Out of seemingly nowhere, this quarter saw funding for HR technology start-ups take off in a big way. Four HR tech companies were in the top 10 equity investments for the quarter: Betterfly ($125M), Sólides ($103M), Flash ($97M), and Gupy ($94M). So, what’s been going on with HR tech in Latin America, and where might it be headed in coming quarters?
Historically, HR tech has been a bit of a sleeper segment in the region. Since 1Q18, HR tech investments have made up an average of only 6% of quarterly fundings. Enterprise tech investors have been paying a bit more attention, as HR tech makes up an average of 22% of quarterly enterprise tech fundings. Yet, they still only account for 10% of enterprise funding dollars. This quarter was not drastically different, with HR tech start-ups being 5% of total fundings and 27% of enterprise fundings.
However, this quarter saw investment dollars going to these firms balloon, with $479 million raised across only 14 rounds (the near exact average quarterly round figure since 1Q18). This represents a 370% increase over the quarter and a 453% increase over the year. In fact, funding dollars to HR tech firms have grown at a quarterly average of 868% year-over-year since 1Q19 and in 1Q22 made up 52% of all investment dollars going to enterprise tech.
Comparing that 868% average dollar growth to the average annual fundings figure of 14 reveals that Latin American HR tech growth is being driven by a relative handful of firms. Only 18 (9% of total) HR tech companies that have been funded have raised over $10 million in total, and only the four firms on this quarter’s top 10 equity investments list have raised over $100 million in total.
The drive for big investments in HR tech may be a product of the region’s growing talent crunch (see page 5). Notably, three of the four companies that have raised over $100 million are focused on recruiting or providing competitive recruiting advantages: Gupy provides an AI-enhanced recruitment platform, Flash offers a benefits card for paying at a range of commerce and transportation services, and Betterfly offers benefits focusing on holistic employee health and social impact. 55% of all funding dollars have gone to firms in similar spaces.
Even if funding levels will likely drop slightly from this quarter’s highs, we expect HR tech to remain a space to watch given the growing competition for Latin American talent.
Those interested should keep their eyes on additional HR tech companies including:
- 37.78 Tecnologia, a corporate health and wellness platform from Belo Horizonte, Brazil with $37 million raised.
- UBits, an employee education platform from Bogotá, Colombia with $32 million raised.
- minu, an early payday benefit solution from Mexico City, Mexico with $27 million raised.
- Ontop, an HR management platform for global or dispersed companies also from Bogotá, Colombia with $26 million raised.
- And, Pipo Saúde, an employee benefits platfrom from São Paulo, Brazil with $25 million raised.
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