Zenefits

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YourPeople, Inc.
Zenefits logo.png
FoundedFebruary 18, 2013; 5 years ago (2013-02-18)
Area servedUnited States
CEOJay Fulcher
IndustryHuman resource management
Revenue
  • Increase US$43.5 million (2016)[1]
  • Decrease US$7.8 million (2015)
  • IncreaseUS$20.0 million (2014)[2]
  • US$1 million (2013)
Websitezenefits.com

Zenefits is a company based in the United States that offers cloud-based software as a service to companies for managing their human resources, with a particular focus on helping them with health insurance coverage.[3][4]

Zenefits was founded in 2013 by Parker Conrad. It is headquartered in San Francisco[5], with offices in Tempe[6], Chicago, Atlanta, Vancouver[7], and Bangalore.

History[edit]

2013–2015: Founding[edit]

Zenefits was started by its ex-CEO Parker Conrad and Laks Srini to help startups and small businesses find insurance quotes and manage employee benefits in one place. It officially launched on February 18, 2013.[8] In 2014, the company announced the addition of commuter spending, flexible spending, and 401(k) support in an attempt to replace the more mundane functions currently handled by companies' human resources departments.[9] The company also announced support for stock options in its cloud HR platform.[10]

2016: Legal troubles and CEO resignation[edit]

In 2016 an internal legal investigation at Zenefits found the company’s licensing was out of compliance and that Parker Conrad, co-founder and former CEO, had created a browser extension to skirt training requirements for selling insurance in California.[11] After self-reporting these issues, Zenefits hired an independent third party to do an internal audit of its licensing controls and sent the report to all 50 states.[12] The California Department of Insurance as well as the Massachusetts Division of Insurance began investigations of their own based on Zenefits’ report.[13][14] Parker Conrad resigned as CEO and director in February and COO David O. Sacks was named as his replacement.[15] Shortly after becoming CEO, Sacks issued a memo to employees in which he banned the consumption of alcohol in the Zenefits offices. "We operate in a highly regulated industry," he wrote, "and it's important to set the right tone in the office. The new policy helps to achieve this and communicate that we are committed to operating with integrity."[16] Days later, The Wall Street Journal dug up an old Zenefits facilities memo from a year previous telling employees that "Cigarettes, plastic cups filled with beer, and several used condoms" had been found in the stairwell of the building. Zenefits was quick to point out that they share this stairwell with dozens of other businesses.[17] When asked about the incident at TechCrunch Disrupt SF, Sacks said, "A lot of the stuff was obviously the media getting carried away. That was not something that happened. That story — there was no truth to it at all.”[18]

On February 26, 2016, Zenefits laid off 17 percent of its employees, or 250 people.[19] In June the company laid off another 9 percent (106 additional people) and offered existing employees a two-month severance package named “The Offer." Employees were given two days to decide whether to accept "The Offer." In a memo, CEO David Sacks told employees, “As you consider your options over the next two days, please know that the company isn’t making The Offer because we don’t want you. We do want you, but we want the best of you. We want you winning core value awards. We want you prototyping a great idea at Hackday. We want you staying late to help out on a project. We want you busting ass on Z2. The next few months are going to be an exciting time at Zenefits and we want everyone participating in that.”[20] Reportedly, fewer than 10 percent of employees took Sacks’ offer.[21]

Later in 2016, Zenefits reached its first state regulatory settlement with Tennessee in July 2016 for $62,500,[22] four months after the company’s initial self-reporting of compliance issues to the states in which they had been operating. Settlements with Arizona, Delaware, Minnesota, New Jersey, and South Carolina followed in September. As of October 2016, Zenefits has also reached settlements with California,[23] Washington,[24] Virginia,[25] and Texas,[26] with more negotiations underway.

On November 28, 2016, Zenefits was fined $7 million by California's insurance regulator, marking the biggest penalty yet for the startup that has faced multiple investigations for flouting insurance laws. [27] California Insurance Commissioner Dave Jones said in a statement posted on the state insurance department's website that Zenefits was charged with allowing unlicensed employees to sell insurance and circumventing education requirements for insurance agents.[27] Zenefits will not have to pay the full $7 million to California up front. In recognition of the changes already made by Sacks, the insurance department said half of the fine will be waived if the company passes an exam of the company's business practices scheduled for 2018.[27] In addition to the $7 million fine, Zenefits was required to pay California $160,000 toward the costs of its investigation. California, Zenefits' home state, was considered the most important resolution, and other states are expected to follow its lead.[27]

2017–present: Additional layoffs[edit]

On February 9, 2017, Zenefits announced it would be laying off 45% of its workforce[28] as a way to “move toward an operating model that is sustainable and better reflects the needs of our current business” as noted by Fulcher in a memo sent to employees.[29] “It is part of an overall turn-around program that began a year ago to correct regulatory compliance issues, reset our culture and values [and] increase operational efficiency," Fulcher wrote. “Today's action aligns our costs more closely to our business realities and gives us the runway we need to build the business properly for the long term." A public statement released by Zenefits noted that the layoffs will help it centralize its operations in Arizona and that it also plans to build out product and engineering teams in Vancouver and Bangalore, in addition to its San Francisco team. [30]

Z2 conference[edit]

On October 18, 2016, Zenefits held Z2, its inaugural customer conference.[31] At Z2, the company unveiled its next-generation product launch: a platform that served as an app store for human resources and allowed third-party apps and developers to build onto it as well.[32]

“We think this idea of suites vs. best of breed is a false choice, this has been the choice of marketplace,” Zenefits CEO David Sacks said. “You could use an antiquated suite or best of breed that’s limited. We’re building an app store for [human resources] for the first time, that’s the way to resolve this conundrum. You build an app store and you release some core apps yourself, but you allow third parties to provide best of breed apps.”[33]

Financials[edit]

Funding and valuation[edit]

Zenefits has been valued as high as $4.5 billion; it has received $583 million in venture-capital funding from investors such as Andreessen Horowitz, Venrock, TPG, I.V.P., and Fidelity.[17]

On April 21, 2015, TechCrunch reported that Zenefits was raising somewhere between $300 million and $500 million at a valuation worth of $3 billion, and possibly as high as $4 billion.[34][35] On May 6, the round was reported to have closed with $500 million raised from investors including Fidelity Management, TPG, and Comcast Ventures at a valuation of $4.5 billion.[36][37][38] In November, Forbes ran an article on the company defending it against the claim it was in a unicorn bubble.[39]

Revenue[edit]

In 2015, Zenefits reported an annual revenue of approximately $20 million, twenty times the corresponding figure in 2013.[40] Its revenue growth rate was compared favorably with such companies as Workday and Salesforce.com;[40] Forbes reported that its valuation growth was among the highest of any company in 2014.[41] In June 2016, CEO David Sacks reported that Zenefits revenue had “not decreased” in spite of recent scandals and that its annual recurring revenue was more than $60 million per year.[42]

Services[edit]

Originally launched as a SaaS platform that simplified the process of administering and managing benefits for small to medium businesses, Zenefits has since grown to include core HR functions like time tracking, onboarding and employee record keeping.[43]

Zenefits’ second iteration, Z2, bills itself as an all-in-one HR platform, with updates including an HR app marketplace featuring 17 integrated partners at launch, a comparative benefits shopping experience, wide release of the Payroll app in California, and an HR Advisor app that provides companies with a library of HR content and consulting services.[44]

Praise[edit]

In 2014, Zenefits was identified as one of the fastest growing software as a service companies in history.[45][46] It was also named among the Bay Area’s Highest Valued Unicorns,[47] one of The World's Top 10 Most Innovative Companies in Healthcare,[48] and one of 26 enterprise startups to bet your career on.[49] Since its launch of Z2 in October 2016, Zenefits was recognized by PC Magazine as The 10 Best Free Mobile Apps for Business of 2016[50] and 20 Best Business Mobile Apps of 2016.[51]

See also[edit]

References[edit]

  1. ^ Alden, William (2 December 2016). "Zenefits Lost $200 Million Last Year". CNBC. Retrieved 24 January 2017.
  2. ^ Lawler, Ryan (14 January 2015). "Zenefits Financials Reveal It Is One Of The Fastest-Growing SaaS Businesses Ever". TechCrunch. Retrieved 24 January 2017.
  3. ^ Manjoo, Farhad (September 21, 2014). "Zenefits' Leader Is Rattling an Industry, So Why Is He Stressed Out?". Retrieved January 21, 2015.
  4. ^ Lynley, Matthew (May 1, 2013). "Zenefits Tries to Take the Pain Out of Human Resources". Retrieved January 21, 2015.
  5. ^ Manjoo, Farhad (October 12, 2016). "Zenefits, a Rocket That Fell to Earth, Tries to Launch Again". Retrieved November 18, 2016.
  6. ^ Gilger, Lauren (June 30, 2015). "Tech company Zenefits to open new office in Tempe, hiring 700 new employees this year". Retrieved November 18, 2016.
  7. ^ McKay, Ian (October 12, 2016). "How Vancouver became a hub for technological talent". Retrieved November 18, 2016.
  8. ^ Empson, Rip (February 18, 2013). "Y Combinator-Backed Zenefits Gives Small Businesses A One-Stop Shop For Finding And Managing Employee Benefits". TechCrunch. Retrieved January 20, 2015.
  9. ^ Empson, Rip (January 10, 2014). "Fast-Growing Zenefits Adds Commuter Benefits, Flexible Spending And 401(k) Support As It Moves To Take Over Startup HR". TechCrunch. Retrieved January 20, 2015.
  10. ^ Lawler, Ryan (July 25, 2014). "Zenefits Adds Stock Options To Its Cloud HR Platform". TechCrunch. Retrieved January 21, 2015.
  11. ^ Alden, Will (February 11, 2016). "Zenefits Software Helped Brokers Cheat On Licensing Process". Retrieved November 28, 2016.
  12. ^ O’Brien, Sara Ashley (February 8, 2016). "Zenefits CEO steps down over compliance issues". Retrieved November 28, 2016.
  13. ^ Suddath, Claire; Newcomer, Eric (9 May 2016). "Zenefits Was the Perfect Startup. Then It Self-Disrupted". Bloomberg BusinessWeek (9 May 2016). Retrieved 16 May 2016.
  14. ^ Fernandes, Deirdre. "Mass. insurance regulator investigates benefits software firm". Boston Globe (9 Mar 2016). Retrieved 16 May 2016.
  15. ^ Solomon, Brian (8 Feb 2016). "Zenefits CEO Parker Conrad Resigns Amid Scandal". Forbes.com. Retrieved 16 May 2016.
  16. ^ Bort, Julie (February 19, 2016) "Zenefits' new CEO just banned employees from drinking alcohol at the office." Business Insider. (Retrieved 6-17-2016).
  17. ^ a b Kossof, Maya (June 14, 2016). "Months After Banning Sex in the Stairwells, Zenefits Lays Off Another 106 Employees". Retrieved December 6, 2016.
  18. ^ Kendall, Marisa (September 13, 2016). "Moving beyond 'sex in the stairwells': Zenefits CEO spills about cleaning up the company". Retrieved December 6, 2016.
  19. ^ Lynley, Matthew (16 February 2016) "Zenefits Is Laying Off Roughly 250 Employees." TechCrunch. (Retrieved 6-14-2016).
  20. ^ Lynley, Matthew (16 June2016) "Zenefits is laying off another 106 people and offering others a buyout." TechCrunch. (Retrieved 6-14-2016).
  21. ^ O’Brien, Chris (June 20, 2016). "Zenefits CEO David Sacks on his bold bet: Less than 10% of employees accepted 'The Offer'". Retrieved November 18, 2016.
  22. ^ "TDCI Levies $62,500 Fine Against Zenefits". July 25, 2016. Retrieved November 18, 2016.
  23. ^ Dave, Paresh (November 28, 2016). "Employee benefits start-up Zenefits is fined $3.5 million for licensing violations". Retrieved December 6, 2016.
  24. ^ Alden, William (October 7, 2016). "Zenefits Settles Insurance Investigation In Washington State". Retrieved November 28, 2016.
  25. ^ Rauber, Chris (September 13, 2016). "Zenefits settles with five more states over broker licensing snafus". Retrieved November 18, 2016.
  26. ^ "Texas Department of Insurance fines Zenefits $550,000". October 14, 2016. Retrieved November 18, 2016.
  27. ^ a b c d https://www.reuters.com/article/us-zenefits-penalty-idUSKBN13O05N
  28. ^ Zenefits is laying off 45% of its workforce
  29. ^ Troubled startup Zenefits just laid off almost half its staff — here's the full email sent to employees
  30. ^ Zenefits slashes its workforce -- again
  31. ^ Kendell, Marisa (October 19, 2016). "Zenefits tries for comeback with splashy Z2 conference, product launch". Retrieved November 28, 2016.
  32. ^ Solomon, Brian (October 18, 2016). "Zenefits Reboots With App Store Approach To Human Resources". Retrieved November 28, 2016.
  33. ^ Lynley, Matthew (October 18, 2016). "Zenefits opens up to third-party developers and launches a suite of new HR tools". Retrieved November 28, 2016.
  34. ^ Lawler, Ryan; Wilhelm, Alex; Lynley, Matthew (April 21, 2015). "Cloud HR Startup Zenefits Is Looking To Raise A Giant New Round Of Funding". TechCrunch. Retrieved April 22, 2015.
  35. ^ Schubarth, Cromwell (April 22, 2015). "Zenefits is latest 'private IPO' in works, seen seeking $300M-$500M". Silicon Valley Business Journal. Retrieved April 22, 2015.
  36. ^ Keohane, Dennis (May 6, 2015). "Zenefits raises $500 million for its HR software and insurance hybrid, beating off new customers 'with a stick'". PandoDaily. Retrieved May 6, 2015.
  37. ^ MacMillan, Douglas (May 6, 2015). "Zenefits Is Tagged With a $4.5 Billion Valuation After Just Two Years". Digits (blog). Dow Jones & Company. Retrieved May 6, 2015.
  38. ^ Baumgartner, Jeff (May 29, 2015). "Comcast Ventures Is Friends with Zenefits". Multichannel News. New York City: NewBay Media. Retrieved May 29, 2015.
  39. ^ https://www.forbes.com/sites/miguelhelft/2015/10/14/what-bubble-the-unicorn-boom-has-just-begun/#f5046b138126
  40. ^ a b "Zenefits Financials Reveal It Is One Of The Fastest-Growing SaaS Businesses Ever". TechCrunch. January 14, 2015. Retrieved January 21, 2015.
  41. ^ Solomon, Brian (December 17, 2014). "The Hottest Startups Of 2014". Forbes. Retrieved January 20, 2015.
  42. ^ Newcomer, Eric (June 14, 2016) "More Trouble at Zenefits." Bloomberg.com. (Retrieved 6-14-2016.)
  43. ^ Empson, Rip (February 18, 2013). "Y Combinator-Backed Zenefits Gives Small Businesses A One-Stop Shop For Finding And Managing Employee Benefits". Retrieved December 6, 2016.
  44. ^ Yeung, Ken (October 18, 2016). "Zenefits looks beyond past troubles with launch of app marketplace for all-in-one HR platform". Retrieved December 6, 2016.
  45. ^ Carney, Michael (June 3, 2014). "Labeled the "fastest growing SaaS company ever," Zenefits raises a $66M Series B just five months post-Series A". PandoDaily. Retrieved January 21, 2015.
  46. ^ Wang, Alexander (September 14, 2014). "How did Zenefits grow so quickly?". Quora (crowdsourced Q&A). Retrieved January 21, 2015.
  47. ^ Gaus, Annie (September 25, 2015). "11 of the Bay Area's highest-valued unicorns". Retrieved December 6, 2016.
  48. ^ Staff, FastCompany (February 9, 2015). "The World's Top Most Innovative Companies in Health Care". Retrieved December 6, 2016.
  49. ^ Bort, Julie (February 2, 2015). "26 enterprise startups to bet your career on in 2015". Retrieved December 6, 2016.
  50. ^ Martinez, Juan (November 23, 2016). "The 10 Best Free Mobile Apps for Business of 2016". Retrieved December 6, 2016.
  51. ^ Martinez, Juan (November 30, 2016). "20 Best Business Mobile Apps of 2016". Retrieved December 6, 2016.

External links[edit]