The Australian HR Tech market has seen a flurry of activity in the first six months of 2021. The market which is estimated to be around $12 Bn in 2018 has seen funding flow in it substantial deals in the first half of the year.

To begin with, Sydney-based Employment Hero, an HR-tech startup providing cloud-based HR, payroll, engagement, and employee benefits tools targeted at small and medium-sized businesses, raised A$45 million (US$35 million) in a Series D funding round led by employment and education group SEEK, a long-time investor of the company in March this year.

Incidentally, this is the largest funding round in Australia this year so far. Other notable investors participating in the round are leading Australian venture capital firm OneVentures and technology-focused fund AirTree Ventures, both of which have previously invested in Employment Hero. Salesforce Ventures, the strategic venture arm of Salesforce, also joined the round. 

The startup has said that it will use the fresh capital to support growth in its existing overseas markets—New Zealand, the UK, Malaysia, and Singapore—and expand into other Southeast Asian countries. The round brings its valuation to more than $250 million AUD ($193.4 million USD). 

And again in July, Employment Hero went on to raise a whopping AUD$140 in Series E financing led by Insight Partners. Ben Thompson, CEO, Employment Hero, is delighted at this turn of events, “We always thought Insight Partners would be a great partner.” The deal will allow them to scale further into Southeast Asian and Western European markets without worrying about raising capital. Insight Partners is known for investing in tech companies.  

Pyn’s funding, A Cloud Guru’s acquisition

Two months later in May, Australia-based employee communications startup Pyn managed to attract a Silicon Valley venture capital firm in its second seed round. Pyn raised $10.4 million in funding, led by ultra high-profile Silicon Valley VC firm Andreessen Horowitz, making its first investment in Australia. Atlassian Co-founder and Co-chief Scott Farquhar also participated in the raise, along with BambooHR Co-founder Ryan Sanders. 

In the same way platforms like Facebook make recommendations based on what they know about a user’s age, demographic and life stage, Pyn allows businesses to use what they know about employees to communicate more effectively. The company's employee communications tool uses information from existing systems such as Workday or Salesforce platforms to determine employees' current priorities and activities, and sends them personalized messages with relevant information or suggestions for what they might currently be working on.

Pyn’s founders share an interesting history too. While Jon Williams was previously a Co-founder at Culture Amp, an employee experience management platform he helped launch in 2011, Co-founder and CEO Joris Luijke used to run HR at Altassian and later at Squarespace.

This is the startup's second successful seed round. Its first seed round was held in July 2020 and raised US$2.21 million from Accel Partners with the participation of Skip Capital and Atlassian President Jay Simons.

In other news, HR tech platform Xref (ASX:XF1), whose core focus is its reference-checking platform, has been constantly catching the market’s attention this year, reporting favourable quarterly numbers and record revenues in the first six months of this year. CEO Lee-Martin Seymour attributed this to the increase in digital focus which has “vital to our growth in 2021 as global employers search online for better ways to verify and measure talent”.

Meanwhile, in April this year, Pluralsight, the technology workforce development company, announced that it has entered into a definitive agreement to acquire Australia based cloud skills development platform A Cloud Guru (ACG). The acquisition closed in July.

“With the acquisition of A Cloud Guru, we can now provide an all-in-one solution to accelerate the cloud skill development journey for large enterprise customers and individual learners,” said Aaron Skonnard, Co-founder and CEO of Pluralsight.

Sam Kroonenburg, Co-founder and CEO, A Cloud Guru stated that he was excited by the next phase of the company’s mission in which, together, the duo will build the next-generation platform for hands-on learning across all of the technology.

So what do all these positive developments mean for the HR Tech space in Australia?

More investment in employee performance and culture focused HR platforms

Robert Stone, Chief People Officer at Wunderman Thompson Australia/New Zealand shared with us, “I 100% think that the HR tech space is going to continue to grow due to the constant change in our new ways of working. I don’t think that there’s going to be a huge shift in new technologies, however, I feel like organizations are going to invest in employee performance and culture focused HR platforms such as Reward & Benefits etc.”

With employee engagement going virtual, organizations are bound to expect in more such platforms going forward, as annual appraisals are shunned for real time feedback in the new normal of work.

More self-service tools that allow people access 24/7

Another area of demand that will surface is the need for more self-service tools in HR that allow people access 24/7.

Elucidating further, Robert shared, “We’re never going to return to the same working model. Hybrid is the “new normal” and we need to reshape and rethink the tools and systems that we interact with our employees on. Moving away from the traditional model and with more people working on flexible hours, it means that there’s a huge need for more self-service tools that allow people access 24/7. However, it’s important to note that this doesn’t replace the need for human interaction! These tools and systems should be put in place to complement and empower your staff to be able to manage people matters in a more efficient way.”

Ultimately what this means is HR will go more and more real time and online, thus leading to more SaaS and cloud based HR tools.

More investments in collaboration platforms

“From our recently launched report ‘A Workplace that Works: Impacts of shifts in the digital, physical, and cultural landscape’, employee well-being comes across as the top-most priority for ANZ companies. We have seen companies in this region focus largely on safety procedures and social distancing at the workplace, shared Rajesh Varrier, SVP, Head of Digital Experience & Microsoft Business, Infosys.

Like most companies across the globe, the ANZ region too, will see investments in platforms for collaboration like Microsoft Teams.

Enterprises are looking at redefining employee experience and learning by leveraging platforms like Infosys Meridian  -- a Live Enterprise workplace platform that helps companies reimagine experiences in the work-from-anywhere era -- and learning on-the-go with Infosys Wingspan -- a next-gen learning solution that helps organizations accelerate their talent transformation journey. 

Varrier added that from a workplace standpoint, companies will embrace the hybrid model of work, which will eventually increase the use of hubs and co-working spaces.

More investments in AI powered talent management platforms

The pandemic has caused major shifts in the way recruitment. In its wake, it has brought about the great waves of resignation and attrition, which have fueled the great war for talent as people switch careers or upskill and talent becomes even scarcer as Australia continues to keeps borders shut. As companies scout talent globally online without having to move them, the use of AI in recruitment and talent management will be further augmented in the coming months.

Government’s push on building a digital economy a boost for HR Tech

Further, it’s to be noted that the government is pushing big on building a digital economy for a more resilient Australia.  The 2021 Federal Budget has earmarked $121.4 Bn in funding aimed at creating 250,000 more jobs and kick starting Australia’s economy. Another big area of impetus is upskilling the workforce to reduce the talent shortage. A $1.2 Bn digital economy package has been rolled out to encourage growth and boost skills in the digital economy. 

A push towards a digital economy means more and smaller businesses will also readily adopt cost-effective HR solutions. For HR Tech and Work Tech startups, this push could not have come at a more opportune time.