Startups are generally associated with words like flexible, unstructured, informal, etc. Hence people have this notion that having an HR would hamper their relaxed environment. But the point is that you can initially work without them but to keep everything together, you will have to incorporate this department sooner or later.
Organizations think that they can manage the role of HR on their own. But if we think otherwise having an organization without Human Resources is like driving a vehicle without knowing how to drive. These roles clearly describe why this particular department is the best for what it does.
Workforce planning: You can try to fill the positions presently needed but that is not it. You will have to create new positions in order to grow in size and quality. And not everyone can do it. You will need proper expertise for doing this.
Development: Getting workforce is not enough. You need to hire, retain and develop employees continuously to survive and not just exist.
Rewards and compliance: An automated payroll system can send salaries to employees timely but who will keep a record of the changes in policies and leaves?
Engagement: It is not enough for employees to just keep working day in and day out. Your employees need to feel proud of the place they walk into every morning. And for that organization needs time and effort separately.
An answer to all these would be an HR department with an HR toolkit. For better understanding and implementation of these functions, HR toolkit provides tools and information you need for traditional Human Resources areas.
For startups particularly, these help in the same way as HR does. You can go about doing your stuff in an unstructured manner but a basic structure would help you to keep it together, saving it from falling apart.
Moreover, when you have a guideline for doing something, you need minimal assistance which in turn saves manpower and hence money.
And in this way, we can have the best of both worlds.