Its estimated value, in global terms, will exceed 43 billion USD in 2028. The last 1.5 years of the pandemic have driven up the valuations of startups operating in the HRM area. Analysts at the investment fund Market One Capital have taken a look at the most interesting entities.

The global pandemic crisis has changed the way people work. The HR sector had to adapt quickly to the new, remote reality. This was followed by investments in companies offering digital platforms and tools that facilitate human resource management. According to the LaRocque report, in 2020 alone nearly 5 billion USD was invested in HR Tech solutions. This year it will likely be an even larger amount.

- Investor interest has shifted from solutions supporting talent acquisition to tools improving remote work, work efficiency, and the overall wellbeing of employees - explains Marcin Zabielski, Managing Partner at Market One Capital, a Venture Capital fund that invests at an early stage in European marketplaces and digital platforms.
[ANALYSIS]: How the HR Tech market is growing — illustration 1

The solutions that attracted the greatest investor interest were those supporting collaboration and creation, such as Mural. The company was founded in 2011 and had not previously sought external financing. However, during the pandemic it quickly closed three funding rounds - one in 2019, the second in 2020, and the third in 2021 - for a total of more than 190 million USD. This year, the lead funds in the B round were Insight Partners and Tiger Global Management. According to TechCrunch, in 2020 Mural tripled its annual recurring revenue (ARR) and had more than one million monthly active users (MAU).

Another area attractive for investment is tools that help manage multiple applications from a single platform, increasing convenience and improving users' work. Noteworthy examples include Schema.team - for file management, Reason.al - for synchronizing and updating files created across various channels used by team members, and Click.Up. The latter - similar to the popular Asana on the Polish market - raised 100 million USD in December 2020 from the Canadian company Georgian, reaching a valuation of 1 billion USD.

Concern for employee wellbeing encouraged startups in this area to increase their activity, especially in the second half of last year. Riding this trend, Lyra Health achieved unicorn status thanks to a Series D round worth 110 million USD raised from Addition Capital. It currently serves about 2 million users, which represents twofold growth compared with the previous year.

As for the pace of funding, an even more impressive example is the company Modern Health, which in February 2021 raised 74 million USD, among others from Founders Fund - less than 2 months after collecting a round of 51 million USD, in which the lead investor was Battery Ventures! In 2020, the startup tripled the number of employees and doubled its customer base to more than 220. Both startups offer comprehensive mental health solutions, providing employees with personalized treatment plans and access to therapists in a virtual space. Lyra is available only in the USA, while Modern Health already operates in more than 35 countries.

- It is clear that access to similar solutions translates into employee engagement indicators and companies' financial results - explains Marcin Zabielski. – The Polish company Mindgram, in which we invested in the second quarter of this year, enjoys enormous interest from corporations that take employees' mental health seriously. We are impressed by the pace of this platform's development.

Investors are also interested in solutions supporting employee training and development. Skillshare and Coursera are startups that raised financing in 2020 (66 million USD and 1.1 million USD, respectively).

- The current market situation shows that the challenges and problems the HR sector faced a few months ago became a signal for investors to support solutions responding to specific user needs, and for entrepreneurs they became a driving force for creating new, more specialized solutions. In my view, this is only the beginning of the revolution in this sector - forecasts the Market One Capital expert.