What a Difference a Year Makes
The backdrop for last year’s HR Tech conference was a workplace in the early stages of emerging from the COVID pandemic. Many companies still had business travel bans in place, and the conference was sparsely attended. For those who did attend, the focus was on themes related to the response to the pandemic and its aftermath. The tight labor market was front and center, with significant focus on Employee Experience, Diversity, Equity and Inclusion, Wellness, and recruiting and retaining talent in the midst of the Great Resignation.
Changes since the 2021 Conference
In the year that has passed since we last gathered in Las Vegas for this conference, much has changed. While the fourth quarter of 2021 saw record levels of VC funding and M&A activity, 2022 has seen a shift from the exuberance of 2021. As soon as the calendar turned to the New Year, investor sentiment turned attention to growing signs that the post-pandemic inflation might not be so transient after all and the Fed tightening needed to bring inflation under control might result in a recession. Venture funding across all sectors has been impacted – both in terms of volumes and valuations, and the HR Tech sector is no exception. In the M&A arena, buyers have become more conservative as the year has progressed, with interest shifting from some of the more cyclical areas such as Talent Acquisition to more defensive sectors such as compliance-related solutions and core HR.
That being said, the past year has seen its share of notable fundings and impactful M&A. There have been several significant M&A transactions in the people data space, such as Sontiq by TransUnion, Appriss by Equifax and Inflection by Checkr. Learning has also been an area with significant M&A activity, where we would highlight the SumTotal, Edcast and Credly acquisitions.
Sectors that have received significant funding include Payroll and Compensation Management solutions (particularly those that support the needs of a distributed workforce), Learning with a focus on the need for Upskilling, and Employee Communication platforms that connect a distributed or non-desk workforce. We have also seen some significant capital committed to employee lifecycle solutions for the SMB market, such as Personio and Employment Hero.
M&A
VC Funding
Things to Look for This Year
The tight labor market may be coming to an end. Recent data suggests that we are seeing a shift from the extremely tight labor market of the last two years. It will be interesting to see the implications of this for HR Tech solutions. In a less robust labor market, employers may be less enthusiastic about supporting the recent shift to a more flexible hybrid work environment. The last few years have seen a lot of capital committed to solutions that help employers manage a distributed workforce. Will interest wane as the labor market shifts? Another implication is a potential shift from HR solutions that are viewed as a “nice to have” versus mission-critical and a shift away from talent acquisition priorities to an emphasis on core HR solutions that aid efficiency.
Digital transformation continues to be top of mind. We expect companies that support this transition will continue to attract interest and capital. As the work environment continues to transform, the need for ever-evolving skills to adapt to new ways of working will continue to be a trend that will require significant investment. As a result, we believe that the emphasis on learning and upskilling will continue for years to come.
Learning continues to evolve. It has been exciting to witness the ongoing transformation of corporate learning. Some of the trends that have been driving this evolution include:
The learning sector continues to be the recipient of significant capital flows. We are excited to see how this capital infusion will continue to drive innovation.
Look for a shift from proliferation to consolidation. The HR Tech space has been a beneficiary of the active venture capital environment, spurring the proliferation of point solutions. The pace of investment is slowing and some companies with significant cash burn may find it difficult to raise the next round of capital. Rather than try to go it alone, this may be the right time to consider where their best long-term strategic home may be.
We hope to see you in Las Vegas this year as we gather to discuss the latest trends, industry leaders, innovators and M&A transactions. We welcome the chance to get your take on what’s happening within your business, HCM and the broader market. If you’re not able to attend, we’re happy to catch up after the conference to share what we learned.
DISCLAIMER This presentation is intended for information and discussion purposes only and does not constitute legal or professional investment advice. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of Harbor View Advisors, LLC (“HVA”). The information in this presentation was compiled from sources believed to be reliable for informational purposes only. HVA does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented.
