“I almost used the word ‘rebound’ when I was writing some stuff. Maybe I did use it. I was hesitant, though, because I feel like this market, speaking globally, including the economy, everything is just really confusing right now. It has been for a while.”
That’s how George LaRocque opens our conversation on this episode of Work Tech Weekly, and, honestly? Same.
George is the founder and chief analyst at WorkTech (the research and advisory firm, not this podcast … yes, I know it’s confusing.) He’s also an old friend and fellow Work Tech numbers nerd. In this episode, we are breaking down his 2025 Work Tech investment recap because he has some of the best research and clearest views in the industry on what’s happening beneath the surface of Work Tech: where investors are placing bets, where buyers are actually spending, and which companies may not survive this cycle.
From an investment perspective, the Work Tech market in 2026 looks … oddly healthy. The charts are trending up, capital is flowing again, and 2025 clocked in at $6.24 billion in funding — the third-biggest year the sector has ever had. On paper, it’s momentum, if you’re brave enough to say it out loud.
But founders? Raising money today is like trying to sell a timeshare during a recession — technically possible, spiritually devastating.
You can’t blame founders for their lack of happy vibes about this market. Capital is concentrating into fewer, later-stage bets. Investors like the mission-critical stuff — payroll, benefits, core HR, compliance-heavy platforms — and everyone else is left doing the startup equivalent of scavenging for loose change under the couch cushions.
The disconnect is psychological and structural: Investors see stability, founders feel selectivity. Raising isn’t about having a cool AI story anymore — it’s about adoption, ROI, survival. George nails it: “Never before has adoption been so tied to your ability to exit or raise capital.”
So yeah, the market is up.
It just doesn’t feel that way if you’re the one pitching.
We dig into today’s somewhat paradoxical and often contradictory Work Tech investment dynamics and hope this episode brings some clarity.
The big headline from George’s report is that the rebound is real but unevenly distributed.
Investors are placing fewer, bigger bets. Mega-rounds are back, but they’re mostly flowing to companies that already look inevitable. Also, investors are comfortable making big bets when the category feels, as George puts it, non-optional.
“We had 17 mega rounds that were worth $100 million or more,” he says. “There are two things there. One, investors are more comfortable making big bets on established players because those are later stage…. The other thing it reflects is investors looking at our space: They like core HR, they like benefits, they like HR platforms, they like... those are the things in our market that sound like must-haves, and they're highly compliance-driven.”
Not all the money is floating to the top. There were 72 seed rounds and that doesn’t include the many pre-seed rounds, George says. “So, while the average deal size there came down in the seed rounds from $5.4 (million) to $5 (million), that's still good news because where it was up by 25% or something, volume-wise. So I think I was surprised at some of the momentum and some of those signals.”
Still, fundraising dynamics are way off-kilter. Capital isn’t flowing as freely as it once was. Lots of companies find they can’t count on the boost to get to the next stage. “Now, unless you're focused on an area where, for the employers, there's a real clear line to an ROI … they're not buying.”
This is a market shift that has mattered most: Adoption isn’t just growth — it’s survival. George notes that it’s never been more true that a company’s ability to raise or exit is tied directly to whether buyers are actually pulling the trigger.
The result: A lot of acid reflux and sleepless nights for founders because traction is hard to come by. George explains that buyers will pilot your solution. “What's happening now is even where there are good results on those pilots, they're not converting as rapidly as they used to in pre-AI days,” he adds. “We've got a use case, we've got a test, here are the metrics, here's what success looks like. Look at that, we made it happen, but we're still not going to pull the trigger.”
Why? Fear of making a mistake. Buying committees are slower, trust is lower, and nobody wants to be the person who bought the wrong AI product right before the next restructuring. That’s a one-way, non-stop ticket to Layoff City, Population: You.
If you are looking to follow the money in Work Tech, “transformation” is out; “boring” is where it’s at. Delivering solutions to boring, expensive pain — the stuff companies have to fix — is where you want to be.
George’s take is pretty blunt: investors are chasing categories where there’s real waste, real transactions, and real ROI. White-collar solutions have saturated the market for most of the SaaS era. Non-office occupations got ignored. Now the pendulum’s swinging hard. That’s why so much energy is going into frontline recruiting and high-volume hiring, where automation can actually move dollars, not just deck slides.
Then you’ve got the broader frontline stack: shift scheduling, workforce management, and the operational plumbing that never went viral on LinkedIn but runs the real economy. Same story in benefits administration — a compliance-heavy mess with awful employee experience and a lot of cost sitting in plain sight. “Those are the things in our market that sound like must-haves, and they're highly compliance-driven,” he says. “So there's a lot of risk if you don't have the right tech in those categories.”
George also flags an emerging opportunity in skilled trades and early career talent solutions, basically the parts of the labor market we’ve ignored for a decade. “We've had vendors dabble in here or there, but we've never seen it emerge as a true category in our space,” he adds. “It's really tough for college students right now and folks two to three years out (of school.) I think we're going to see some innovation there.
And maybe the most interesting frontier: The collision of payroll, payments, and FinTech, where Work Tech starts looking like banking with better UX. “I keep reading that Return to Work is where it is, and just forget the remote workforce and all of that. Yet Employer of Record solutions are... nobody seems to care that Deel’s entangled in a massive espionage lawsuit. They're just raising money.”
Inside the tech bubble, everyone is agog about agentic AI. And, sure, the promise sounds interesting. But in the real world — where HR teams still can’t get an RFP converted without three committees of propellerheads straight out of Mission Control from the Apollo 13 movie — adoption runs into much messier friction.
Skepticism is high. Compliance teams are nervous. Governance is mostly good intentions right now. In this environment, George makes the point that the bottleneck isn’t innovation — it’s lack of institutional confidence. And that dynamic is stacking the deck in favor of incumbents and legacy brands.
“All that hesitancy really helps the platforms because they've got more time to look, more time to think about build-buy-partner, test out some partnerships, test out some integrations,” he says. “You've either got to have the breadth of solution, which means you've got a lot of data to capitalize on for that AI. Or if you're a point solution right now, even the most agentic of point solutions, it's a tough time because the platforms are moving quicker than ever.”
Bottom line: The next phase of Work Tech AI won’t be won by the coolest agent. It’ll be won by whoever earns trust.
Don’t expect anything vastly different than 2025. As we mentioned above, capital is still doubling down on the big, inevitable players, and early-stage experimentation is creeping back. Some of this new interest is investors looking for the cheapest place to make new bets — especially as AI reshapes workflows and creates openings for entirely new categories.
“Last year there were a lot of headlines, a lot of stories about VCs going earlier,” he says. “That's a signal to me that says there are these opportunities. I take less risk, I get in earlier, I'm able to get my fingerprints on that company and set them up for that next stage sooner.”
But the middle? Brutal. Too small to be a platform, too big to be a scrappy startup, and increasingly stuck in the churn zone. George also points out what I would characterize as a significant lack of imagination in the investment ranks for this segment of the market.
“I get frustrated with some private equity firms that they talk a good game about, ‘We're not concerned about the size anymore, it's more about the fit.’ But I haven't seen any triggers get pulled yet when it comes to making that. ... At the end of the day, once they go to put their money on the table, they're looking for EBITDA, they're looking for traction and growth.”
George also expects more acquihires, tuck-in M&A, and quiet consolidation — less headline-grabbing IPO energy, more “strategic addition to our portfolio” energy. He’s also watching for unexpected buyers from adjacent industries: fintech, insurance, payments, vertical SaaS. Because once you zoom out, payroll starts looking less like HR software and more like a financial rail.
“I feel like there's this push around pay to align payroll and payment and then lay a little financial wellness over that,” he says. “And there are players that might look like banks, they might look like insurance companies, it might look like everybody.”
In other words, Work Tech is slowly turning into Work Finance — whether HR asked for it or not.
George closes with a take that lands like a polite indictment: Too much of Work Tech right now is being built and funded by investors and strategics obsessing over TAM math, comp grids, and exit multiples like they’re doing CSI: Series B. The models are pristine. The decks are immaculate. The customer reality? Slightly optional.
And in a tighter market, that gap matters.
“There are a lot of strategics and a lot of investors that I think would get a lot out of getting out into the market with some folks that are actually in the market,” George says. “And I love the MBAs with the spreadsheets and the armies of corp devs that can run a model better than anyone in Excel. But I think right now there are a lot of really interesting opportunities out there in the market and there's a lot of time being spent looking at the forensics and not of the deal and not really looking at the rubber’s meeting the road around the dollars and cents. And maybe that's the way it's always going to be, but I think somewhere along the way, the gaps in the product and the strategic opportunities to solve problems for customers are going by the wayside a little bit.”
Because when capital isn’t free and buyers aren’t impulsive, you don’t win by being the cleanest story on paper. You win by being uncomfortably close to the actual mess.
George’s point is simple: The market doesn’t need more “AI-powered workforce optimization blah blah.” It needs tools that solve real problems for real humans inside real organizations — the ones drowning in compliance, understaffed operations, and broken systems duct-taped together since 2012.
The next wave of winners won’t be the companies with the slickest narrative.
They’ll be the ones who understand the pain — and stay close enough to actually fix it.