Human Experience Management (HXM) is one of the most exciting markets in software. This presentation discusses overall trends in HXM/HR, the software categories, IPOs, mergers and acquisitions, unicorn startups and the trends towards distributed work.

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HXM Software Trends
Christian Dahlen, June 2022

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Content
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• HXM trends
• HXM software categories
• IPOs, mergers and acquisitions
• Unicorn startups
• Megatrend: Distributed work

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The Workplace Is Constantly Evolving And Changing
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HXM is one of the most exciting markets in software:
• People constantly change, and sometimes very quickly.
• Each emerging generation, such as millennials and Gen Z, introduces
novel behaviors and expectations.
• Underlying trends such as artificial intelligence technologies, a growing
contingent workforce, the ongoing globalization, and most recently, the
impact of the coronavirus pandemic, result in an exciting mix of
changes in the workplace.

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The World Of Work Is Changing
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McKinsey & Company recently observed
"The world of work is changing. Artificial
intelligence and automation will make
this shift as significant as the
mechanization in prior generations of
agriculture and manufacturing. While
some jobs will be lost, and many others
created, almost all will change.
The COVID-19 crisis accelerated
existing trends and caused organizations
to reevaluate many aspects of work".

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Individuals’ Needs Are Moving Up the Hierarchy of Needs
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Automation and globalization
impact everyone, and as
humanity at large prospers,
individuals' needs continue to
move up the pyramid.
In their private lives, and when
working.

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The Quest For Equity, Inclusion And Access Continues
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In his famous speech Dr. Martin Luther
King Jr remarked
"I have a dream that my four little
children will one day live in a nation
where they will not be judged by the
color of their skin but by the content of
their character."
People and organizations are
increasingly held accountable when
and how they judge.

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Employees Prioritize Relational Factors
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It has been called the great resignation
by some, the great attrition by others.
According to a McKinsey & Company
survey, almost two years of corona
have surfaced the already existing
disconnect between employers and
employees:
”Employees were far more likely to
prioritize relational factors, whereas
employers were more likely to focus on
transactional ones.”

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Contingent Labor Is A Feature Of Modern Work
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The US market for contingent
workers held steady at around 3
million people until corona struck.
The impact was hard, and it was
immediate: The number dropped
to 2 million in March 2020 and
has been on a climb back up
since then.
The implications for the future of
contingent talent as companies
are shifting to remote work are
still to be determined.

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The Employee Lifecycle Goes From “Hire” To “Retire”

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2021 IPOs: ZipRecruiter, Paycor And Udemy
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There were several
noteworthy IPOs in the HXM
space in 2021: ZipRecruiter for
recruiting, Paycore for core
HR and payroll, and Udemy
for learning and
development.
At the time of the IPO, Udemy
had 7000+ enterprise clients
and generated over $100
million in revenue from Udemy
for Business.

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Freshworks, Monday.com And Qualtrics Also Went Public
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IPOs in the HXM space kept coming in 2021: Employment marketplace
ZipRecruiter went public in May, core HR and payroll provider PayCore
in July, and online learning pioneer Udemy in October. This seems
consistent with the average of 2-3 HXM software IPOs per year
observed in earlier years.
Also playing in the HXM space and with a much broader offering:
Business suite provider Freshworks, workflow platform monday.com and
employee experience leader Qualtrics all went public in 2021.

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The Likelihood of Exit via Acquisition vs. IPO is ~ 20:1
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IPOs remain an exception for startups in the HXM space, as in all
other software segments: 10 HXM startups went public and 191
exited via M&A between 2012 and 2016 according to
CBInsight.com.
While these numbers cut across a wide range of funding stages,
the likelihood to be acquired compared to an IPO was 20:1.

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Workday, Ceridian And UKG Made Material Acquisitions
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HXM suite player mergers and
acquisitions:
• In the Gartner leadership quadrant
Workday, Ceridian and UKG made
material acquisitions
• Challengers and niche players
watched from the side lines in 2021.
Outside of the leadership quadrant,
the only activity was Cegid’s
acquisition of Talentsoft

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HXM Software Mergers & Acquisitions Was Muted In 2021
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• Workday acquired employee experience provider Peakon for $700M,
and vendor management system VNDLY for an undisclosed amount
• The remainder was much about payroll:
Ceridian bought payroll software Adam, Xero bought payroll
software Planday for $240M, Paylocity bought Bluemarble for $60M,
and TriNet bought former unicorn Zenefits
• Microsoft acquired Ally.io to build out their Viva family of employee
experience products.

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Darwinbox Is The Only New HXM Cloud Suite Entrant
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• Cloud based human resource
management platform
• Entire “hire to retire” cycle
• 1/3 of customers previously used
Oracle, SAP or Workday
• $116M raised; founded in 2015
• Based in India

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There Are 18 HXM Software Unicorns As Of January 2022
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The combined private valuation of the 18 HXM unicorns is $51 billion,
and they raised $6.4 billion since founding.
The average unicorn is 7 years old and has raised $357 million.
The top ten by valuation:
#1 Gusto at $10 billion
#2 Rippling at $6.5 billion
#3 Personio at $6.3 billion
Rounding out the top ten: Deel, Checkr, Jobandtalent, PayFit,
Eightfold, Culture Amp, and Paradox

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18 HXM Unicorns
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14 Of The18 HXM Unicorns Play In the Two Most Traditional
Categories: Recruiting and Core HR/Payroll
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The international growth of enterprises and the increasingly distributed
nature of companies are the main drivers behind the high number of
core HR and payroll unicorns
• 7 in core HR and payroll
• 7 in recruiting
The list is rounded out by 2 unicorns in employee engagement, 1 in
learning and development, and 1 in HXM analytics.
No unicorns in the later three stages of the employee life cycle:
performance career and succession; incentives and prerequisites;
termination.

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Distributed Workforces are Changing CoreHR/Payroll
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The three most recently funded HXM unicorns have all benefited from the
acceleration towards a more distributed workforce brought about by
corona.
In less than 4 years Deel has raised $629 million, Remote $196 million and
Turing.com $156 million.

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14 of 18 HXM SW Unicorns Were Created in North America
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14 of the 18 HXM unicorns
have been created in North
America, and 13 in Silicon
Valley.
Europe contributes 3 unicorns:
Personio, Jobandtalent and
PayFit.
Rounding out the list of 18:
Culture Amp from Australia.

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The Pace of Change is Breathtaking
Work and the nature of work
can and do change quickly
and often.
HR categories like payroll, core
HR, talent management and
learning are constantly being
reinvented.
deel is the fastest growing
software company on record.
Their business is in about the
oldest space of the whole HR
portfolio: payroll

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Y Combinator Has Seeded 6 Out Of 18 HXM Unicorns
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Six out of 18 HXM unicorns went
through the program.
Four of the top ten most valued
HXM unicorns were started at Y
Combinator:
• Gusto in 2011
• Checkr, Inc. in 2014
• Rippling in 2016
• Deel in 2018

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Y Combinator Has Funded 121 HXM Startups
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59 recruiting and talent startups
No unicorn; 7 acquisitions
62 human resources startups
Five unicorns
0 5

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YC’s HXM Unicorns Have Been Funded by High Profile
Venture Capital Firms
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• Gusto raised their Series A from Kleiner Perkins and General Catalyst
one year after YC’s demo day
• Deel got their Series A from Andreessen Horowitz also one year after
demo day
• Checkr raised their Series A from Accel only one month after YC
• Rippling's Parker Conrad was a repeat founder and raised the Series A
from Kleiner Perkins 2 years after a $7m seed

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HXM Startups in Germany
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Investments in HXM startups poured into
the space at a before unseen pace and
scale.
At least 18 founding rounds were
announced in German speaking countries
alone between January 2021 and March
2022.
GoStudent, Personio, Staffbase and
CoachBase all raised in excess of $100
million, and the total investment volume
exceeded $1 billion

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Personio Case Example: No Entry Barriers
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A large number of new startups
are launched in the HXM space
every year.
Case in point: Personio’s Hanno
Renner and his co-founders
launched straight out of
university without having worked
at a company before. What
they lacked in experience they
made up with inquisitive minds
and a clear focus on solving a
real problem.
Personio was valued at $6.3
billion in the last financing round

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GitLab Case Example: Distributed Work At Scale Is A Reality
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GitLab started as an open source
software project in 2013 and the
company emerged from Y Combinator
in 2015. They went public on NASDAQ in
October 2021.
Gitlab was set up as an all-remote
company from day one. The company
embraces total transparency.
GitLab now has the world's largest
distributed workforce with more than
1500 team members in 65 countries.

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Gitlab’s Remote Playbook Has Been Open Sourced
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GitLab has pioneered the all remote
concept and provided the blueprint
for any company. Manifesto, culture
and communications have all been
codified and open sourced.
During Covid every startup was all
remote by default. Gitlab’s principles
have been adopted by many.
Even established companies were
forced to go all remote during Covid.

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Gitlab Uses A Best Of Breed Approach for PeopleOps
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GitLab runs as a fully remote
company.
Their HR software landscape is
a best-of-breed assembly of
applications from BambooHR,
Greenhouse Software,
Lawlogix, Betterment, Lumity,
Bonusly, NexTravel, Expensify,
Culture Amp, and Slack, Zoom
and others.
This set-up serves their
employees in 65 countries

30. WUNDERVC
HXM Software Trends
Christian Dahlen, June 2022