Why are VCs hesitant to fund HR technology related start-ups?

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JASON LEMKIN

This isn’t exactly true.

“Human Capital Management” is one of the largest categories of enterprise software, at $15b+. Innovation will constantly be happening here.

Personally, I’m an investor or advisor in many next-generation HR SaaS companies, from Teamable to Greenhouse to PlatoHQ to Fond etc. etc., and was previously involved with several others.

Having said that, there is clearly investor fatigue in the space.

There were so many Zenefits/Gusto/Namely clones funded. So many point solutions to track time. 120+ LMS vendors that all seem to do the same thing. 250+ next generation payroll solutions.

There was an HR SaaS 2.0 innovation explosion from ‘13-’15/’16 or so — and with so many vendors funded, many VCs have a bit of overhang here. It was a period of great innovation in SaaS HR. So many new vendors, many of who reached some amount of traction but now clearly will never be “big”.

So if you are Doing the Same Thing but The Web Version, I think that phase of SaaS HR 2.0 is mostly over.

The next generation of HR apps that gets investors excited are mostly doing things that are “new”, not just another version of what’s been done 100 times the last 4–5 years.

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Published on September 20, 2017
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