HR Technology Investing Climbs in Q2, Despite Pandemic

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Investment activity in the HR technology space continued at a consistent pace during 2020’s second quarter, despite concerns that the COVID-19 pandemic would act as a brake. According to HRWins’ Q2 2020 HR Tech Global VC Update, venture capital investment in HR tech increased more than 14% from the first quarter during the period.

Just more than $1 billion was invested in HR tech during the quarter. The report said HCM solutions attracted significantly more money from investors than did talent acquisition products, continuing trends seen at the beginning of the year.

Despite pandemic, #HRTech investing increased during Q2, with emphasis on HCM solutions. @glarocque #HRWins #HR Click To Tweet

While the consulting firm doesn’t want to call two quarters of behavior a trend, it said the pandemic may be causing investors to focus on the needs of HCM and workforce management activities, as opposed to talent acquisition. The tilt toward HCM ends a 14-quarter period during which investment was roughly equal between those products and TA.

HRWins said it continues to “hear hesitation” from investors, HR technology vendors and the analyst community regarding the industry’s future path. While deal-making goes on, it said, “investors are changing their calculus” as they try to discern how the pandemic and the recession will impact work, experience, talent acquisition and the products employers need to address post-crisis challenges.

It identified strengthening investor interest in reskilling and upskilling, as well as solutions that can address the needs of a more distributed workforce. This seems in line with the messages delivered by many vendors, who are emphasizing tools for managing and engaging remote workers, and speculating on corporate learning needs as businesses reopen and employees return to work.

During 2020’s first quarter, investment in HR technology totaled about $867 million. That was less than the 2019 fourth quarter’s $1.1 billion, but greater than the 13-quarter average of $841 billion. At the time, HRWins expected investment to slow during Q2.

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