Zenefits – From Untouchable (good) to Untouchable (bad)

Rewind a year and if you were in SaaS sales, Zenefits was THE hottest tech startup. 0-20-100 million in revenue in three years, not only did they grow a huge team almost overnight, they spoke on every industry panel about the right way to build a high performing sales machine.

Fast forward to now when you talk about Zenefits in the sales and VC world, your words are received with a turned-up nose followed by a “Can you believe Zenefits did XYZ?”

My answer is “Yes, of course, I can believe it!”. You handed a company of around 500 people an investment of 500 million dollars and said go as fast and hard as you possibly can. You told them to hire as many people as they can, more than tripling their size in less than 10 months. You advised them to spend that money to scale at a blazing rate and if you make a few mistakes, that’s okay. Sam Blond and his leaders did exactly what any other young, executive team would have done and because they hired a young, first time VP of Sales to do it, they had the perfect scapegoat when things got really bad.

Here are the three pieces that are most frustrating that all Zenefits employees – and CEOs at other rapid-growth startups – need to know:

  1. Any time you hire 400+ people aged between 22-28 in a very short period of time and have them in the same office….they will hook up and maybe even have sex in the office stairwells. It happens and Zenefits isn’t the only company where this happened and surely won’t be the last. Yes, the email probably shouldn’t have been sent, but it doesn’t mean that it doesn’t happen all the time. In fact, my guess is that out of everyone reading this, if you have a team size larger than 50 people, some form of inter-office romance has probably already happened.
  2. Of course, they cut corners in going to market faster than they were actually ready for. It’s amplified because of the industry’s regulations but the team isn’t filled with experts on insurance legislation. But when your forecast says you need X revenue in Y market and that pressure to grow is the number one priority, oversights are going to happen. Could they have avoided it with more due diligence? Yes. Did they really have any other option with all else being equal? Maybe, but I really doubt it.
  3. And of course, they had to upsize, then downsize the team; so does every other rapid growth company. You grow as fast as possible because in the early stages you really don’t know the exact profile of who will or won’t be successful in the various roles. You hire a ton of people, expecting only the strong to survive, and then you start to nail the hiring profile moving forward. This is what they did, just on a larger scale than we’ve ever seen before. In fact, we did the same thing at Glassdoor in year one. We hired over 50 people in under a year, just on the sales team, and then learned what people we did and didn’t need.

Let’s compare Zenefits to current Silicon Valley icon, Slack. Why Slack is so fortunate here is that they don’t have salespeople, they face little to no regulation, and have built a very flat organization that can scale with usage. Their growth is more predictable because of the thousands of daily data points they collect to help forecast future demand more accurately and subsequently, future hiring needs. Will Slack turn into a fad in a few years if and when people look to the next wave of tools to help solve the email issue? No clue, but I do know for now, that they picked a path less likely to lead them to be a pariah.

If you currently work at Zenefits, stay put, it’s in a good market and in one year people will be back to saying it’s a great place to work. At the end of the day, the tech world has an amazingly short memory. If you are a CEO or sales leader who may have turned your nose up on the SaaS darling of the last two years, relax. My guess is that most of us would have done similar things had we been in similar shoes.

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