SmartHR, a cloud-based human resources and workforce management software startup, announced Monday that it has raised $140 million in a funding round led by KKR and Teachers Ventures Growth, the investment arm of the Ontario Teachers’ Pension Plan, with participation from existing investors.
The Series E round, which comes three years after the company raised $142.5 million in Series D funding that gave it a valuation of $1.6 billion, is the latest indication that investors remain eager to back technology that helps companies more efficiently manage their largest cost base: human resources.
The company declined to comment on its current valuation.
Co-founded by Kensuke Naito and Shoji Miyata in 2015, SmartHR has seen growing demand in recent years for its SaaS platform that helps companies manage and streamline their human resources and operations. A company spokesperson told TechCrunch that the company expects to reach $100 million in annual recurring revenue (ARR) as of February 2024, which represents a significant increase from the $80 million in total revenue reported in fiscal year 2023.
This growth is in line with the robust demand for HR technology seen in other parts of the world. US-based Rippling, which SmartHR cites as its closest comparable in terms of product and strategy, is expected to double its ARR to $350 million in 2023, according to The Information. Payroll software and services provider Gusto told TechCrunch it will exceed $500 million in revenue by April 2023. And Deel, which manages payroll for international companies, announced it had surpassed $500 million in ARR in March this year.
There’s also mountains of venture capital in this market, estimated to be worth $81.84 billion by 2032, according to Fortune Business Insights. One of the biggest startups in the space, Rippling, has raised about $2 billion, according to Crunchbase, and said it was valued at $13.5 billion after a $200 million funding round in April. Gusto has raised about $750 million, according to Crunchbase data, and is valued at about $9.6 billion, according to PitchBook. And Deel, which is valued at $12 billion, has raised a total of $679 million, according to Crunchbase.
Investors are also pouring money into smaller startups that tackle nearly every aspect of traditional HR. Remofirst, which helps clients hire globally without setting up local offices, recently raised $25 million. Palm, which is improving the HR tech experience in MENA with a mobile-first approach, raised $5 million last year. Compa raised $10 million in January to build a platform that provides aggregated compensation data so recruiters can be more competitive when hiring. And Legion raised $50 million last month to automate companies’ hourly staff management.
SmartHR’s competitors in Japan include back-office software companies such as Works Human Intelligence, freee, and Money Forward. A company spokesperson said that SmartHR differentiates itself by “obtaining the latest and most accurate employee data through labor management and positioning it as the system of record for the HR department,” adding that using this employee data allows it to quickly roll out new products.
The startup said the new funding will be used to develop new solutions, hire, and fund organic and inorganic (i.e. M&A) growth strategies. It currently has about 1,000 employees.
Previous backers include Light Street Capital, Sequoia Capital Global Equities and Whale Rock.
