How Market Prospects & Emphasis On Human Resource Functions Are Raising Investors’ Interest In HRTech Startups

The overall investment scenario in India in recent times has been abuzz with cautious mood of the investors. The result has been a strong and steady growth driven by funding, consolidation, new technologies and market developments. Between 2010 and 2014, the infusion of VC and PE increased from $13 Mn to $1,818 Mn. Angel investment too has multiplied almost eight times from $4.2 Mn to $32.2 Mn. There has been a significant interest from international funds in the Indian startup ecosystem. Acqui-hiring, a form of merger and acquisition, has gained grounds with several of the acquisitions in 2015 along with shop closures, consolidation of operations, and cut in employee strengths.

Today organizations are finding solutions for strategies and leadership, talent, and human resources. Millennials have taken centre stage with growing numbers and accordingly human resources (HR) trends are being worked out to lead, engage, reinvent, and re-imagine work and workplace. There is an increased attention on learning and development to cater to increased skill gaps. The traditional performance management is being replaced by performance solutions. Companies are actively working on talent analytics capabilities to address complex business and talent needs. As a result, the HR spend to embrace new technologies have seen a steady increase over the years for improvement and uniformity in HR processes.

While globally the United States still remains the hotbed of innovation in the HR domain, India is fast catching up as companies and industries across various sectors, scale, and geographies in the country have been found to strategically align the HR functions to business initiatives as partners rather than a division to facilitate administrative or other people functions. Business leaders are increasingly using technological innovations and focused human interventions to leverage and develop human resources. And though the gap is closing fast, India has some distance still to travel when it comes to scale, maturity and adoption of HR startups.

Globally, last few years have seen concentration on vital HR functions like recruitment, recruitment automation, and analytics, the coming times would focus on predictive analytics and employee engagement products. Such emphasis would be seen in India as well in coming times. Adding to this, globally startups offering software for human resources and recruitment have garnered about $811.6 Mn from venture capital investors in the first half of 2015 – and India has seen its fair share of action as well.

With the Indian government’s increased attention on skill development, jobs creation, entrepreneurship schemes, and other business friendly measures leading to expansion of current business or addition of new companies, both talent hunt and talent management has acquired the centre stage with India Inc. Measures on developing entrepreneurship are bound to have a positive impact on the overall sentiment for entrepreneurship in India. HR entrepreneurship being no different is also expected to get a boost from the same, which in turn would be direct positive impact on the Indian economy.

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While the HR solution space in India has seen many new age startups catering to different HR needs, the established players in the HR outsourcing or consulting domains have moved a step upwards with one stop shops for various needs including HR technology, thereby releasing the bandwidth for strategic work and also bring in uniformity in the HR process. The technological innovations in traditional HR functions like recruitment (analytics, referral space), people engagement, performance evaluation, learning & development, payroll, workforce management etc., have provided solutions to the vital factors of time, cost and productivity.

As jobs and hiring have revamped themselves in 2015 with positive trends, there has been buzz on other HR aspects as well. Many experts and business leaders have considered HR as a new business and strategic partner in the growth of an organization. There has been substantial increase in amount of investment by companies on improving HR software. While application of HR platforms has been on rise, cloud/Saas-based HR tools have been hugely recognized. An interesting point to be noted is that HR tools have been found to have focus on employee first.

Predictive analytics and engagement have become keywords with many startups emerging in the space and CXOs realizing their importance. Many leading international corporate houses like Accenture and GE have also talked of a gradual demise of the annual appraisal cycles being replaced by a more fluid mechanism.The India story on investments in the HR space is on a growth momentum is not only visible in the deals being signed but also in the fact that India is being talked both as a key market and strong investment destination at the recently held HR technology conference in the United States.

We in the recent past made an investment of$ 500k in a Chennai-based company, PiQube Analytics, an easy to use recruitment tool for effectively matchmaking candidates across the web. Among other HR investments that have happened this financial year, Babajobs raised $10 Mn from SEEK Limited (Australian online employment marketplace). Recruitment platform HackerRank (formerly InterviewStreet) has received a $7.5 Mn from Japanese firm Recruit Holdings, Matrix Partners and a few marquee angels have invested over $5 Mn in another Bangalore-based recruitment startup, Belong. Hiree (formerly MyNoticePeriod), an online recruitment portal raised $3 Mn from IDG Ventures and other investors. Mumbai-based Aasaanjobs raised seed funding of $1.6 Mn from Inventus Capital Partners and IDG Ventures India. Sachin Bansal & Binny Bansal backed incubator, TracxnLabs, along with a few others seed funded online referral platform ZenRadius. Flexing It (a marketplace for part-time resources) raised $500K in angel funding from multiple investors.

Some key factors fuelling the rise of HR startups in India include a market growing at 20% year-on-year with adaption rates around 10-15%. India presents a large and untapped play across B2B and B2C segments. Currently the market is estimated to be in excess of $4 Bn.With the youngest and largest workforce by 2020, innovation across the HR domain in India is a must for efficient talent acquisition, engagement, and management. This can be described as the second factor. Besides, a favorable ecosystem including a positive geo-political climate, people-focused government initiatives, technology trends and a fast growing startup ecosystem can be considered as the third factor. With the recognition of efficient human capital directly impacting economic growth, HR startups are seeing huge traction in the region.