Software is eating the world, and that includes the traditional workplace. We used CB Insights data to track funding to the startups transforming companies’ human resources departments, aka human capital management.
Q2’15, as we’ll see below, represented a peak in human resources technology funding, with more investment than any other quarter across the last five years, at $1.1B.
HR Tech Deals And Dollars
Over the last 5 years, HR tech startups have seen an explosion in investment. Funding for full-year 2014 was $1.9B, compared to ~$100M in 2010. Deal count, similarly, almost quadrupled between 2011 and 2014.
During the first two quarters of 2015, HR tech startups have taken in $1.4B across 99 deals, putting the industry on pace for $2.8B total in funding this year, which would be a 47% increase over 2014.
Quarterly Trends
Looking at trends on a quarterly basis, Q2’15 has been a record-breaking quarter in the 2010 to 2015 period, in both deal-count and dollar terms.
The next-largest quarter for funding was Q1’14, after which funding halved but deal flow continued to climb.
In the last four quarters, including Q2’15, HR tech startups attracted $1.97B, up 17% compared to the previous four quarters.
Notable recent deals include a whopping $500M Series C round for Zenefits, from investors including Khosla Ventures, TPG Growth, and Founders Fund in Q2’15; and a $60M Series B round for ZenPayroll, from investors including Google Ventures and KPCB, also in Q2’15.
Deals And Dollars By Investment Stage
Early-stage deals have accounted for around 70% of deal share since 2010, with the exception of 2011 — when they only accounted for about 57% of deal count. Mid-stage deal share has been pretty variable but has tended to hover around 15% to 20%. Late-stage deal share has fluctuated between 3% to 11%.
Early-stage rounds’ share of dollar funding has stood at around 15% in 2014 and the first half of 2015. In 2013, early-stage dollar share was 30%. Mid- and late-stage dollar share has also been highly variable, influenced by a few large mid-stage deals in the last couple of years. Large mid-stage deals in 2014 and 2015 included Zenefits’ Series C and ZenPayroll’s Series B.
Most Active Investors
Over the last five years, the most active investors in HR Tech were 500 Startups and Khosla Ventures, followed closely by Lerer Hippeau Ventures and SV Angel. Notable portfolio companies of the top 10 include Zenefits, Campus Job, and ZenPayroll. Google Ventures is the only corporate VC among the top 10 most active investors.
| Rank | Investor |
|---|---|
| 1 | Khosla Ventures |
| 1 | 500 Startups |
| 2 | Lerer Hippeau Ventures |
| 2 | SV Angel |
| 2 | East Ventures |
| 3 | New Enterprise Associates |
| 3 | Index Ventures |
| 3 | Slow Ventures |
| 3 | Google Ventures |
| 3 | Andreessen Horowitz |
The most active early-stage investors were Khosla Ventures, East Ventures, and 500 Startups. The overwhelming majority of Khosla Ventures’ HR tech investments were early stage.
| Rank | Investor |
|---|---|
| 1 | Khosla Ventures |
| 1 | East Ventures |
| 1 | 500 Startups |
| 2 | Andreessen Horowitz |
| 2 | Lerer Hippeau Ventures |
| 2 | Google Ventures |
| 3 | Qualcomm Ventures |
| 3 | Felicis Ventures |
| 4 | Kleiner Perkins Caufield & Byers |
| 4 | CyberAgent Ventures |
Most Well-Funded Startups
The most well-funded HR tech startup by far is Zenefits, which has accumulated almost $600M in funding, including its latest funding round in Q2’15, which valued the company at $4.5B. Following Zenefits in total funding were SilkRoad Tech, FXiaoKe, and GlassDoor, each of which has raised more than $150M in funding through Q2’15.
Major funding rounds included a $100M Series D for FXiaoKe, which closed in early July 2015; and a $70M Growth Equity round to GlassDoor in January 2015.
| Rank | Company |
|---|---|
| 1 | Zenefits |
| 2 | SilkRoad Technology |
| 3 | OneSource Virtual |
| 4 | FXiaoKe |
| 5 | GlassDoor |