HR tech is a hot category, with both funding and deal activity leaping to new highs in 2015. However, when taking a closer look, $100M+ mega-rounds to Zenefits, OneSource Virtual, and FXiaoKe took a large portion of total funding in the year, making up roughly 30% of investment in HR tech in 2015.
Funding growth aside, deal volume also increased significantly in 2015 reaching close to 400 deals, when 2014 had ended at under 300 deals.
Using CB Insights data and analytics, we dig into funding trends, most well-funded companies, and active VC investors in HR tech (aka human capital management), which includes tech-enabled management of human resources, staffing, recruiting, and employee benefits.
Deals and dollars
Total funding to the space in 2015 hit $2.4B across 383 deals representing 62% growth in funding over the total in 2014. When comparing 2015 to 2011, funding totals grew 8x in the period, climbing 707%. Despite impressive growth, 2015 funding was buoyed by three deals that together represented $750M in investment, or 30% of total funding for the year. Those deals were the $500M Series C to Zenefits, the $150M Growth Equity round to OneSource Virtual, and the $100M Series D to China-based employee management platform, FXiaoKe.
Deal volume increased through 2015 with 383 HR tech deals completed compared to 296 deals in 2014, representing 29% growth in activity.
The quarterly trends echo the annual growth seen in the previous chart, but also reveal a drop-off in funding toward the end of 2015. After reaching an all-time high of $1.18B in funding in Q2’15, quarterly funding totals declined to just under $400M in Q4’15.
Deal volume remained strong in Q4’15 at 91 deals, with the last 6 quarters all reaching 80+ deals to HR tech companies.
Deal and dollar share
HR tech deal share skews towards the early-stage (seed/Series A) deals with 3 of the last 4 quarters seeing these stages account for at least 65% of deal share. Mid-stage accounted for 9% to 19% of deals over the past five years while late-stage deal share made up between 6% to 10% of HR tech deal share.
There was an increase in deals classified as “Other” in 2015, which includes convertible note funding and minority investments by corporations who are increasingly active investors in the startup scene generally.
In terms of dollar share, funding doesn’t weigh as heavily toward the early-stage.
Mid-stage took the bulk of dollar share in 2015 accounting for 44% of dollars to the space, and made up between 20% and 41% in the four prior years. Early-stage dollar share still represented a significant portion of HR tech dollar share, taking between 20% and 31% of dollars in the five-year period. Late-stage deals accounted for up to 44% of dollar share, a peak reached in 2013, but dropped to 29% in 2015.
Most well-funded company
Perhaps the most well-known HR tech company in this analysis is Zenefits (the company was in the news early in 2016 after its CEO Parker Conrad resigned following irregularities in how the company complied with regulations). Zenefits raised a $500M mega-round led by Fidelity in May 2015, and has raised over $580M to date. The top 3 list is rounded out by less well-known HR tech companies like the aforementioned OneSource Virtual (a Texas-based provider of HR solutions built on the Workday platform) and FXiaoKe. Check out the top 10 list ranked by total disclosed funding below.
|Rank||Company||Total Disclosed Funding ($M)|
Top VC investors
Andreessen Horowitz tied 500 Startups as the the most active HR tech VC investor over the past 5 years. A majority of Andreessen’s deals are happening at the early-stage, and it’s worth noting their largest investment position is in HR tech company Zenefits. NEA is also an active VC investor in HR tech, rounding out the the third spot.
|3||New Enterprise Associates|
|7||Lerer Hippeau Ventures|
Top early-stage investors
Andreessen Horowitz was also the most active early-stage VC investor with recent investments in HR analytics company Reflektive and recruitment software Jopwell. 500 Startups was the second most active early-stage VC investor, with the number 3 spot tied between NEA and East Ventures.
|3||New Enterprise Associates|
|5||Lerer Hippeau Ventures|
|6||General Catalyst Partners|
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