Workday, Deel, and The Future of Core HR

Musical accompaniment for this week’s newsletter. The popular kids’ table in the HR Tech/Work Tech lunchroom has long been occupied by the HCM/ERP/Core HR brands like UKG, SAP, Oracle, Paychex, ADP, and other traditional brand powers. Of course, the coolest kid in the SaaS Era has been Workday. For almost 20 years, they have been The Brand, the one with the rizz, as the kids say. It was bulletproof.

That run came to a screeching halt this week when it announced a layoff of 8.5% of the workforce (1,750 employees). The company is rebalancing as it shifts its focus to innovation and competitiveness in the AI Era.?

In unrelated but completely related news: Deel announced that new anchor investors have purchased close to $300 million in secondaries from early investors. Deel, a YC graduate in 2019, also said that it has achieved a run rate of $800 million as of December 2024, growing 70% year-over-year. The business has been profitable for more than two years. (Translation: We’re gonna be down at the Ferrari dealer and <mike drop>) Seems like the EOR table is kind of the place to be. Great news for the Gustos and Ripplings of the world.

But, in a world of accelerating disruption, it’s saying what’s rapidly becoming the catchphrase for 2025: Don’t get too comfortable. A few trends that will disrupt the HCMs, EORs, and legacy codebase powers that be:

1. AI. I mean, what else did you think I would lead with? But, as crews of AI agents become easier to deploy and dial in for your specific use cases. That’s especially true because of …
2. Embedded everything. Embedded payroll solutions (Check, Zeal, Salsa) are just the start. Expect more key functionality to go the embedded route.?
3. API players. Finch, Merge, Pinwheel, and others are making enterprise software more plug-and-play.
4. Vertical SaaS. Industry vertical players with scale (ServiceTitan, Arcoro, Restaurant365), along with upstart hyper-targeted niche players (see Trayd below), will make more sense for more employers than a one-size-fits-all HR platform. Expect the big brands to make more plays like ADP’s investment in services/hospitality SaaS player Harri.

Don’t get me wrong. Workday and other power brands will still have a future in enterprise software. However, the category hegemony these brands have enjoyed for the past 15 or so years is unlikely to continue. It’s helpful to expect this stage of the AI Era market cycle to be more like where the SaaS Era was in 2003 – myriad point solutions leading with features and functionality beginning to evolve into new market categories and carve out more strategic market positions. Get ready.

What else is going on this week?

OpenAI launches Deep Research

What’s an industry leader to do after an upstart steals your thunder like DeepSeek did? Hey, let’s launch a new product. Check out this take from Stacia Sherman Garr at RedThread Research to see what it means.

Micro Podcast Ep. 81: Damon Klotz

In Ep. 81 of Micro Podcast, Matt Tatum interviews Damon Klotz , who was the first marketing hire at Culture Amp a decade ago. Damon is now leveraging his experience to help B2B companies tell their stories and build communities. WATCH NOW

Funding and Acquisitions

• Paradox acquires eqtble (Acquired by Paradox) . The Scottsdale-based Conversational AI for recruiting power brand acquired a leading people analytics platform with a robust data model and analytics engine that can offer relevant, accessible insights. Deal terms were not disclosed. (Press Release)
• ElevenLabs raises $180 million Series C. The Warsaw, London, and NYC-based research company specializes in text-to-speech and AI voice generation. (FinSMEs)?
• ADP acquires PEI. The Mexico City company has been operating in the market for 30 years, offering robust domestic payroll solutions, HCM expertise, and technology to local businesses, and has been a valuable ADP Global Payroll partner since 2009. (LinkedIn)
• Swan raises $43.7 million Series B. The French fintech startup provides embedded banking solutions through APIs, including HR use cases. (CB Insights)
• Riot raises $30 million Series B. The NYC-based startup offers an employee-focused cyber-protection software platform. (TechCrunch)
• Khazna raises $16 million Series A. The Cairo, Egypt, startup offers financial solutions to employees through a mobile app that allows them to access a portion of their earned salary as needed. (CB Insights)
• Tana raises $14 million Series A. The London/Palo Alto startup is developing a workspace that naturally integrates AI into everyday work. (FinSMEs)
• Final Round AI gets $6 million seed round. The San Francisco startup’s Interview Copilot delivers real-time AI-powered insights and answers during interviews, redefining the preparation and execution of job searches. (Press Release)
• Zelt raises $6 million seed round. The London people operations company offers employee onboarding, payroll, benefits management, time off tracking, performance reviews, and IT asset management, all integrated within a single system. (CB Insights)
• Trayd: Construction Payroll raises $4.5 million seed round. The NYC-based startup offers a payroll and compliance software platform designed for specialty contractors in the construction industry, providing scheduling, field tracking, HR, and accounting tools. (FinSMEs)
• Semeris - Legal AI for Finance raises $4.3 million. The London startup is a finance-focused legal AI company. (FinSMEs)?
• SquarePeg raises $3.5 million seed round. The Salt Lake City startup develops AI screening tools for lean recruiting teams.? (Press Release)
• Cauridor raises $3.5 million seed round. The Delaware startup offers services such as cross-border payments, payroll processing, merchant collection, bulk disbursement, and white-label solutions via APIs. (CB Insights)
• banca.me (Techstars '23) raises $3 million. The Chilean startup offers individuals and employers financial wellness solutions. Deal terms include $2 million in debt and $1 million in seed funding. (CB Insights)
• Doctor's Prime raises $2.5 million Series A. The Tokyo company focuses on healthcare staffing and digital learning resources for medical practitioners. (CB Insights)
• Wilson raises $2.2 million in venture funding. The Berlin startup specializes in workforce management solutions. (CB Insights)
• Kahuna gets line of credit. The Houston-based skills management platform automates the curation, assignment, assessment, and gap analysis of skills and competencies for workers. Deal terms were not disclosed. (CB Insights)
• 15Five acquires Kona . The performance management platform adds an AI-powered assistant and coach for remote managers. Deal terms were not disclosed. (Press Release)
• Leading Mark raises Series E. The Tokyo company develops online HR platforms. Its platforms include Recme, a mobile job-hunting app for students, and AImeets, a job-matching platform based on personality analysis algorithms. Deal terms were not disclosed. (CB Insights)

The Big Number

Percent of employees who believe that within two years Gen AI will change 30% or more of their work according to new McKinsey research.

Industry Notes?

• The 401(k) has reached a tipping point in its takeover of American retirement. (Wall Street Journal)
• OpenAI to make its Super Bowl ad debut. (Wall Street Journal)
• Fewer Americans are quitting their jobs. (Wall Street Journal)
• DailyPay and goHappy partner to offer earned-wage access to frontline workers. (Press Release)
• Merge announces partnership with Gusto to build approved intergrations. (Press Release)
• BetterComp partners with Compa to combine offer data and survey benchmarks in one platform. (Press Release)
• G-P delivers AI advancements across EOR products. (Press Release)
• Envoy introduces Virtual Front Desk Mobile. (Press Release)
• Staffbase launches next-generation email solution to transform employee communications. (Press Release)
• Earnings: Coursera reports posts net revenue loss for FY 2024, announces new CEO Greg Hart. Dayforce reports solid Q4, FY2024 results. Manpower Group reports mixed results.?
• Paylocity unveils recruiting innovations for high-volume hiring. (Press Release)
• Layoffs: Asana (100 employees/ND), Okta (180/3%), Salesforce cuts 1,000.
• Venture debt lenders will play a big role in the fire sales and startup shutdowns this year. (TechCrunch)

WATCH: Work Tech Funding 2024 Recap

?? Where did all the funding go in 2024? TL;DR: AI is big, but smart money is flowing into where AI meets everything else. WATCH NOW!

ICYMI: Last Week’s Top 3 Reads

The three most-clicked links from the previous Work Tech Weekly:

1. Is DeepSeek an extinction-level event for venture capital? (Axios)
2. They invested billions in AI. Then the script flipped. (The New York Times)
3. What an insomniac knows: What’s really going on when you can’t power down. (The New Yorker)

Around The Shop

Stuff we’re finding interesting right now at TSC.

• 5 ancient habits from Socrates to help you think more adaptively. (Fast Company)
• Why microinfluencers are gaining traction in B2B marketing. (Diginomica)
• 6 lessons for startups from a museum dedicated to failure. (Harvard Business Review)
• Americans are falling out of love with relationships. (The Atlantic)

That’s it for this week!?

Everybody love everybody,

Steve

P.S. Let’s meet. Are you a #WorkTech or #EnterpriseSoftware company with more than $10 million in revenue or funding that wants to accelerate your growth? Book a meeting with us to discuss how we can improve your go-to-market strategy and execution.

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