Venture capitalists poured $6.24 billion into work technology companies in 2025, marking a 31% jump in average deal size, even as pending lawsuits against industry leaders Workday and Eightfold AI threaten to reshape how artificial intelligence can legally be deployed in human resources.
The end of ‘algorithm as an alibi’
The collision between record investment and mounting legal scrutiny represents what George LaRocque, founder of global advisory and market intelligence firm WorkTech, calls the end of “algorithm as an alibi” for HR decisions.
“The $6.24 billion in VC we tracked in the 2025 report is now on a collision course with regulatory mandates,” LaRocque says. “The focus is shifting from what can the AI do to how does the AI prove it is fair?”
The market tracked 193 deals across 31 countries, according to WorkTech’s annual Global Work Tech VC Report. The U.S. led with 88 deals, followed by the U.K. with 24 and India with 10.
The year included 17 mega-rounds valued over $100 million, up from 14 in 2024.
Rippling‘s $450 million Series G led the pack, reinforcing investor appetite for all-in-one HCM platforms that promise to consolidate HR functions. Other major deals included isolved’s $350 million secondary market round and Deel’s $300 million Series E.
Read more | Eightfold suit highlights the legal risks of AI in hiring
Algorithmic decision-making ‘on borrowed time’
But AI-driven platforms may create concentrated legal exposure, LaRocque warns. When one system makes algorithmic decisions across compensation, performance management and internal mobility, each function becomes a potential compliance failure point.
“Black boxes are hiding in plain sight across the entire HCM and talent management stack,” he says. “From automated performance scoring to sentiment-driven retention models, the enterprise is currently operating on algorithmic assumptions that are becoming massive legal liabilities.”
The pending class-action suits against Workday, which allege age discrimination in hiring algorithms, and Eightfold AI, which center on Fair Credit Reporting Act violations and what plaintiffs call hidden dossiers on job candidates, could set precedent that force wholesale changes in how AI tools are built and deployed.
The 2025 market showed continued fragmentation despite consolidation at the top. Deals spanned 44 different subcategories, up from 39 in 2024, as investors sought niche AI-native solutions in areas ranging from compensation intelligence to agentic sourcing.
The early-stage pipeline remained active with 72 seed rounds generating $364 million total, an average of $5.05 million per deal. But the capital concentration at the top was stark. The 17 mega-rounds accounted for a substantial portion of the year’s total investment.
“This isn’t just a brewing talent acquisition problem,” LaRocque says. “Make no mistake, this is enterprise-wide. Every function that relies on algorithmic decision-making without transparency is operating on borrowed time.”
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