Wednesday, 17 February, 2016

Zenefits' CEO Parker Conrad resigns amid startup turmoil

Zenefits CEO Parker Conrad Out Amid Compliance Concerns Zenefits Faces Investigation by California Regulator
Dillon Hess | 14 February, 2016, 02:32

Such was the case with tech darlings like blood-testing startup Theranos, daily fantasy sports companies DraftKings and FanDuel, and most recently human-resources software startup Zenefits, whose cofounder and CEO resigned January 8 for running a company that flouted state laws. Zenefits hired a Big Four auditing firm to conduct an independent third-party review of it's licensing procedures that "we will turn over to regulators as soon as possible". Sacks was also an early PayPal executive. Its value as a company is associated with things we like to avoid talking about - insurance, payroll, forms, and fax machines. "In order to do that, we must be properly licensed".

"In order for us to move forward as a company, we cannot seek to hide or downplay the problem", Sacks wrote.

"Our culture and tone have been inappropriate for a highly regulated company", Sacks wrote.

Zenefits offers cloud HR software designed for small businesses and gives much of it away for free, making money by selling insurance and other HR products. We sell insurance in a highly regulated industry.

"For us, compliance is like oxygen", Sacks said.

Sacks also announced Josh Stein, former VP of legal, would replace him as COO.

For example, BuzzFeed reported that it was two years after the company launched that it created a system to track whether its sales representatives had licenses in states, and reported that former employees said management was less concerned with the requirement than meeting sales quotas. "We must admit it and remediate it as soon as possible".

The changes come after multiple reports about compliance issues at the startup - specifically doing deals with companies without having proper licenses.

So the writing has been on the wall for Zenefits and Conrad for some time. Not because agencies can't compete against this business model, she says, but because agencies have spent so many years focused on technology advancements in the industry, they may be struggling to cultivate other aspects, including relationships with employers, communications and messaging.

Zenefits also appointed three new members to its board of directors: Peter Thiel, a co-founder of PayPal who is now an investor at Founders Fund, Antonio Gracias of the investment firm Valor Equity Partners and William McGlashan Jr. of TPG Growth. In November 2013 the Food and Drug Administration sent genetic testing company 23andMe a public warning letter demanding that it cease marketing genetic testing kits for health problems.



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