The circumstances of COVID-19 are driving learning, virtual, and employee engagement technology investment.
By Larry Basinait
While the economy was slowed by COVID-19 in the fourth quarter of 2020, the development of new HR technologies continued at a rapid pace. In total, there were 127 major announcements—those with at least $1 million in funding—up substantially from the 77 announced in the third quarter of 2020. Private equity and venture capital firms continued to invest heavily in HR technology, totaling $1.02 billion in the quarter, down 13.3% from $1.18 billion in the third quarter. The average investment declined from $26.0 million to $16.5 million.
Seventy-nine of the announcements were from companies located in the United States, two from Canada, 24 from EMEA, 13 from APAC, and one from Latin America. Additionally, there were eight joint announcements by geography: four U.S./EMEA, three EMEA/APAC, and one U.S./APAC. In the United States, 24 of the announcements were from companies in or near Silicon Valley, while in the EMEA region, 10 were from London-based companies. The most common type of announcement was funding-related, with 68 citations. There were 34 product announcements and 25 merger and acquisitions. Funding-related activity increased dramatically, up 47.8 from the third quarter when there were 46 announcements.
Learning and upskilling products and funding were a big part of HR technology in the fourth quarter of 2020. While these announcements cannot entirely be attributed to a response from the worldwide pandemic, there was certainly an uptick in this area. In the quarter, there were 18 separate accounts that addressed upskilling or learning.
Announcements that addressed working in a virtual environment were also frequent, with 13 new emerging technologies. Solutions for increased employee engagement were noted 13 times as well, showing overlap between employee engagement and remote work solutions. For example, a mobile communications platform might include tools to drive employee engagement. Generally, there were about 40 announcements that pertain to the current reality of a year-long pandemic.
2020 in Review
Despite the worldwide pandemic, 2020 was a remarkably busy year for HR technology announcements. There were nearly 400 major announcements made globally, up from 288 in 2019, with nearly two-thirds (64%) of them from North America-based companies. The worldwide investment in funding alone was over $4 billion, though that was down a sizable 41% from the year before, resulting in an average investment decline of $13.5 million, down to $10.5 million in 2020.
The technology with the largest investment was learning solutions, with a $780.2 million investment for the year. Again, there is some overlap between technology categories, but the takeaway is that developing and upskilling the workforce were paramount in interest.
Artificial intelligence (AI) and machine learning (ML) technologies were once again prevalent in 2020. In total, there were 63 citations of products incorporating AI technology, up from 38 in 2019 and 25 in 2018. AI or ML is more a means to an end in producing technology for recruiting, learning, or engagement, among other areas related to HR.
The impact of COVID-19 was more clearly felt in the engagement/virtual/mobility technology. Because of the vastly increased number of workers operating out of a remote environment, technology was needed to better serve this population. Organizations were looking for ways to keep their remote workforce engaged and were looking to leverage virtual or mobile technology to continue their business operations. The amount of activity in this area increased throughout the year, resulting in investment totaling $345.1 million.