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Zenefits (YC W13) Just Raised $500M at a $4.5B Valuation
- tomblomfield 11y ago"If you think about it like we’re driving a car, we want to go extremely fast at an extremely high speed, and go very far,” [CEO] Conrad said. “And if you want to do that you’re gonna burn a lot of gasoline. So this round we had to do the mother of all pit stops for gas and beef jerky, to continue building at the speed that we’re going."
- donkeyd 11y agoI wonder what Marc Andreessen thinks of this statement... Context: http://www.businessinsider.com/marc-andreessen-on-startup-burn-rates-worry-2014-9?IR=T http://www.businessinsider.com/marc-andreessen-on-startup-bu...
- calcsam 11y agohttps://twitter.com/pmarca/status/515249537385250816 https://twitter.com/pmarca/status/515249537385250816 Parker Conrad: "@pmarca how should a CEO eval their own situation on this? What's the rubric / framework to decide if it's "too much"?" Marc Andreessen: "Very dependent on individual circumstances. For example, you should be investing aggressively :-)."
- cylinder 11y agoGoing extremely fast at an extremely high speed also frequently results in a fatal accident.
- pbreit 11y agoSorry, but driving fast very rarely results in a fatal accident.
- austenallred 11y agoYes it does. It also wins races. Conrad recognizes that risk and is taking it.
- sschueller 11y ago$4.5B Valuation for an SaaS business that doesn't charge for it's service and makes money from commissions? Did they invent something no one else can do? Why would insurance companies not just scrap the middle man and build their own thing?
- GFischer 11y agoI don't know about other insurance companies, but the ones I know are incredibly bad at building software (I don't know any in the healthcare or HR business though). Still, they're burning a very worrying amount of money.
- onion2k 11y agoZenefits are one of the few companies where the burn rate is probably inevitable. They're trying to get a secure foothold in a market that has slow-moving, largely technologically ignorant companies who are very wealthy. That wealth could be used to leverage the incumbent companies' dominant position if someone successfully starts to disrupt things. They need to get to a position where they can't be crowded out by the big players fast. That means spending a lot. Growing slowly isn't an option. Uber was the same. PayPal was the same. They were both so successful at it that the incumbents in their respective markets have just accepted the loss of market share without any return strategy. I imagine that's Zenefits aim too.
- jbob2000 11y agoUber and paypal had the advantage of offering a service that wasn't strictly specific to the USA. I can only use Zenefits in the states; the way HR works is totally different in Canada and Europe, much less India, China, etc.
- arthurcolle 11y agohey dude you're dead
- bsaul 11y ago
- deleted 11y ago[deleted]
- kauffj 11y agoA fella named Kevin from Zenefits sent me email once asking about our human resource needs. I told Kevin that we have no need for human resources since our company was run entirely by strong AI. I signed it, Yours in the Singularity. Kevin never emailed me back.
- antidaily 11y agoGuess he didn't need a friend with zenefits.
- chinathrow 11y agoSo essentially, he spammed you?
- nolok 11y agoNo no no, this is a funded startup, he used the power of social relationship and communication medium to reach out and generate interest
- gregorycarter 11y agoDoes anyone know of a Zenefits like business that serves the UK? I've not come across anything close and HR administration is just as big of pain in the UK as the US. I recognise the business model (commissions on health insurance) wouldn't work in the UK, but I'd be happy to pay. Our health insurance costs are so much lower anyway....
- cissou 11y agoYOU'd be happy to pay, but maybe not the rest of the UK companies (or not that much, or not today, etc.). SO the growth of a UK-based Zenefits-clone will be much, much slower, and maybe never reach profitability. So I wouldn't count on that too much :/
- tvanantwerp 11y agoMy company had considered to switching to Zenefits, but decided to stick with the local middleman we've already got. The difference, according to HR, was that he knew for certain that a phone call to the current rep would fix almost any weird issue--with Zenefits, despite the convenience of doing things online, he couldn't be sure that was the case.
- eatbuckyballs 11y agoNo to mention their platform is still far off from what i'd call user friendly. I have to download excel sheets, edit them and upload? Really??
- mgkimsal 11y agodepends on the user as to what's friendly...? not used zenefits, but I've got several apps where I end up doing just that, because the target audience is so used to excel, that anything short of excel is a really bad experience for them. as I can't embed excel directly in, down/uploading excel files is the next best thing (for now).
- aajtechmail 11y agoreally
- jccodez 11y agoI do not see it. I worked forMarsh & McLennan Companies, Inc. It has been around for years, has billions in revenue, and owns Mercer HR Services with customers like Toyota Motor Corp., Halliburton, American Airlines and many many others. They have a platform, SASS model, and nothing much different that what zenefits is doing. Even in the mid market they are extremely competitive. I do not see this is worth 4.5 billion dollars.
- joncalhoun 11y agoI suspect that if HN had been around when Google was raising we would have read the same type of comments there. Based on the numbers in the article, they could very well be in the billions of rev within a few years if they can maintain the growth.
- bane 11y agoThe problem I have with valuations is that they're supposed to somehow reflect what somebody might pay to buy the company. But because of the hamfisted way they're calculated they seem to be so huge or so small (depending on the case) that they're essentially meaningless. For example, here's a company operating in an ultra-competitive space, from a fairly interchangeable position (middle-man) that has a supposed value on the market that's 225x what they expect to bring in in revenue during 2015. And they're losing 5x their projected revenue in customer acquisition costs (yeah yeah, growth stage and all that). "Valuation" as a term is clearly divorced from actual business realities. People who claim to be smarter than I will say "but the investors figure the company's market position in through their N-round investment terms". So what do I know?
- trimbo 11y ago> I suspect that if HN had been around when Google was raising we would have read the same type of comments there. Before raising, Google had a substantially better product than Altavista running on a dev server in the stanford.edu domain.
- bane 11y agoIt's surprising how frequently businesses switch out their benefits and HR services as well. This is a very crowded space. > The company said it’s on track to hit annual recurring revenue of $100 million by January 2016, and hit $20 million in annual recurring revenue in January this year. So it sounds like they're actually worth around $100-400 million at this point in non-imaginary money, which is impressive for being so new and in such a competitive space. > Our sources previously told us that the company expects to lose more than $100 million in 2015 ouch. I guess their sell point is that this can be considered recurring revenue. So if companies they contract with grow, or don't switch to some other vendor, this turns into lots of money. But their customer acquisition costs are insane right now. How we value companies is clearly completely broken.
- redwood 11y ago$20M ARR... $5B Val?
- deleted 11y ago[deleted]
- ukd1 11y agoCongrats guys, this is awesome! :)
- triangleman 11y agojbob2000, you are hellbanned, that means every comment you've made for the last few weeks has been hidden from this forum.
- BinaryIdiot 11y agoNot to go off topic but this is a thing on HN? That's psychologically terrifying (though I'm assuming deserved). How does it work, exactly? Is it permanent? Just curious.
- GFischer 11y agoI think it's permanent. pg defended it here: https://news.ycombinator.com/item?id=6060954&utm_source=dlvr.it&utm_medium=tumblr https://news.ycombinator.com/item?id=6060954&utm_source=dlvr... (I'm not a moderator here, though I was in another high-profile site) In particular, jbob2000 made several low-quality or sarcastic comments, not very in line with what HN wants. The one that probably triggered the hellban: https://news.ycombinator.com/item?id=9382992 https://news.ycombinator.com/item?id=9382992 was a sarcastic: "Oh no! Giving something away for free! The travesty!" but he had others like: "Foursquare? What is this, 2009?" which don't contribute that much.
- BinaryIdiot 11y agoAh thanks for the clarification. Today I learned.
- dang 11y agoWe're working on some major changes to how banning and flagged/dead comments work, so please put a mental asterisk alongside all of this. Assuming our changes hold up in testing, the community will soon be managing most of it.
- deleted 11y ago[deleted]
- BinaryIdiot 11y agoWe're using Zenefits at the current start-up I'm at. It's not half bad. I am only a user so I can't speak for how the entire system works but from my perspective it took all of the annoying HR, payroll and insurance paperwork and put them into a single place where I can always access it, digitally sign it and fill it out / update it. This is the first place where I didn't have to manually sign up or print anything which was great. It's a valuable service in my opinion and I'm surprised there are not more companies that make this stuff all together. $4.5 billion valuable though? I'm not sure especially since I'm only seeing the user side, not the management side.
- pxlpshr 11y agoI'm the first tweet on their homepage expressing my profound love for Zenefits. Great product, my praise is authentic. Happy to see they've raised a boatload of capital. I look forward to more product development and additional customer support resources. If I had the means to invest at a $4.5B valuation, I would.
- blairanderson 11y agoSeriously anyone working to create just a brokerage these days is pathetic in comparison to zenefits. Also, zenefits knows that they don't really have a moat. Anyone with a brokerage license can come along and follow their model. They need to blow up while nobody is chasing them.
- phil248 11y agoWe have Zenefits at my job and it really is amazing. All workers should be so lucky to have that type of interface for their benefits.
- gkop 11y agoZenefits: you are growing too fast! Scale up your customer service and improve your customer satisfaction rates before making big customer acquisition pushes, else you risk disappointing your existing customers. (Anecdote: I am a disappointed existing customer)
- dj-wonk 11y agoI'm also a disappointed customer because my first payroll cycle was two weeks late. This (or worse) happened for my colleagues as well. Apparently the integration between Zenefits and ZenPayroll is not ironed out.
- parkerconrad 11y agoOur view of this is that growth is not inconsistent with improving the service - and, actually, quite the opposite, our growth is what gives us the ability to solve a lot of the challenges in this industry. This is particularly relevant in your case (an installation error on Aetna's end). One of the biggest problems with health insurance for companies < 1,000 employees is that everything is done via paper / pdf / fax machine. This is of course a pain in the ass, but more importantly it's a source of large and irreducible error. Insurance companies average about 10% to 20% error rates on the stuff that we send them even if Zenefits is 100% correct. These errors aren't unique to Zenefits -- any broker or other company doing this stuff would have them -- and we spend a lot of time following up with carriers to verify, etc.... Here's the important thing -- our growth means we can make insurance companies build APIs for us, some of which are live right now, and many more of which will be live in the coming months. Only with this full electronic integration can these processing errors go away, for us and for everyone else. APIs == zero errors. Existing paper / pdf method can never fully eliminate errors b/c we (zenefits) don't control the guy on Aetna's end who is keying information into their system.
- colbyh 11y agoThis is a really bad answer to a concern about customer service, just a heads up. We want to be reassured that you value your customers and will be working to make things better no matter what, not given paragraphs on why it's actually someone else's fault.
- randall 11y agoOne of my favorite displays of how little the tech press gets it is this stark contrast. (I think Garry Tan is the one who pointed to me it originally but I don't have that reference right now.) PandoDaily in 2013: "While I don’t have my Tarot cards handy, I don’t think there’s a big winner in this bunch either." http://pando.com/2013/03/26/y-combinator-demo-day-2013-still-looking-for-the-next-airbnb-or-dropbox/ http://pando.com/2013/03/26/y-combinator-demo-day-2013-still... Startups are a function of markets and execution. Pick a big market and execute well and you're golden. It's difficult beforehand when a company is larval to tell who's picked the right market unless you're able to really think through it.
- frakkingcylons 11y agoTeespring is another successful company in that batch (W13).
- colbyh 11y agoJournalists make terrible VCs as a general rule.
- randall 11y agohttp://en.wikipedia.org/wiki/Michael_Moritz http://en.wikipedia.org/wiki/Michael_Moritz Michael Arrington's prowess has not yet been actually assessed. I'd say I know a few journos who aren't that bad, but a lot of tech press who are horrible.
- vm 11y agoMichael Moritz, senior partner at Sequoia Capital and arguably the best VC ever, started his career as a journalist. From his bio, it sounds like he leveraged that to start his career at Sequoia. http://en.wikipedia.org/wiki/Michael_Moritz http://en.wikipedia.org/wiki/Michael_Moritz
- austenallred 11y ago> as a general rule
- scurvy 11y agoI don't get the hubbub about Zenefits. They offer a commodity service for no fee, but offer worse plans at higher rates? I've heard there's some merit to using them when your company is really small. But our finance and HR teams whines about them incessantly -- saying how they can't handle larger companies well. I know their ADP payroll integration is terribad. I just don't get the $4.5B valuation other than they don't make any money.
- diminoten 11y agoHoly shit, now that's a slide deck I'd like to see.
- shah_s 11y agoWhat exactly are they spending the money on? Is it marketing? I assume their overhead should actually be very low.