With over US$ 12 Billion pumped the year closes as second best for HR Tech industry, VC's see promise amidst a volatile market.
by Swechha Mohapatra, Head Consulting & Delivery, hrtech
The HR Tech market, which runs the gamut of managing end-to-end employee lifecycle, has been remarkably resilient in the face of recent Black Swan events like the pandemic and the war. These events have spurred organizations to invest in digital infrastructure for their remote staff. Moreover, the macroeconomic fears have led to layoffs and increased pressure on HR teams to vet candidates carefully.
While the analysts have seen a funding dip in other industries, HR Tech remains agile and promising. The demand for HR Tech continues to grow as organizations deal with talent challenges like hiring, engaging, managing, upskilling and retaining employees.
Key Highlights of 2022:
- Over 440+ deals tracked in the year 2022 accounting to a total investment of US$ 12.4B. 2022 saw a 18% funding dip as compared to 2021 (US$ 15.1B funding).
- Quarter-wise split: Q1: US$ 5B | Q2: US$ 4.3B | Q3: US$ 1.8B | Q4: US$ 1.2B.
- While 2022 saw a Y-O-Y decrease of 18% as compared to US$ 15.1B in 2021 (which was undoubtedly the best year for HR Tech space so far), the year started bullish with US$ 2.3B in Jan 2022 (highest grosser in a month) and H1 2022 at US$ 9.3B. While the second half of 2022 felt the funding winter and closed at US$ 3B.
- Top categories of 2022: Talent Acquisition($4.5 B, 37%), Talent Engagement($1.8B, 15%) and Talent Development ($1.6 B, 13%)
- 67 Deals with ticket size of $50M and above comprised more than 65% the total amount raised in 2022. In comparison 94 deals with a ticket size of $50 M and above in 2021 totalled to a funding of $12.4 B. This is a clear indication that the average deal size has been significantly lower in 2022 as compared to 2021.
Top 5 deals(by funding amount):
- Uniphore (Talent Engagement-Employee Listening, $400M)
- Velocity Global(Talent Acquisition- Employer of Record, $400M)
- Remote (Talent Acquisition – Employer of Record, $300M)
- beqom (Total Rewards-Compensation Management, $300M)
- PayFit (Talent Operations- Payroll, $287.1 M)
Access the 2022 HR Tech Funding Top Investment deals here
- In comparison, the highest funding was raised by JobandTalent ($728 M) in 2021 and by Eightfold AI ($125 M) in 2020.
- Maximum number of deals: Talent Acquisition. (Refer below chart for no. of deals by segment).
- Highest average deal size: HRMS
- Average funding size: US$ 28.7 M ($45.7M in 2021, $16.3M in 2020). (Refer below chart for average deal size by category).
- Almost 50% of the total amount flowed into Series C to F start-ups, thereby indicating the focused interest of investors for mature and proven solutions.
- With US$ 6.8B (55%) of investments across ~200 deals, North American HR Tech start-ups continued to top the fund-raising game globally. There has been a notable Y-O-Y drop (US$ 10B in 2021) which could be attributed to the growth in other regions like EMEA, India and Middle East.
- EMEA (Europe, the Middle East & Africa) region witnessed a Y-O-Y growth of 13% in 2022 with a total funding of US$ 3.7B across ~130 deals. Top categories in the region were Talent Operations (US$ 818 M) followed by Talent Acquisition (US$ 782 M).
- APAC HR Tech start-ups raised US$ 1.6B in funding, up by 11.9% as compared to 2021. Big funding tickets were garnered by upGrad (Learning Marketplace, $210 M), eRoad (HRMS, $140 M), Employment Hero (EOR, $129 M) & Go1 (Corporate Learning & Authoring, $100 M). Top categories in the region were Talent Acquisition (US$ 454M) and HRMS (US$ 449M).
- Top funding deals received by Singapore-headquartered HR Tech start-ups include Multiplier (EOR, $60 M), Intellect (Mental Wellness, $20 M in 2 deals), FastCo (Job Board, $7.5 M) & X0pa AI (ATS, $4.2 M).
- Compared to 2021 where 35 companies raised funds more than once in the year alone, only a handful 10 companies had 2 rounds of funding in 2022. This included India-based HR Tech Unicorn Darwinbox, Germany-headquartered EOR WorkMotion, Singapore-based Health and Wellness provider Intellect amongst others.
- 34 deals were valued to be more than $100 M as against to 52 deals in 2021.
- HR Tech providers like Darwinbox, Beamery, Seekout, Payfit, Travel Perk, Staffbase, League entered the HR Tech Unicorn list.
- Top HR Tech investors in 2022 included Tiger Global, Gaingels, Sequoia Capital, Salesforce ,Coatue and Softbank.
Chart: Fundraise by Region: 2022
Segment-wise Notable Deals
The HRMS segment has particularly witnessed a growing focus on introducing new features and offerings for SMEs as HRMS or core HR systems are usually the starting point for small organizations looking to digitize their HR systems. The HRMS segment also had the largest average value of deal size at US$ 53.1 M.
Several HRMS providers, specifically catering to SMEs, raised funding including Brazil-based Solides, US-based Bambee, and India-based Zimyo.
India-based HR Tech startup, Darwinbox raised its Series D funding, earning the coveted Unicorn Status with US$76 M under its belt across two deals in 2022. Key deals across geographies in this segment were:
- APAC: China-based eRoad (US$ 140M), India-based Darwinbox (US$ 76M), Keka (US$ 57M)
- China-based YS Group (US$ 40.4M) and Yungsheng Group (US$ 40.3M).
- EMEA: Personio (US$ 200M), who is set to be a HR Tech decacorn after it raised its Series E funding, Israel-based HiBob (US$ 150M), Spain-based Factorial (US$120 M), Solides (HRMS for SMEs, US$103 M).
- North America: Rippling (US$ 250M), Gusto (US$ 55M), Bambee (US$ 30M).
The surging remote work trend is gaining more acceptance and adoption across organizations worldwide. This has augmented the need for EOR platforms that can help hire global remote talent with ease, resulting in huge investments of US$ 1.7B in the EOR subcategory under Talent Acquisition segment.
With a total funding of US$ 1.6B, the Sourcing subcategory saw the rise of niche job boards to hire gig workers, blue-collar workers, healthcare professionals, fresh grads and more. Background Screening subcategory also gained a lot of traction with a funding of US$ 479M.
Talent Marketplace has been another interesting category to watch out which bagged a total of US$330 M in funding.
Key notable deals across the locations were:
- APAC: Australia-based Employment Hero (EOR, $129M), Singapore-based Multiplier (EOR, $60M), Scaler (Sourcing, $55 M).
- EMEA: Omnipresent (EOR, $120 M), Talent.com (Talent Marketplace, US$120 M), TestGorilla (Screening Assessments, $70 M), Veremark (Background Checks, US$ 8.5M).
- North & South America: Velocity Global (EOR, $400 M), Remote (EOR, $300 M), Globalization Partners (EOR, $200 M), Handshake (Job Board for Freshgrads, $200 M), IntelyCare (Job Board for Healthcare professionals,US$ 115M), SeekOut (Sourcing, US$ 115M), Gupy (Background Checks, US$ 93M), Argyle (Background Checks, $55M), Certn (Background Checks, $50M).
Immersive Learning has emerged as a niche trend in this segment because of the generational shift that demands a new approach to today’s workplace learning and to tackle the widening skills gap. Immersive learning providers raised dollars to bring new technologies like AR/VR into the mainstream.
Overall, US$1.6B were invested in the Talent Development segment with prominent categories being Corporate Learning and Authoring & Learning Marketplace. Key notable deals in Talent Development across geographies were:
- APAC: upGrad (Learning Marketplace, $210M), Go1 (Corporate Learning & Authoring, $100 M).
- EMEA: Multiverse (Corporate Learning & Authoring, $220 M), CoachHub (Digital Coaching, $200 M).
- North America: Guild (Learning Marketplace, $175 M), eLearning Brothers (Corporate Learning & Authoring, $54 M), Simplilearn (Corporate Learning & Authoring, $45 M), Torch (US$ 40 M), Strivr (Immersive Learning, US$35 M), and Transfr (Immersive Learning, US$35 M).
As employee well-being and enhanced employee experience continued to be a top priority for organizations, it translated into increased traction in the Talent Engagement segment, making it the second highest in the no. of deals. Talent engagement HR Tech solutions averaged a deal size of US$28.9 M.
Employee Listening and Health & Wellness subcategories bagged 50% of the funding deals under Talent Engagement category, with big ticket deals like Uniphore & Lyra. The other trending subcategory in this segment was Performance management platform where HR Tech unicorn Lattice raised US$ 175 M.
Key notable deals in the Talent Engagement segment across geographies were:
- APAC: Sonder (Health & Wellness, $35M), Enboarder (Onboarding, $32 M), Xoxoday (Reward & Recognition, $30 M),
- EMEA: Staffbase (Employee Communication, $115M), Beekeeper(Employee Communication for Frontline workers, $50M)
- North America: Uniphore (Employee Listening, $400 M), Lyra Health (Health & Wellness, $235 M), Lattice (Performance Management, $175 M), 15Five ($52 M and an undisclosed amount in the extension)
As highlighted in our 2022 HR Tech Market Outlook Report, every 1 out of 5 companies (with only 25-99 employees) is currently struggling with compliance & regulatory issues. This number is even higher for firms with larger workforce. Further, smooth payroll is a very sensitive business aspect considering the wave of The Great Resignation. Hence, a smart payroll solution that automates complex and time-intensive HR processes, as well as serves SMEs is a major need of the hour to simplify payroll in a complex regulatory market.
Also, Talent Operations had the second-highest amount of average deal size at US$ 34M. Key notable deals in this segment include:
- APAC: Itilite (Travel & Expense Management, US$ 29 M), Singapore Headquartered Workmate, which later was acquired by Persol Kelly, raised US$3 M.
- EMEA: France-based Payfit (Payroll, US$ 287M), Connecteam (Workforce Management, US$ 120M), TravelPerk (Travel & Expense Management, US$ 115 M).
- North America: Envoy (Visitor Management, US$ 111 M), Check (Workforce Automation, $75 M), Spotnana (Travel & Expense Management, $75 M).
- APAC: Australia-based eQ8 (SWP, $4 M).
- India: Prism Force was backed by Sequoia capital for US$13.6M.
- EMEA: Belgium-based TechWolf raised US$10.7 M in a Series A round to develop the technology that empowers enterprises to understand and leverage skills in their organization, and help people develop and optimize their talent.
Compensation Management emerged as a key subcategory in the Total Rewards segment with US$506 M across 9 deals from a total of US$ 1.2 B. Benefits is the second-largest subcategory with 33% of the share in this segment, raising over $402M across 28 deals tracked. Another trending subcategory, Earned Wage Access (EWA) has gained popularity as a key benefit and support to employees in their financial wellness. The subcategory was amongst the highest with 15 deals that accounted for US$ 250M. Key deals across geographies were:
- APAC: Refyne(EWA, $82 M), Abhi (EWA, $17 M)
- Malaysia-based EWA provider Paywatch bagged US$ 14.3 M across 2 deals
- Malaysia-based EWA provider Paywatch bagged US$ 14.3 M across 2 deals
- EMEA: Switzerland-based beqom (Compensation Management, $300M), Wagestream (EWA, $60M).
- North America: Pave(Compensation Management, $100M), HealthJoy (Benefits, $60M).
The increasing demand for data-driven decision making in HR has been the driving factor for talent analytics solutions. Additionally, the growing need for organizations to improve their talent management and recruitment processes, and to increase employee productivity and engagement, is also driving demand for people analytics solutions. People data platforms and Analytics for Diversity and Inclusion insights were top sub categories under this segment.
Leading Analytics provider Humu, headed by Lazlo Block, raised US$ 60M in its Series C funding round.
The investors might be conservative to invest extravagantly in the HR Tech market as there is a glooming fear of recession, fed rate hikes and inflation. However, this will not hinder the increasing demand for employee-centric solutions. Despite the macroeconomic condition, organizations will still need to address the challenges like sourcing, hiring, engaging, managing, upskilling and retaining their employees.
This is likely to fuel the demand and subsequently the funding for HR Tech solutions, albeit cautiously. As the market unfolds, our team will continue to track the HR Tech space closely to keep you updated.
The latest copy of the HR Tech Investments and Start-up fundings can be downloaded from here.
Disclaimer: The numbers shared in this blog are based on the deals tracked by the hrtech research team over a period of 2020-2022.