Israeli Fintech Startup Sorbet Completes $21 Million Seed Round
CTech – Sorbet announced on Thursday that it has closed a $21 million financing round — the biggest seed round for a fintech startup in Israel. In April, the company announced that it had closed a $6 million round, which has now been extended by another $15 million, led by Dovi Frances’ Group 11, along with current investors, including Viola Ventures, Meron Capital, and Global Founders Capital.
Sorbet’s platform allows employees to convert their unused Paid Time Off (PTO) into cash. In the US alone, the value of unused PTO totals $270 billion. Oftentimes employees are unable to cash out their PTO until they resign or are fired. From the employer’s perspective, this unused PTO value creates a cash flow liability on the company’s balance sheet.
Even before the Covid-19 outbreak, 28% of PTO in the US remained unused. This problem only intensified with travel restrictions and as more and more people started working from home. Employees simply weren’t motivated to take time off, and the challenge of managing PTO grew exponentially for employers along the pandemic. This lack of motivation to take time off is expected to persist, even as we see a light at the end of the pandemic tunnel.
Sorbet integrates into and syncs with employers’ existing calendar, HR, and payroll systems, so it can identify habits and analyze time management patterns. Sorbet then begins to proactively suggest personalized, pre-approved 3-6 hour “Micro Breaks,” 1-4 day “Micro Vacations,” and +1 week vacations that fit the employees’ personal preferences without disrupting their work.
By doing this, Sorbet both increases Time Off usage by an average of 15% and is able to predict the portion of time-off that will never be used by the employee, which will end up accruing.
Sorbet co-founder and CEO Veetahl Eilat-Raichel told Calcalist that they began working on their current product after receiving inquiries on the matter from companies. “We understood that many companies are troubled by the fact that employees don’t take holidays and we decided to look into the matter and discovered a massive market failure,” said Eilat-Raichel. “We started with an initial product from June to November of last year, based on which we also raised $6 million, and we received a lot of demand across the US and also globally.
“Employees amass many holiday days that they cash out when they leave the company,” added Eilat-Raichel. “This is a commitment the company has towards the employee and it creates a very problematic debt for it as the company doesn’t know when it will need to pay it out and at what cost.”
Sorbet offers to buy out the unusable portion of the employees’ PTO, and is able to refinance these liabilities for employers so they can better manage their cash flows, save on financing costs and increase tax deductions.
Cashed out days are loaded on a virtual prepaid card which can be used anywhere and unlocks highly curated experiences and activities through brand partnerships, enabling employees to do anything from upgrading to business class, booking a spa treatment, or simply taking an online course paid directly out of their unused PTO.
Along with the new financing news, Sorbet also announced the expansion of its operation from the US to Australia, where labor laws allow employees to accrue PTO indefinitely — a major challenge for any Australian employer.
The company currently employees 28 people of which 16 are in Israel. Sorbet will be recruiting dozens of new employees this year, the majority of them in Israel, with others joining the US and Australian operations.
“At Group 11 we pride ourselves in our unique ability to uncover the unicorns of tomorrow,” said Dovi Frances, Founding Partner, Group 11. “Veetahl and the team did something exceedingly difficult, which is to uncover a massive market inefficiency hiding in plain sight. With a $270 billion market opportunity, it was crystal clear to me this was the time to push forward and not look back.”
Sorbet was founded in 2019 by Veetahl Eilat-Raichel (CEO), Eliaz Shapira (CPO), and Rami Kasterstein. Veetahl most recently served as Head of Retail Marketing at Bank Hapoalim and Head of Marketing and Customer Experience at Isracard. Eliaz most recently served as co-founder and CEO of Oneder, a leading educational platform focused on special education. Rami has been active in the hi-tech industry for over 30 years, as both serial entrepreneur and investor.