It’s no secret that Zenefits has had its fair share of news coverage in its short, but storied, existence in the HR and insurance industry. Once seen as disruptive and innovative, Zenefits now finds itself as a cautionary tale of compliance, culture, and controversy.
That’s in large part because of Parker Conrad, the now-ousted CEO who cheated the system by allowing his employees to bypass licensure requirements, was at the helm as investors lost revenue confidence, promoted a “frat house” ethos in the office, and sold $10 million in stock prior to his mandated resignation.
It wasn’t that long ago (seriously, only 14 months) that we at BenefitsPRO were covering San Francisco-based Zenefits’ introduction into the marketplace, wondering what would be next for the rapidly growing startup. Today, we don’t wonder, we wait. Mostly for the other shoe to drop — because it has. Several times. With a thud.
Just look at the downward trajectory based on a small sample of our Zenefits’ coverage:
April 6, 2015: Is Zenefits the ultimate broker threat?
May 20, 2015: Zenefits unleashes more disruption
June 15, 2015: Who will win the Zenefits, ADP battle?
November 13, 2015: Zenefits hits a rough patch
February 8, 2016: Zenefits CEO resigns, new head David Sacks focuses on compliance
February 11, 2016: California regulators say they’re investigating Zenefits
February 29, 2016: Zenefits lays off 250 employees
June 16, 2016: ADP targets former Zenefits workers
Despite its scandalized reputation and consistent headlines, Zenefits is still somewhat of an enigma. Journalists love it (hello, juicy headlines galore), brokers hate it (all this bad press and still Zenefits is poaching potential clients), and in today’s cutthroat make-it-or-break-it Silicon Valley community, everyone else is either rooting for it to succeed or fail — the answer is different depending on who you ask.
One thing is for sure, though: No one has tired of hearing Zenefits’ saga. Thus, we thought it would be worthwhile to look at some of the other Zenefits facts that got buried under headlines like those above. Here are some we found interesting:
(Photo: Winni Wintermeyer)
Parker Conrad: Before and after Zenefits
Before he became infamous for, well, being himself, Parker Conrad was a Harvard student, managing editor at The Harvard Crimson, Harvard dropout, Harvard graduate (he left for a year after failing because of his 70-hour weeks at the college newspaper, reports Business Insider), cancer survivor (he was diagnosed, treated and cured of testicular cancer in the same year). All by the time he was 24.
After college, he took a job with biotech firm Amgen, but soon, the entrepreneurial spirit that would eventually lead him to Zenefits kicked in. An old college roommate, Mike Sha, called with an offer to work on stock research. He left his job and moved into a retirement living center, where he had to sneak in and out since he was well below the 65-plus age requirement.
He and his co-founder/co-CEO ended up creating a company called Wikinvest, which eventually became SigFig. After a falling out (“Eventually, there was a critical juncture where Mike’s family put in a whole bunch of money and part of that agreement was that he would become sole CEO,” Conrad told Business Insider) with his partner, Conrad was eventually fired. He started Zenefits almost immediately after. Since we know what happened there, let’s fast-forward to now.
The Wall Street Journal reports that a briefly posted help wanted ad on Hacker News hints at what Conrad is up to. “The advertisement … said Mr. Conrad and a partner are looking to hire their first engineer for a new company it doesn’t name.” The ad was posted and removed on Wednesday, June 15. The other breadcrumbs?
The Journal says the ad offered an email for both Conrad and Prasanna Sankar, a former director of engineering at Zenefits. Sankar’s current LinkedIn profile says “Co-Founder and CTO at Stealth Startup.” (In case you’re wondering, Conrad’s LinkedIn profile says he is still currently the co-founder and CEO at Zenefits). An email to Sankar was not returned.
The ad references Facebook — “You have a (small) shot at building a FB scale company” — and comments on Silicon Valley’s “unicorn” dream: “Unlike most startups, shooting for a $1B business, the opportunity size here is also really massive.”
There is mention of “this 3 member team.” Is the third member a reference to a potential new hire, or someone we haven’t heard of yet?
Personally, I find it hard to believe Conrad was allowed to walk out of Zenefits without some type of anti-compete clause, so what is he up to? Another finance firm? A peripheral HR and insurance company? Only time will tell. (Or, if Sankar answers our email, maybe he’ll tell.)
(Photo: Getty Images)
As reported by Venture Beat, in the politest way possible, new Zenefits CEO David Sacks told employees in no uncertain terms to get onboard or jump ship.
Following the latest round of layoffs, Sacks sent an email to employees, notifying them of the changes ahead. He mentions laid-off employees will depart with three months of severance, six months of COBRA and transition assistance. Then, he makes "The Offer."
“I recognize that the new Zenefits may be a very different company than the one many of you joined. I want to be respectful and realistic of that fact. And if you are not motivated by our mission to make entrepreneurship easier, or if you do not agree with the new company values, or if your role has changed in ways that you cannot support, then you can take The Offer. The Offer is a voluntary separation package consisting of 2 months severance and 4 months of COBRA. Every employee who joined before Day One (February 8, 2016) is eligible and has until noon on Thursday to consider it.”
It's an audacious move, encouraging employees to move on if they aren't ready for the new regime. But Sacks' email was clear: “We need everyone to be all-in on Z2.” (Z2 is the nickname for the next stage of Zenefits, according to the email.)
Clearly, Zenefits is not the same company it was two years ago, 14 months ago, hell, even six months ago. Things have changed, and that means it's possible some people who were used to Conrad's management style (or, it can be argued, lack thereof) might not be prepared for what Sacks has in store.
I asked Jessica Hoffman, the vice president of communications at Zenefits, about Sacks' email and the subsequent response. She says there have been questions from employees regarding The Offer, but that all in all, she's excited about what it means.
"Zenefits is a new company with new leadership and new values," she says. "And we want everyone to be signed up for that."
(Photo: Getty Images)
Zenefits quickly rose to prominence when it came on the scene, and investors jumped at the chance to be involved in the startup, which was once valued at $4.5 billion. Investments from venture capitalists aren’t anything new, but Zenefits made a splash with a few surprise funders.
Ashton Kutcher (yes, the flippy-haired kid from "That 70s Show" and "Dude, Where’s My Car?") has made notable strides with his investment firms, A-Grade Investments and Sound Ventures. He participated in Zenefits' Series C round.
Another actor, Jared Leto, participated in both Series B and C funding, in June 2014 and in May 2015. (Side note: Leto has 16 personal investments in 14 companies. I thought he was only good at having really great hair.)
Although not the same type of celebrity, several prominent tech executives also made sizable investments in Zenefits. Aaron Levie, Box’s co-founder and CEO, participated in the startup's $2.1 million seed round in July 2013. Twitter's Vice President of Corporate Strategy Elad Gil participated in Zenefits' Series B round (in the same round as Leto). Six other founders participated in Zenefits' initial seed funding round, which totaled $2.1 million.
As you've probably guessed, Zenefits’ valuation has since plummeted.
To see a full list of investors and their funding, click here.