Sparrow raises $35M Series B to automate the employee leave management nightmare

Sparrow, the employee leave management technology company, announced Tuesday it raised $35 million in Series B funding led by Silver Lake Waterman, bringing the company’s total investment to $64 million as it capitalizes on the growing complexity of workplace leave compliance.

The funding comes as companies grapple with an explosion of state and local leave regulations that have transformed what was once a straightforward HR process into a compliance nightmare. With 14 states now operating paid leave programs and six more considering legislation, distributed workforces face a patchwork of rules that vary not just by state, but by county and city.

“Leave is complicated — and stressful,” explained Deborah Hanus, Sparrow’s CEO and co-founder, in an exclusive interview with VentureBeat. “It touches so many aspects of the company — legal compliance, insurance, state agencies, payroll, HRBPs, managers and employees. Everything is always changing, and no one has the data they need when they need it.”

The problem has intensified dramatically since the pandemic accelerated remote work adoption. What was manageable when employees worked from a single office has become nearly impossible to navigate manually across multiple jurisdictions.

Sparrow’s growth metrics underscore the urgency companies feel around this problem. The company has grown revenue 14x since raising its Series A in 2021, now serving more than 1,000 customers including OpenAI, Reddit, Chime, and Oura. The platform manages leave for over 500,000 employees and has processed more than 2 million days of leave.

Perhaps most telling is the financial impact: Sparrow has saved customers more than $200 million in payroll costs by ensuring employees receive proper wage replacement from state agencies and insurance providers — money that would otherwise come from company coffers when paperwork errors prevent benefit claims.

“Using Sparrow actually saves our customers money, because the default is people are making mistakes on their paperwork. They’re not getting paid properly, and then usually their employer is making up the difference,” Hanus said.

One customer, which Hanus declined to name, paid Sparrow roughly $250,000 in its first year but saved $2.5 million in payroll costs — a 10x return on investment simply by ensuring compliance paperwork was filed correctly.

Traditional leave management requires HR teams to navigate a maze of federal regulations like FMLA alongside varying state programs, insurance providers, and medical documentation. The process involves coordinating between employees, managers, payroll teams, legal counsel, and multiple external agencies — often using spreadsheets and email threads.

“Before Sparrow, we were managing all of our leaves through an Excel spreadsheet,” said Sara Marzitelli, Vice President and Head of People at SonderMind, a mental health company that experienced 2,289% growth over three years. “It was hectic. Information wasn’t always up to date and we were missing key pieces of data.”

Sonya Miller, VP People Business Partner at Eightfold.ai, an AI-powered talent intelligence platform, echoed similar challenges. “Before using Sparrow, we were keeping up with constantly evolving state programs and manually tracking absences, which frequently resulted in us overspending without realizing it,” Miller told VentureBeat. “Hiring a leave management partner to save money may seem counterintuitive, but that is precisely what happened. Sparrow helped us save time and money by streamlining the entire procedure and guaranteeing compliance.”

Sparrow’s AI-powered platform consolidates this fragmented process by ingesting data from insurance providers, state agencies, and medical providers into a single system. The technology automates form completion, tracks deadlines, calculates wage replacement amounts, and manages communication between all parties.

“The biggest problem is not having the right information in the right place,” Hanus explained. “We’re able to take all of that information across the insurance providers, medical providers, state agencies, and we are putting that all into one system.”

The company’s compliance engine stays current with constantly changing regulations across all 50 states plus Canada, automatically updating processes when new legislation passes. This is critical as compliance requirements often differ not just in policy but in implementation details that can vary significantly between jurisdictions.

Unlike pure software solutions, Sparrow combines AI automation with dedicated human specialists who handle complex cases and provide employee support. Each employee taking leave gets paired with a Sparrow Leave Specialist who manages their case from start to finish.

“We know how to use AI when it needs to be used, but there are some moments where maybe the AI is not quite ready for it,” Hanus said. “These are very sensitive moments. You don’t want to give people wrong information.”

This hybrid approach has generated exceptional customer satisfaction. Sparrow maintains a Net Promoter Score above 60, sometimes reaching 100, compared to industry averages in the negative range for insurance-related products. Customer retention exceeds 90%, with net revenue retention above 110%.

The human element proves especially valuable in complex scenarios. “Maybe someone was in a car accident, they’re in a coma, and you’re dealing with their spouse, so they don’t have access to any of their accounts,” Hanus said. “Some of these situations just get complicated enough that sometimes you do actually want human intervention.”

Miller from Eightfold.ai praised the platform’s user experience. “Sparrow gives our staff members the freedom to manage their own leave. We also don’t have to worry about the specifics because it guarantees state-specific accuracy and compliance,” she said. “Additionally, the dashboard is simple to use and intuitive for HR, business partners, and employees. Filing paperwork for disability insurance and other state funding for the employee is a huge benefit for both our employees and Eightfold with Sparrow, in contrast to other leave management vendors we spoke with.”

Customer case studies reveal the substantial financial impact of proper leave management. Wish, the mobile commerce platform with 850 employees globally, saved more than $600,000 in 2023 alone by utilizing wage replacement programs properly managed by Sparrow.

“We decided to partner with Sparrow to give employees a seamless leave experience, and reduce the workload for HR Ops and Payroll,” said Pauline Lam, People Operations Manager at Wish.

At SonderMind, the transformation freed up strategic capacity for the HR team. “We’ve gotten so much time back with Sparrow, which means it’s a major cost savings as well,” Marzitelli said. “Working with Sparrow has given us more time to focus on strategic initiatives that help us attract new talent and improve employee retention.”

The time savings prove substantial. At Gong, the revenue intelligence platform, Senior Manager of Benefits Programs Karen Hoang reports spending “at least 30% less time on leave-related interactions thanks to Sparrow.”

At Eightfold.ai, Miller highlighted both employee and operational benefits. “The biggest benefits for employees have been the simplicity of use, the feeling of privacy, and the genuine support they received during their leave,” she said. “Time, energy, and money have been saved for our team, and everything is easy to manage thanks to the dashboard.”

The funding comes at an inflection point for workplace leave policies. While federal paid leave legislation has stalled, states have filled the gap with their own programs. Since 2019, multiple states have launched paid family and medical leave programs, with more in development.

“Leave was not always this complex,” Hanus noted. “Thirty years ago, there were really no regulations related to leave. Then we got FMLA in the 90s. Then for 20 years, there were no more regulations related to leave. It’s really in the last 15 years where there’s been all this interest in federal paid leave.”

The complexity extends beyond state programs. Companies must navigate short-term disability insurance, workers’ compensation, and various federal protections while ensuring consistent policy application across their workforce.

“When teams became much more distributed in 2019 and 2020, this went from being a difficult compliance problem to an absolutely insurmountable problem,” Hanus said.

Sparrow already operates in the United States and Canada, with plans to expand its compliance capabilities internationally. The company offers a global leave solution that manages tracking and communication for leaves worldwide, though without the detailed compliance automation available domestically.

“Today, if someone at a company like Samsung says ‘We’re going to start hiring in France,’ HR panics,” Hanus said. “They usually have to go find a local employment lawyer who may or may not be able to provide information in the language that HR speaks.”

The Series B funding will enable Sparrow to expand beyond leave management into adjacent compliance areas like accommodations and immigration — other high-touch, regulation-heavy processes that burden HR teams.

“Our core competency is making sure that everyone has the right information at the right time, and all that data is in one place,” Hanus said. “Really, what our core competency is within this is these sort of high touch compliant moments in compliance.”

Sparrow operates on a usage-based pricing model, charging companies for each employee leave rather than a flat subscription fee. Roughly half of the company’s revenue comes from six-figure deals, indicating strong enterprise adoption.

The company plans to introduce subscription-based pricing for new products as it expands into additional compliance areas. This hybrid approach allows smaller companies to access the platform while scaling with larger enterprise clients.

“If you’re using it, you’re paying for it. If you’re not, you’re not,” Hanus explained.

The complexity Sparrow addresses resonates throughout the HR industry. Andy Biladeau, Chief Transformation Officer at the Society for Human Resource Management (SHRM), noted that among the organization’s 325,000 members, “Every year, we receive over 60,000 calls, and for more than a decade, leave management has consistently been a leading concern.”

Silver Lake Waterman Managing Director Matt Walsh, who led the investment, sees Sparrow addressing “one of the most complex and underserved areas of HR by utilizing AI to automate the manual, error-prone tasks that companies and employees encounter today.”

The timing aligns with broader workforce trends. “As the future of work demands more flexibility and support for employees, Sparrow is uniquely positioned to become the category leader in this essential part of the human capital management stack,” Walsh said.

As more states pass leave legislation and remote work becomes permanent, the administrative burden on HR teams will only intensify. Sparrow’s rapid growth demonstrates that companies are willing to pay significant sums to outsource this complexity rather than risk compliance failures or employee dissatisfaction.

The company’s success also highlights a broader trend: specialized AI solutions that combine automation with human expertise are emerging as the preferred approach for handling sensitive workplace issues. Unlike purely automated systems, this hybrid model builds trust while delivering efficiency.

For Sparrow, the challenge now lies in scaling its operations while maintaining the high-touch service that has driven customer loyalty. With regulatory complexity showing no signs of abating and distributed workforces becoming the norm, the company appears well-positioned to capitalize on what may be HR’s most persistent pain point.

After all, in a world where taking time off work has become a compliance minefield, the company that can make leave truly stress-free may have found the ultimate competitive moat.