What pushes HR VCs to invest?
Zoe Chambers, partner at Frontline Ventures, catches up with UNLEASH about the trends in the HR economy.
Why You Should Care
The HR tech economy is booming.
Discover why and the impact it is having on businesses.
At one time a HR unicorn was a rare sighting and a fabled fate for aspiring businesses. This has undoubtedly changed as an increasing number of companies enter the billion-dollar valuation threshold.
This threshold isn’t just being reached because of inflation, instead, it reflects changing investments from business leaders.
Increasingly, employee experience, benefits, and talent management are becoming priorities for organizations. With this comes company spending, and effective tools are finding themselves quickly propelled to newfound heights.
To get an insight into what’s attracting investors in the start-ups that are seeing growth, UNLEASH spoke to Zoe Chambers, partner at venture firm Frontline Ventures ahead of London Tech Week. Frontline Ventures is a venture firm for globally ambitious B2B businesses on both sides of the Atlantic, so there’s no better place to get insights into the HR tech economy.
The modern HR landscape
The very definition of HR has changed; “In just the last few years alone we’ve seen the biggest change in a generation when it comes to how we work and how we think about working. Tech is at the heart of this flexible work proliferation.”
Zoe Chambers, Partner at venture firm Frontline Ventures
For Frontline Ventures, that means finding and supporting those businesses tackling the “administrative nightmare” caused by this change head-on. “One of the biggest things we’ve come to appreciate is the sector is far bigger than it might seem at first. We have an increasing number of portfolio companies that touch some aspect of the HR sector,” says Chambers.
Chambers unpacks: “We’ve noticed a real focus on the employee as a human, not just as a resource. Technology companies are really thinking about making employees’ lives easier, and the sell to the corporate level is achieved by demonstrating this. Employers must look at things like benefits and the way they’ve changed. They must look at what’s available and make sure they don’t prioritize people in countries with easier access to certain benefits than others. That being said, this can certainly be hard to manage at scale.”
When it comes to large investments from enterprises, Chambers notes: “The battle for talent is ongoing, and big tech companies are looking for a way to attract and retain top talent. It starts with them.
“More than ever employers have been prompted to consider what they should be doing because of the ‘Great Resignation’ and businesses are now thinking about things like fertility and mental health. Even the idea of coaching in the workplace is just so different from the generations before us. It’s a much more holistic, and caring approach where employers want you to feel supported in life so you feel able to perform well at work.”
“Finally, I think that talent is basically the correlation as to why some companies fly or die. Great talent always wins out, and there has been a real war because people can now choose where they work.
These areas and trends are what Frontline Ventures look out for when making an investment, particularly technologies that enable flexibility at work.
Attracting investment
On the back of these features that make a company appealing to Frontline Ventures, Chambers outlines that the parameters have allowed for varied investment in the HR space.
Chambers points to Learnerbly as an example of learning and development content that can be delivered in multiple formats. Elsewhere, workplace management platform Lattice attracted investment because of its actionable insights.
While acknowledging that many tools that the company has invested in haven’t been discussed, Chambers comments: “One of our big breakout success stories is it is a company called Humaans. What they do, is they essentially automate onboarding and management of your staff super easily, in a very employee-centric way.”
As many will know, technology alone is not always enough to attract investors. Environment, social, and governance (ESG) policies are often tied to attracting investment. Chambers notes that this was something they discussed at every Investment Committee.
“In the world of HR tech, we can also invest in those businesses which are trying to help the businesses of the future to improve on their own ESG goals (including diversity, equality, and inclusion). We’ve seen a number of startups such as Sigma Polaris surfacing potential job matches matching purely on the basis of skills and removing all unintended biases.
“There’s certainly been some movement forward on this front, which is brilliant.”
Trends going forward
Looking ahead at how the HR market will change in the future, Chambers notes: “I think the power will continue to shift into the hands of employees. We will continue to expect even more from our work environments, and in particular, will continue to expect maximum flexibility.”
“There’s a desire to continuously learn. That desire manifests itself in people having multiple avenues of revenue income. Plenty of people have a job and then have a side hustle or have multiple gig-type jobs. That lifestyle will only increase.”
Chambers also believes: “Overall we will become chameleons in our careers, and people will happily move jobs every two to three years. The bigger challenge to come is around retirement and whether we will ever be able to actually do that! As such, thinking about how HR tech can support and guide older generations to remain a skilled and valued part of the workforce will be an interesting challenge.”
Evidently, there’s still plenty of activity to come in the HR tech economy. The only question is how you choose to invest.
