Everyone's betting big on India's start-up culture. And we do have young entrepreneurs mushrooming across
the country. Some become names to reckon (read Snapdeal and Flipkart, Housing.com) with while others
fade away with time. While ideation, execution and sustainability are the basic mantras for a start-up, it is the
nitty-gritty involved in these stages of a new company, which makes a start-up a roaring success.
"In the complex world of entrepreneurship, it is difficult to avoid operational and strategic missteps. But the
real reason a large number of entrepreneurs feel dispirited is the feeling that their enterprise has gone the
wrong way. Whether it is the product/market fitment, scalability, or other managerial issues, one should not
give up before all the key elements have been tried and tested," said Utkarsh Joshi, Principal at the HR Fund.
BI India lists down the basic factors that come into play when one thinks of starting a new venture.
Founding and management team
People are the biggest asset of any company. And when the company is new, the right kind of leadership is
extremely essential. "Many experts believe that two people in the founding team are considered ideal as with
increasing number of founders, the company's value is shared accordingly. However, what is really important
to be mentioned is that more than the number, it is critical for the founder of the company to carefully
choose the right mix of co- founders with him/her who bring in the right expertise and culture to the table.
Founders need to realize their strengths and weakness," said Joshi.
This is also true for the management team that is at the core of any business. Right people with the right kind
of expertise and experience can either make or break any start-up. The
"A well-informed management team is considered good on strategizing and would be able to minimize the
risks at various aspects of business. It not only starts with putting together a right product but also validating
its usability at several instances (before and during development) for necessary checks and balances and
thereafter right planning to enter the market. The management also owns the responsibility for scheduling
the above aspect for rightful gains," said Joshi.
Besides, a good management team plays a pivotal role in the kind of talent the company ultimately gets, thus
penning down the fate of the start-up.
Valuation and funding
Valuation of a company is very important at every stage of its life cycle. It is this valuation that gives
confidence to investors to fund a certain start-up. Every year, several start-ups that receive seed funding at
the time of inception, fail to raise funding at later stages. This happens because the valuation of the start-up
has dropped significantly for investors to bet their money on it. But there have been times when a company,
whose valuation had dropped, manages to gain more after taking corrective steps, thus attracting the
investors' attention once again.
"Companies progress and fail at various stages of funding, reflecting on their valuations. Though it varies
from one industry to another, increase in valuation is an important milestone to be worthy for next round of
funding. However, it is also required to mention the risks of blowing up the valuation too much, which leads
to a potential investor/VC shying away at times and making it difficult to go for the future round of funding,"
But how do we measure a company's valuation? Well, it's simple! The company's ability to make inroads in a
certain market, handle business risks tactfully while expanding successfully add up the numbers.
"Proven ways to lower the cost of operations and customer acquisition speaks loud of a profitable business.
Such a business is scalable and needs further funding to speed up the growth or expand. Though it is possible
many times to raise money at lower valuations too, but running out of cash does not include signs of a
progressive company. Conserving and spending money judiciously is the art that is learnt on the go," averred
Choosing right investors
Every new entrepreneur needs guidance and the right investor provides exactly that. An investor with the
requisite background, industry expertise or specialization in business ventures offers advice, inputs and
guidance based on their experience with various companies they work with. Or they could be because they
were successful entrepreneurs themselves.
"In addition to money, proper hand-holding and guidance should be something that every entrepreneur
should look for. It is important to differentiate between the ones who seem to know enough about the
project/industry to cast an opinion but not substantial to help manage a situation," asserts Joshi.
Besides, when prominent people from the industry associate themselves with a start-up, not just the
valuation of the company but also its business grows by leaps and bounds. And then, there's no stopping!
This one is tricky but then when has running a company been a cakewalk! The cost of acquiring a customer
should be low. With digital media penetrating the businesses aggressively, reaching out to the right customer
is not a big deal. Try content marketing or word of mouth if it works for you but remember the bottom line is
—cost of customer acquisition should be lesser than the lifetime value of the customer.
"Judging the market right in terms of need for the product, its usefulness, timing, market size, and pricing
leads to consistent and successful customer acquisition, as these are all cohesive factors.
The 21 year old Ritesh Agarwal's OYO Rooms is a perfect example. His customer acquisition is way lesser
than the infinite lifetime value of its customer. This entrepreneur ventured into a territory that no one else
had thought about and its biggest marketing tool is probably the word-of-mouth. The budget-hotel segment
has suddenly become a hotbed and one can see many other similar services in this segment now.
"Rather than various marketing gimmicks - a well-defined process that leads to scalable ways to acquire the
customers and thereafter monetize them at a higher level than the cost of acquisition is the solution. PR also
plays an important role in the same. A press coverage is about positioning from the company's point of view
and perception from the reader's point of view. However, it is important to see how much does the coverage
talks about the progress made in the business. Startups need to judiciously manage and mention the press
coverage while fundraising, evangelizing among others," said Joshi.
NEW DELHI: The HR Fund, a human resources-focused private investment company, has invested $500,000 (about Rs 3.2 crore) in PiQube, a Chennai-based startup assisting in hiring.
The investment, which will be made in two tranches, is the third transaction for the HR Fund, which has a Rs 50 crore corpus.
It previously invested in human resources outsourcing venture PeopleStrong and HRfocussed knowledge and media platform People Matters in 2012.
"Recruitment is a huge chunk of the human resources sector. We expect PiQube to, in a few years, be the default platform and attack the market, which is really yet to adopt technology so far," said Utkarsh Joshi, principal at HR Fund.
Founded in 2012 by Jayadev Mahalingam, an alumnus of the University of Madras, PiQube uses data-driven algorithms and undertakes socio-metric profiling to assist recruiters in finding candidates with the right skills for positions across sectors. This is the first institutional round of funding for PiQube, which was selected for online payment giant PayPal's Start Tank incubation programme last year.
Gurgaon-based HR Fund, which typically invests between $500,000 and $1 million, plans to make at least two more investments in the current financial year, according to Joshi.
"We're looking to make between 8-10 investments from the first fund, and are considering investment opportunities in the human resources learning and development, as well as in the HR analytics space," he said.
The fund, which has an investment holding period of 3-5 years, is backed by high networth individuals, largely from the corporate sector.
They include Pratik Kumar, chief executive officer of Wipro Infrastructure Engineering; Arvind Agrawal, president, corporate development and group HR in the RPG Group; NS Rajan, group chief human resources officer and member of the group executive council of Tata Sons.
The Indian startup scene is an exciting phase with entrepreneurship at its zenith. In addition to several government initiatives to promote entrepreneurship, venture capitalists sank $4 Bn into India in 2014 in some 300 deals—almost twice as much money as they invested in 2013 and 14 times the level of a decade ago, according to Indian data tracker, Venture Intelligence. Many a times, entrepreneurs rush to seek funding without having a strong grip on their own business or on investor's needs or criteria.
Given such a scenario wherein India Inc. is looking forward to organized staffing and workforce solutions to reach its various business goals, the HR solution companies have witnessed considerable evolution with niche, customized, and innovative products and systems with increased focus on technological interventions for staffing, recruitment, and other HR shared services.
Recruitment process outsourcing (RPO) and other HR shared services (HRSS) have caught up in recent times with growth in dedicated technology oriented solutions. HR technology and other services like payroll, training and development, verification, social recruiting, background verification, onboarding, training and induction, leave management, attendance management, reimbursements applications and referral hiring etc. are the buzzword in the HR space. Besides, focusing on core services and key talent areas, HR solution industry is increasingly initiating strategic initiatives, such as wellness programs and workforce analytics.
With a focus on continual improvement of the HR function, organizations have achieved lower turnaround, higher employee engagement, and more productivity, thereby benefiting from better business outcomes. These services are generally outsourced with competent HR solution companies working on cloud-based solutions and complaint systems in place for the security of vital data.
Having seen the need for growth of the HR space, an increased number of investors are finding it lucrative to invest in growth-oriented HR companies with niche product and service areas. The size of this space is expected to be upwards of INR 300 billion in FY14-FY15. There is increasing community of start-ups within the industry that is developing products and solutions that enhance HR processes and release the bandwidth of HR team within the organizations so that it could focus on more strategic aspects and align with business goals.
A good investable idea in the HR space can be assessed on 3 major things to begin with. If these things are in place the business will become attractive for any investor in the HR space:
So along with functional HR domain and operational experience, it is becoming equally important to have someone in the team who understands technology.
Apart from the three parameters mentioned above, client signups and stage of business/funding requirements are two more important criteria that any investor will look at.
Firstly, it is obvious that more the users, the more attractive the business would become for potential investors. However, selling HR solutions comes with its unique challenges. While more and more clients are employing HR solutions to address their requirements, the HR function still lags traditional functions like information technology (IT) and infrastructure, etc. in terms of adoption of HR products and services. Thus, a tailored, HR specific approach needs to be taken while selling in this market. Also, it is possible that there would be cases where HR departments are using external HR solutions for the first time. In such cases the selling approach needs to be tweaked accordingly.
Secondly, the entrepreneurship ecosystem in the country is definitely heated up and as a result there are multiple businesses vying for an investor's attention. Thus, stage of business along with the funding requirement becomes an important decision making criteria for any investor. Gone are the days when a power-point business plan got easily funded. Now, the market has matured and if one is looking for seed capital, then one should keep ready the proof of concept and prototype. Most of the times, entrepreneurs reach this stage using their own resources or angel funding. If one is looking for series A capital, then it is imperative that one should have recurring early revenue numbers along with considerable client signups. The series B and C rounds thereafter move upwards in similar proportions.
Chennai-based start-up PiQube helps companies hire faster and better by matching job needs to the right candidates.
A few months ago, a Singapore-based bank was looking for candidates with knowledge of FORTRAN, a programming language that’s not in vogue anymore. Its search was desperate, as all its systems still run on FORTRAN. Yet, none of its attempts bore fruit.
When it did finally bear fruit, it was thanks to a proprietary algorithm (say, a formula) built by a Chennai-based start-up called PiQube. Started by 32-year-old Jayadev Mahalingam, PiQube wants to help companies hire faster and better, by matching job needs to the right candidates.
The start-up, groundwork for which began in 2014, was in the news a few days ago when a human resource focussed private investment company called the HR Fund invested $500,000 (about Rs 3.2 crore) into it. It was the second public recognition for PiQube.
In December last, the company and its team of 14 employees moved into an incubation centre run by PayPal, an eBay company, and The Indus Entrepreneurs network. By being one of the few to be selected thus, it not only got itself space to run its operations for a year but also an opportunity to be mentored by pros in the field. The starting point, Mr. Mahalingam says, is a database of 76 million candidates, which is increasing every month. His algorithm uses 72 different data points to zero down on the best resume. Some of these points are domain skills, mobility, the probability of this person choosing the job, social profile, and so on.
“Our algorithm mimics the brain function of a human being. As a human being, you are going to search across multiple portals. Our system has the ability to do it by itself,” he says.
The idea for this start-up struck Mr. Mahalingam when he was running a recruitment firm. He had to figure out two things — how to pick up professional information and funnel down to the best set of people. “The end game is replacing a recruiter,” he says.
He also realised that the world of recruitment was lagging behind in the use of data, unlike many other professions. But making algorithms work isn’t that easy. For instance, he found people write ‘Ernst & Young’ in 173 different ways! His point: a lot of cleaning up of data is needed.
PiQube currently has four IT firms as its clients – Mr. Mahalingam doesn’t want to name them. His business model is to charge companies for use of the algorithm-based tool. Backed by fresh infusion of funds, he wants to increase the database by ten times in the next two years. He is also looking to build his marketing team and eventually look to expand into the U.S.
Mr. Mahalingam wants to sell the company after building it to scale in the next 4-5 years.
Meanwhile, he is eager to solve more recruitment problems, like the one he did for the Singapore bank. Its FORTRAN puzzle was cracked after PiQube’s search showed most of such experts weren’t working anywhere but doing research work.
Players like Mynoticeperiod, Hackerearth, e-poise and Merajob are expected to play a role in changing the HR start-up ecosystem
Over the years, India Inc. has concentrated on human resource mobilisation and talent management to a greater extent, given the shift in gaining profitability for business through new and innovative HR interventions.
Given such a scenario, HR solution companies have witnessed considerable evolution with increased focus on technological interventions for staffing, recruitment, and other HR-shared services.
Mergers and acquisitions
Besides, with the maturing of several leading Indian HR solution companies in niche sections like recruitment, HR technology and services like payroll, training and development, there has been considerable foothold of specialised international companies in the country. This entry has resulted in some prominent mergers and acquisitions with top HR companies in India.
HR is also increasingly initiating strategic initiatives, such as wellness programmes and workforce analytics. With this focus, organisations have achieved lower turnaround, higher employee engagement, and more productivity, thereby benefiting from better business outcomes.
The advent of social media has considerably helped in the workforce revolution. Incorporating social media in branding and marketing exercises, majority of the companies including start-ups in India have integrated social technologies into HR functions.
With the country struggling to attract and retain top talent, social recruiting and referral hiring are definitely huge opportunities.
The HR solution industry is showing signs of maturity, evident in the news of Ikya and Teamlease preparing for an IPO in India.
Successful listing would signal a new era in the HR industry with coexistence of companies in various stages of growth and expansion.
With organisations increasingly working on employee productivity issues and cost cutting, innovative HR software systems are being accepted and used by the organisations, making it an attractive deal for the investors. In the recent past, HR software solutions from IT companies like Oracle and SAP have been in use by several organisations but new-age software and technology solutions, which could be customised to specific and evolving HR needs are fast replacing them.
These new-age technologies are also being integrated with social media platforms for better outcome.
Talking of HR start-ups,the technology players have consistently made efforts to build niche and innovative systems from scratch. The complex technology system manages employee data, tracks leave, monitors attendance, calculate payroll, generate appraisal reports, and use of data and analytics for recruitment and other strategic HR functions.
A customised solution specific to company and industry needs enhances the scope for research and development for increased market share. Such HR businesses make for lesser risk and substantial gain for the investors.
HR solutions is a highly competitive and fragmented industry that is poised for enormous growth in the coming years as companies increase their investment in HR infrastructure.
The search and recruitment market is expected to grow from ₹29.5 billion in FY11 to ₹62 billion in FY16 in low case at a CAGR of 15 per cent and ₹72 billion in high case at a CAGR of 20 per cent. In terms of temporary staffing, companies and captive units are likely to increasingly depend on agencies to lease them with the required manpower in time, to meet sudden demand from clients. The temporary recruitment market is expected to grow from ₹167 billion in FY11 to ₹400 billion in FY16 at a CAGR of 19 per cent.
Recruitment is expected to evolve from a fragmented ecosystem to players adopting ways to work closely with clients’ requirements, where recruitment companies are likely to move away from sourcing relevant candidates to accessing the right ones by using psychometric and other robust tests to shortlist candidates.
Recruitment process outsourcing (RPO) as a service offering is fast evolving significantly in India, wherein companies are increasingly adopting the outsourcing model to withstand competition. Many recruitment companies are offering it as part of their portfolios.
International players entering India are tapping the potential of the HR ecosystem. These players are working on the problem of matching people to jobs, and jobs to people, as well as coming up with more effective ways for employers to motivate their workforce.
A few players in this space are Mynoticeperiod, Hackerearth, e-poise, Merajob, Grownout, Mettlandmany, which have received funding and expected to play a major role in changing HR start-up ecosystem in India. The change will come with the handholding that investors would take in working with the entrepreneurs to help take the entrepreneurial spirit to grow the company.
The writer is Principal, The HR Fund, a VC fund dedicated to investing in HR solution companies
BENGALURU: If you think you are submitting your resume to an HR black hole, may be you can now count on your friends to recommend you. Such is the hunger for good talent that employee referral programmes have become extremely attractive.
Bengaluru-based mobile advertising network InMobi has just reworked its referral programme to include a host of adventure and experiential travel rewards. These include cage diving with sharks in South Africa, parties in Thailand or Amsterdam, and wine tours in Europe. If the employee is a bike enthusiast, he/she could get a Thunderbird, and if a tech enthusiast, an iPhone. Cricket buffs have a chance to win two tickets for the IPL finals at Eden Gardens.
Last year, internet product company Directi gave away Harley Davidsons and even a Volkswagen Polo car as rewards for internal referrals.
Under referral programmes, if an employee recommends a friend for a position in the company and if the person is selected, then the company rewards the employee. Normally, such rewards involve a cash payment of several thousand rupees.
Rajesh Sridhar, member of the people operations team at InMobi, said the company's vision was to build 'Dream Team InMobi'. "We're doing this by disrupting the usual way referral programmes are run. Usually referral programmes are not generous or if they are generous, they don't create memorable experiences as the currency used is mainly cash," he said.
New-age companies like InMobi are growing at a scorching pace and attracting right talent is key to their strategy. InMobi competes with Google in the mobile advertising business.
"Psychological research suggests that awaiting an experience elicits more happiness and excitement than awaiting a cash incentive," said Sridhar.
Utkarsh Joshi, principal in The HRFund, an HR-focused private investment company, noted that the average age of employees in these companies is below 30, and companies "are doling out innovative perks as an engagement tool." It also reduces hiring lead time significantly, he said
Pankaj Bansal, CEO of PeopleStrong HR Services, said HR heads are tapping into their internal employee pool for recommendations on senior level positions because executive search consultants charge exorbitant fees of 30-35% of the candidate's CTC (cost to company). "There are firms that hire 60% of their employees through referrals," he said.
"The HR Fund plans to make two to three investments in the coming financial year with total investment base expected to be eight to ten investments across the next three years."
Utkarsh Joshi, Principal, The HR Fund for fundraising, investment strategy, operations, and governance aspects, Utkarsh has played a key role in managing the existing investments and operations of the fund while also scanning and analyzing potential investment opportunities.Utkarsh brings in the technical knowledge of valuation, capital raising, research, and financial modeling. Apart from human resources domain, he also commands expertise in sectors like financial services, food and beverage (F&B), real estate, hospitality, education, non-profit, and internet-based businesses, among others. Utkarsh started his career with a leading global major, Accenture, as Senior Software Engineer, where he worked in the areas of business intelligence and data warehousing, etc., and hence brings in the technical methodology and innovation spirit to his leadership activities at The HR Fund. After completing management studies from ISB, Hyderabad, he joined Cognizant Technology Solutions in 2007 as member of the business consulting unit which signified movement from a pure technology role to a functional consulting role.
The HR Fund is India’s first human resources (HR)-focused private investment company with an objective and vision to transform the HR entrepreneurship in India to a more organized and institutionalized industry. The fund’s unique strength lies in its dedicated focus on the HR sector, strong team with domain expertise, and wide-ranging network. The founders and investors of the fund are seasoned HR and business professionals with a track record of setting and scaling up HR businesses both in India and abroad. With a network spread across India, Singapore, and the United States, the company is a growth investor with functional expertise combining HR, technology, and finance. With increased usage of technology and innovative products across the HR spectrum, ventures in HR are turning into strong, stable, growth-oriented, and high-margin revenue businesses. Investors in the fund include some well-known and veteran HR sector specialists, CXOs, and entrepreneurs with a strong background in the space across several key industries.
Speaking with Yash Ved of IIFL, Utkarsh Joshi says “The HR Fund plans to make two to three investments in the coming financial year with total investment base expected to be eight to ten investments across the next three years. “
What is the scenario that you see for Indian HR product and services companies?
India’s human resource industry, dominated by talent acquisition in the form of recruitment, temporary staffing and executive search, has been growing at an estimated CAGR of 21% over the last four years and is now estimated at more than Rs 228 billion. (Report on Human resource solution industry 2012 by EY and Executive Recruiters Association).
Business friendly government policies and enhanced focus on creation of new jobs and development of relevant skills with maturing perception of several other human resource functions have been instrumental not only in strengthening the delivery by existing HR product and services companies but also encouraging several startups to venture with niche solutions to cater to growing demands by corporates. Increased hiring activities in the country would lead to increased need for other services in talent management, shared services, and related technologies for smooth and better servicing. Recent mergers and acquisitions (M&As) including traction of approximately $160mn in last few years and reports of companies like Teamlease and IKYA planning for initial public offers (IPOs) suggest a lot of scale and appetite for growth.
What outlook do you see for the global human resources outsourcing market?
According to reports, year 2013 has seen double investments in the HR technology space with approximately $34.5mn. Overall, in the last 10 quarters, almost $1 billion were invested in companies that solve real world problems faced in the HR and recruiting space. The successful IPO by Workday Inc. in 2012 and noteworthy acquisitions including those of SuccessFactors, Taleo, and Kenexa by SAP, Oracle, and IBM, respectively sparked interest in the HR space resulting in further mergers and acquisitions(M&As) and entry of new startups.
This momentum is expected to continue further leading to many international companies starting Indian operations or potential M&As with Indian players. The time is also ripe for many leading Indian companies to expand its global footprints especially in the Asian-Pacific region to start with. In line with global trends, the Indian HR market is set for high growth over the next few years, as a major chunk of large, medium and small businesses are expected to migrate from on-premise to software as a service (SaaS)-based HR products and services. The India cloud computing market is expected to reach $1.1bn by 2015, out of which SaaS alone is expected to be $650mn.
What are your investment plans?
The HR Fund plans to make two to three investments in the coming financial year with total investment base expected to be eight to ten investments across the next three years. The focus remains on niche solution providers in recruitment, HR technology, and learning & development sectors.
The HR Fund’s existing portfolio includes PeopleStrong HR Services Pvt. Ltd. (PeopleStrong) and People Matters. While PeopleStrong is a leading platform-based human resource outsourcing and HR technology company, People Matters is India’s leading HR knowledge and media platform. PeopleStrong has emerged as a preferred HR partner for large marquee clients and is taking an organic route to further growth and expansion. People Matters has achieved the distinction of becoming the single point of reference for any news and developments in the HR fraternity.
Which are the four segments that you are focusing on?
At present, The HR Fund looks forward to invest in growth potential organizations working in below areas
Recruitment or Hiring: With government of India’s increased focus on jobs and skills development and business friendly measures, the outlook for hiring looks positive, providing scope for new and competent recruitment companies to develop their business portfolio. There is a need for existing players to bring in innovative systems, technology, expand footprints, and be ahead of the competitors by implementing complaint measures. Recruitment market is moving beyond finding a suitable candidate to candidate engagement and right candidate experience ensuring a faster and uniform process. Corporates are increasingly outsourcing the entire recruitment functions to hiring companies, necessitating establishment of strong recruitment process outsourcing (RPO) capabilities.
Learning & Development: This integral function of the HR department has gathered increased attention over the years and corporates are increasingly partnering with solution providers to remain competent on productivity. Apart from innovative content for training, the key is also to align the training schedule, given the vast geographical and cultural spread that the organizations have. The need for learning and development spans across several processes of new employee induction, product training, sales training, and compliance training, among others. Monitoring and evaluation, subsequent reports, and re-training are also important.
Solution providers are not only employing innovative technologies like workstation-based training, use of mobile platforms like laptops, tabs and mobile phones, audio-visual and interactive content manual, real-time training but also things like gamification to engage the users in an interesting way and achieve desired results. Besides being effective, such solutions are a huge cost and time saver for corporates who do not have to employ trainers at different locations or fly the same trainer for a uniform training program. Such companies need innovative technological and creative systems to service the growing needs.
HR Technology and HR Analytics: Human resource departments are not behind other departments within the organization to embrace newer technologies and smoothen its several deliveries. It is no more seen as additional cost but a way to release the bandwidth for strategic functions by either incorporating the technology in-house or outsourcing it to competent players. Integration of technology platforms with existing ones or its modification, mobility, user friendliness, security of data, and integration with social media channels, etc. are the key selling points. Analytics and big data are also considered a way for the HR leaders to make inroads to the boardrooms and upscale to the level of strategic business partners.
Several small and medium companies are developing cloud-based technological platforms ensuring safety of data and working on customized solutions specific to industry, size and scale of company’s operations. Given the successful adoption of HR technology and analytics in the western world, HR and business experts consider them to be drivers of growth for HR functions in India. Increased innovation, research and development hold the key and hence need for investment in such companies.
What is the future of HR service sector in India and also about the industry?
The growing acknowledgment of contributions that various HR functions in companies across growth levels and industry sectors make has seen a paradigm shift in recent times. Organizations are aggressively working with competent HR solution providers to outsource the non-core and administration-oriented functions, thereby concentrating on strategic functions and partnering the business goals. Besides prioritizing strategic creativity and innovation to deliver HR roles, the increased adaptation of concepts like human resource shared services (HRSS), outsourcing, adoption of technological practices, analytics and social media to communicate with relevant stakeholders is facilitating the choice of HR leaders for business roles (CEOs), be considered for board positions, and venture into HR entrepreneurship.
The present HR space in India consists of a mix of freelancers, start-ups, small and medium players, as well as large Indian companies and multi-national companies (MNCs). The size of the HR space broadly categorized into temporary recruitment, permanent recruitment and other segments (non-core HR functions like payroll, interviewing, background verification, onboarding, training and induction, leave management, attendance management, and reimbursements applications, new age customizable software and technology solutions, etc.) Organizations are fast realizing the benefits of outsourcing non-core activities and focusing on enhanced value-added activities.
The search and recruitment market is expected to grow from Rs 29.5 bn in FY11 to Rs 62 bn in FY16 in low case at a CAGR of 15% and INR72 bn in high case at a CAGR of 20%. The temporary recruitment market is expected to grow from INR167 bn in FY11 to INR400 bn in FY16 at a CAGR of 19%. Recruitment process outsourcing (RPO) as a service offering is fast evolving significantly in India, wherein companies are increasingly adopting the outsourcing model to withstand competition. Besides focus on recruitment, HR solution space is concentrating on learning & development, and HR technology & analytics, among others.
What is the biggest challenge in India market?
The investment market is still in the nascent stage if compared to the west. The lack of dedicated structured platform for HR entrepreneurs in the country has been a key factor that has restricted the growth. Nonetheless, adoption of technology-based HR products and services has begun and there is substantial need for scaling up innovation, and research, etc. to service the growing needs. Corporates at different levels see the value associated with using HR products and services, presenting an untapped and underserved market as of now.
The HR Fund has domain experts to lead its unique functioning model including the identification process, equity infusion, mentoring, and growth chart for the investee companies. With notable growth & expansion and leadership position that both its investee companies (PeopleStrong and People Matters) have seen, it has become a fund of choice for entrepreneurs in the HR space in a short span. Though large sector agnostic funds are now also beginning to look at this space, The HR fund is an early mover in this space and has seen transactions gradually moving from HR services to HR products and more specifically towards technology. More importantly – the core network of the HR Fund consists of professionals who are veterans in the HR domain and have an in-depth understanding of the space. Our inputs at the board and strategic level, add a lot of value to all the companies that The HR Fund invests in.
What is the need for funding in the HR space?
The HR space has investment at all levels including seed fund, early stage, venture capital transactions, there are latest reports of planned IPOs by Teamlease and Ikya. Though the ticket size has remained small with respect to other industries, there is substantial scope for sustained returns for the investors and need for increased growth funds in the HR space, given the increased budget for HR outsourcing and other products and services.
The need for funding arises from the opportunity that exists. The Indian HR opportunity is huge and the market could still be considered to be in its nascent stage. Entrepreneurs in this space are still in the post seed, pre-venture capital(VC) stage and require growth capital to scale up for competitive advantages as there have been many international entrants in recent times. There is no dedicated setup with domain expertise which looks exclusively at this sector and the fund has systems in place to fill this gap.
In the last four years, nearly $160mn worth of transactions has taken place in the Indian market. Taking clues from global scenario of investments and mergers and acquisitions that follow, the Indian HR space would also lead itself to organic growth route, hence need for increased funds.
Who are your investors?
Investors in the fund include some well-known and veteran HR sector specialists, CXOs, and entrepreneurs with a strong background in the space across several key industries. The investors in the fund with rich experience across leading Indian and International brands are ardent about the evolving face of India’s HR industry, which is taking substantial clues from established global models and trends for growth and provide strategic direction to the fund.
At present, the fund has 23 investors who are senior professionals with HR, finance, and technology experience and dedicated approach to handhold potential businesses in the HR space to the next level of growth and expansion. The anchor investors in the fund include Dr. Santrupt Misra, CEO, Carbon Black Business and Director, Group Human Resources of the Aditya Birla Group; NS Rajan, Member, Group Executive Council and Group Chief Human Resources Officer at TATA Sons; Dr. Arvind Agrawal, President, Corporate Development and Group HR in the RPG Group; Pratik Kumar, President of Wipro Infrastructure Engineering and Member of Wipro’s Corporate Executive Council; and Govind Iyer, Managing Director, Egon Zehnder India, besides leading the private equity practice.
Prime Minister Narendra Modi has called for speedy reforms to make India a $20-trillion economy. India's GDP growth target for 2014-15 is 7.5 per cent. But the 2012-13 Economic Survey said that total employment grew by just 1.6 per cent per year from 1999-2000 to 2009-10 in spite of the growth. As such, it cannot be debated that for sustainable growth, it is important to have right human resources at the right place and at the right time.
There have been positive sentiments of growth and development and change in job outlook ever since the Narendra Modi Government came to power in the parliamentary elections of 2014 with full majority.
"The business friendly measures and ease of working has percolated to the job market with positive and increased hiring estimates across industries. Whether it is the 'Make in India' campaign, focus on skill development of youth, reducing inflation numbers or buzz around rate cuts by RBI, India's growth story will strengthen," Utkarsh Joshi, principal, The HR Fund, told TimesJobs.
Joshi expects the vibes surrounding the market to have a positive effect on the human resource (HR) solution industry as well.
Today, the industry not only manages the matchmaking of talent with jobs available but also contributes towards talent management processes with innovative technology in a compliant and secure environment.
The industry that works hand-in-hand with companies and provides customised solutions to boost growth and increase quality of life at workplace wishes for the following six things from this year's Union Budget:
The HR Fund, country’s only HR-focused private investment company, is looking to close at least 2-3 deals in the coming year.
The company is having discussions with 4-5 companies in the HR Technology (product) space, however it is too early to take specific names but companies are in the recruitment technology and L&D Technology space, said Utkarsh Joshi, Principal, HR Fund.
With a corpus of R50 Cr, the company is looking at funding start-ups specifically in the recruitment, learning & development and HR Analytics space.
The fund is backed by a host of investors from the HR domain including Santrupt Misra, CEO, Carbon Black Business and Director, Group Human Resources of the Aditya Birla Group; NS Rajan, Member, Group Executive Council and Group Chief Human Resources Officer at TATA Sons;.Arvind Agrawal, President,Corporate Development and Group HR in the RPG Group; Pratik Kumar, President of Wipro Infrastructure Engineering and Member of Wipro’s Corporate Executive Council.
The fund has a total of 23 investors.
The fund’s existing portfolio includes PeopleStrong HR Services Pvt. Ltd. (PeopleStrong) and People Matters. While People Strong is a platform-based human resource outsourcing and HR technology company, People Matters is a HR knowledge and media platform.
The Gurgaon-based fund is founded and promoted by VarunTalwar, serial entrepreneur and Founder of the Withya Group and PankajBansal, Co-Founder and CEO of PeopleStrong.
Utkarsh Joshi, Principal at the company is primarily responsible for fundraising, investment strategy, operations, and governance activities.
The positive sentiments of growth and development and change in job outlook has been charting at the top ever since the unprecedented...
Development of human resources and knowledge capital is the key while budgeting for growth. Human resources are required to engage in continuous research and development and also monitor the quality and infrastructure, thereby increasing the productivity vis-à-vis investments.
The positive sentiments of growth and development and change in job outlook has been charting at the top ever since the unprecedented mandate to the Modi government in the parliamentary elections of 2014. The business friendly measures and ease of working has percolated to the job market with positive and increased hiring estimates across the industries. Whether it is the ‘make in India campaign’, focus on skills development of youth, reducing inflation numbers, or buzz around rate cuts by the apex bank, India growth story is here to strengthen further.
In order to complement the rising potentials, it is important to improve the delivery. India needs not only skilled manpower to drive the growth but also competent and committed business managers and leaders including the top management in every sector with domain knowledge and expertise to leverage available channels of stakeholder management and bring ways to harness the power of technology to facilitate business goals. Development of human resources and knowledge capital is the key while budgeting for growth. Human resources are required to engage in continuous research and development and also monitor the quality and infrastructure, thereby increasing the productivity vis-à-vis investments.
Though India is a two trillion economy, according to a recent report by United Nations, approximately 30 crore Indians still live in extreme poverty. Prime Minister Narendra Modi calls for a top speed reform to make India a $ 20 trillion economy. India’s GDP growth target for 2014-15 is 7.5%. The International Monetary Fund says India will grow at 7.6% and surpass China. The economic survey 2012-13 found the total employment in the country grew by just 1.6% per year from 1999-2000 to 2009-10 in spite of growth boom. It cannot be debated that for sustainable growth fundamentals, it is important to have right human resources at right place and at the right time frame.
At The HR Fund, we expect the budget to have a positive effect on the human resource solution (HR) industry, which manages not only the matchmaking of talent with jobs available but also has started contributing significantly towards the entire talent management processes with innovative technology in a compliant and secure environment. The industry works hand in hand with the companies and provides customized solution to boost growth and increase quality of life at workplace. This goes without saying that the various HR functions increases the employees’ experience, motivation, and productivity, besides saving key time and money resources for the company.
Utkarsh Joshi, principal, The HR Fund, a private investment company, with dedicated focus on the HR segment, said, “The budget is expected to be pro-business and should lead to an upswing in hiring across multiple industry sectors. This would strengthen the already positive hiring sentiments across industries as several estimates and job outlook reports suggest a strong increase in hiring over last year.”
With the government’s ‘Make in India’ drive, the manufacturing sector is estimated to see a strong demand for manpower to achieve competitive advantages. Other sectors like BFSI, aviation, retail, e-commerce, and IT/ITES should also see introduction/extension of business friendly policies leading to increased hiring. Explaining the HR solution industry ecosystem, Utkarsh said, “Increased hiring will translate into increased demand for talent acquisition and talent management products and services in India. The recruitment pass-through revenue will go up and the increase in employee numbers will push up expenditure for human resource management services (HRMS).” Additionally, besides increase in HR outsourcing, products and services for management/retention of the best talent would be adopted among other things, leading to robust growth of the HR industry, added Utkarsh.
Announcements around skill development and labor norms are expected as well. Apart from strengthening the workforce, positive measures in these areas would further open up the industry with an increased number of players in skilling and compliance sub–domains.
This environment would help start-ups in HR segment flourish with niche product and service lines and would require to remain competitive with a structured growth plan including timely expansion, investments, and research and development, among other business measures.