2017 has been another strong year for VC investment in HR technology. While companies around the world wrestle with what work of the future will look like, HR technologists rush to provide the answers and the technology to support it. Many of them, startups. Venture capitalists are there to fuel the innovation. Placing their bets on the ideas and teams they feel can innovate into the hearts and clouds of employers large and small.
We track as many of the investments as we can find, and we’re careful not to say that we have them all. We’re sharing the data we have here, along with the insights we think it provides us into what is happening now and what businesses can expect in the future. If you are aware of any deals that we aren’t tracking let us know. We encourage vendors to send us their funding announcements and any perspective they might have on their company, product, service, and funding. We do up date the list on a constant basis.
The following data is tracked through December 21, 2017. Deals we can find in all HR technology categories globally of all stages and sizes are tracked in US dollars. When deals were reported in non-US currency, the amount was converted at the time of the deal using then current conversion rates. While we know of a few straggling deals out there, we won’t report again until the first week in January 2018, when we will do a thorough “look-back” at all of the VC investments and HR Tech trends they represent.
While several trends are noted below, our 2017 “look-back” report, published in early January 2018 will dig into more trends across the HR Technology VC landscape.
We’re not financial analysts, and none of this should be considered investment advice.
Quarter to Quarter
With one week left in the year, we saw Q4 generate $224.5 million in HR Tech VC. This is strong, but it didn’t continue the steady increasing ramp of dollar volume we saw through the first three quarters. Q3 was the biggest quarter for HR Tech VC, with just shy of $371 million invested. We are aware of a few interesting VC deals in their final stages, but even if the deals get done in 2017 their announcement may be delayed until 2018 for PR purposes.
In Q4 Talent Management leads the way with $88.32 million across 19 deals. Within Talent Management we noticed a flurry of learning VC activity in Q4. Businesses and tech vendors are racing to bring the way employees learn on the job in alignment with the reality of today’s modern content world. Employee engagement apps also saw some continued investment.
Talent Acquisition Had A Big Year
Talent Acquisition, with $550 million of investment, was by far the leading HR technology category. Looking at actual deal sizes, HCM was the leader, with an average size of $12.5 million versus Talent Acquisition at $6.6 million and Talent Management at $6.3 million.
$218 million going to job boards continues to amaze me. Many of these vendors position themselves as “marketplaces,” however a rare few demonstrate any value beyond the display of job ads and rudimentary candidate search and match. My hunch is that the VC, who rarely have HR domain expertise in house, relate to the economics of a transactional “marketplace” model. My hope is that entrepreneurs looking at starting a marketplace get some perspective on sorely needed value add for employers and candidates.
Talent Acquisition always sees a higher volume of smaller funding rounds. Recruiting is a business problem that most have experienced as a candidate, hiring manager, or both. This leads to a lot of idea for “better mouse traps.” Perhaps more than any other segment, I see founders that come from outside the market, applying various B2C and B2B strategies and techniques in this domain. This is overall a good thing – fresh eyes are more likely to discover a new innovative path. On the other hand, I do see many that have little perspective of the realities of talent acquisition. What’s worse, there are also many that fail to educate themselves on the market even after funding. No matter how you see this, just the sheer constant deal volume in talent acquisition leaves us with a lot of “tech zombies” out there – vendors that take a seed round and generate enough momentum to stay in the market for a long period of time, but don’t ever grow at any scale.