Zenefits Founder's Next Act!
Just about 14 months after leaving the company he founded -- Zenefits -- more or less in public disgrace, Parker Conrad has launched his next company called Rippling. There, he is trying to repeat the same amazing smartphone-like integration and ease-of-use, only this time for onboarding at small companies. And don't believe everything you've read about him. (Except here, of course.)
By Bill Kutik
Full disclosure: Parker Conrad and I were both managing editors of The Harvard Crimson -- 33 years apart. For both of us, that was a full-time job, completely displacing classes and required reading. So even more than the misbegotten corporate manager who hires an applicant for being a member of his old college fraternity, I imagine that I know the values and standards Parker learned while he worked on the independent daily newspaper. But you decide if I'm being a bigger dope than the hiring manager "going by his gut."
Very few vendors break out of our world of HR technology to become subjects in the general tech and commercial press, and eventually get known by just about everybody who cares about business. I believe PeopleSoft (certainly by the Oracle hostile takeover) and Workday (at first for its spectacular IPO) have managed that trick.
But I know Zenefits did, even with its comparatively modest goal of becoming the HRMS for companies under 50 employees.
Because it was a Silicon Valley story, the first reason was the money. Big money. Venture capitalists invested more than $500 million when Zenefits had fewer than 500 employees and about 2,000 tiny customers not even paying for the software. That skewed all the charts on how much investment HR technology was attracting year by year and valued infant Zenefits at $4.5 billion.
The second reason was its principle backer, Lars Dalgaard, the first CEO of SuccessFactors, who sold that for $3.1 billion to SAP and soon became a venture capitalist. He knew HR systems and the next big thing, right?
Lastly, its customer growth went beyond torrid. In 2014, tech watchers said it might be the fastest growing SaaS, or cloud, company in history. In a long feature, The New York Times wrote Zenefits defined Silicon Valley's recent technology boom.
I wrote about Zenefits in Nov. just before the big investment and before the storm clouds appeared on the horizon in 2015.
The clouds gathered fast and from many directions. Briefly, the company made its money selling health insurance to its subscribers. It had allowed its brokers to sell in states where they weren't licensed, and some company employees used a software program to speed up state-insurance-licensing tests.
With dangerous and expensive legal issues like those and so much money at stake, somebody had to fall on a sword or get thrown under the bus, depending on what you think happened, when things started to go south. That was Parker, who stepped down as CEO, while still owning more than 10 percent of the company.
Under his separation agreement, Parker legally can't give his side of what happened, but he understands what "off the record" really means in journalism. It's not an "unnamed administration official said" (that's called "on background"); its that the words were never actually spoken except to inform the thinking and attitude of another person.
Apparently, many people heard his side off the record because 20 of the original investors in Zenefits (90 percent of the total number, he says) joined the $7 million seed round for Rippling.
So Parker is now literally in his garage on Folsom Street in San Francisco serving about 100 paying clients with the help of 14 paid people, including a dozen software engineers (a bunch in Bangalore) and a CFO. Typically, a start-up hires a CFO much later. And Parker is reportedly even trying to recruit a general counsel.
Two lessons learned at Zenefits: First, install internal controls.
Parker also learned that free isn't always the best price for SaaS software. Rippling is charging $8 per employee per month for its onboarding software, which includes its own payroll system. No, it can't do a gross-up of a retroactive effective-dated one-time bonus, but it can do gross-to-net and make direct deposits into employee bank accounts nearly anywhere in the world.
Parker completely understands that hiring and onboarding new employees involves a lot more than forms and data entry that it often involves provisioning of physical objects such as ID and security badges, laptops and various devices; and includes system issues such as passwords, e-mail and lots more software. Even in larger-company onboarding, some software does little more than send an order form to the procurement department or IT.
Know that Parker is no HR software guy. He's a Valley Guy, although happily without the typical arrogance. He's just trying to find new and better ways to make employees productive that have vexed him and his friends at other start-ups. So he may start with a manual process, move up to a software kludge and then find a cool solution.
One solution I like is hardware from a company called Proxy that, once installed, allows employees to badge in and out with their cell phones. No more cards to make or snatch back.
As at Zenefits, getting new software with Rippling is literally as easy as installing a new app on your phone -- at those companies where Rippling has worked it all out, of course. It goes without saying that Parker has a grander vision for Rippling. Well save that until after Rippling is a going concern.
I was stupefied by Parker's response in a TechCrunch video from the very early days of Zenefits in 2013, when he was asked about potential competitors. He only mentioned TriNet, the PEO for Valley start-ups. He truly did not know that ADP, Paychex and Sage have, for years, served the HR needs of millions of companies in what was then his target market of fewer than 50 employees.
Even now, Parker told me he hasn't investigated the leading point solution for onboarding from SilkRoad called Red Carpet. Discussing his new company's name, he said he wasn't bothered by the possible confusion with Rypple because he had never heard of that bleeding-edge HR-tech company acquired by Salesforce.
While firmly believing that those ignorant of history are doomed to repeat it, I'm beginning to think that Parker's truly blank sheet of paper in HR administrative systems could turn out to be a major benefit for him and his customers.
And with our gossamer old school ties, I'm just glad that, after being out, he's back.
HR Technology Columnist Bill Kutik is co-chair emeritus of the 20th Annual HR Technology® Conference & Expo, returning to Las Vegas, Oct. 10-13, 2017. Learn how your job may actually be killing you from expert Steve Hunt on the 27th episode of his broadcast-quality video series, Firing Line with Bill Kutik®.