Zenefits, once worth $4.5 billion, has completed a financing deal with private-equity firm Francisco Partners that gives the investment firm control of the company. The effective acquisition, the exact dollar figure of which remained unclear, represents quite a comedown for the one-time highflier.
Founded by Parker Conrad in 2013, the HR startup quickly became a tech darling, sporting that sky-high valuation within three years. Then, everything unraveled as the San Francisco-based company’s growth stalled amid compliance problems that included brokers selling health insurance in states where they weren’t licensed to do so.
Conrad resigned under pressure in February 2016, while Zenefits retrenched and slashed its valuation by more than half under new leadership. First, PayPal
Dipanjan (DJ) Deb founded Francisco Partners in 1999 after working as a principal at Texas Pacific Group. The firm, with locations in San Francisco, London and New York, focuses on providing capital to technology companies “facing strategic or operational inflection points,” according to its website.
A source familiar with the deal noted that the investment would allow Zenefits to capitalize on the $30 billion market for human-resources software among small- and medium-sized businesses. The source also said that Francisco sees momentum in Zenefits’ transition from its original business model to a software-as-a-service one.
The deal occurs as Zenefits has come under increasing pressures during Covid-19. The company, which once had more than 1,000 employees, laid off 15% of its staff in the spring of 2020, according to Insider, and ended the year with 522 employees, according to venture-capital database PitchBook.
Sources say Zenefits’ venture-capital investors, including Andreessen Horowitz and Founders Fund, have already marked their investments in the firm to zero.
Both Zenefits and Francisco Partners declined to comment.
Conrad has since founded Rippling another startup designed to automate human resources, that passed $1 billion valuation last year.
Source: Forbes
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