The Future of Work is in Emerging Markets

For many US and European companies and investors focused developing technologies and training for the future workforce, staying at home seems like a sensible option.  After all, the US and Europe both have thriving, sophisticated education and labor markets within a supportive venture capital and private equity environment.  But in a world where rising working-age populations, educational achievement levels and productivity increases will largely be driven by Asia, Africa, and Latin America, a domestic strategy has serious limitations.

Let’s start with a few macro data points:

  • Growth in resident US population is expected to decline through 2050 when the population will increase by less than 0.5% per year. So unless American resident families suddenly begin to show higher fertility rates and super-size their households, or allow massive and continuous immigration, the US will not represent a particularly high-growth and dynamic labor pool.
  • Europe is also aging and anticipates a more educated but declining labor force according to individual country projections through 2053.  Immigration has limits there as well, and the eurozone’s current growth rate is already hampering youth unemployment in member countries.
  • Outside of these two regions, the demography and labor force picture across emerging markets looks vibrant.  Projected high-growth education achievement levels, scope for future productivity gains, and increased technology adoption geared toward the workforce are all trending positive, driving a projected 4 billion+ working age population by 2050, with Asia and Africa leading the way.

This is not to say that so-called future of work companies and investors targeting the US, Eurozone or other developed regions don’t have room to thrive.  Rather it’s that these markets will soon be a sideshow to the rest of the world in terms of scale, investment and profitability. Yet very few Western enterprises in the education and workforce sectors, public or private, have a coherent, sustainable and sufficiently aggressive strategy, assuming they have one at all.

Tracking Future of Work Investments

To understand these investment trends in more detail, I analyzed approximately 245 individual companies operating along various sub-segments, including career navigation; interest and skills inventory/assessment; labor markets and workforce alignment; job search; learning and training; and productivity technologies.  Many of the companies surveyed are industry leaders or otherwise competitive and well-known brands.  I eliminated early start-ups. I focused on investments and M&A transactions as opposed to non-equity strategic partnerships because invested capital often signifies deeper commitment and more pro-active expansion, as well as enhanced ability to localize within target markets.

The results of this initial data–the start of what I’m calling the Future Work Investment Graph (FWIG)–tells us that most competitors in the future of work arena have little if any global footprint.

To summarize:

  • There were 73 transactions initiated by 28 companies. This suggests that less than 12% of sample companies were active at all in M&A and related investment activities beyond their borders. 
  • Geographic scope was narrow.  It was also heavily trans-Atlantic.  25% of cross-border transactions were targeting US companies (mainly from European buyers), followed by 24% targeting Europe (mainly US buyers). By contrast there was much less activity in the world’s largest labor markets such as Brazil, China, India and other countries across emerging Asia. Never mind that these countries most significantly define the future of work for the planet (granted, some investments into US and EU were into multinational platforms, but even these transactions were relatively few).
  • Acquirers were highly concentrated. Recruit Holdings (Japan), Randstad (Netherlands)and Seek (Australia), all operating within the job search and HR segment, were the most active acquirers by a long shot, securing 8, 8 and 12 deals respectively.  To cite two examples, Recruit acquired or invested in several market bellwethers (Indeed, Simply Hired, Udacity) in a span of 3 years while SEEK was the most acquisitive with local brands, consolidating its presence across China, India, Brazil, Mexico and South Africa, among other countries.
  • There was very little consolidation or expansion within workforce technologies such as employee productivity, AI applications, assessments and retention. This is odd, given the significant activity of start-ups and growth companies in these segments within regions such as emerging Asia. 
  • Finally, US-based businesses that match university students with internships and work are with a few exceptions such as Symplicity (itself acquired by Brazilian investors and only then turning toward Brazil), largely absent from international markets. This, of course, despite of the rapid rise of international student and work mobility.  Included here are companies such as WayUp, Handshake, and AfterCollege, not to mention the company I’m recently affiliated with, VersatilePhD.

The two charts below focus on the geographic direction and concentration of these investments and acquisitions by country and type.




Strategic Implications?

This contrast between rapidly growing education, technology and labor pools across emerging markets and the reticence of US and European competitors–including start-ups–to make big bets outside of their crowded home markets will have adverse consequences.  Opportunities will be lost.  At minimum they will become much more expensive to execute once the Board finally decides it’s a Go.  I’ve seen this film many times.

More importantly, as labor and education markets around the world face growing challenges, local competitors will not be waiting around for help from Western investors or technologies.  They will deepen the localization of content and technology platforms as well as their ability to provide innovative solutions across regional or global labor markets.  Those operating where the future of work is actually being defined, and tested at scale, within emerging economies, will thrive.  The rest can stay at home and watch.


Further reading:

Talent, Training and AI: How Asia is Emerging (again) as the World’s Laboratory

Next in Emerging Markets:  A Jobless Future


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