SmartHR, a startup specializing in cloud-based human resources and labor management software, announced on Monday that it secured $140 million in a funding round led by KKR and Teachers’ Ventures Growth, an investment arm of Ontario Teachers’ Pension Plan. Existing investors also participated in the Series E round.
This funding round, coming three years after their Series D round of $142.5 million (approximately 15.6 billion JPY) at a valuation of $1.6 billion, underscores ongoing investor interest in technology that enhances efficiency in managing staff, which is a significant cost for companies.
Founded in 2015 by Kensuke Naito and Shoji Miyata, SmartHR has experienced increasing demand for its SaaS platform, designed to streamline human resources and operational processes. According to a company spokesperson speaking to TechCrunch, SmartHR achieved an annual recurring revenue (ARR) of $100 million as of February 2024, marking a notable increase from the $80 million total revenue reported for the fiscal year 2023. The company declined to disclose its current valuation following the latest funding round.
The growth aligns with the strong demand for HR technology observed globally. Rippling, a U.S.-based company similar to SmartHR in product and strategy, saw its annual recurring revenue (ARR) double to $350 million in 2023, as reported by The Information. Gusto, specializing in payroll management software, disclosed to TechCrunch that its revenue surpassed $500 million by April 2023. Meanwhile, Deel, which facilitates international payroll services, announced an ARR exceeding $500 million in March.
The HR tech market is supported by substantial venture capital, projected to reach $81.84 billion by 2032 according to Fortune Business Insights. Rippling, a major player in this sector, has raised approximately $2 billion and achieved a valuation of $13.5 billion after a $200 million funding round in April. Gusto has garnered nearly $750 million in funding and is valued at about $9.6 billion according to PitchBook. Deel, valued at $12 billion, has raised $679 million to date based on Crunchbase data.
Investors are increasingly backing smaller startups targeting various aspects of traditional HR. For instance, Remofirst, which facilitates global hiring without physical local offices, secured $25 million in recent funding. Palm, focusing on enhancing HR technology in the MENA region through a mobile-first approach, received $5 million last year. Compa, which offers a platform aggregating compensation data for recruiters to improve competitiveness in hiring, raised $10 million in January. Additionally, Legion, specializing in automating hourly staff management, raised $50 million just last month.
SmartHR’s peers in Japan include back-office software players such as Works Human Intelligence, freee and Moneyforward. The company sets itself apart by “obtaining the latest and most accurate employee data through labor management, which positions it as a system of record in HR,” its spokesperson said, adding that leveraging this employee data allows it to deploy new products rapidly.