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In the battle of the workplace, office workers and their RTO-demanding bosses might not have called for a truce just yet. But if VC funding offers a glimpse of where to place your bets, ours is on the Zoom-friendly sofa.
There’s been a considerable leveling off of funding rounds for HR tech startups, according to Crunchbase. Deals across the HR tech space have fallen to a three-year low, down from a peak in 2021.
Venture funding in 2021 had more than tripled when compared to 2020, according to Crunchbase. Now, with the fewest deals in the works since the Covid-19 pandemic, startups in the sector have only raised a little more than $1.6 billion in the first half of 2023.
The drop in the HR tech space may look a little more dramatic than the rest of tech because of the rapid investment in remote workplace technology during Covid-19.
“There was a ton of money that was poured in HR tech, and became extremely popular with investors, and then I think—much like everything—it’s now a slowdown,” said Chris Metinko, a senior reporter with Crunchbase.
But there may be a notable exception: startups helping companies adjust to the reality that some work can (and maybe should) be done from home.
A Crunchbase analysis of venture-backed hybrid-focused startups found that many are still finding investors.
“Some of the hybrid work platforms are actually a little bit…newer and more innovative in a way,” Metinko said. “That’s something that’s a little less mature in the market, and so there’s probably still VCs that are placing bets on some of those platforms.”
Investors could be thinking that some of the tech that HR teams flocked to in 2020 and 2021 in order to accommodate remote work wasn’t ready for prime time when it debuted, Metinko said. Startups offering new and refined hybrid solutions could be the winners when the dust settles.
Zoom out. Despite notable major players calling their employees back to the office, some remote or flexible way of work appears to be here to stay.
HR Brew reported in July that US workers spent about 28% of their paid working days at home in the first half of the year. That was down from 61.5% at the height of the pandemic, but still a whopping six-fold increase from pre-pandemic days.
“I think platforms…that deal with hybrid work or remote work are still something that companies desire,” Metinko said.