/o/n/j/image.related.articleLeadwide.620x349.gnp5br.png/1459156446998.jpg)
Flare HR co-founders Daniel Cohen, Jan Pacas and Saul Kaplan plan to disrupt default super. Photo: Louie Douvis
Westpac Banking Corp's venture capital fund Reinventure Group has taken a stake in Flare HR, a start-up that has built software that promises to enhance company engagement with employees and disrupt the $9 billion default superannuation market.
Reinventure Group has invested more than $1 million in a recent seed fundraising round by Flare, which has spent a year building a cloud-based platform that will launch in May. The Sydney-based company has a dozen full-time staff working in the fintech hub Stone & Chalk and expects to grow to 30 people over the next six months.
Flare's software, which manages the on-boarding of new employees and various human resources functions including performance reviews and internal communications, will be provided free to small-to-medium-sized enterprises. The company will earn a revenue stream from the delivery of financial services and products, such as superannuation, insurance and advice.
It's a model similar to Zenefits, one of the fastest-growing software start-ups in US history, which is valued at around $US4.5 billion after three years of operation.
But the Zenefits story also shows the pitfalls of fast growth: the company is facing a compliance scandal after it was revealed employees had not been properly licensed to sell health insurance products. To avoid Zenefits' headaches, Flare is partnering with existing holders of Australian financial services licences, who will provide the financial advice.
Flare co-founder Jan Pacas said "We will be completely distancing ourselves from their compliance issues because we have taken compliance and rigorous processes very seriously from the beginning – that is a priority for us. We are ambitious and want to build a very successful company, but to do so in the most ethical and sustainable way."
If Flare is able to scale, it threatens to disrupt industry super funds' stranglehold over the market for default super funds, which are selected when employees do not make a choice of fund.
About $9 billion a year flows into default super and around 75 per cent of employees take the default option. Mr Pacas said such numbers reflect widespread the disenfranchisement and lack of transparency about super, despite the government's efforts to improve customer literacy through the MySuper reforms.
At its launch, Flare will offer employees using the platform with super options from four large retail super funds, plus a range of options for life insurance. It is planning to add additional funds to the platform, including industry funds.
"If we can build the literacy of our users and provide value in the information that we present, we'll drive healthy revenue," said co-founder Daniel Cohen.
Goldman Sachs
Mr Cohen previously worked at Goldman Sachs. He left the investment bank in 2006 to start Park Assist, which makes the systems in car parks that display red and green lights to show drivers where parking spaces are vacant. After Westfield signed up as its first customer, Park Assist expanded to 15 countries, before it was sold to the Dutch TKH Group in 2013.
Mr Pacas had been managing director of Hilti Australia, which makes premium power tools and has 22,000 staff worldwide. He came to Australian seven years ago and co-founded Mat Paws in in 2014, which has been described as an Airbnb for pets.
The third co-founder of Flare and its chief technology officer is Saul Kaplan, who created the MacromatiX operating system which is used by McDonalds, Starbucks and KFC in the Asia Pacific to power supply chain management, rostering, forecasting, analytics and in-store operations. It was sold to TPG 2012.
Danny Gilligan, co-founder of Reinventure Group, said the fund has been looking at disruptive opportunities in the wealth space for the last couple of years.
"In our view, Flare represents the most interesting wealth distribution opportunity in market, given its ability to offer personalised financial services offerings at scale through a largely unaddressed market segment," he said.
Westpac may consider introducing the platform to its SME customer base to assist Flare scale.
Flare has created a fully digital on-boarding process for employees, including employment contracts that are signed electronically in the cloud. It also offers an internal social network, employee communication pages, performance reviews, leave applications, training documentation and rostering. In the future, staff education may be added to the platform. Other financial services could also become part of the offering, from home loans to novated leasing.
The software will target both companies too small to have their own HR staff and which might be using email and spreadsheets to manage employees, through to companies with hundreds of employees who might be using disparate IT systems for various HR processes. Oracle and SAP dominate HR software for large companies; Flare says as it scales, it might consider expanding to companies with more than 2000 employees.
Mr Pacas said Flare will empower human resources staff who feel like paper-pushers and compliance monitors, but should be working to develop staff skills and enhance corporate culture.