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What is going on in HRtech and the future of work?

General Partner, SemperVirens Venture Capital

The world has changed a lot since the last time I reflected on HRtech and the future of work last summer. After months of warnings, the technology industry moved forward with massive layoffs, downsizing by nearly 200,000 since the beginning of 2022. Although there are rumblings of job cuts expanding into other sectors, they have not materialized. Quit rates remain high and unemployment is still sitting at record lows. While the overall labor economy is still healthy, a retrenchment by technology companies matters as they have been the earliest adopters of new “future of work” tools including next generation benefits, HR technology, and work collaboration platforms. Not only that, but the investor community that plowed billions of dollars into #HRtech over the past few years is taking a pause.

So what happens to HRtech in this kind of environment? Is this the end of the road for innovation around the #futureofwork? Were we all just being swept away in a post-pandemic frenzy of new technology and now we are coming back down to earth to realize that things were just fine the way they were in 2019? The short answer is ABSOLUTELY NOT! We are merely entering the next era of innovation in the future of work. It will be a critical phase where renewed discipline in both employer purchasing cycles and VC investing cycles will yield some of the most exciting opportunities we have seen in many years.

First, let’s review. How did we get here?

  • Pandemic-related subsidies and low interest rates fueled rapid growth in the economy, and companies needed to hire A LOT more people to meet business demand. Business leaders forecasted that demand would remain high and kicked off hiring sprees in order to meet those predictions.

  • A lot of people left the workforce, and the emergence of remote work meant employees had way more options, so the war for talent intensified and employers started to heavily invest in talent acquisition tools to make recruiters more efficient and effective.

  • Fast-growing tech companies with sky high valuations leveraged their equity as a significant component of compensation, forcing businesses in other sectors to up cash comp and ancillary benefits to compete for talent.

  • New, shiny wellness benefits exploded in popularity as employers were willing to experiment to attract and retain high quality candidates.

  • The four C’s – compliance, culture, connectivity and collaboration – proved challenging in the remote-work environment. HR leaders responded by empowering their business units with discretionary budgets, further amplifying the frenzy for new innovative solutions.

  • VCs enamored with the future of work hopped on the bandwagon and deployed a record amount of capital into the space, fueling valuation of new startups despite little or no traction with large scale customers (as defined by 1k+ employees).

So, what’s happening now?

  • For many companies, and technology companies in particular, the increase in demand they experienced has not persisted as COVID risks and subsidies have normalized. As a result, growth forecasts failed to materialize and they realized they overhired.

  • Although many companies have reduced their headcount, their budgets for HR and people related technology tools have remained unchanged.

  • However, decision-making is swinging back toward centralization through the CHRO to ensure accountability and consistency across teams.

  • Major category consolidation is underway as buyers are prioritizing end-to-end solutions instead of a myriad of point solutions that require stitching together. For example, coaching, L&D, mentorship and training are all merging together as appetite for separate line items is drying up.

  • Buyers are not interested in solutions that require additional investment or headcount to implement successfully. We have heard, “I need to start saving money on day one.”

  • When it comes to benefits, many employers are asking, “What should I really be paying for, and what should other stakeholders be footing the bill for instead? Should my insurance carrier be covering this cost? Should employees be paying for certain things on their own instead?”

  • They are also asking, “Is this the right way to pay for it?” They are taking a hard look at utilization and engagement with the tools and benefits they have implemented over the past few years, and asking for shared savings or utilization based models instead of traditional PEPM.

  • Workforce technology, healthcare technology and financial technology companies that found early traction with customers in the technology industry are now facing record levels of churn and a great deal of “zombie revenue” where customers have technically renewed contracts but their point of contact at the business was laid off and it is only a matter of time until someone higher up notices a line item on the budget that they don't’ recognize and cancels the contract.

  • VCs that were once willing to take a leap on an idea and a slide deck have become unforgiving on the need for demonstrable revenue traction, profitable growth, and the ability to scale into larger scale customers. With confusing signals from “zombie revenue”, growth funds are taking a “wait and see” approach as the market shakes out over the next several quarters, meaning founders are needing to optimize for runway over growth.

Ok, so what bets are worth making during this market cycle?

  • Next generation core HR systems that are smarter, more flexible, and easier to use. Re-evaluation of budgets means we are entering a potentially exciting replacement cycle for big legacy systems. Incumbents are no longer a given and a better product at a lower cost will be a big win for HR leaders looking to make a mark in this environment.

  • Workforce management systems that seamlessly integrate different types of workers. Employees still have more choices than ever before and many are opting to piece together their own careers instead of relying on one employer for their sense of identity and stability. The burden will still fall on the employer to figure out how to best integrate different types of flexible employment models into their overall planning and people management.

  • Caregiving benefits will be the next “need to have” for employers. Mental health, MSK, and fertility benefits are becoming entrenched as the new normal, but they are still not enough to keep underrepresented employees in their seats. Women and BIPOC employees are disproportionately affected by family caregiving, and employers will not be able to retain them unless they invest in supporting them.

  • Infrastructure for hybrid teams. Most employers will converge around a hub and spoke model where they have centralized offices available for collaboration and connection, but employees remain more distributed than when they had to commute into one office every day for a set number of hours. Successfully executing this model requires new systems and tools for effective compliance, communication, collaboration, and culture building. More on that here.

  • Skills-centered talent activation. Clearly, internal mobility has not lived up to its hype given the mass layoffs that are stealing headlines every day. There will be a new crop of next generation, personalized learning platforms that drive engagement, connect peers, and tie content to outcomes.

  • Automation and SaaS-ification of HR functions. Tough economic environments mean teams have to do more with less, and leveraging technology for compliance and internal knowledge resources is a no-brainer move for teams that want to focus on people and not processes.

  • Innovation for retaining and enabling hourly employees. While the technology industry is cutting jobs, large-scale employers are still struggling to fill hourly jobs. With newfound power over vendors and an ongoing critical need to attract and retain high quality workers, large employers will continue to invest in better benefits, workplace experiences, and career pathways for their hourly workforces.

In conclusion...

We are all facing (and feeling) the ramifications of the rollercoaster ride of the past several years. I wish I could say I believe it will end soon, or that this is just a natural rebalancing after a few years of change. However, I believe this level of volatility is the new normal. Whether you are an investor, an HR leader, or a technology hoping to change the future of work, it is time to buckle up and get used to the ups and downs. The ability to navigate change will be the biggest competitive edge going forward. I am excited to see how the next chapter unfolds, and look forward to building it alongside all of you!

About SemperVirens:

Founded in 2018, SemperVirens Venture Capital is an early stage fund investing in workforce technology, healthcare technology, and financial technology transforming the relationship between employers and employees. The firm runs an ecosystem of hundreds of senior HR leaders across a range of sectors, from venture-backed tech companies to Fortune-100 employers. For more information, visit


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