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On the surface, Zenefits is one of the least sexy of the tech unicorns, companies valued at $1 billion or more by their investors. It automates benefits and compliance systems for human resources offices, serving mostly small and medium-size businesses. But there’s money to be had in taking on stodgy old industries, and with a $4.5 billion valuation, it has reeled in the biggest investment that venture firm Andreessen-Horowitz has ever made. Zenefits’ culture can be described in one word: Hustle.
I talked with CEO Parker Conrad for the second chapter of Re/code’s “Lunches with Unicorns” series, where we interview founders of these big companies about impending bubble doom, runaway valuations, their biggest “oh, shit” disasters, the values that drive them and other topics of the day. It’s a series inspired by the entrepreneurship panel at this year’s Code conference.
Unlike most big tech offices, Zenefits’ couches and lounge areas are tucked into dark corners, carrying a tattered look of neglect. Their existence has been forgotten by the 1,000-plus staffers, who cram themselves into tightly packed desks in the open floor plan, with Conrad sitting smack in the middle of them. Flat-screen TVs hanging from various pillars flash profile pictures of staffers who have made the most customer calls that day.
In a blindingly white conference room, Conrad talked quickly, maintained eye contact and took exactly one bite of his burger the entire time. We touched on employee sacrifice at startups, rapid-growth war stories and why he regrets publicly rescinding a job offer to a candidate on Quora.
Afterward, Conrad’s assistant eyed the CEO’s forlorn lunch with exasperation: “I knew he was going to forget to eat.”
Re/code: There’s a lot of animosity and concern about inflated valuations and the explosion of all these “unicorns.” What do you think of the valuation arms race?
Parker Conrad: I’m the wrong guy to ask. Talk to VCs who see 10 deals a week. When we went out to raise money, we didn’t have any specific opinion on what our valuation was. We didn’t come out with terms. I personally am really bad at figuring out valuation, so we’re going to let the market decide.
I doubt you left your valuation up to chance. There are stories about people agreeing to crazy terms in their fundraising contracts just to get the valuation they want.
There’s no structure in our deal. I don’t know about other people. I’m just trying to make my business work. This whole thing seems very academic. Some people are like, “This is interesting.” They’re grabbing popcorn to watch how it plays out. For me day to day, it has very little relevance or bearing on what’s going on with us.
Founders always say that, but I don’t believe it. It must help with validating the company, attracting interest. How did things change for you when you crossed that $1 billion valuation?
Rightly or wrongly, for better or worse, valuation is a very important tool for recruiting, particularly in the markets for software engineering, where the market is really tight. People look at the value of their equity grant and how much it’s worth in the last round.
Like a lot of other unicorns, you’ve grown incredibly quickly. What challenges have you faced? Any epic war stories?
A thousand, but nothing immediately comes to mind. There was a time where we were doubling every eight weeks. The problems other companies would have a year to resolve, we had eight weeks to fix them or we’d be screwed.
The stakes are a little higher for you than some other tech companies, though. I saw the BuzzFeed story about people who faced lapses in their health insurance because of issues with Zenefits. What happened there?
We have tens of thousands of customers around the country; [the reporter] found three of them on Twitter that were pissed at us. You can do that with any company out there. Two of them are still clients. There were bumps in the road, but it’s rare for our clients to run into big hiccups. That’s unusual. Like with everyone else, sometimes you make mistakes. We take full responsibility.
Most of our scaling challenges have not ended up being things customers see at all. We’re working long hours to prevent that from spilling over.
Yeah, I get that feeling walking into the office. There’s a buzz. How would you describe your culture?
It’s very driven. Everyone at the company, and the company as a whole, has a real underdog complex. Everyone feels we’re fighting for survival against much larger forces trying to crush us. That’s stayed a part of the DNA of the company even as we’ve gotten pretty big ourselves.
So what did you think about the New York Times investigation into Amazon, then? Does work-life balance not have a place in high-growth tech companies?
I don’t know anything about Amazon’s culture; I’ve never worked there. Some of the stuff people said about Amazon in that article sounded really bad. Without saying I like the culture portrayed by Amazon in that article, I will say that Zenefits is certainly a company out to have a really big dent in the universe. Why would anyone think you can do that without some sacrifice? Why would anyone think that would be easy, and you could leave on time and still get that done? There’s a lot of people who do want that. They want outsized impact, a chance to fucking make a mark, goddammit. And often to do that, there is some sacrifice that’s required. That’s the way I think about it.
You talk about making a big dent in the universe, but fundamentally you do HR software. It’s not the sexiest issue to inspire sacrifice in employees.
I don’t think you have to care about HR software. You have to understand the pain point and get excited about the scope of the problem were solving, which is not building HR software or even better HR software. There is so much headache and hassle involved in starting a business or running a business. The way Zenefits is approaching this, you can eliminate wide swaths of that. That has a real impact on people’s lives.
You, rather infamously, retracted a job offer to a candidate who took to Quora to ask whether Google would be more likely to hire them down the line if they had worked at Zenefits or Uber. What was that about?
I don’t have any issue with someone asking for advice or doing it publicly, but the fact that they didn’t want to be here, that killed me. There’s a lot of people who maybe don’t bleed for the company, but there’s a lot of sweat and tears. At a startup, it’s so important — you want true believers.
I definitely wish I hadn’t done that publicly, though. There was some blowback. But a lot of people who have started companies understood it.
This article originally appeared on Recode.net.
