Irvine-based startup ShiftPixy plans to issue an initial public offering by the end of the year, with hopes of raising between $15 million and $50 million.
The company is offering to sell between 1.88 million and 6.25 million shares at $8 per share, according to initial public offering documents, which point to a maximum market capitalization of $259 million.
ShiftPixy offers a proprietary app to businesses that rely on large numbers of part-time employees and often have open work shifts to fill with little notice.
It’s an approach similar to Uber and other car services, but ShiftPixy specializes in groups such as fast-food employees who might be able to answer a call within hours to fill shifts at various locations of the same chain or bring basic skills—working a grill, for example—for a night at some other eatery.
“We’re different than a temp firm,” said Steve Holmes, founder of ShiftPixy, “because most temp firms attempt to fill positions within 48 to 72 hours.”
The 13-month-old company is working with investment bank W. R. Hambrect in San Francisco to pursue an IPO on the NASDAQ.
“The timing is perfect, considering the rise of the ‘gig’ economy,” said ShiftPixy Chief Executive Scott Absher, referring to the part-time labor market that’s developed new niches as apps have reshaped various consumer behaviors in recent years.
ShiftPixy now employs 40 software developers and customer service staff at its headquarters in Irvine.
The company’s revenue is on the rise—it rose from $2.3 million over the six months ended in February to $33.7 million in the following three months, according to documents filed for the possible IPO. The company reported a net loss of about $375,800 for the nine months ended May 31.
It has 155 clients with about 3,500 part-time employees combined, according to Absher.
The startup allows business owners and their part-time employees to solve competing problems regarding work shifts, wages and healthcare coverage—workers generally want more hours, and many small businesses aim to keep their headcounts below the minimum threshold under the Affordable Care Act for providing healthcare insurance.
Shift Shuffle
Business owners usually limit their part-time employees—“shifters” in the parlance of ShiftPixy executives—to less than 30 hours of work per week. The Affordable Care Act mandates that employers with more than the equivalent of 50 full-time employees provide health insurance coverage to any workers who put in more than 30 hours per week, or pay a penalty of $2,160 per person.
The company’s app is connected to a cloud-based database that managers and business owners can use to monitor and schedule employees’ weekly hours, Holmes said.
The app also helps managers connect with ShiftPixy’s roster of shifters to work the remaining shifts without the need to recruit, interview, hire and conduct background checks, he said.
Managers “simply” announce available work shifts to all eligible employees via the app, said Absher, who bills the process as more efficient than the typical practice of calling employees one at a time to fill out shifts, Absher said.
Workers of any given enterprise or employees from another store—or another business—can immediately respond to the request through the app.
Managers can review a list of respondents via the app, their qualifications and their latest work reviews. They can contact the desired workers through the app, then reach out to other candidates if needed.
Holmes said ShiftPixy staffers enter employment paperwork for participating workers into the app’s database.
Their goal is to process all the information about clients’ part-time employees within a couple of days of getting it. Holmes and Absher plan for shifters to enter all of their employment information directly into the app in the future.
The average ShiftPixy client has about 23 part-time employees, or shifters.
Shifters can indicate their store preferences, geographic range and availability after they have accessed the app on their mobile devices.
ShiftPixy also promotes the app as an aid for stay-at-home parents or working professionals who want to earn additional money. They can use the app to “express interest” in working for a franchise or business within a geographic radius, giving their preferred day of the week and time of day.
Shifters can make informed decisions about whether to accept a shift using reviews of business owners and sites in the ShiftPixy database.
Absher and Holmes have worked mostly with owners of restaurants and retailers with limited human resources departments.
“We can closely work with local clients to improve their experience with the app,” Absher said.
Rollout
The company plans to use the IPO proceeds to open offices—one at a time—in New York, Orlando, Dallas, Chicago, Las Vegas, Atlanta and San Francisco.
A rollout beyond Orange County—where caution has been a byword of the recent growth streak—will take a cautious approach, similar to that it’s had in Orange County, according to Absher.
“Execution is our first concern,” he said. “We have to serve our clients well for our business to be successful.”
It also plans to target “middle-tier” companies that have 100 to 500 shifters.
“Cities with high population density are the best fit for us,” Holmes said, and the company plans to expand slowly.
The app can handle 1 million shifters, Absher said.
ShiftPixy plans to raise between $15 million and $50 million via the Security and Exchange Commission’s Regulation A+, which is part of the Jumpstart Our Business Startups Act.
It enables startups to develop into larger companies by sidestepping the usual small business loan or venture capital process. The startups sell company equity directly to unaccredited investors.
Unaccredited investors have a net worth of less than $1 million, earned less than $200,000 annually in the last two years, or have an annual household income less than $300,000.
Reg A+ is similar to crowdfunding, said David Gosslin, a principal at DBBMcKennon, an accounting firm in Newport Beach, but Reg A+ investors have partial ownership in the company and may be able to share in the profits.
Crowdfunding investors help create a product, but they do not own stock in the company, Gosslin said. Crowdfunding also is limited to raising $1 million for companies valued between $3 million to $5 million.
Gosslin said investors might be more interested in Reg A+ companies because they have a lot more upside: They are young firms, with revenue, that may grow into large corporations.
“A lot of the new IPOs are issued after the company has been fully developed,” Gosslin said. “If Apple computer adopted that strategy prior to its IPO, the stock would have been priced at $350,000 a share.”
ShiftPixy faces one risk in its IPO strategy, he said: A single investor with a lot of money could buy a majority or even all of the shares.
Absher and Holmes also said they don’t want to sell the startup.
“You spend a lot of time watching the industry, developing strategies and building a company,” Absher said. “You want to see it catch fire and become a success.”
“We know that a lot of larger companies are aggressively tracking our progress,” he said.
