Jul 06 2022

HR Tech Investments Continue Momentum Despite Global Challenges With Over US$9 Billion In Funding In H1 2022

“While 2021 was clearly the best year for HRTech start-ups with US$14+ B being pumped across 330 deals in 2021, the first half of 2022 has already seen US$9.3 B (including 10 deals with undisclosed amount) pumped in 250+ deals. ”

by  Swechha Mohapatra, Head Consulting & Delivery, hrtech.sg

The spotlight on the HR function continues to grow steadily even after two years since the deadly pandemic hit the world. To tackle and overcome the challenges in hiring, engaging, training, upskilling and managing their workforce, many organizations are prioritizing digital transformation. This has led to the inevitable acceleration of the investment trend in the HRTech sector.

The Europe war, impending recession fears, and Fed rate hikes that led to inflationary pressures with massive correction in stocks globally have failed to impact the HRTech sector. HRTech start-ups continue to raise capital to meet the accelerating demands for employee-centric solutions.

While 2021 was clearly the best year for HRTech start-ups with US$14+B being pumped across 330 deals in 2021, the first half of 2022 has already seen US$9.3B (including 10 deals with undisclosed amount) pumped in 250+ deals. It will be interesting to see how the second half of the year will shape up considering organisations continue to deal with talent challenges like hiring, engaging, managing, upskilling and retaining their employees.

Key Trends Driving the HRTech Investments

  • A significant theme in the list of HRTech start-ups is to help enterprises stand out as an Employer Brand of Choice & ultimately help in the process of hiring talent. Companies on this list are focused on upgrading their recruiting and hiring processes through innovative digital technologies –
  1. EOR platforms to hire globally
  2. AI & VR to enhance training and improve the onboarding experience
  3. Providing skill assessment tools
  4. Leveraging AI to evaluate candidates
  5. Developing better job matching platforms


These solutions have become of utmost importance with concerning events like The Great Resignation and the widening gap between talent demand and supply.

  • The investment market has become more distributive across geographies as North America’s share in the total HRTech valuations has decreased in 2022.
  • The 2022 HRTech Investment market is shaping out to be quite different from 2021. The usual late fund investors are investing in early start-ups leading to distortions in valuations as these late-stage investors are not so pricing sensitive. This may result in a bubble trap for start-ups like Hopin which recently burst with the news of lay-offs & struggles.
  • However, this also brings positive news for early-stage start-ups trying to raise money. Top 20 valuation funding's till H1 2022 saw 15% investments coming in Series B round as compared to no investment in Series B in 2021 Y-o-Y. Analysing the entire investment scenario in H1 for both 2021 and 2022 suggests that the investment trend is inclining towards early-stage start-ups trying to raise capital in Pre-seed, Seed, Series A, and B rounds.


This is a clear indication of VCs turning their attention towards emerging start-ups and a softening of the late-stage market. In fact, the highest number of investments this year have been into Series B making it one of the most sought investment spaces for funds.

  • The graph below summarizes the total investments in each segment when comparing H1 2022 to the corresponding period in 2021. There was an increase many segments like Total Rewards(181%), Talent Operations(146%), Talent Acquisition(140%) .The HRMS segment remained almost the same size .

  • 29 high-value deals comprised 56% of the Total HRTech investments raising over $5.2 B from $9.3 B with each raising $100M at least. Access the list of the Top deals here.

 

Segment-wise Notable Deals

1. HRMS

The HRMS segment has particularly witnessed a growing focus on introducing features and offerings for SMEs as HRMS/core HR systems are usually the starting point of any small organization looking at moving their HR systems to digital. The HRMS segment also had the largest average value of deal size at US$57.3 M.

In H1 2022, we saw several SME-specific HRMS raise funding which included Brazil-based Solides (US$103 M), US-based Bambee (US$30 M), and India-based Zimyo (US$2.2 M).

India-based HRTech startup, Darwinbox raised US$72 M in Series D funding and rose to Unicorn Status. Other key deals across geographies were:

 

  • APAC: YS Group (US$40.4 M), Flex (US$32 M)
  • EMEA: Personio (US$200 M), Lucca (US$71.5 M)
  • North America: Rippling (US$250 M), Gusto (US$55 M)

 2. Talent Acquisition

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 remote global talent with ease, resulting in huge investments in the EOR subcategory in the Talent Acquisition segment amounting to US$1.5 B. US-based Velocity Global (US$400 M), Remote (US$300 M), Globalization Partners (US$200 M) and Deel (US$55 M), Australia based Employment Hero (US$129 M) and SG based Multiplier( $60M), were among the top EOR platforms.

The sourcing, and screening subcategories saw high traction. Within Sourcing, we saw the surfacing of niche job boards like Handshake (US$200 M) and IntelyCare (US$115 M). Within Screening, we saw the unfolding of Background Verification platforms like Brazil-based Gupy (US$93 M) and US-based Argyle (US$55 M).

Talent Marketplace is another interesting high-growth subcategory within Talent Acquisition to watch out for. Spain-based Talent.com (US$120 M), and US-based Gloat (US$90 M) made their mark in this subcategory with a total of US$325 M in funding.

Other key notable deals across the locations were:

  • APAC: Scaler (Sourcing, $55 M)
  • EMEA: Omnipresent (EOR, $120 M), TestGorilla (Screening, $70 M)
  • North America: Handshake (Sourcing, $200 M), Oyster (EOR, $150 M)

3. Talent Development

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 and to tackle the widening skills gap. We  saw US$600 M+ investments in the Talent Development segment with prominent ones being: Go1 (US$100 M), Guild (US$175 M), eLearning Brothers (US$54 M),  Torch (US$ 40 M), Strivr (US$35 M), and Transfr (US$35 M).

This huge growth in the segment is a clear indication that businesses have understood the importance of skills & the need for continuous upskilling to navigate through the times of The Great Employee Resignation.

Other key notable deals in Talent Development across geographies were:

  • APAC: 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)

 4. Talent Engagement

The increasing priority of Organization leaders towards employee wellbeing and enhanced employee experience has translated into traction in the Talent Engagement segment that was next to Talent Acquisition in terms of the number of deals. However, the average value of the deals was only at US$35.7 M.

Employee Listening and Health & Wellness subcategories emerged as the leading focus with  26% funding for deals in these categories. Uniphore an Employee Listening platform bagged the highest amount of $400M while Lyra, the leading Mental wellness solution provider announced a $235M Series F. The other trending subcategory in this segment was Performance management platform where HRTech Unicorn Lattice announced a new valuation of $3 billion after closing a $175 million round

Key notable deals in the Talent Engagement segment across geographies were:

  • APAC: Enboarder (Onboarding, $32 M), Xoxoday (Reward & Recognition, $30 M), Infeedo (Conversational AI & Employee Mental Wellness, $12 M), Mesh(Performance Management, $11M)
  • EMEA: Staffbase (Employee Communication, $115 M), Workvivo (Employee Communication, $22 M)
  • North America: Uniphore (Employee Listening, $400 M), Lyra Health (Health & Wellness, $235 M), Lattice (Performance Management, $175 M)

 5. Talent Operations

As highlighted in our 2022 HRTech Market Outlook Report, every 1 out of 5 companies (with only 25-99 employees) are currently struggling with compliance & regulatory issues. These numbers are even higher for firms with large 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. France-based Payfit raised US$287 M to fulfill its mission of simplifying payroll in a complex regulatory market.

Also, Talent Operations had the second-highest amount of average deal size at US$45 M. Other key notable deals in this segment include:

  • APAC: Itilite (Travel & Expense Management, US$29 M)
  • EMEA: Connecteam (Workforce Management, US$120 M), TravelPerk (Travel & Expense Management, US$115 M)
  • North America: Envoy (Visitor Management, US$111 M), Check (Workforce Automation, $75 M), Assembled (Workforce Management, US$51 M)

 6. Talent Planning

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 organizations, and to put people in a position to develop and optimize their talent.

 7. Total Rewards

Compensation Management emerged as a key subcategory in the Total Rewards segment with US$450 M funding out of a total of US$892 M. Switzerland-based beqom and US-based Pave received US$300 and US$100 M funding respectively.

The emerging subcategory as highlighted in our 2022 HRTech Trending tools  Earned Wage Access is the second-largest subcategory with 25% of the share in this segment raising over $200M across 9 deals tracked. India-based start-up Refyne (US$82 M) and UK-based start-up Wagestream (US$60 M) were among the top EWA startups that received funding. Other key deals across geographies were:

  • APAC: Abhi (Earned Wage Access, $17 M)
  • EMEA: Wagestream(EWA, $60M), Compete (Compensation Management, $15M)
  • North America: Nayya (Benefits, $55 M), Pinwheel (Payroll, $50 M)

 

Conclusion

While the market and investors might still be conservative given the recession fears, fed rate hikes and inflationary pressures, organizations still need to address  challenges like sourcing & hiring, engaging, managing, upskilling and retaining their employees. This is likely to fuel the demand and subsequently the funding albeit cautiously.

As the market unfolds, our team will continue to track the HRTech space closely and share updates. The latest copy of the HRTech Investments and Start-up funding can be  downloaded from here.

Swechha Mohapatra (IHRP-CP, Associate CIPD) is Head of Consulting & Delivery at hrtech.sg and has over a decade of of global experience in various Talent functions. She is a passionate HRTech evangelist, a member of IHRP HRTech CoP Taskforce, and an avid learner who is certified Six Sigma-Green Belt with a background of MBA (Specialization in HR and IT) and Master’s in Labor Laws and Labor Welfare. 

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