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Zenefits Was the Perfect Startup. Then It Self-Disrupted

Zenefits Was the Perfect Startup. Then It Self-Disrupted
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David Sacks walked into Dolores Park Café in San Francisco to talk to Lars Dalgaard, a venture capitalist, about what he should do with his life. Or rather, his money. Sacks, who is 43 and has thick gray hair and blue, protruding eyes, made his first fortune as an early executive at PayPal, then a second as the co-founder of Yammer, a social network for businesses, which he sold to Microsoft in 2012 for $1.2 billion. He played in poker tournaments, produced the film Thank You for Smoking, and became an early investor in Uber and SpaceX. But by the fall of 2014, he was sick of jumping from hobby to hobby. He wanted in on a startup again.

Sacks and Dalgaard were business acquaintances—Dalgaard, a general partner at Andreessen Horowitz, had once tried to buy Yammer for $300 million. After the requisite industry gossip, they got down to business. Dalgaard urged Sacks to take a look at Zenefits, a new company in which Andreessen Horowitz had recently invested.

Zenefits makes online software that automates health insurance, payroll, and other essential office drudgery—kind of a human resources version of TurboTax. It’s not a sexy idea, but with 6 million small businesses in the U.S., it’s enormously useful. The company was founded in 2013 by Parker Conrad, who realized he could streamline small businesses’ managerial needs, saving them hundreds of hours of mind-numbing paperwork—not to mention the cost of staffing an HR department—by putting everything online. Conrad was known to be a little frenzied and disorganized but fiercely intelligent. “From an investment philosophy … we look for the magnitude of the genius, as opposed to the lack of issues,” says Andreessen’s founding partner Ben Horowitz. “And in a way, [Conrad] was like the prototype.” Conrad had no background in health insurance but quickly learned the intricacies of the business as well as any veteran. “If you’re an insurance broker,” he said at the TechCrunch Disrupt conference in 2013, “we’re going to drink your milkshake.”

 

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SOURCE: Bloomberg


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