HR tech is evolving quickly — more acquisitions are on the way

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Globally, HR technology is massive space, spanning everything from recruitment to performance reviews. One source pegs the value of this market at $400 billion. In the past two years, venture capital and private equity investors have poured close to $2 billion into this market, with more than $900 million of that in the first seven months of 2017.

With so many new entrants emerging to attack individual segments, the incumbents will have to defend their positions in an increasingly competitive space. And so, already well underway, an era of inevitable HR tech consolidation will soon be in full force.1

So far, 2018 has seen some massive HR tech acquisitions. Recruit (already owners of Indeed.com) recently announced a $1.2 billion acquisition of Glassdoor, the popular company/jobs “review” site, making it one of the largest acquisitions so far this year. Earlier this year, ADP acquired Workmarket, a software solution enabling the freelance economy for companies including Yahoo and the New York Times, and staffing agency Adecco acquired popular technology training academy General Assembly for over $400 million. And, in early June, Workday announced its first HR acquisition of the year: internal mobility solution Rallyteam.

Larger enterprises are finally waking up, realizing that their younger, more nimble startup counterparts are innovating. And, unsurprisingly, they’re approaching the HR tech ecosystem with an “eat or be eaten” mentality.

This typical “old meets new and subsequently acquires to stay relevant” narrative arc is not the only reason I think we’re now due to see more HR tech acquisitions than ever before.

Key macro trends also underpin HR innovation, changing how we as a society think about work. If you think about HR tech as a “stack,” there are universal categories that define each step of an employee’s journey.

Broadly speaking, there is: (1) Recruitment, (2) Onboarding, (3) Learning & Development, (4) Payroll & Benefits, (5) Performance Management & Feedback, and (6) overall Human Resource Information Systems (“HRIS”). There are, of course, further subcategories within each, followed by sub-subcategories; yet as they exist today, specific verticals within the stack are fairly commoditized. The best opportunities lie outside these realms and are also the areas where the HR tech world has seen the most innovation vis-à-vis new startup formation.

Recruitment is the first area worth mentioning. One trend that has emerged here in the past few years is the rise of the freelance “gig” economy, and mobile workforces more generally. With the “Uber”-ization of everything, the ability to always be connected regardless of location, and rapid globalization, it’s no wonder people no longer have to work within the confines of a 9-to-5 role or physically be in an office to be productive.

I am super excited by technologies that enable working with freelancers, or attracting and retaining talent that exists via remote or mobile workforces. The more prominent startups here range from Toptal (a seasoned, pre-vetted freelancer marketplace) to Hackerone (hacker communities “for hire”) to Slack (the new standard for team productivity and communication). This is an HR category that comes with many nuances, though, and it is important to differentiate amongst factors such as vertical-specific versus general platforms, closed versus open marketplaces, enterprise versus SME clients, skilled versus unskilled workers, and long-term projects versus short-term gigs.

Companies in Europe doing interesting things in this category include Side and Comet in France and Gronda in Germany. These are three different freelance platforms for distinct use cases and types of workers. Side is an on-demand platform that taps into student networks for easy tasks, while Comet tries to attract more skilled technical talent via an all-encompassing freelancer “OS” (i.e. community, events, and suite of enabling tools and services). Meanwhile, Gronda caters to the hospitality industry alongside its social media channel, which showcases talent and establishes credibility.

The other part of recruitment I find compelling revolves around how better to use data to attract talent. How can companies go beyond the standard CV to attract and understand candidates while keeping them engaged at every point in the journey? Startups like Heyjobs in Berlin are capitalizing on the rise in programmatic targeting to profile applicants better, while Entelo is using AI to source passive candidates (i.e. those not actively searching for a new role) on a global scale.

Once applicants apply for roles, there are other technologies that can add value at every subsequent step of the applicant lifecycle. Teamtailor in Sweden and Beamery in the UK are two of my favorites here. While the former takes traditional applicant tracking system (“ATS”) technology to the next level by helping employers create branded sites for superior candidate experiences, the latter is building an applicant CRM platform to optimize for candidate re-engagement and marketing for future jobs.

Another exciting part of the HR stack ripe for innovation is culture and engagement. Historically, companies have overlooked this component given its nebulous definition and the difficulty of measuring concrete ROI. Yet with an increasingly millennial workforce and (as alluded to previously) more opportunities for employees to freelance or switch companies, firms can no longer afford not to take employee sentiment seriously. After all, for most positions, the cost to find and train a brand new employee will be more than what it takes to keep an existing one happy, motivated, and engaged. Companies like Cultureamp and Glint are leading the charge here, providing real-time feedback tools for employees at all levels coupled with actionable insights and analytics for managers. In Europe, somewhat similar solutions are now emerging, including Peakon in Denmark and Jubiwee in France. While each tackles employee engagement somewhat differently, the shift to seeing employees as a profit maximizer, rather than as a cost item, is universal.

With half of 2018 already behind us, one thing is clear: Technology-driven trends and innovation will only continue to transform the future of work. With this change will come acquisitions — the inevitable industry consolidation, and of course a reshuffling of old and new. Yet this is precisely where the opportunity exists. Fresh HR tech startups can be a part of this. They can and will be heard by the large incumbents. They can and will effect change.

Julia Qiu is Associate Partner of Mosaic Ventures, a London-based Series A-focused fund.

AppZen raises $35 million for AI expense report auditing
KYLE WIGGERS@KYLE_L_WIGGERSOCTOBER 30, 2018 06:00 AM
AppZen
Above: AppZen’s Insights tool uses AI to prevent expensing fraud.

Image Credit: AppZen

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Expense reporting is a significant time sink for enterprises. It takes 20 minutes on average to complete a single report, according to Concur, and 18 minutes on average to correct an erroneous one. It’s also costly — late, lost, and fraudulent filings incur an estimated $2.8 billion per year in collective expenses.

The answer, according to AppZen cofounder and CEO Anant Kale, lies in artificial intelligence (AI). The automated expensing startup today announced a $35 million Series B funding round led by Lightspeed Venture Partners, with existing investors Redpoint Ventures and Resolute Ventures participating. The round brings AppZen’s total funding to more than $52 million.

Kale said that AppZen will use the capital to expand its team in San Jose and Chandler, Arizona and to grow its product suite from expenses into invoices and contracts.

“We’ve helped our customers detect more than $40 million in incorrect expenses in a little over a year and have grown rapidly, adding 600 companies on our platform this year alone,” he told VentureBeat via email. “AppZen is at the forefront of transforming the CFO organization using AI to bring in more efficiency, reduce spend, and improve compliance. These funds will help us keep pace with this rate of growth — hiring the best of the best to take the business to the next level, better serve our customers, and expand our product suite to cover a wider range of CFO processes.”

AppZen
Above: A dashboard showing expense trends over time.

Image Credit: AppZen
AppZen’s Expense Audit platform, which integrates with Workday, Oracle, Coupa, Concur, and other reporting services, leverages algorithms to eliminate the need for managers and auditors to approve travel receipts line-by-line. It assigns employees a score — the AppZen Behavioral Index — tabulated from each report, receipt, and travel document they’ve submitted over the course of a trip. Taking into account hundreds of internal and web data sources, Expense Audit’s Insights feature can recognize and authorize reimbursements for items within clients’ approved list (e.g., travel), and highlight possible infractions (alcoholic beverages) that warrant a closer look.

Within the Expense Audit dashboard, managers can filter expenses between policies, cost centers, and departments and quickly drill down to top spending areas and high-risk employees. And when the AI doesn’t get it right, they can mark false positives.

According to AppZen, its technology improves financial risk detection by a factor of 10 and cuts human resources required to process expense reports by up to 90 percent.

“The current status quo is expense report auditors sample 2 to 3 percent of reports submitted,” Ryan Floersch, senior director of product marketing, told VentureBeat in an interview conducted earlier this year. “AppZen Insights brings it up to 100 percent off the bat.”

AppZen isn’t the only startup applying machine learning to expensing, of course. Pleo offers a prepaid MasterCard product that tracks employee spending and automatically categorizes transactions. And London-based Soldo’s platform lets clients lay out different expense criteria for each employee, contractor, and spending department.

But six-year-old AppZen has early momentum on its side. Its customers include Fortune 1,000 heavy hitters like Amazon, Citi, Hitachi, Salesforce, Comcast, Intuit, Airbus, and CBS. The company has raised $52 million in funding to date.

“We remain focused on our goal to become the AI platform that audits all business processes in real time, driven by the organization’s CFO,” Kale said. “The AI-driven future of work has matured to the back office, transforming the workplace to make companies more efficient and pleasant places to work.”

Concord raises $25 million for digital contract management
KYLE WIGGERS@KYLE_L_WIGGERSOCTOBER 30, 2018 06:00 AM
Concord
Image Credit: Concord
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Dealing in contracts typically means negotiating all sorts of legal and logistical unpleasantries, like endless back-and-forths between parties and copious legal review. And it can significantly drag down the corporate bottom line — contract management cost companies $153 billion per year, according to IT market analysis firm Aberdeen Group.

Virtualization and digital collaboration tools promise to simplify the process, and four-year-old San Francisco-based Concord is gunning to become the suite of choice for sales, legal, and procurement. The startup today announced a $25 million Series B funding round led by Tenaya Capital, with participation from previous investors CRV and Alven. As part of the arrangement, Tenaya Capital partner Paul Drews will join Concord’s board of directors.

Concord CEO and cofounder Matt Lhoumeau said the capital would be used to expand the company’s footprint. It currently has offices in Paris in addition to the Bay Area, with an eye toward international expansion.

“This funding round will deliver flawless scale and expanded platform capabilities,” Lhoumeau told VentureBeat in an email. “We plan on tripling head-count across product development, sales, and marketing teams. We will begin rolling out new platform features as early as next month.”

Concord
Above: Concord’s compliance flow.

Image Credit: Concord
Lhoumeau said the idea for an end-to-end contract management platform came to him at a previous employer, where he was tasked with renegotiating over 500 vendor agreements. Many of the necessary paper contracts and documents were missing, and it took a 52-column spreadsheet, hundreds of files, and four months’ worth of emails and phone calls to get it all sorted out.

Never again, he resolved.

“Once companies experience the digital transformation of their agreement and contracting processes, the ‘Concord effect’ quickly extends outside the legal department,” Lhoumeau said. “Our enterprise customers are bringing their entire finance, procurement, and sales environments onto the platform. This horizontal growth will have a powerful multiplier effect on platform adoption.”

Concord’s platform allows stakeholders to hash out clauses internally and with third parties, all while tracking in-document changes, and to manage every step of the process — including origination, close, and negotiation — in a web dashboard that integrates with cloud storage and customer relationship management services. A streamlined approval workflow helps automate compliance and push updates in the right direction, and version control allows contributors to quickly view all versions of a document.

Other spotlight features include a discussion panel, access control, user permissions, native e-signature support, automated templates, deadline and renewal reminders, and real-time compliance recommendations.

Concord’s tools are used by Stanford, Kickstarter, Newell Brands, Barracuda Networks, Bitdefender, Rent the Runway, Sizzling Platter, Just Eat, Thredup, the U.S. Department of Transportation, Harry’s, and more than 180,000 others, according to Lhoumeau. And if this past fiscal year is any indication, it’s the start of a trend — the startup recently announced 300 percent year-over-year revenue growth.

“The contract management category is ripe for digital transformation by a software company, and we believe Concord is perfectly positioned to lead that charge,” Drews said. “With 95 percent of contracts managed manually, organizations struggle with the ensuing business inefficiencies and vulnerabilities. Matt Lhoumeau and his leadership team have already steered the company into a leadership position in the contract management market. We are excited to partner with Concord as it scales and builds a global, category-defining company in this multi-billion dollar market.”

Source: https://venturebeat.com/2018/10/30/concord-raises-25-million-for-contract-management/

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