The last month of the year is to look back and take stock-where did we start from and where have we reached after 12 long months. This has been a difficult and dystopian year for the entire world. As the world went through lockdowns, layoffs, and hunkered down to work from home, a wave of digitization swept our lives. And when the startups in the HR Tech space look back, they will mostly say the wave did help them navigate the choppy seas of work and HR this year. 

From the degree of adoption to the amount of funds flowing in, the startup space has generally seen an increased awareness around technology in HR. With the talks of digitization, collaboration, tech, automation, dominating the whole year round, HR Tech saw a definite uptake globally.

We talked to a number of startups in the HR Tech space such as HRIS provider Talbrum, Leena AI, an artificial intelligence (AI)-powered employee experience platform, online skills assessment platform TestGorilla, recruitment service provider Avsar, Engage Rocket-cloud-based software that helps leaders and organizations make better people decisions using real-time data, HR, payroll and benefits platform Swingvy, Joye.ai-a B2B SaaS startup in mental health space, and hiring startup Able Jobs. 

The majority of the startups agreed there has been a big spike in interest and fund flow into the HR Tech space. 

Demand due to the obvious digitization

2020 has been one of the most successful years for HR Tech startups. HR Tech startups have always faced a challenge in justifying the importance of Tech in HR Tech, but this year there has been a lot of demand due to the obvious digitization that has happened across companies. 

Ravish Agrawal, Co-founder, and CEO, Able Jobs revealed that with Able Jobs customers, pre-COVID, less than 15% of entry-level interviews happened online; however even after the current unlock scenarios more than 75% of interviews are happening online today. Less than 20% of companies were using any digital touchpoint outside of the interview process pre-COVID, but post-COVID more than 60% of companies have been either using an ATS to screen applications or other tools to take pre-interview tests or roll out the offer. Outsourced recruitment will also see an immediate increase since companies do not have the bandwidth to scale teams internally. 

Corona accelerated digitization efforts across functions, but most notably in HR shared Otto Verhage, Co-founder of Amsterdam-based online skills assessment platform TestGorilla. This is because remote working came with significant HR challenges across the employee lifecycle (hiring, onboarding, L&D, health & safety, retention, exit). Also, due to lower volumes/workload in hiring and onboarding, those functions had the time to implement new tools and ways of working.

Reduced expenditure for infrastructure due to remote work

Besides encouraging automation and digitization, remote working has reduced the expenditure for infrastructure drastically which is a major plus point for startups, shared Navneet Singh, CEO & Founder of Avsar HR Services. Many HR startups are now looking to register themselves as MSMEs to avail the benefits of the economic package announced by the Indian Centre Government. Collateral-free debt capital will help many of them to sail through the crisis. 

HR Tech emerged as a hygiene factor

Vinay Dalal, Co-founder of Talbrum stated that the year was when HR was the superhero, employee well-being was at the forefront and technology played a large role in helping HR take this leap.

So here was an opportunity for all ready HR Tech product companies; prospects who were fence string on adopting technology suddenly saw it as a hygiene factor 

Vinay revealed that TalBrum itself grew four times in this duration.

Increased focus on employee satisfaction

Adit Jain, CEO, Leena AI, an artificial intelligence (AI)-powered employee experience platform, shared that with the pandemic hitting us, several employers have realized that retaining employees is a lot more beneficial than onboarding and training new employees. This has led to an increased focus on employee satisfaction. HR departments have started focusing on employee retention and the need for employee engagement is higher than ever.

Need for HR automation

Adit also shared that the pandemic has also forced every organization to go remote, and some of them have gone remote for the first time since they started out. This situation has led to a sudden rise in the need for HR automation and it is this exact space that HR tech startups have used to their advantage.

Be it to ensure employee engagement, answer employee queries, or to manage employee feedback, HR tech has helped organizations realize all their needs despite all obstacles the pandemic has brought in. 2020 has been a very forward-looking year for HR Tech startups.

Similar views were expressed by Chee Tung Leong, CEO and Co-founder of EngageRocket who shared that with the COVID-19 pandemic normalizing remote working, many organizations are forced to accelerate their understanding and adoption of technology. Traditional HR processes have had to be digitalized and reworked for the new normal. Recruitment, on-boarding, engagement, talent management processes are undergoing seismic changes and major transformations.

The need for appropriate solutions to meet today's new reality gives HR Tech start-ups greater visibility and the opportunity to thrive.

Demand from SMEs for HR cloud-based systems

Jin Choeh, Co-founder and CEO of HR Tech startup Swingvy shared they noticed an increase of HR cloud-based system adoption and demand from SMEs especially from traditional businesses and small businesses because of COVID-19.

Businesses that are reluctant to shift their traditional business towards digitalization were encouraged to with digital transformation grants provided by the local governments in Malaysia (MDEC) and Singapore (MAS).

These local governments released a list of technology service grants offered to SMEs certainly helped to increase the visibility and credibility for listed HR tech startups, allowing them to focus on meaningful conversion.

Jin also added that the size and activity of the HR online community increased noticeably, which gave us a platform to discuss HR pain points with various employers and employees so that we could make sure their needs were met in our own software. Businesses were more willing to receive training online, and peruse online material by themselves, rather than demand in-person training and demos. This indirectly saved a lot of resources for us, so that we could focus on the depth of our training material.

Challenges in 2020: Frozen HR Budgets, Freeze in Hiring, Rising to the challenge of remote work

While the willingness to adopt tech has increased during COVID, realized sales were still challenging to close because HR budgets were on freeze. As demand came back across the market, companies have started adopting products and upgrading to premium versions as well. Due to a freeze in hiring in some industries, the immediate value of tech tools was not captured effectively, reveals Ravish Agrawal, Co-founder, and CEO, Able Jobs.

Similar thoughts are echoed by Otto Verhage, founder of TestGorilla who shared that mass layoffs caused a sudden drop in demand for e.g. hiring and onboarding services & tools. 

Cost cutting efforts also hit HR departments, so budgets to invest in new ways of working and systems have been under pressure.

Strategic investors have slowed down because of COVID-19 which has affected the startup funding, believes Navneet Singh, CEO & Founder of AVSAR HR Services. Lack of business had prompted many startups to reduce the salaries of employees as a cost-cutting measure. Though the wage-cut has been rolled back now because of an increase in demand. 

Also, recruitment in this changed business-dynamics has proven to be tough.

Vinay Dalal, Co-founder of Talbrum stated that as far as challenges are concerned, the challenge was purely a shift of prospect connect and lead generation.

That’s because it became purely network-based as startups have limited budgets to do social media marketing.

Adit Jain, CEO of Leena AI shared that from onboarding to employee feedback, most HR tech products were built without considering the remote mode of working as primary. With this new mode of working becoming mainstream, HR tech startups had to make changes to their product to suit the needs of the remote employees. Nobody saw the pandemic coming, but the unique challenges it brought with it helped us HR tech startups to evolve and to be more aware of changes that can happen in the workplace. 

Chee Tung of EngageRocket shared that 2020 brought a very new and unexpected set of challenges. First, we had to take care of our employees and make sure they were safe and confident in the future of their organization. This had to be done in the face of greater prudence and the need to ensure that the balance sheet could support present and future operations.

Second, traditional ways of buying within HR have been upended, and HR Tech startups had to go beyond the usual technology hype cycles to deliver tangible value in an unprecedented global economic crisis. This meant taking a hard look at the solutions provided and adapting them to the real challenges at hand.

Third, additional safety factors had to be accounted for in calculating financial runways, and growth assumptions had to be re-thought from the ground up. Ensuring that the company stays solvent and can meet all its financial and operational obligations required quick planning and decision making in an extremely uncertain environment.

“For most HR Tech startups, including EngageRocket, we had to do all these while taking physical actions to transition teams to becoming 100% remote - a relatively unfamiliar mode of working. Drinking our own champagne and using EngageRocket internally helped us come up with action plans to increase resilience and engagement,” he adds.

Jin Choeh, Co-founder and CEO of HR Tech startup Swingvy shared that traditional SME businesses find it difficult to cope with technology although they understand the importance of digital transformation, many are overwhelmed by the idea of having to revamp their entire digital approach. While it’s not say a challenge for HR Tech but an opportunity for HR tech startups to help these companies and more importantly, small businesses transform their HR with technology. 

Ultimately, the increase in demand for HR tech products and the need for these products to fit into the requirements of a remote workplace was sudden, but most HR Tech startups rose to the occasion. And that’s why this year has been an inflection point for HR Tech startups like no other year before.