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

It’s 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 Crunchbase data — 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’s important to note that while funding may be on an uptick this year, investment is still among the lowest it’s been in several years. The $2 billion raised in 2024 was not only far less than the $10.5 billion peak in 2021 — when startup investment overall was inflated — 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 Rippling in May raised a $450 million Series G round 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 Sequoia Capital, Founders Fund, Y Combinator, Kleiner Perkins, SV Angel 1 and Coatue, among others.

Also in May, Utah-based Awardco secured $165 million in Series B funding, propelling it to unicorn status. Investors include General Catalyst, Spectrum Equity and Sixth Street. The 14-year-old company has built an employee recognition software and rewards platform.

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

Ashby told Crunchbase News that it more than doubled its customer base over the past year — from about 1,300 to more than 2,700 — and saw its ARR jump by 135%. Those customers are a high-profile bunch, including the likes of startups Ramp, OpenAI, Harvey.ai, Notion and Cursor, as well as enterprises such as Shopify and Snowflake.

As the workforce has become more global — especially since the COVID pandemic led to more remote and hybrid work — the competition for hiring and retaining employees has intensified. On top of that, managing an existing workforce is more complex than ever. It’s 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’s no wonder more companies in the space are raising capital.

Mark McLaughlin, general partner at Alkeon Capital and an Ashby investor, told Crunchbase News earlier this year: “The world is entering a new infrastructure cycle. Every system that companies rely on — CRM, ERP, finance, security, and yes, hiring — is being rebuilt with AI at the core,” 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 Workday announced plans to acquire Sana, 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 Crunchbase data, from investors such as Menlo Ventures, New Enterprise Associates, EQT Ventures, Workday Ventures and Acequia Capital.

The deal announcement followed one a few weeks earlier from Workday, which said it also plans to acquire Paradox, 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 raised more than $250 million in funding, according to Crunchbase, from investors including Sapphire Ventures, Thoma Bravo, Workday Ventures, Geodesic Capital and SAP.iO.

In April, Intuit, parent company of TurboTax, Credit Karma and QuickBooks, announced it would buy GoCo.io, 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.