SmartHR, a cutting-edge provider of cloud-based HR and labor management solutions, has announced a major financial milestone. The Tokyo-based company has successfully raised $140 million in a Series E funding round. Leading the investment were KKR and Teachers’ Ventures Growth, an arm of Ontario Teachers’ Pension Plan, with participation from existing investors.
This latest funding round arrives three years after SmartHR secured $142.5 million (15.6 billion JPY) in Series D funding, which at the time valued the company at $1.6 billion. While the company didn't disclose its current valuation, the latest capital injection underscores the robust investor interest in technology solutions that optimize human resource management.
Having been co-founded in 2015 by Kensuke Naito and Shoji Miyata, SmartHR has experienced a surge in demand for its services. The company's SaaS platform is designed to streamline HR processes, offering enterprises an efficient way to manage operations. As of February 2024, SmartHR’s annual recurring revenue (ARR) reached an impressive $100 million, up from $80 million in total revenue for FY 2023, according to a company spokesperson.
The strong growth trajectory of SmartHR mirrors global trends in HR technology. For example, Rippling, a U.S.-based company considered akin to SmartHR in terms of products and strategy, doubled its ARR to $350 million in 2023. Similarly, payroll management firms like Gusto and Deel reported revenues surpassing $500 million by early 2023.
The HR tech sector is booming, with market value projected to reach $81.84 billion by 2032, as per Fortune Business Insights. Rippling, a key player in the space, has amassed $2 billion in funding and boasts a valuation of $13.5 billion. Gusto has raised nearly $750 million and is valued at approximately $9.6 billion, while Deel is worth $12 billion and has attracted $679 million in investment.
Meanwhile, smaller startups are also securing significant investment. Remofirst, which enables companies to hire globally without establishing local offices, recently raised $25 million. Palm, focusing on the MENA region with a mobile-first HR tech approach, secured $5 million last year. Compa, providing recruiters with competitive compensation data, attracted $10 million in January. Additionally, Legion raised $50 million last month to automate hourly staff management.
In Japan, SmartHR competes with back-office software firms such as Works Human Intelligence, freee, and Moneyforward. However, it differentiates itself by capturing the latest and most accurate employee data through labor management, positioning itself as a system of record in HR. Leveraging this data allows SmartHR to swiftly introduce new products.
The newly acquired capital will be directed toward further developing innovative solutions, expanding the team, and pursuing both organic and inorganic growth strategies, including potential mergers and acquisitions. SmartHR currently employs around 1,000 people.
Previous investors in SmartHR include Light Street Capital, Sequoia Capital Global Equities, and Whale Rock.
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