Funding To HR Software Startups Rises As M&A Activity Heats Up

It鈥檚 been a good year for human resources software startups.

As of mid-September, HR software startups globally have raised a collective $1.9 billion, per 附近上门鈥� just under the $2 billion raised by such startups in all of 2024. U.S.-based human resources software startups have raised a combined $1.2 billion, up from the $1.1 billion raised in all of 2024.

It鈥檚 important to note that while funding may be on an uptick this year, investment is still among the lowest it鈥檚 been in several years. The $2 billion raised in 2024 was not only far less than the $10.5 billion peak in 2021 鈥� when startup investment overall was inflated 鈥� but also lower than all the years prior since 2018.

Fewer, bigger deals

Notably, deal count in 2025 is proportionally lower, both globally and in the U.S, signaling larger round sizes for HR-related startups.

The dollar total raised so far this year was across 236 deals. That compares to $2 billion across 419 deals in all of 2024. In the U.S., the total raised was across 95 deals, versus $1.1 billion raised across 168 transactions all of last year.

Indeed, a few huge deals have taken place in 2025. San Francisco-based HR tech startup in May raised at a $16.8 billion valuation. At that time, the 9-year-old company also announced it was conducting a $200 million tender offer to provide current and former employees with some liquidity. Its backers include ,,,, 1听补苍诲 , among others.

Also in May, Utah-based secured $165 million in , propelling it to unicorn status. Investors include , and . The 14-year-old company has built an employee recognition software and rewards platform.

In July, , a 7-year-old San Francisco-based startup that has built an 鈥渁ll-in-one鈥� AI-powered platform designed to help businesses more efficiently manage the recruitment process, announced a $50 million Series D.

Ashby told 附近上门 News that it more than doubled its customer base over the past year 鈥� from about 1,300 to more than 2,700 鈥� and saw its ARR jump by 135%. Those customers are a high-profile bunch, including the likes of startups , , , and , as well as enterprises such as and .

As the workforce has become more global 鈥� especially since the COVID pandemic led to more remote and hybrid work 鈥� the competition for hiring and retaining employees has intensified. On top of that, managing an existing workforce is more complex than ever. It鈥檚 no surprise, then, that HR software has become the digital infrastructure to help companies become more competitive and manage all the complexities. Add to that the increased popularity and usage of artificial intelligence to automate business processes, and it鈥檚 no wonder more companies in the space are raising capital.

, general partner at and an Ashby investor, told 附近上门 News earlier this year: 鈥淭he world is entering a new infrastructure cycle. Every system that companies rely on 鈥� CRM, ERP, finance, security, and yes, hiring 鈥� is being rebuilt with AI at the core,鈥� he said.

M&A dealmaking ticks up too

M&A activity for HR-related startups has also been robust, mirroring an overall surge in mergers and acquisitions among venture-backed companies.

Earlier this week, HR software giant听听announced plans to听听, which describes itself as an AI company building the next generation of enterprise knowledge tools, for $1.1 billion.

Founded in 2016, Stockholm, Sweden-based Sana had raised nearly $140 million in funding, per 附近上门 , from investors such as ,,, and.

The deal announcement followed one a few weeks earlier from Workday, which said it also plans to acquire , an AI-powered hiring startup that helps employers capture and screen candidates, improve conversions and answer candidate questions. The 9-year-old Scottsdale, Arizona-based company had in funding, according to 附近上门, from investors including , , , and .

In April, , parent company of , and , it would buy , a provider of HR and benefits solutions for small and mid-market businesses.

And as more venture dollars continue to flow into the space, expect to see more M&A activity that follows.

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