6 Investment Focus Areas in the Future of Work & HRTech
PeopleTech, or HR Technology, refers to the software products, technology, and tools designed to modernize the employee lifecycle. HR leaders rely on tools and technology to efficiently and optimally manage functions such as talent acquisition, employee engagement, compensation, performance management, and other people functions within their organizations.
In 2020, the PeopleTech market size was $22.89 billion and grew 4.9% to $24.04 billion in 2021. However, the market is expected to grow to $35.68 billion in 2028 (5.8% CAGR) which indicates a return to pre-pandemic growth rates inclusive of the impact of the digital transformation that has pushed companies to invest in technology to optimize business processes and reduce costs.¹
Today, HR and Business leaders are focused on six main areas when making technology decisions²:
- Talent Acquisition & Retention — As it becomes increasingly more difficult and costly to recruit and retain talent in the current labor market, companies are investing in technology solutions to optimize recruiting processes and improve job satisfaction.
- Employee Development — Employers are looking for new ways to engage employees with training and development opportunities to improve skills, increase performance, and enhance company culture.
- Employee Experience — The transformation of the workplace has forced leaders to rethink the employee experience and consider the experience not just through a lens of policy and procedure but through a UX lens that spans all employee-facing products.
- Collaboration — Collaboration is not just about having the best messaging system or video conferencing software. Employee collaboration tools directly impact a person’s ability to feel connected to the workplace and how that contributes to their own productivity.
- Workforce Planning — Employers are looking towards technology that can facilitate workforce planning processes as they evaluate the future of work in their organizations. They are seeking tools to more actively collect and analyze data to make better informed decisions that impact their workforce.
- Employee Wellbeing and D&I — Possibly one of the largest impacts of COVID has been the effect of employees having to rebalance their personal lives, health, and work priorities. This has led to an increased importance for employers to provide tools that span from mental health wellness to social impact resources.
Investment Landscape
Digital transformation and necessity for companies to reimagine the future of work has led to an influx in PeopleTech VC funding. By July 2021, PeopleTech had experienced nearly $3.6 billion in venture funding consisting of over 260 deals according to Crunchbase data. This is up from $2.2 billion invested in roughly 500 deals in all of 2020.
Top PeopleTech Venture Rounds in 2021³:
Top VC Firms Investing in PeopleTech from 2017–2019⁴:
Noteworthy 2021 Acquisitions⁵:
- Givful acquired by isolved
- Peakon acquired by Workday
- Talentcube acquired by Phenom
- Ascender acquired by Ceridian
- Lua acquired by Beekeeper
As business leaders shift their focus to the future of work, innovation in PeopleTech will expose a growing opportunity for investment in technology and ideas that will shape how work is performed and experienced.
¹ https://www.fortunebusinessinsights.com/human-resource-hr-technology-market-105437
² https://www.pwc.com/us/en/services/consulting/workforce-of-the-future/library/hr-tech-survey.html
⁴https://hackernoon.com/list-of-top-vc-firms-investing-into-promising-hr-startups-part-4-f6633y4h
⁵https://www.unleashgroup.io/2021/04/13/five-hr-tech-mergers-acquisitions-deals-2021/
