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.
Zenefits was started by its ex-CEO Parker Conrad and Laks Srini, Conrad's colleague and a software engineer at Sigfig, to help startups and small businesses find insurance quotes and manage employee benefits in one place. It officially launched on February 18, 2013.
In 2013, Zenefits, which had been operational only in California and New York, announced that it was rolling out to the additional 48 states in the United States, albeit only for businesses with more than 20 employees.
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. The company additionally announced support for stock options in its cloud HR platform. In November 2014, Zenefits opened an office in Scottsdale, Arizona.
In May 2015, payroll provider ADP blocked Zenefits from accessing payroll information on behalf of Zenefits customers. In a post on the company's blog, Zenefits alleged ADP was spreading "fear, uncertainty and doubt" about Zenefits data security due to worries about increased competition. In June 2015, ADP filed a lawsuit accusing Zenefits of defamation.
Investigations of wrongdoing
In 2016 an internal legal investigation found the company had created and used a browser extension to skirt training, licensing, and certification requirements around selling insurance across state lines. This revelation came amid additional reports of internal misconduct and led the California Department of Insurance to start its own investigation. The Massachusetts Division of Insurance launched its own similar investigation in March 2016.
In February 2016, amidst the scandal, Parker Conrad resigned as CEO and director. COO David O. Sacks was named as his replacement. Shortly after fitting 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're committed to operating with integrity." Days later, another internal memo reminded staff that smoking and having sex in the office stairwells additionally constituted inappropriate office behavior.
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.
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. 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.
In 2015, Zenefits reported an annual revenue of approximately $20 million, twenty times the corresponding figure in 2013. 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.
In 2014, Zenefits was identified as one of the fastest growing software as a service companies in history. Its revenue growth rate was compared favourably with such companies as Workday and Salesforce.com; Forbes reported that its valuation growth was among the highest of any company in 2014. The Wall Street Journal discussed the rapid growth in Zenefits' own workforce as it scales to cope with a growing clientele.
In February 2016, Zenefits laid off 17 percent of its employees, or 250 people, and closed its Arizona offices. In June the company laid off another 9 percent (106 additional people) and offered existing employees a two-month severance package ominously 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.”