Inside HR Tech: Current market signals for founders and investors

In a sector that loves buzzwords, the HR Tech market continues to show that clarity, not hype, is what ultimately drives deal activity. 

At EM Advisory, we’ve spent the past few months diving deep into the Australian HR Tech landscape. Our goal: to help founders and investors understand where value is concentrating, where deals are happening, and what it all means for building or backing a company in this space.  

What we found is a market full of nuance, but also one with a few clear signals. 

Start with the Workflow, Not the Acronyms 

It’s tempting to get caught up in category labels – ATS, LMS, HCM, WFM – but the real insights come when you map technology back to the employee lifecycle: how companies hire, manage, develop, and retain their people. 

Through that lens, the market starts to make sense. “Hire” is the largest and most active segment by number of companies, followed by “Manage” (payroll, HRIS, workforce tools). Smaller categories like “Retain” and “Develop” exist but are more fragmented and niche. Across the ~180 HR tech companies we identified, over 75% of them play in the Hire and Manage spaces.  The concentration of companies in these two categories isn’t random. It mirrors where the budget sits – and where acquirers are looking. 

Not All Segments Are Equal 

Since 2022, strategic acquisitions in the Australian HR tech market occurred in either the Hire or Manage categories. There have been no strategic acquisitions in the Develop or Retain segments. 

Why? Because these companies solve problems that are closer to the revenue and compliance lines. Payroll, onboarding, compliance tracking – these are non-negotiable functions. They drive stickier contracts, larger budget allocations, and clearer ROI. In a world where strategic buyers want certainty and scale, these segments simply offer more. 

But this doesn’t mean founders in the other areas are out of luck. It just means your strategic path likely runs through integration. If you’re building an engagement, culture, or learning tool, the best path to scale and exit may be via partnerships with core HRIS or payroll platforms. Acquirers aren’t just looking for features – they’re looking for fit. 

Valuations Reflect the Power of Platforms 

This bifurcation plays out clearly in valuation. Companies building in core HR and payroll are still trading at ~5× revenue multiples. These platforms capture more wallet share, are mission-critical, and serve as launchpads for cross-sell.  

In contrast, point solutions – especially those outside of regulatory or budget-critical workflows – are trading at a discount. The implication is clear: to defend or grow valuation in this environment, your product either needs to be the infrastructure, or plug directly into it.  

That may sound limiting. In fact, it’s the opposite. It creates opportunity for smart founders to build with a more strategic lens. In a consolidating market, the fastest path to value may be as a well-positioned, well-integrated piece of a bigger ecosystem. 

M&A as a Product Strategy 

Another emerging theme: acquisitions are being used as shortcuts to product depth. Strategic and financial buyers alike are looking to plug gaps and scale faster – especially in sectors with regulatory complexity or fragmented legacy systems. 

Recent transactions reinforce this: 

• Employment Hero raised capital from KKR to expand its all-in-one HR platform globally, after acquiring Canadian HR firm Humi. 

• Citation Group bought foundU to deepen its compliance-focused offering for Australian SMEs. 

These are not isolated bets. They’re part of a broader push toward embedded, ecosystem-led models that span the entire employee lifecycle. The playbook is clear: expand core capabilities, embed AI, and integrate into broader operational workflows – from hire to retire. 

What Founders Should Do Now 

We often tell founders that the difference between a good business and a great outcome is strategy. That’s especially true in HR Tech today. The best-positioned founders are already doing three things: 

• Designing for adjacency. Are you one acquisition away from being part of a full-stack platform? 

• Thinking like a buyer. What gap do you fill? What budget line do you tap? What integrations reduce churn? 

• Owning your workflow. Are you solving a pain that’s budgeted, measurable, and repeatable? 

It’s not just about building a product anymore. It’s about building a product that matters – inside someone else’s roadmap.