“Zenefits more than tripled its Annually Recurring Revenue (ARR) last year, growing from $20 million to over $60 million,” the company’s new CEO David Sacks revealed in an email when announcing that he was laying off 250 people.
For any other startup in its third year of business, that result would have been cause for huge celebration.
Unfortunately for Zenefits, it was a failure.
That’s because Zenefits cofounder CEO Parker Conrad had been saying, quite publicly, that the company was on track to grow its ARR to $100 million, from $20 million that year.
Those promises helped convince venture capitalists to plow a whopping $500 million into the young company last May, valuing it at $4.5 billion and bringing the total raised to $582 million.
But, just a few months later, it was clear that Zenefits was not going to hit that skyhigh sales goal, and cracks began to show in the company’s culture, its sales strategy and even its products.
In September, one of the company’s main investors, Fidelity marked down the value of its investment in the company by nearly half. (Fidelity also marked down a lot of other startups that VCs had valued at a $1 billion or more.)
Zenefits cranked on the pressure on its sales people.
One person who knows the company well told us that under Conrad’s administration, some sales people were told that if they weren’t in the office very early (as early as 6 a.m.), their leads for the day would be given to someone who was. (Zenefits declined to comment on this).
So the final number is $60 million.
And it’s an interesting turnaround challenge for Sacks, who was not only the COO prior to the departure of Conrad, he was also an investor, confessing that Zenefits was the largest personal angel investment he ever made. He joined Zenefits back in December, 2014.
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