What downturn? Investors remain bullish on HR tech as the Great Resignation slows
HR tech platforms are still getting a lot of investor attention despite headwinds at the macroeconomic level that have the potential to affect their sales.
Platforms, not point solutions, might lead the way
The market for HR tech, which runs the gamut from workforce management to applicant recruitment and tracking systems, has proven remarkably resilient in the face of both pandemic and economic headwinds.
In fact, some would argue that it’s precisely because of these headwinds that HR tech has attracted, and continues to attract, investors’ attention. The pandemic spurred companies to invest in digital infrastructure as their staff moved remote, while macroeconomic fears upped the pressure on HR teams — some of which had to contend with layoffs among their ranks — to vet candidates carefully.
And investors saw the opportunity clearly. In 2021, venture investors funneled more than $12.3 billion into HR tech startups, roughly 3.6 times the amount invested in 2020, according to PitchBook data. That trend continued in 2022, with megadeals ensuring more than $1.4 billion was invested in the sector in the first two months alone.
“HR tech startups will need to demonstrate a clear return on investment not just by impacting top-line growth but also bottom-line efficiency.” Allison Baum Gates, general partner, SemperVirens VC
In early January, Paris-based payroll software developer Payfit closed a $287 million Series E that brought its total funding raised to nearly half a billion. The same month, Darwinbox, which offers an HR tech platform for recruiting and virtual onboarding, landed $72 million at a valuation of over $1 billion. The list of successes goes on: Remote raised $300 million in April; SeekOut secured $115 million in January; and Personio nabbed $200 million in June.