How Hot Startup Company Zenefits Self-Disrupted

Tech company selling HR software forced to handle own HR nightmare.

May 10, 2017 5:00 am
What Happened When This HR-Related Tech Startup Needed Its Own HR
Co-founder and CEO of Zenefits Parker Conrad speaks onstage with moderator Matthew Lynley during day one of TechCrunch Disrupt SF 2015 at Pier 70 on September 21, 2015 in San Francisco, California. (Steve Jennings/Getty Images for TechCrunch)

This is the story of a startup that could’ve benefited from a bit of its own software.

Zenefits, which helps automate HR tasks for small businesses and makes its money via commission, was at one point a rising star in Silicon Valley, and has been brought crashing down by a series of cultural, ethical, and functional related issues, Bloomberg Businessweek reported.

The true genius of the platform is that it was able to streamline the process small businesses had to go through to choose a healthcare company for its employees—often a task that included hours of sifting through thousands of plans. The Zenefits model basically turned their sales reps into de facto health insurance brokers, but in trying to advance their business, cut corners.

Each state has its own set of requirements for brokers, and Zenefits, in one case, wrote a Google Chrome extension that helped its employees bypass hours of training. This ended up meaning that many were unlicensed and doing business in states illegally.

Then BuzzFeed wrote a stinging report about Zenefits’ use of unlicensed brokers, and with the resulting lawsuits, the startup’s downward spiral began.

It’s now under different management, and tweaks have been made to the company’s culture. Will it survive it’s second life?

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