Wheelings & Dealings: Upstart HR Automation Company Zenefits Worth $4.5 Billion

By Paula Bernier
Executive Editor, TMC

Two-year-old human resources management outfit Zenefits now has a $4.5 billion valuation – up from just $500 million last June. And it represents Andreessen Horowitz’s biggest investment to date.

This follows a new round of funding through which the company raised $500 million. Fidelity Management and Research Company and TPG led the round. Other investors include Andreessen Horowitz, Insight Venture Partners, Institutional Venture Partners, Founders Fund, Khosla Ventures, Jared Leto, Palm Drive Ventures, and Sound Ventures (in which Ashton Kutcher and Guy Oseary are involved).

“In my experience, the momentum that Zenefits has achieved in two years is unprecedented. Zenefits has brought the benefits of software to a massive industry that had yet to embrace technology at scale,” said Lars Dalgaard, general partner at Andreessen Horowitz. “And their potential market includes tens of millions of employees, using multitudes of different business applications in companies of all sizes. We’re thrilled to have led the A and B rounds and to have doubled down again in the C round.”

Zenefits offers small and medium businesses free online tools to manage benefits and insurance, HR software, and payroll and taxes. It makes its money via commissions from insurers.

“There are millions of small businesses in the country that have been wasting countless hours every year juggling multiple HR systems and outdated technology. We are not just eliminating the paperwork; we are eliminating the actual work – making it easier for small businesses to manage and grow,” said Parker Conrad, co-founder and CEO of Zenefits, as noted in a recent blog on the company’s website. “We are thrilled that investors share our vision for the company and for what Zenefits can bring to the marketplace.”

Zenefits expects to lose more than $100 million this year, although it’s already signed on more than 10,000 U.S. companies and manages more than $700 million in health insurance premiums, according to a TechCrunch article. However, Zenefits says it expects to reach $100 million in annual recurring revenue by January 2016.