SmartHR, a cloud-based human resources and labor management software startup, announced on Monday that it has successfully raised $140 million in a Series E funding round. The round was led by KKR and Teachers’ Ventures Growth, an investment arm of Ontario Teachers’ Pension Plan, with additional participation from existing investors. This infusion of capital underscores the continuing investor interest in technologies that help businesses manage their most significant expense: their workforce.
The recent Series E funding round comes three years after SmartHR raised $142.5 million (15.6 billion JPY) in a Series D round at a valuation of $1.6 billion. Although the company has declined to comment on its current valuation, this latest investment signals strong investor confidence in SmartHR’s growth trajectory and market potential.
| Funding Round | Amount Raised | Previous Valuation |
|---|---|---|
| Series D | $142.5 million | $1.6 billion |
| Series E | $140 million | Not Disclosed |
Co-founded in 2015 by Kensuke Naito and Shoji Miyata, SmartHR has experienced robust demand for its Software as a Service (SaaS) platform, which assists enterprises in managing and streamlining their human resources and operations. A company spokesperson revealed that SmartHR’s annual recurring revenue (ARR) reached $100 million as of February 2024. This represents a notable increase from the $80 million in total revenue reported for the fiscal year 2023.
SmartHR’s growth is reflective of a broader trend within the HR tech sector, which has seen a surge in demand globally. For instance, U.S.-based Rippling, a company comparable to SmartHR in terms of products and strategy, reported that its ARR doubled to $350 million in 2023. Additionally, Gusto, which provides payroll management software and services, achieved over $500 million in revenue by April 2023. Deel, another major player that manages payroll for companies across international borders, reported an ARR exceeding $500 million as of March 2023.
The HR tech market is poised for significant growth, with Fortune Business Insights projecting it to be worth $81.84 billion by 2032. This booming market has attracted substantial venture capital, with some of the largest startups raising considerable funds:
- Rippling has raised approximately $1.4 billion and is valued at $13.5 billion following a $200 million funding round in April.
- Gusto has secured nearly $750 million in funding and holds a valuation of around $9.6 billion.
- Deel, valued at $12 billion, has raised a total of $679 million.
Investors are also backing smaller startups that are innovating within specific niches of the traditional HR space. For example:
- Remofirst, which helps companies hire globally without setting up local offices, recently raised $25 million.
- Palm, focusing on a mobile-first approach to enhancing the HR tech experience in the MENA region, secured $5 million last year.
- Compa raised $10 million in January to develop a platform providing aggregated compensation data to recruiters.
- Legion secured $50 million last month to automate hourly staff management for companies.
In Japan, SmartHR faces competition from other back-office software providers such as Works Human Intelligence, freee, and Moneyforward. However, SmartHR differentiates itself by obtaining the latest and most accurate employee data through labor management, positioning itself as a system of record in HR. This strategic advantage enables SmartHR to rapidly deploy new products, leveraging its comprehensive employee data.
The newly raised capital will be allocated towards several key areas:
- Product Development: Enhancing and expanding the SaaS platform with new features and capabilities.
- Hiring: Increasing the workforce to support growth initiatives, with the company currently employing around 1,000 individuals.
- Organic and Inorganic Growth: Pursuing both organic growth strategies and potential mergers and acquisitions (M&A).
SmartHR’s earlier funding rounds saw investments from notable backers, including Light Street Capital, Sequoia Capital Global Equities, and Whale Rock. These investors, along with the new funds from the Series E round, position SmartHR for continued success and expansion in the rapidly evolving HR tech market.
- SmartHR raised $140 million in a Series E funding round led by KKR and Teachers’ Ventures Growth.
- The company’s annual recurring revenue (ARR) reached $100 million as of February 2024.
- The HR tech market is projected to be worth $81.84 billion by 2032.
- SmartHR differentiates itself by leveraging accurate employee data for rapid product deployment.
- The new capital will support product development, hiring, and growth strategies.
The HR tech industry’s landscape continues to evolve, and SmartHR is well-positioned to capitalize on these trends, driving innovation and efficiency in human resources management. With substantial new funding and a clear strategic direction, SmartHR aims to further solidify its place as a leading player in the global HR tech market.
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