Investment in Human Resources Technology Hits an All-Time High in 2021

Hiring has skyrocketed in 2021 and made a huge rebound from the layoffs of the 2020 lockdowns. With hiring rates accelerating exponentially in 2021, we’ve seen renewed vigor around investment in talent acquisition technology and the human resources space. In the current thriving talent acquisition and HR space, there are many emerging trends that make TA (talent acquisition) technologies appealing to investors. In this blog, we will shine light on the trends propelling investments in TA technology, reveal funding news in the TA space, and share future forecasts.

Top Trends Driving the Spike in TA Tech Investment

With the dramatic shift to a remote workforce, many employers and companies are re-envisioning how to recruit, hire, and retain their work-from-home employees. As featured in “HR Tech Funding Explodes As Companies Grapple with Transforming Workforce”, “Saad Siddiqui, a principal at Telstra Ventures, said everything in human resources is changing—at least in part due to the remote work world we now live in—from how talent is being sourced to building a company culture where people no longer see each other in-person.”

@TalentTechLabs says that while #TalentAcquisition rates are soaring, #EmployeeRetention rates are dropping. One obstacle companies are now facing is maintaining their culture in a remote work environment. Learn more: Click To Tweet

While talent acquisition rates are soaring, employee retention rates are dropping, with employees demanding more from their jobs. One of the current obstacles companies are now facing is how to maintain company culture and employee performance in a remote work environment. With all these unprecedented changes in the workforce, companies are searching for ways to transform their outdated HR tech stacks.

Jonathan Covey, Senior Analyst at TTL comments, “The shock period is over – this is the new normal. What you saw during the economic slowdown is a willingness of executives to rethink their tech stack. Now, a lot of these experiments are successfully evolving from pilot to global scale. Investors have picked up on this, giving the market a whole bunch of new unicorns in the first half of 2021.”

Key Insights on the Latest Funding News

According to the Starr Conspiracy, $6.642 billion was invested in HR technology during  Q2 on 139 transactions. The average deal size was $47.4 million.

Top categories of investment in TA Tech include:

  • Employee Benefits (excluding well being – $2.03 billion – 32 deals)
  • Employee Experience ($1,74 billion – 38 deals)
  • Talent and Learning ($1.54 billion – 43 deals)
  • Payroll ($1.25 billion – 16 deals)

Crunchbase reports that human resources “already has seen nearly $3.6 billion in venture funding for 260 deals this year. That amount already surpassed all of the last year, which witnessed not even $2.2 billion invested in 500 funding deals.”

In regards to the HR tech funding data reported by Crunchbase and the Starr Conspiracy, Jonathan Covey says, “you have to look at the data on a relative basis. 2020 was a wash (with the exception of really high investment and M&A activity in the Conversational Bots segment), and we expect 2021 funding and number of deals executed to exceed previous year-over-year growth rates, but not in an unusual way.”

In the current thriving #TalentAcquisition and #HR space, @TalentTechLabs says many emerging trends make TA technologies appealing to investors. Take a look for more about trends in TA technology, funding news in the TA space, and future forecasts: Click To Tweet

Future Forecasts on Funding in the TA Tech Space

The future for funding for TA and HR tech seems promising. Crunchbase notes that “technologies around recruiting, internal mobility, culture building, and employee services—like San Francisco-based Cleo-all remain attractive to investors as the second half moves forward.”

Potential companies that may go public in the next year include San Francisco-based Gusto, a cloud-based human resource management solution that reached $3.8 billion in 2019 and Utah-based BambooHR, a SaaS HR software solution for small and medium-sized enterprises.

Possible acquisitions include large human resources information systems such as   Workday and even older payroll and benefit providers like ADP to differentiate their product in an increasingly competitive TA Tech environment.

Covey predicts, “you’re going to continue to see overlapping capabilities in what you’d think of as “Talent Acquisition” and “Talent Management” solutions as tech companies try to expand their market share. Where vendors can’t build, they’ll acquire so we expect to see transactions between companies in both ecosystems.”

Trends Report: Mastering Remote Work Management