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BONUS: A great H1 for HR Tech investments

Anita Lettink
Anita Lettink
Hi, I hope you are enjoying the summer. We’re experiencing a heat wave, so I thought to spend the day indoors and share the HR and payroll tech investment results for the first half of 2022. And they are impressive!

You’ve probably read that VC investments are sharply down in Q2, but that wasn’t the case for HR Tech. In fact, the first half of the year was better than 2021: HR Tech companies raised $7.7B!
HR Tech Funding per month
HR Tech Funding per month
Financials
I didn’t expect that the investment pace of last year could continue, but in the first six months of 2022 companies already raised 63% of the total FY2021 funding.
I registered exactly $7,720,899,205 across 254 rounds. 13 companies did not disclose the amount. There were more VCs per deal than last year, and more than 95% only participated in one deal: a lot of new investors joined the HR Tech industry. We’re also seeing a considerable number of angels. Tiger Global remains the no 1 investor in the space in number of deal participations.
The average investment was $30M, and that is lower than in 2021 ($38M). There were fewer large series C-E, and the initial investments for series A are lower too.
New unicorns
Still, 9 new unicorns were created, of which 5 in the HCM & Pay category: Payfit, Seekout, Darwinbox, Employment Hero, Staffbase, Oyster HR, iCIMS, Velocity Global and Pave.
And you can find my thoughts on HR Tech Unicorns in a separate post, including the full list.
HR Services
The investments cover the whole spectrum of HR services, but with $3.5B, HCM Suites & Pay is once again the largest category, both in value and number of deals (67). The largest subcategory are solutions to support the Global Workforce ($1.3B), followed by Full Suite HCM ($848M) and Payroll ($376M) while Earned Wage Access solutions came in fourth and received $219M in funding.
HR Tech services
HR Tech services
While Talent Acquisition comes in second place in number of rounds (55), from a value perspective Talent Management (43 rounds) ends up second because the average deal size is larger.
Also pay attention to Learning, where the average deal size is growing quickly. In this space I see a lot of employee coaching solutions that provide one on one sessions with coaches in all kinds of areas, from leadership development to learning a particular skill. Learning is trending away from classroom and cohorts, and headed towards a more personal and personalized approach.
Geographic spread
The investment rounds cover the entire global, even though Africa, the Middle East and Eastern Europe are underrepresented.
Geographic spread of funding rounds
Geographic spread of funding rounds
With 113 rounds, the United States remains firmly in the top position, with the caveat that a fair number of international companies move their HQs to the United States when they start raising money. The United Kingdom (22) and India (19) complete the top 3. Special mentions go to Germany (14) and France (13) - both countries have already exceeded the 2021 deal count.
Predictions!
Considering the volatile economic situation, I don’t think this pace of investment will continue. In fact, July funding rounds have fallen off a cliff, while M&A deals are sharply up. The first HR Tech companies have announced layoffs, which means everyone will be watching costs. We’re halfway through the month and a lot can still happen, but I don’t think we’ll see a major change.
Expect M&A to be the focus for the remainder of the year. Unless something changes fundamentally, I don’t expect that total funding rounds will exceed the $12.3B of last year.
I hope you enjoyed the overview. Let me know if you have questions. See you in September!
Have a great day, Anita
Definitions
This overview focuses on solutions that directly support the HR or People function and are most likely to be procured by CHRO’s and their teams.
That means that the following solutions are excluded:
  • Productivity platforms
  • Job boards
  • Marketplaces for independents
  • Course platforms and EdTech (a category by itself)
  • Experience technology
  • Solutions for gig workers
  • Virtual offices
  • Event platforms
WorkTech, which includes solutions that support the employee experience through digital workplace and productivity platforms, is also excluded.
To establish the overview, investment news is tracked from sources around the world in several languages. Note that the list is not complete: sometimes a company doesn’t publish a press release or the investment is private. All funding rounds are shown in US dollars.
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Anita Lettink
Anita Lettink @let_anita

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