HRtech Market Report 2014-2016: Moving Beyond Hiring Portals

A human resource (HR) manager’s responsibilities encompasses all the services involved in improving employee performance in accordance with a company’s overall strategic objectives. This is a role requiring extensive documentation and strategic communication considering various microcosms of information.

Effectively, the infrastructure in place for all crucial requirements that an HR manager needs to execute their functions, can be amplified by the use of technology. In the past couple of years, with the advent of startups in India, companies helping improve various HR processes have cropped up – ranging from hiring, employee benefits, onboarding, to performance measurement. In this report, we look at the trends that give a bird’s eye view of the segment’s development since 2014.

What The Numbers Tell Us

With 50 (33 disclosed) deals grossing in $75.52 Mn from 2014 (till November 30, 2016), it can certainly be said the sector is still under-serviced. The average ticket size in the sector was $2.29 Mn and a majority of the deals came in 2015, with $47 Mn in funding for that year. The current year witnessed a slowdown, but is in parallel with the overall slowdown in the startup market in India this year, and ought not to be a concerning metric.

Out of the 81 unique investors in this space, 38 were by VC’s with the largest being IDG Ventures, Blume Ventures, and New Enterprise Associates (NEA). There were only three angel investors with more than one deal, namely Kunal Bahl, Phanindra Sama, Rohit Bansal.

In a massively populated country like India, tackling unemployment can be a big challenge. But taking on this uphill task, and doing it right can be big business. This is reflected in our analysis, which shows 70% of all deals in this space being made in the hiring sub-sector – as the last three years saw such startups mushrooming.

HRtech: The Businesses They Operate

With the use of data-backed software, most of these startups have tried building online platforms that allow for the simplification of the hiring process, increasing visibility, and enabling employers in the matter of finding the right fit for their requirements.

One might wonder, why so many companies are building such similar products – the answer to this lies in differentiation.

The differentiation in these hiring-centric startups has been seen in two ways – one is targeting a niche audience, the other is in added service delivery. The added service faction include startups using additional aspects in hiring like social profiling, employee training, and on-boarding. While startups target a niche audience work across various demographics like the informal sector (plumbers, maids, cooks and the like), entry-level, women, programmers & developers, premium hiring, etc.

This leaves tremendous potential for consolidation in the future, as efficiencies in various niches ought to be applicable for synergistic growth for what is essentially, an identical process. 

The biggest gap/opportunity, however, is reserved for startups that do not focus solely on recruitment. Startups that have products which are not largely identical and help companies in other aspects of human resource management, like employee engagement, benefits, performance measurements, etc. If the focus is deviated from hiring to these sub-sectors, the future of this space can be much larger than what is today.

Expectedly, the sector’s consumer-base is primarily divided between B2B and B2B/B2C consumers. However, what is surprising is the dearth of late-stage fundings, with just four deals falling in this category – all Series B fundings at that. The interpretation here is that the sector has not yet seen any player grabbing a substantial market chunk, with products not yet mature enough to be widely accepted by companies.

In Conclusion

Every company in the world requires HR services, so the market is most certainly large. With rising attrition rates, and a growing trend of increased movement from one job to the next, it is just a matter of time before we see a company coming through the ranks, making a large splash in the field through either an extremely adoptable product or an aggressive expansion policy (which ironically, would require the kind of large funding that this sector is yet to witness).