David Sacks sold the last company he founded, Yammer, to Microsoft for $US1.2 billion in 2012 and could be doing anything right now, from sitting on a beach to firing up a new startup.
But he has surprisingly chosen to take the number two role at one of the hottest startups in the Valley right now, 20-month old Zenefits. He just signed on to be COO.
He won’t be any old lackey though. Sacks is also coming in as an investor big enough to get a seat on the board. While he wouldn’t reveal the sum, Sacks told TechCrunch’s Ryan Lawler, “This is the biggest investment I’ve made in a startup, and it represents my commitment to the company.”
That’s saying something because Sacks is known as one of the most active, successful angel investors in tech. He’s invested in companies like SpaceX, Palantir, Airbnb and Uber.
So why is he joining Zenefits instead of firing up a new startup?
Because Zenefits is on fire.
The San Francisco-based company offers a cloud service for human resources functions (onboarding, payroll, benefits, vacation tracking, and so on) and is on track to grow its user base 1,600% this year, it says. In a little over a year, Zenefits has signed up more than 2,000 companies across 47 states, serving over 50,000 employees, it says.
And it’s on fire because its free.
Absolutely free, with no contracts.
Zenefits makes its money from the benefits providers — for example, a health insurance carrier — if companies choose to use it to purchase such services. They don’t have to use it for that, Zenefits says, and they’d still get to use the cloud software for free.
But free is irresistible. Companies are used to paying big bucks for HR software alternatives from companies like Workday, Oracle, or SAP.
Zenefits CEO Parker Conrad says this business model is working so well that it’s on track to boost revenue 20 times over the course of this year, reports Bloomberg’s Dina Bass.
For instance, it says it has become a top broker for one of the largest health insurance companies in California, Anthem.
And that why Sacks signed on to work there. He told Bloomberg:
Zenefits is the fastest-growing business software company Silicon Valley has ever seen. Zenefits has done in one year what it took Yammer three years to do in terms of growth. Yammer was considered fast-growing but Zenefits reset all the benchmarks and so I was curious about that.
Sacks isn’t the only big name involved with Zenefits.
Lars Dalgaard, co-founder of SuccessFactors sold to SAP for $US3 billion, is on its board. Dalgaard is now a VC with Andreessen Horowitz, one of Zenefits major backers.
It was Dalgaard who suggested to Conrad that the company hire a COO, he told the Wall Street Journal’s Shira Ovide. Conrad resisted the idea, telling Dalgaard, “I don’t want a big company bureaucrat coming in here.”
So Dalgaard replied, “How about David Sacks?”
And Sacks isn’t the only one wanting to work at Zenefits.
The company is hiring employees almost as fast as it is signing on customers. In 2014 alone, Zenefits grew from a mere 15 people to over 420 employees. It plans to hire at least 1,300 new full-time employees within three years at a new 94,000 sq. ft. office in Arizona, too, it tells Business Insider.
This hasn’t been a bump-free ride. Its new business model is scaring rival insurance brokers and regulators. The state of Utah banned Zenefits earlier this month, threatening it with big fines (similar to how Uber and Airbnb were treated as they grew). Zenefits is working to get that situation resolved.
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