Yesterday, $4.5 billion software startup Zenefits has stated they’ve replaced their founder and CEO Parker Conrad, appointing a new leader for the company. Conrad has been succeeded by David Sacks, a former executive at Yammer and PayPal who joined the company a year ago as the COO. In a letter to employees, Sacks wrote that the resignation was due to “inadequate” work around compliance.
Zenefits provides software for businesses to automate aspects of their HR services, such as healthcare benefits, stock options, maternity leave and vacation time. Although venture capitalists once considered it to be the fastest-growing software startup, Zenefits has since come under fire for allegedly flouting insurance laws and failing to deliver on promises to customers. It’s a textbook example of a unicorn: a venture-backed tech firm worth $1 billion or more whose business appears much less sound than investors believe it to be. Recently, the company came under investigation in Washington state for allegations that it let unlicensed brokers sell health coverage. Buzzfeed reported that they ultimately did this in at least seven states.
Yesterday, Zenefits announced that it had appointed its first chief compliance officer to ensure that the company complies with regulations and broker licensing requirements. In a statement released by Zenefits, Conrad said he was proud of the company, although he recognizes that the company had a tough time keeping pace with their rapid growth. The company also said that PayPal co-founder Peter Thiel would be joining the board.
Zenefits originally launched as a high-tech health insurance broker in 2013, working as the middleman between businesses and healthcare providers such as Anthem Blue Cross and earning money off the commission fee, sparking a turf war with more traditional brokers. The company also butted heads with insurance regulators, who argued that Zenefits couldn’t serve as an insurance broker while also giving its free software to businesses. At one point, Zenefits was growing 30 percent month-to-month, hiring thousands of employees and opening offices in Arizona in 2014 and 2015.
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