The Money Shot with George Larocque for Q3 2019
Would you believe the amount of money going into HR tech decreased last quarter? Well, it did. But money man George Larocque ain't scared. In fact, he's as bullish as ever on investment flowing into the space, and he lays it all out for Chad & Cheese in the Sovren exclusive.
For more on who got money and who wants more money, tune in now.
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Intro: Hide your kids, lock the doors. You're listening to HRS most dangerous podcast. Chad. Sowash and Joel Cheesman are here to punch the recruiting industry right where it hurts. Complete with breaking news brash opinion and loads of snark. Buckle up boys and girls it's time for The Chad and Cheese Podcast.
Joel: All. Yeah,
Chad: It's the money shot baby.
Joel: Back, back again. And guess who's back? Tell a friend...
Chad: George Larocque is back.
Joel: Larocque rock out with your…. Uhhh…
Chad: Yeah, eh. Well you're, you're in Larocque out. Yeah. So I just thought this is going to be a new segment that we do every quarter called The Money Shot. What do you think?
Joel: Are you asking me or George?
Chad: I'm asking you. This is our show dip shit.
Joel: Oh, well, I don't care what we do. It's George's name gets to be attached to The Money Shot.
Chad: George Loves it. It's the money shot with George Larocque. Hello everybody.
Joel: I think he left. Is he still there?
Chad: Are you there? George
George: Can I speak now? You guys need, I got the riot act on the way in about being muted and introductions and stuff.
Joel: I'm about your crappy survey. We're talking about what you actually know about your your money. Money, time, money, report, money time.
Chad: Before we get to the money shot, tell, tell us about George, the rock. For all those listeners out there who don't know who George is, they've, they've, unfortunately, I don't know who wouldn't, but who is George Larocque and what does this HR Win's thing?
George: George Larocque. I'm going to, I know, I don't want to speak in the third person, but I am George Larocque and I'm a market analyst. I've been in the industry for 30 years. I've been in recruiting and in HR, spent 10 years there, 10 years on the vendor side, a couple of good runs with a couple of bigger brands taking Bullhorn and BrassRring to market and a couple and one or two others. And then for the last 10 years I've been a market analyst. So I cover the market, I with employers to help them understand the tech trends and the technology that's out there. Right, a lot of reports about it, work one on one with them. I also work with vendors and do advisory on helping them understand the customer. One of the things I do is track all of the investment the VC and the private equity and the mergers and acquisitions in the space.
George: And I put out a quarterly, I cover every deal day in day out at HR winds.com. But I also put out the quarterly, a quarterly update report on everything that's happened and an annual look back. And today we're going to talk about the quarterly report, but everything's at HRWins.com and we're breaking news today, soon to be released. HrLoses. I do own the URL thanks to Chad and Cheese. I thought I better own it so that the, you know, something responsible happens when you guys get ahold of it.
Chad: Dude, I'm really hoping that we get a version of fuckedcompany that is just on the HR side. I'm hoping that's what we get. But today, today, this is what we're going to get kids so dangerous today that this is what we're going to get. It's, it's HR Wins Q3 2019 global HR tech investment update, AKA The Money Shot. George, where can they find this? So if our listeners aren't driving but they are listening and they can go to their mobile or they can go to their desktop, how can they follow along?
George: A real simple, just go to HR wins.com. Scroll down to the feet. You'll see featured reports and it is the big featured report right now, a big purple picture of like a report cover with the title on it. You can't miss it.
Chad: Big purple monster looking money shot. Okay.
George: You're not going to get me to say it. I'm not going to say, I'm just not going to say you can say it all you want. I'm not going to say it.
Chad: Oh, everybody's going to take it. Everybody has to take a shot when I say money shot. Okay. So let's go ahead and dive into this. So we have close to a billion dollars that was actually spent in Q3. Tell us, tell us a little bit about this and what we're seeing on the trend lines.
Joel: Yeah. What's the executive summary of this thing for everyone?
George: The executive summary is, I mean, it was another, you know, big quarter. I've tracked details for the last three years and this is the, a, this is quarter number five, right as fifth largest. It's an incredible amount of VC coming into the space. The talent acquisition. And HCM categories are the big categories as usual. And you know, the, the subcategories talent in talent acquisition, job boards and assessments scored big this quarter job boards is every quarter and month. You know, across all categories. The leader this quarter assessments, you know, edged it out. So that's a, that's the high, the high level. There's, you know, we can go deeper into analysis if you want.
Joel: Oh, we're going to go deep with The Money Shot George, don't you worry.
Chad: Top of the report, a bit close to a billion dollars, $964.3 million spent. So how does that compare? Is that looking good? How are we trending?
George: Yeah, well, when you look at the, you look at the chart it, you know, the, your first reaction it, it's, well, it's the fifth largest in the last three years. It's a drop from the last couple of quarters. But the thing to remember about the last two quarters is we had something like eight mega rounds, right? Deals worth over 100 million and half of those were worth over 300 million. So we didn't have any mega rounds in this, in in Q3. So that's that, that's the impact right now,
Chad: Q3, are we taking a breath? Is that what's happening?
George: I don't know if you can say $1 billion is taking a breath. It's, it's, it's a lot lower than two, three last year though. Okay. Yeah. I, but we did have mega rounds last year. We had, we consistently have some really large routes now in Q4 already started and we've already had a Mega round in Q4. We had a $300 million round go to rig up. So maybe but I, I really don't think quarterly. I, I do this quarterly because everybody wants a quarterly. And I think over time it's good to see the trend, but I don't think quarterly is the way to look at VC and private equity coming into the space to take, to take the to take the temperature. Right. I, I don't think that's the way to look at it
Joel: Or this year is not a Canary in the coal mine, if you will. And if you were in their prediction game, you wouldn't sort of name this the death knell of the investment money coming in. You expect to see greater numbers going forward.
George: We had a, a high, a good deal volume D D the number of deals didn't go down. The average deal size when you take out the, the outliers and comparatively the last quarters is, you know, right on track. I, I, I'm not a financial analyst, so you know, something happens in the economy. And that's going to cause all investors to tap their brakes, get more conservative. But what I do see, I, you know, I got I got I see a lot of new funds being created, not, not just for HR tech, but across the board. The, the venture capitalists are raising a lot of money. They're, they've, they're bringing a lot of money into their funds that they need to find homes for. And I'd have had a call in you know, in the last 48 hours of someone creating a new fund for just for HR tech.
George: So, you know, as we sit today with the economy not, nothing seems to be slowing down. You know, that's, that's my, that's my take now. I, but I, I again, if anything happened, of course, if anything happens in the economy, things will, will slow. And I, I don't know if this is the new normal or if this 2000, 18, 2019 level of investment was like our peak. Yeah, it's, it's, it, it really is. I, I, yeah, you look at the number of of startups. You look at the number ILA cow you know, anybody can, you know, really at low cost, create an app. And we see a lot of apps coming into the market. So you know, all of these things, you know, play into this, there's going to be no shortage of folks starting up companies. And when the economy does go soft, that's sort of the best time to start. If you, if you have the capacity to do it, if you have the resources to do it. So,
Joel: So you mentioned, you mentioned mobile. Can you look at sort of other trends that may have sparked this? Like I know for me you know, Microsoft dropping 26 billion for LinkedIn kinda started this, this gold rush, but what's your take
George: Yeah, that those sizeable investments have a lot to do with it. I think a lot of investors see Workday and I'm not talking about the, the product that they're providing to the market, but looking at look, they look at Workday and they see how it's trading. They see it's multiples, they see and it's a big shiny object and it's in the HR technology category. I think that's another thing that that draws a lot of investors, you know, in, into the space.
Chad: Do you think they liken it to Salesforce and Salesforce is obviously exploded? I mean, it's almost like it's a different segment, different industry. And this could prospectively be the sales force of the HR tech industry.
George: I think there's something to that. I think it's they liken it to a lot of things. Most investors don't know much of anything about this space.
Chad: Neither do most of the startups that get in this space.
George: Yeah. So you hear just like from the startups, I, you still here, I'm still hearing like, you know, we're, we're going to be the Match.com of recruiting. We're going to be the Uber of recruiting. We're going to be this. Yeah. Yeah. The Tinder of recruiting. We're going to be all of this stuff and have HR and have employee engagement, whatever the category is. And you hear it from the investors to you here. And I, I think there has been a trend with vendors and marketplaces sort of emulating Salesforce. I think the, the challenge with the Workday is a different kind of topic, but the challenge with the legacy vendors in Workday is now a legacy vendor. They've been around a long time. They've got really limited, they don't have workplaces like Salesforce. Salesforce is, is just open, right?
George: They don't care, you can replace any of their features with your own apps coming through their marketplace. You can't show me an HR vendor like that. Some of the newer vendors that came up after 2010, 2015 ha, culturally they're more aligned with that. But, but most of the, you know, do, none of the HR platforms are are open like that. They should be. But, but they're not. So I think that that confounds the vendors and the investors over time because to this, to this point, buyers don't act like people that buy or, or, or companies that buy Salesforce or marketing platforms or other financial systems or things like that.
Joel: You, you mentioned Uber and I'm curious because we've, we've had a lot of, I guess, work platforms or, or companies in our space go public this past year and frankly be pretty challenged. You know, Upwork, Lyft, Uber, Fiverr. I'd even maybe throw Slack in there. As someone in the public market that has been challenged, do you think that will affect the, the amount of money coming into this space negatively? Or will it not matter?
George: You know, if you look at you look at some of these mega rounds you know rig up this quarter Q for 300 million I think it brought their total to 450 million. You know, the, the pressure on the back side of that level of investment. You know, that's, you look, you look at a lot of those vendors that you mentioned, they raised huge amounts of capital and then you know, the, the results that are expected as a startup, but then as they look to go public, you know, what their market cap needs to be. It's, it's kinda hard for me to see where we aren't going to have, you know, the only examples w