Zenefits Touts New Software in Turnaround Effort
October 18 2016 - 12:40PM
Dow Jones News
Human-resources startup Zenefits is seeking to put its troubled
past behind it, launching redesigned software at its first customer
conference on Tuesday in an effort to jump-start sales and repair
its corporate image.
Zenefits said the new software, dubbed "Z2," enables its
small-business customers to manage more human-resources tasks, like
employee payroll. It also now works with 17 business apps made by
other software makers, including Intuit Inc. and Salesforce.com
Inc.
Zenefits, incorporated as YourPeople Inc., gives away its
software free to small businesses, which use it primarily to manage
employee health-care benefits. Zenefits makes money by collecting
brokerage commissions from insurance carriers. The new payroll
feature—which costs $35 a month, plus $5 monthly per employee—is
among the first services offered by Zenefits for a fee, following
the lead of rival Gusto Inc. which already offers a payroll
service.
"This is the culmination of everything the company has been
building for the last three years," said Chief Executive David
Sacks in a statement. Mr. Sacks was scheduled to speak Tuesday
morning in San Francisco at the company's Z2 conference alongside
insurance partners such as Aetna Inc. and MetLife Inc.
It has been a volatile three years for Zenefits, whose rapid
growth was plagued by missed revenue targets, management miscues
and regulatory compliance failures.
Founded in 2013, Zenefits grew quickly out of the gate, securing
$500 million in funding at a $4.5 billion valuation in May 2015. It
used the cash to add hundreds of salespeople to meet aggressive
revenue targets.
At the time of the funding, Zenefits told investors it was on
pace for annualized sales of $100 million by year-end. But Zenefits
ended the year 40% short of its revenue goal, and since last fall
has reduced its staff by about 40% through layoffs, attrition and
buyouts.
Along the way, Zenefits ran afoul of regulators, as many
employees weren't properly licensed to sell or manage health
insurance benefits. Zenefits has since settled investigations with
a handful of states including Tennessee and Delaware, paying only
nominal fines.
In February, Zenefits co-founder and Chief Executive Parker
Conrad resigned and was replaced by Mr. Sacks, previously the chief
operating officer. Since then, Zenefits has rolled out new internal
controls, worked with regulators on compliance and even changed the
corporate motto from "ready, fire, aim" to "operate with
integrity."
Zenefits struck a deal in June with some investors to cut its
valuation by more than half to $2 billion, giving them additional
shares in exchange for releasing the company of potential legal
claims. Early investors including former employees and Mr. Conrad
saw their stakes significantly diluted in the process.
Write to Rolfe Winkler at rolfe.winkler@wsj.com
(END) Dow Jones Newswires
October 18, 2016 12:25 ET (16:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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