In announcing the news Monday, September 29, Authoria also said the buyer, Bedford Funding, will make an additional $8 million investment in working capital “to enhance Authoria’s overall corporate growth.”

Tod Loofbourrow, founder of Waltham, Massachusetts-based Authoria, will continue to lead the firm as CEO.

“Authoria is a platform for building the first billion-dollar company in talent management,” Loofbourrow said in a statement. “Our partnership with Bedford brings us an investor well-matched to the size of the market opportunity before us and enables us to accelerate our next phase of growth.”

The deal is another sign that private equity firms are keen on human resources software, which is growing quickly thanks to factors including fears of a talent shortage. In fact, AMR Research reported that in 2007, the HR software market grew a faster-than-expected 13 percent to $7.2 billion.

Last year, Chelmsford, Massachusetts-based HR software vendor Kronos agreed to be acquired by private equity investors for about $1.8 billion.

Bedford Funding, based in White Plains, New York, is a private equity firm with $800 million in available capital.

Authoria focuses on talent management tools, which refer to software for key HR tasks such as employee performance management, compensation management and recruiting. Talent management vendors tend to pitch their wares as integrated “suites” of software, which can allow organizations to gain greater insight into their workforce and reduce the complexity of their software systems. Research firm Bersin & Associates estimates that spending on integrated talent management suites is growing 20 percent annually and should reach $2.3 billion this year.

Authoria faces stiff competition from the likes of SuccessFactors and the big guns of HR software, SAP and Oracle.

Still, Authoria is among the most well-regarded competitors in talent management. Last year, Authoria won a showdown of talent management vendors at the annual HR Technology Conference & Exposition in Chicago. The Waltham, Massachusetts-based firm beat three rivals in an audience-decided contest to see who best connects recruiting and performance management applications. Authoria’s win followed the firm’s victory three years ago in a similar “shootout” among vendors that sell compensation and performance management software.

A Forrester Research study last year of 10 integrated performance and compensation management products named four leaders: SuccessFactors, Softscape, Authoria and and Plateau Systems.

Authoria said bookings in the second quarter of 2008 grew 93 percent year-over-year. Its customers include Aetna, Intuit and Starbucks.

“Bedford Funding chose Authoria for the company’s impressive enterprise customer base, the breadth and depth of its new Authoria Talent Management solution, demonstrated leadership in meeting the needs of the world’s largest employers, and the stellar management team,” Charles Jones, managing partner of Bedford Funding, said in a statement.

—Ed Frauenheim

Correction: October 22, 2008

Forrester’s 2007 study of 10 integrated performance and compensation management software products initially concluded there were three leaders: Authoria, Softscape and SuccessFactors. Later, Forrester corrected its report, saying there were four leaders: Authoria, Plateau Systems, Softscape and SuccessFactors. This story did not reflect the conclusion of the updated report.