Empowering the growth mindset: Next gen people SaaS

The employer-employee relationship is being reshaped and the next generation of HR software vendors are helping employers attract and retain the best talent

At long last, companies are waking up to the reality that the talent they employ is their most strategic, and ultimately differentiating, asset. However, in a somewhat ironic twist of fate, attracting and retaining talent is more difficult than ever before, driven by near decade-low unemployment rates, the much touted Covid-induced “Great Resignation”, and global competition for increasingly diverse and inclusive talent. Employers are also facing hybrid work as the new normal, as well as a generational shift to Millennials as the dominant employee base. 

The task for navigating these challenges is being laid at the feet of HR teams, whose responsibilities now span everything from driving Diversity, Equity, and Inclusion (DE&I) initiatives and improving organizational health and wellness to reducing employee attrition and navigating hybrid work / the return to the office. All of this in turn necessitates a much more strategic approach, and has escalated the importance of People teams to mission-critical as organizations recognize they need to do everything in their power to hire, nurture, and retain top-tier talent.

At the same time, People teams have historically relied on a legacy stack of outdated and inflexible software tools (e.g. ADP, SAP Successfactors, Oracle HCM, and Ceridian) that have acted primarily as systems of record rather than systems of engagement built for a hybrid work-environment and focused on employee user-experiences and organizational ROI. These tools are unable to drive employee engagement and lack the functionality required to enable People teams to operate effectively.

Enter Next Gen People SaaS, the new-age of HR software tools seeking to empower People teams looking to align People operations with overarching company strategy. 

These vendors are going after a massive market opportunity – Paychex, Workday, and ADP alone comprise $200Bn in market cap. That said, the market is not homogeneous, and the dynamics in each segment are nuanced. For instance, while the SMB market is largely greenfield (running many HR processes on paper and Excel), the enterprise market is rife with legacy solutions that are difficult to integrate with and thus organizations are left with tool sprawl, where a spaghetti-mix of 50+ different HR tools is not unusual. 

We at TCV have been lucky enough to partner with next gen HR leaders including LinkedIn, Grupa Pracuj (the largest job board in Poland), Hirevue (AI-driven talent assessment and video interview platform), Perceptyx (employee surveys and people analytics platform), OneSource Virtual (Business-Process-as-a-Service vendor for the Workday ecosystem) and more recently Darwinbox (cloud-native end-to-end HRIS platform for Enterprise), and Humu (enterprise-grade digital training platform). In addition, we have also had the opportunity to both collaborate with and learn from a deep bench of People-team leaders across our portfolio, including TCV Venture Partner Jessica Neal, the former Chief Talent Officer at Netflix. We continue to believe there are enormous opportunities ahead in HR and expect to see innovation arise from every corner of the globe. Here are three of the major themes we believe will shape the HR-tech landscape in the coming years.

#1: HR products built for employees

While we are now used to frictionless, user-friendly tech experiences everywhere in our personal lives, the software tools many of us use daily in the workplace are clunky and counter-intuitive. Next Gen People SaaS is changing this paradigm by putting employee experience at its heart and, in the process, turning systems of record into systems of engagement, driving ever-higher ROI, as well as enabling flexibility with how employees engage with employers.

Best-in-class UX is required for Next Gen People SaaS

Superior UX enables employees to self-serve to a much greater degree, alleviating the administrative burden on People teams. Geographic and vertical context also becomes relevant. For example, offering a truly mobile-native and mobile-optimized (note: not the same as just having an app) UX in emerging markets and frontline industries can be critical in driving access and engagement across the full employee base. This is a key factor that underpins the  strong momentum seen in companies like Darwinbox. Many new-age tools also monitor traditionally “B2C” KPIs (e.g. DAU/MAU, sessions per day), while also continuously A/B testing to drive better user engagement, thereby unlocking workforce insights that legacy tools with poor user uptake are simply unable to access. By utilizing Next Gen People SaaS, People teams can drive heightened employee engagement while also gaining meaningful insights in culture, sentiment, and employee performance.

Employing talent on its own terms

The days of inflexible, full-time, in-office employment are largely behind us. Companies have realized that, in the war to hire world-class talent, the ability to offer flexible employment (e.g. remote work from anywhere in the world, freelancing) can be a critical differentiator. That said, this creates enormous challenges for People teams, as running onboarding and compliant payroll and benefits across full-time and freelance employees in several countries is fraught with complexity. This has driven the rise of a host of new tools (e.g. employer of record, aggregated global payroll, end-to-end freelancer management tools) to simplify this process and alleviate companies of onerous compliance and administrative burdens. We believe these tools will further embed themselves into the core-HR stack of the hybrid workplace of the future.

#2: Talent is at the forefront of HR product innovation

The ongoing war for talent will dramatically reshape the HR tech-stack in the years ahead. Given the criticality of talent as a key differentiator, we expect to see accelerated innovation and the rise of best-in-breed point solutions (particularly for larger enterprises) at every stage of talent management process:

Sourcing

Professional networks, such as former TCV investment LinkedIn, have become staples of the HR toolkit. That said, there are further opportunities to enrich data from existing networks and build more advanced, automated searches powered by AI:  e.g. aligning with an employer’s diversity and inclusion goals, helping to automatically elevate talent at the right stage in their careers, prior candidate rediscovery, etc.

Screening and recruitment

We are seeing two major, and often simultaneous, themes reflecting the growing war for scarce talent – 1) a pivot towards building candidate-friendly recruitment experiences vs. being employer-centric (as much as employers are trying to better evaluate whether a candidate is a good fit for them, savvy candidates are doing the same with potential employers); 2) a pivot away from interview processes focused on subjective individual assessments towards more quantitative, standardized screening that collects dozens of data points along the candidate journey to reach better, less biased recruiting outcomes. 

Enablement

Retaining and nurturing talent have become highly strategic areas for employers, exacerbated by the generational shift towards a Millennial employee-base. We have seen the rise of increasingly sophisticated solutions for engaging and training talent, including a focus on individualizing content delivery. For instance, TCV portfolio company Humu helps teams instill and develop effective workplace habits through the use of behavioral nudges. At the core of Humu’s differentiation is the focus on delivering the right content, to the right person, at the right time.

Although the supply of world-class talent in every department is scarce, nowhere is the effect of the war for talent felt more acutely than in R&D. As ‘technology’ has shifted from being a standalone industry vertical to a horizontal foundation that nearly every industry depends upon, demand for engineering talent has never outweighed the supply more dramatically. Given that analysts continue to forecast a global technology talent shortage of nearly 5M workers by 2030[1], we anticipate this will be a defining trend of the 2020s and will continue giving rise to engineer-focused talent solutions.

While we expect the proliferation of talent-focused point solutions to continue, at the same time, we expect to see other segments of the HR stack begin to rebundle. Many mid-market and enterprise People teams have experienced massive tool proliferation over the last years (some using as many as 50+ different HR apps!) and tool sprawl is now becoming increasingly challenging to manage. As a result, we expect to see many core HR tools (e.g. time & attendance, benefits etc.) naturally aggregate thereby providing HR teams and employees with seamless, end-to-end integrated workflows.

#3: The specialization (and verticalization) of HR

In spite of the fact that both employer and employee needs vary significantly by size, industry, and geography, many vendors historically have offered a ‘one-size-fits-all’ HR proposition. As a result, there have been a number of historically overlooked and underappreciated market segments that represent massive greenfield opportunities when innovators focus on them explicitly. Going forward, as we have seen with broader vertical SaaS over the last decade, we expect to see the rise of verticalized HR vendors who focus on a specific customer segment and offer a much deeper, more tailored proposition than a generic, horizontal platform. In addition to this, we believe there are clear parallels with our theses around the office of the CFO and SaaS as a network whereby the verticalization of HR also gives rise to the opportunity for vendors to offer a bundled solution which in turn can drive TAM expansion, improved retention, better unit economics, and a more strategic relationship with customers. Two major expressions of this that we are focused on are 1) the rise of SMB-focused platforms and 2) tool-building for frontline workers.

Rise of SMB platforms

People teams in SMBs have historically been notoriously overstretched, understaffed (or even nonexistent!), and undertooled. More often than not, the “core People” platform is pen-and-paper or an Excel spreadsheet that is error-prone, time-consuming to update, and only acts as a very basic system of record. 

Increasingly, as SMBs are having to up their game and offer great employee experiences irrespective of resource constraints, we are seeing a new generation of arms dealers cater to this enormous yet enormously underserved market segment. Given the greater propensity for SMBs to purchase bundled solutions, we believe that vendors who can land with a mission-critical beachhead have an opportunity to expand their footprint and build a single-aggregated People suite for SMBs. 

We see two primary beachheads into the SMB today – the central people data repository (“HRIS”) and Payroll (mission critical from day one). Companies in such a position have a unique opportunity to build an ecosystem of integrations with best-in-breed tools (e.g. for performance, engagement, training and onboarding, interviewing, etc.), further embedding themselves as the epicenter of the new SMB People stack, and potentially over time branch out and cross-sell other People modules and even financial services (e.g. insurance, expense management, etc.). As outlined above, this drives a multitude of benefits (ARPU expansion, improved retention, deeper customer relationship, etc.). 

Given the sheer scale of the SMB base (e.g. SMBs typically represent ~50% of national GDPs[2]), the market opportunity for even national or regional champions is enormous.

Building for the frontline

Despite the fact that nearly 2 billion people currently work on the frontline and nearly every organization employs a combination of desk-based and frontline workers, HR tools have historically catered primarily to longer-tenured, desk-based employees. That said, this is changing as organizations are increasingly recognizing the importance of engaging their frontline workforce, in no small part catalyzed by the recognition of the critical role frontline workers played in helping navigate the Covid-19 pandemic.

The requirements of frontline employees can differ significantly from those of desk-based workers. As a starting point, many frontline workers lack access to a desktop (so being truly mobile-optimized and deliverable to a variety of endpoints is mission critical); they may not have a company email address (which has implications for security as well as means of communication); and they often have more flexible, shift-based working hours (which has implications for time/attendance/payroll). In addition, hiring, training, and onboarding may need to happen in a matter of hours, versus days or weeks for desk-based employees.

We are now seeing the rise of HR tools optimized to service the unique requirements of this historically underserved segment of the workforce. Going forward, mirroring the rise of vertical SaaS in the past several years, we expect to see continued specialization of HR platforms by worker type, which in turn is a stepping stone towards industry verticalization. As with the SMB opportunity, this could in turn drive opportunities to offer bundled HR solutions such as employee learning, time and attendance, and payroll.

What excites us

While great progress has been made modernizing the HR technology stack in recent years, the unprecedented challenges HR teams face when looking to hire and retain world-class talent are more pertinent today than ever before. We believe this will continue to create massive opportunities for problem-solving technology vendors across the HR stack, especially into historically underserved market segments. We at TCV are incredibly excited about what the future holds for HR tech and look forward to backing and supporting visionary teams building the seminal businesses of tomorrow across every corner of the globe.


[1] Future of Work: The Global Talent Crunch, Korn Ferry, 2018

[2] 2020 Annual Report on European SMEs, European Commission; & “Measuring the Small Business Economy,” Bureau of Economic Analysis, US Department of Commerce, 2020

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The views and opinions expressed are those of the speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the speakers and disclaims any responsibility therefor. This blog post is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this blog post, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/


Reshaping Online Travel and Surpassing AU$100M ARR From Sydney

Silicon Valley does not have a monopoly on innovation. Great entrepreneurs are everywhere, and we have seen a strong software ecosystem emerging from Australia and New Zealand.

We recently profiled Rod Drury’s Xero journey building a global platform out of New Zealand. Meanwhile, another TCV company, SiteMinder, just reached an important milestone of AU$100 million ARR.

SiteMinder has methodically built a global SaaS leader in hospitality out of Sydney, Australia. Coupled with its impressive revenue milestone, SiteMinder has 35,000 hotel customers in 160 countries and is reshaping the hotel distribution value chain and online travel, itself.

TCV’s Dave Yuan caught up with founder Mike Ford to reflect on his journey.

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Dave: Congratulations, Mike! Hard to believe you’ve grown SiteMinder to AU$100 million ARR. That’s an incredible milestone and a great foundation for things to come, but let’s start from the beginning. Tell us about yourself and how you got here.

Mike: I always had an interest in technology and commerce, having majored in both. This led me to consulting, where I worked on large business intelligence projects for the likes of SABMiller, AngloGold Ashanti, and Chase Bank, bridging technology teams with executive management and getting a good grounding in both disciplines. Being passionate about travel, I embarked on a year-long backpacking adventure in 2000 before I arrived in Australia and took on a three-month contract with a health technology startup to fund further travel. In 2006, I founded SiteMinder, and I am still in Sydney 18 years on, so, clearly, my adventures didn’t work out as expected!

Dave: Tell us about the SiteMinder creation story. What was the original insight? When did you know you had an idea good enough to quit your day job?

Mike: I didn’t quit outright and that was key. I consulted for my then-employer, two days a week, in order to fund the early months.

There were two major influences that led me to take the leap.

The first was the health tech startup I was working at. They were digitising paper-based claims sent from hospitals to medical funds for reimbursement, as paper-based claiming involved a long payment and reimbursement cycle. For hospitals, the digitisation of claims meant instant delivery, faster reimbursement, and a clear digital trail. At the core of the engine was a switch that converted data from different hospital systems into formats digestible by different medical fund systems.

The second influence was an investment I’d made in an accommodation business. Through that, I learned how hotel and other accommodation sales were rapidly moving away from traditional channels, such as wholesalers and brick-and-mortar travel agents, to online booking sites as travellers were increasingly turning to the internet to make their reservations. The shift in consumer behaviour drove a proliferation of last-minute booking sites in Australia at the time, such as Wotif.com and lastminute.com.au, which promised huge discounts if you booked close to the date of your stay. The issue for hoteliers was there was no means of centrally managing all of those websites and keeping their room rates and availability continuously up to date on each. So, they often chose to list on only one or two sites and miss out on others because they couldn’t manage them at scale.

I quickly realised that if I could connect hotel systems with different online channels, as I did in the medical funds world, I could synchronise hotel room rates and availability in real time. For hoteliers, the value proposition was they could get more rooms onto more booking sites to grow their reach online. At the same time, they could reduce overbookings and the operational overhead of manually inputting reservations. That value proposition helped us get a strong foothold quickly in the market.

Dave: What was it like to start a company out of Sydney?         

Mike: We were actually very fortunate to be in Sydney. As with banking and payments technologies, Australia was far ahead in terms of technological innovation in online travel. Where other markets weren’t yet embracing dynamic room rates and availability, there were many booking sites in Australia available for hotels to list on. The multitude of sites, combined with the sheer number of hotels out there, especially independent hotels, meant that conditions were ideal for our entry into the market.

Funding was a big challenge as the technology venture market was very underdeveloped relative to what it is today. The government in Australia also had a myopic attitude to how important tech and STEM jobs were to the future of the economy, so tech startups got very little support in terms of R&D benefits, and sadly that hasn’t changed. In spite of these challenges, more than 80% of our revenue now comes from overseas markets. We are a truly global business that has kept its roots deeply in the city of Sydney where it all started.

Dave: You’ve scaled past AU$100 million ARR. Was it all smooth sailing from there, or were there big doubts and moments of near death?

Mike: In the early days, moments of doubts may have been around survival. Later, they were more focused on growth or new market entry, but they’ve never quite ceased, and I suspect it’s no different for any founder.

If ever there was a near-death experience, it would’ve been pre-angel investment, when I was funding the business and paying my co-founder out of my own savings. On top of that, we learned a competitor was launching a month before us, and they had AU$100 million in funds and an existing product. We had AU$180,000 and a beta release. It was nearly a no-go decision, but I’m pretty stubborn and so we took them on, and they soon went bankrupt.

Dave: What were the big decisions along the way?

Mike: Very important decisions included:

  1. Who we were going to take money from and bring on to our board of directors. We turned down early interest from numerous VCs purely on the first meeting dynamic.
  2. Whether we were going to go global or dominate locally, and what the timing would be.
  3. What not to chase. There are so many opportunities, and you can lose focus quickly unless you’re very clear about what you are and are willing to let go of opportunities that may seem attractive but don’t provide long-term benefits.

Additionally, the most crucial decisions involve the people you choose for the journey and the timing of bringing on key talent. The outlook of a founding CEO, certainly in the formative years, can differ substantially from those of a professional CEO. As a founding CEO, you have grown the team and the business from nothing. You have loyal, committed, and talented individuals who have helped you get the business to a particular stage so the company culture is more familial. Yet, through high growth, it’s hard to stay on top of skills and challenges across the business, and you may find yourself in a situation where you either don’t recognise that such deficiencies exist, or you don’t take appropriate measures quickly enough to address them. Over time, you get better at identifying the skills you need for the future, ahead of the curve.

Dave: How has SiteMinder succeeded in a field that has gotten so much competitive attention?

Mike: I think the definition of success is different for everyone. There are many travel tech companies that I would consider successful, even if they may not all have the size and growth trajectory of SiteMinder.

It sounds cliché, but it comes down to the deliberate process of ensuring many ingredients come together in the right way, at the right time, and in the right sequence. We’ve had a focused and smart go-to-market strategy, plus we over-indexed on personalised support for our customers and doubled down on localising our products and service for many different countries. We’ve invested in strong operational centres around the globe to provide true round-the-clock sales and customer service, and we’ve hired smart people. I could go on, but at our core we are product-driven and customer-obsessed. That permeates our culture and is key. Even if your product is average, you can have early success if your sales and marketing are great. In the long run, you can only continue your success if your product is truly market leading.

Dave: As you look forward, what are the big opportunities for hoteliers? How might this translate into benefits for the consumer and traveller?

Mike: Many hoteliers are still stuck in their traditional ways and aren’t open to the possibilities that technology can offer in making a world of difference. This does vary between hotel segments such as independent versus chain, full service versus limited service, regional versus city, and even by country. The vast majority of hoteliers still struggle to navigate the changing online landscape and are overwhelmed by the extent of the choice out there.

It’s for this reason that we’ve created an ecosystem, not just of our own technology, but of all other technology players that can help hoteliers navigate the online world in search of guests. If hoteliers can connect with customers at every touchpoint throughout their buying journey, they can ultimately create greater guest experiences long before those guests set foot in their lobby and long thereafter.

Dave: If SiteMinder fulfills its mission, what role can it play in the changing online travel ecosystem?

Mike: SiteMinder currently connects to 700+ partners within the travel ecosystem, so hoteliers can hook everything they need into their property management system and harness the power of integration, openness, and choice. Essentially, our platform is the most comprehensive and effective way for hoteliers to bring guests to their hotels, without having to think about or manage technology. It gives them more time to spend on the guest experience, which is the part they really enjoy.

If hoteliers can choose any best-of-breed solution to optimise their opportunities in acquiring guests in an increasingly online-driven world, we’re doing our job.

We also play a big role in the value chain in online accommodation, specifically the supply equation, by connecting hotel room rates and availability in real time to points-of-sale such as booking sites. We enable those booking sites to gain traction in core markets, where they otherwise can’t access a supply of rooms to sell.

There have been middlemen aggregators in the past that have rolled up supply for booking sites yet we connect the room supply directly to booking sites or room demand sources, so there is no ticket clipping and dilution of margin between the supplier (the hotel) and the seller (the booking site). In doing so, we have streamlined the supply chain for hotel rooms, rates, and content.

Dave: SiteMinder’s opportunity is also unique as a SaaS company. Vertical SaaS is seeing a renaissance with SaaS companies taking on platform and network characteristics, meaning “SaaS as a Platform”. What does SiteMinder look like as a SaaS business model over time?

Mike: We started out with a distribution platform for hotels. Over time, we recognised the importance of the direct sales channel and expanded our platform to integrate a hotel’s own website, so they could manage both their indirect and direct sales channels.

Over the years we’ve designed our platform to be more proactive and have powered it with business intelligence that steers our customers and makes them aware of opportunities to improve their hotel business. For example, our platform makes hoteliers aware of changes in market conditions or demand, so they can maximise their guest acquisition capabilities in a rapidly evolving online landscape.

The next evolution is really exciting. We recognise that there are many great applications and tools out there for hoteliers, and they can all improve a hotel’s guest acquisition strategy. These may be upselling tools, airport transfer services or activity bookings, revenue management systems or anything in between. We know that one company will never build the best of all these things. Our brand essence has always been one of openness, so we’ve developed a way to seamlessly link a hotel’s property management system to all the different applications. In doing this, our customers will be able to use all the best-of-breed applications available out there in combination with our own platform. If we are successful in this endeavour, we will have the most open and connected platform the hotel industry has seen, with the greatest number of hotel participants (we already have 35,000 today).

Dave: Outside of SiteMinder, what in online travel gets you excited?

Mike: One important shift is the rise of tours and activities moving increasingly to online with dynamic inventory and pricing. Driving this is people’s desire to seek experiences, not just flights and accommodation. We’re seeing increasing demand among consumers to package their accommodation, services and ancillaries, so they can get the best experience out of their accommodation and the local destination.

Somewhat tangential is the rise of personalisation. For a more personalised experience, including destination advice, many travellers still use a brick-and-mortar travel agent to plan their trip. That said, we’re also seeing the growing dominance of online booking sites. Alone, neither of these options is ideal for at least one segment of the leisure travel market, so I think we will increasingly see hybrids where booking sites get better at offering deeper, more human advice and personalised service. This may even include speaking to a local human expert when booking online. We are already starting to see signs of that happening now.

There are also relatively new entrants like Google making a wave in the space with disruptive models that are attractive to hoteliers. I think the race is on for OTAs to create a seamless end-to-end experience for the consumer, including research and advice, flights, hotels, car hire, transfers, in-destination activities and experiences, restaurants and everything in between.

Dave: Thanks so much, Mike, and congratulations again! AU$100 million ARR is an amazing milestone that only a few reach. Savour it!

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The statements, views, and opinions expressed are those of the speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the speakers and disclaims any responsibility therefor. This interview is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified, if any, are not necessarily representative of all TCV investments and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies. For additional important disclaimers, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at
https://www.tcv.com/terms-of-use/.