Zenefits

Zenefits, legally YourPeople, Inc. and now called TriNet Zenefits, provides cloud HR software for small and medium sized businesses covering benefits administration, payroll, time tracking and employee records. Parker Conrad and Laks Srini started it to let startups shop for health insurance and manage benefits in one place, and it launched publicly on February 18, 2013 out of Y Combinator's Winter 2013 class. It was based in San Francisco. The original model gave the software away and earned broker commissions on the health insurance its customers bought.

SEC Form D filings show the company raised about $17.1 million in January 2014, about $61.5 million in June 2014 and $512.6 million in a May 2015 offering. By mid 2014 TechCrunch reported more than $80 million raised from investors including Andreessen Horowitz, Institutional Venture Partners, SV Angel, Hydrazine Capital, Elad Gil and Jared Leto. The 2015 round of roughly $500 million, with Fidelity, TPG and Comcast Ventures among the investors, valued Zenefits at $4.5 billion. Wikipedia puts total venture funding at $583 million, with Venrock also among the backers.

Growth outran controls. In 2016 an internal investigation found licensing violations, including a browser extension that let staff skip California insurance training. Conrad resigned in February 2016, David Sacks took over and investors' positions were reset at about half the prior valuation. States levied fines, including $7 million in California. Jay Fulcher became CEO in 2017, cut 45 percent of staff and turned the company into a software platform that works with brokers. In March 2021 Francisco Partners took control through a financing deal. TriNet completed its acquisition from Francisco Partners on February 15, 2022. TriNet's quarterly filing lists cash and stock consideration of $220 million under the agreement, a total purchase price of $209 million after adjustments, paid as $192 million in cash and 193,221 TriNet shares.

Zenefits is a standard case of growth capital priced on momentum before operations matured. Its Series A backers entered at the start of 2014, and investors in the 2015 round paid a $4.5 billion price for a company that sold seven years later for about one twentieth of that. With a structured financing from Francisco Partners ahead of them, common and later stage preferred holders likely recovered little. The episode is frequently cited in discussions of governance, compliance and the cost of blitzscaling in regulated markets.