Investors usually anticipate a liquidity event occurring in around 5 to 7 years from the time of their investment, which could manifest in various forms like IPOs, mergers or sales. The recent pandemic has led to a surge in interest among software buyers for purchasing niche solutions. However, it is still unclear whether larger software suites will make a comeback due to budgetary constraints.
When it comes to recruitment and talent acquisition technologies, the emphasis should be on minimizing early employment turnover, retaining the top performers and safeguarding them against bad bosses. A smooth onboarding process within the first 90 days of employment is key to preventing recruitment ghosting and early resignations.
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The HR Technology Conference (HR Tech) had a record-breaking number of exhibitors with over 400 HR vendors in the expo hall, focusing more on discussing their offerings rather than just getting together.
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There are a number of new-ish firms at the show and some of these have grown quite spectacularly since the pandemic, and determining who is behind specific products or companies has become more difficult due to the sheer number of mergers, acquisitions, partner deals and other activities.
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Valuations in the venture capital world are more frequently running to unicorn levels in the HR space, and some HR vendors raised between $70 million to more than $370 million in recent years.
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Venture capital money, like private equity investments, are not permanent, and investors usually want to see some sort of liquidity event usually within 5 to 7 years of their investment. As a result, HR firms may complete an IPO, be sold, and/or merged into another company. Additionally, change in leadership in these HR firms may occur.
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Private equity firms may enter the space and acquire two or more HR vendors so as to create a rollup solution, but any material change of control is almost always a reason for software buyers and customers to be concerned.
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Payroll service providers or software vendors may need to acquire a commercial line of credit to support on-demand or daily pay, and the cost to provide this service could become an interesting issue as interest rates climb.
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HR and/or payroll providers that do not have a personal finance education capability that comes with their solutions do not have a complete market offering.
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During the pandemic, software buyers were interested in buying niche solutions that solve a very painful need, but whether they will see a return to more firms buying larger suites of application software is uncertain due to the impact of the pandemic on budgets.
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There are lots of integration issues to solve, and the HRMS suite of a major employer may often have 100 or more integrations.
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Recruiting and talent acquisition technologies need to focus on addressing the concerns that trigger early employment churn.
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Ensuring a painless, frictionless, and enjoyable first 90 days on the job can reduce recruitment ghosting and early resignation.
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Employment fraud is a growing concern with remote work trend being uphill, where the person hired may not actually be the one doing the work.
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Retaining top talent is as important as finding them, and bad managers and leaders are a common problem in protecting the talent a company already has.
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Mandating a return to the office without considering its impact on retention can be a grave mistake.
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Real-time recognition and career advancement opportunities are more important to employees than small incentives like gift cards.
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Firms need to identify and retain their top performers by being mindful of their career needs and protecting them from bad bosses.