It is a good time to be a startup in HCM technology. With new investment, new priorities, and a new focus on the experience, this market presents some exciting opportunities. In fact, according to CB Insights, the amount of investment in this industry has increased from $400 million in 2012 to just under $2 billion last year. The investment and opportunity seems so promising that entrepreneurs from all walks of life are entering this market with new solutions that promise to change talent and workforce management. Sounds great. Yet “new” is not always better in the world of HCM and companies need to be cautious when investing in startups.

Below are a few questions to consider:

  • Financial Viability: Some startups have every intention of becoming a leading provider in the market with staying power. They are passionate about the work they are doing and the value they provide to your company. Other providers are just hoping to get acquired. They have an exit strategy, and it doesn’t include helping you achieve your goals. When considering startups, you want a provider that is going to be around in the next few years and will partner with you around your unique needs.
  • Integration: Startups don’t always understand the complex HCM ecosystem and how important integration is to corporations. You should consider providers that integrate with more than your HRMS and have a willingness to learn and connect with many partners.
  • Deep Domain Expertise: Startups don’t have to be experts in everything HCM but they should have a strong understanding of their market. They should partner with clients to build out their expertise and be flexible to new challenges that come up. According to Aptitude Research Partners, 56% of companies are investing in providers that can demonstrate deep domain expertise in talent acquisition.
  • Budget: It is easy to get excited by something that is new, but you need to make sure that the startups you are considering align with your HCM budget. Is this something you will need to get buy-in for, or can it replace some of your existing technology?

Investing in a startup can be a positive thing for your company. It can help you reimagine the way you are attracting talent, engaging talent, or even providing benefits. Startups can take your HCM strategy to the next level – but you still need to be judicious about the providers you are considering. You need to ask the tough questions. Sometimes “new” is nothing more than new. Solutions should provide greater efficiency, a strong experience, and a willingness to partner with you as you face challenges.