With small to medium enterprises also needing cloud-based HR solutions, there is a huge market that these companies are trying to address, venture capital investors, HR experts and bankers told ET.
Companies such as Apna.co, My Ally, Refyne, DarwinBox, Sense, Advantage Club and Protonn have raised capital from risk investors since January.
“Opportunity in the sector has presented itself in two ways. On one hand, there is formalisation happening in the sector and on the other, there is hastened pace of digitisation. With this, the market opportunity is huge and runs into multi-billion dollars,” Apna.co founder Nirmit Parikh said.
In June, Apna.co had
raised $70 million in a round that quintupled its valuation compared with the previous round in March to $570 million, post funding.
The deal flow in the sector is increasing each month.
Last week, employee engagement platform
Advantage Club raised $1.7 million from Y Combinator, Broom Ventures and Kunal Shah among others. Before that, Hiration, an AI-powered career platform which helps professionals create high-impact resumes and find jobs,
raised $3 million from Prime Venture Partners, Venture Highway and Y Combinator. In July,
InfoEdge acquired HR tech company DoSelect for roughly $3 million, professional networking platform CoffeeMug.ai raised $625,000 from Paradigm Shift Capital and AngelList India in a pre-seed round, and professional employment organisation platform
Multiplier raised $4 million from investors led by Sequoia Capital India’s Surge.
These deals are indicative of the action in the space and experts believe it will only intensify.
“There is an unmet demand from the small and medium enterprises that wish to establish HR solutions within their organisation. These companies are preferring cloud-based and tech-focused offerings and hence HR-tech companies are gaining traction,” said Mohan Kumar, founder of Avataar Ventures.
His firm
led a $16 million round in AI-driven talent engagement and communication platform Sense in June this year.
“For decades, this space did not see disruption and was dominated by a few big companies. But now, smaller startups are bringing in value and filling the gap. The total addressable market is huge,” he added.
Covid has led to a paradigm shift in the way HR functions are performed. Be it hiring, induction, training, grooming, assessment or any other people-related function, the massive shift to remote or hybrid working models has transformed the role of HR. This is giving a push to HR technology — an area that has mostly been untapped so far, but where a lot of investment is happening now.
“Unlike ecommerce or any other area that got accelerated due to the pandemic, HR tech is an area where there was hardly any use case till the pandemic forced widespread adoption of work from home,” said Anshuman Das, CEO of CareerNet and Longhouse Consulting, a talent acquisition and recruitment solution provider.
“The economy around HR tech got created in a way post Covid and will see more innovation in the coming days. The opportunity in this area is massive and is here to stay,” he added.
Experts believe that a rise in the gig economy will further accelerate the trend. The whole realignment in the sector will lead to more funding. Employee fulfilment and upskilling are also turning out to be an emerging theme within the HR Tech space.
“HR-based startups are garnering interest as they are bringing talent management and skilling to the forefront of the organisation. In a rapidly changing work and workplace environment, CHROs equipped with cloud-based HR solutions will lead this transformational change and define the new working world,” said Ankur Pahwa, partner and national leader – ecommerce and consumer internet, EY India.
For companies that have cracked the Indian market, culturally similar markets such as Southeast Asia (SEA), Middle East and North Africa (MENA) are the next steps in growth.
“We are gearing to take our platform to an unexplored new customer base internationally, especially in SEA, MENA and North America markets and add financial wellness products like Early Wage Access to our existing comprehensive employee engagement platform,” said Sourabh Deorah, cofounder of Advantage Club. The company says it is chasing a $13 billion revenue opportunity in this space.
