Human resource technology or HR-tech startups have been a step behind hotter segments like fintech or e-commerce in attracting top dollars but they have been slowly catching up.
Companies operating in HR management systems, payroll, recruitment platforms and other sub-domains within the HR-tech field globally saw over $12 billion in cash being pumped by VC investors last year, according to Pitchbook.
Assessments as a field under HR-tech was not at the top but did record a few notable deals and, in fact, contributed much more indirectly.
For instance, Baltimore-based HR-tech conversational recruitment startup Paradox gained additional spurs as it snapped up mobile assessment platform Traitify last August and later scooped up $200 million in a Series C investment round led by Stripes, Sapphire and Thoma Bravo. Other participants in the round that pushed it to the unicorn club included Workday Ventures, Willoughby Capital, Twilio Ventures, Blue Cloud Ventures, Geodesic, Principia Growth, DLA Piper Venture Fund and existing backer Brighton Park Capital.
According to Emergen Research, the global assessment services market size is expected to reach $11.47 billion in 2027, registering a compound annual growth rate (CAGR) of 7.2% during the forecast period.
“Growing demand for skill evaluation to improve employability and improve overall efficiency or the organization and increasing number of competitive tests across the education sector have accelerated the adoption of assessment services over the recent past,” as per Emergen Research.
It is not just legacy consulting firms trying to carve a big chunk of this growing market but also startups.
Baltimore-based HR-tech conversational recruitment startup Paradox gained additional spurs as it snapped up mobile assessment platform Traitify last August and later scooped up $200 million in a Series C investment round led by Stripes, Sapphire and Thoma Bravo. Other participants in the round that pushed it to the unicorn club included Workday Ventures, Willoughby Capital, Twilio Ventures, Blue Cloud Ventures, Geodesic, Principia Growth, DLA Piper Venture Fund and existing backer Brighton Park Capital.
‘Strategics’ assessing assessment ventures in India
In India too, nearly a dozen assessment-focused HR-tech ventures attracted VC money and strategic buyers over the last year.
The domain has been seeing action for a while now, especially from strategic buyers. Some global HR consulting majors have also used assessment platforms born in India to create a global business segment.
For instance, four years ago HR consulting firm Mercer acquired Gurugram-based online skills assessment startup Mettl. Mettl, which was founded 12 years ago by Ketan Kapoor and Tonmoy Singhal, both with IIT-IIM pedigree, also paved the way for Mercer’s entry into what it termed as the rapidly growing global talent assessment market.
A year later, SHL acquired Aspiring Minds to add an AI-powered suite of assessment and interviewing tools to its basket. Previously, AON Hewitt had acquired CoCubes, which was into online assessment and campus hiring.
Strategic acquirers have been at it more recently too, even as startups now have more choice for bankrolling their next round of expansion with VCs flushed with cash.
Info Edge, the company behind the top recruitment platform in the country, Naukri, snapped up Bengaluru-based DoSelect for Rs 21 crore, valuing it around 5x its revenue for 2020-21, last July. It later pumped in an additional sum to boost the business.
Founded in November 2015, DoSelect provides technical assessment services to its clients for recruitment and learning purposes. It delivers these services via its technical assessment platform doselect.com.
Info Edge said at the time of the acquisition that the deal would help it offer a new variety of services under its flagship brand Naukri.com, allowing it to further consolidate its position in the online recruitment solutions segment.
If anything, such deals are only going to continue. The one difference that may creep in is the nature of buyers. While the acquirers till now were mostly legacy consulting and recruitment platforms, the next batch of acquisitions could be fuelled by startups who are well funded themselves as they go about adding features to their one-stop HR management platform and software products.
This would not only boost their business but also allow VCs who have backed assessment-focused HR-tech startups to find an exit route, a way to recycle the money and go after new ventures in the field. Indeed, some of the assessment-focused companies that were acquired in the past were themselves backed by VCs.
Mettl was backed by Kalaari Capital, Blume Ventures and several angel investors while CoCubes was funded by Ojas Venture Partners.
If anything, such deals are only going to continue. The one difference that may creep in is the nature of buyers. While the acquirers till now were mostly legacy consulting and recruitment platforms, the next batch of acquisitions could be fuelled by startups who are well funded themselves as they go about adding features to their one-stop HR management platform and software products.
Moneybags round the corner
Indeed, if the state of funding in the HR-tech field in the country is anything to go by, assessment as a sub-domain has been backed by angel investors as well as seed-stage investors in the past. It is not yet high up the stack with late-stage VC funding but has seen a clutch of early to mid-stage VC deals.
One of the more significant funding deals in the assessment space in India recently was the Series A round of iMocha, an artificial intelligence-powered digital skills assessment platform. The venture raised $14 million in January led by Eight Roads Ventures with the participation of existing investors Upekkha and Better Capital.
Founded seven years ago, iMocha helps employees and recruiters to assess individual skills proficiency with job roles by leveraging AI simulators, interviewing tools and analytics.
Last year, Talview, a provider of AI-powered hiring and proctoring solutions, raised $15 million in Series B funding led by Silicon Valley investor Eileses Capital with participation from existing investors Storm Ventures, Inventus Capital and Emergent Ventures. The startup, which had previously rebranded from Interview Master, seeks to unify how organizations screen, interview and assess top candidates and learners with an engaging experience.
In another recent transaction, PMaps, a provider of visual assessment services, last month raised a Series A round to top up the seed round of last year and angel funding a few years ago.
Two-year-old Skillr, which helps organisations build their customer-facing teams by providing them with assessment services and identifying the areas for improvement besides a career development path, raised pre-seed funding from a bunch of top angel investors.
That said, there have been a few crossover ventures like Bangalore- and California-based HackerRank, which raised a $60 million Series D funding round led by Susquehanna Growth Equity, taking its total funding to date to more than $115 million.
To be fair, these Indian assessment startups still have a long way to go as against global peers like Amsterdam-based TestGorilla, which raised $70 million in a Series A round last month.
Then again, the flow of money in the assessment domain is skewed towards ventures that focus on recruitment. If it is to go higher up on the radar of investors the startups would also need to provide a much more comprehensive suite of services that automates the assessment of existing employees as that can be a more scalable business and currently dependent on manual interventions.
To sum up, the VC-funded assessment startups would be ripe to be picked by the consulting and recruitment majors as automation gathers pace and their clients ask for a streamlined HR management system, instead of basic dashboards. At the same time, some of the bigger funded ventures such as DarwinBox could look to add the missing pieces in their service offering going forward. In either case, assessment startups within the HR-tech field will continue to see both financial and strategic investor interest in the near term.
Disclaimer: Doselect is owned by Info Edge which publishes All Things Talent
