Sacks wrote, “I believe that Zenefits has a great future ahead, but only if we do the right things”. It’s not clear what, if any, interest Conrad retains in the company, as a press release on additional board members neglected to include him in its ranks. At its height previous year, investors valued the company at $4.5B.
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Compliance issues that have plagued the company apparently contributed to Conrad’s exit.
Once considered by venture capitalists as the fastest-growing software startup, Zenefits has come under fire for allegedly flouting insurance laws and failing to deliver on promises to customers.
Several reports since November have alleged that Zenefits allowed its sales reps to act as insurance brokers, selling insurance policies to consumers in seven states without a broker’s license.
By giving away a software tool to companies for free, Zenefits is able to help with things like managing payroll and then take a cut every time an employer buys health insurance using the Zenefits platform. Now it’s up to Sacks to do something about it, and he is wasting no time in making moves to shore up the company’s image, announcing that he has appointed Zenefits’ first Chief Compliance Officer, former federal prosecutor Josh Stein. It’s also an illustration of what happens when a tech company tries to bring Silicon Valley’s gospel of disruption to an ultra-regulated industry – one that everyday people don’t know or care much about, and certainly aren’t willing to rally behind.
After successfully creating tremendous excitement about a secretive new product that was supposed to change the world, blood testing company Theranos has also gotten tangled up in questions from regulators. “We are committed to having robust administrative and technical controls in place that ensure strict and total compliance”.
“We must admit that the problem goes much deeper than just process”, he wrote. That lead to “at least one regulatory inquiry” into the workings at Zenefits. “Once we’re aligned as a team around core values, the next thing we’re going to do is sharpen our strategic focus”, according to the memo. “And we must have integrity in the way we treat each other”.
For Zenefits he said, that means “hyper-focusing on the small business market where we have product-market fit”. The site said that more than 80 percent of Zenefits policies in force in Washington state as of August had been sold by unlicensed employees.
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Conrad is off the board of Zenefits, which offers HR tools, and Peter Thiel has joined the board.
