SAN FRANCISCO, June 3 Business startup Zenefits
has raised another $66.5 million from investors, months after
its first capital-raising, following a pattern set previously by
a handful of hot, young consumer companies that proved their
worth to investors over a short span.
Investors had valued Zenefits at $500 million before the new
investment, a person familiar with the situation said on Tuesday
after it had raised its second infusion of capital.
The rapid accumulation of early-stage funds puts Zenefits in
the company of privileged start-ups that investors view as
potential disruptors to existing businesses - and puts more
pressure on it to deliver.
Zenefits, which handles human-relations tasks for small- and
medium-sized businesses, draws comparisons to Workday,
which does the same for larger companies.
Zenefits makes money by collecting fees from insurance
companies when it refers its clients for insurance. Its core
services are free.
But while Zenefits, founded just last year, has already
raised a total of $84 million, Workday built up capital over
time. Founded in 2005, Workday's first big funding round of $75
million did not come for four years; it held an initial public
offering in 2012.
These days, many consumer companies are cutting that
timeline considerably, in particular when it comes to the time
between a first serious funding round, known as Series A, and
the follow-on known as Series B.
A couple of years used to pass between those rounds, but
that timetable is changing.
Technological advances such as cloud-based computing make it
cheaper and easier to build a company. On top of that, the
adoption of new services happens faster as mobile technology
makes it easier to use the products and recommend them to
"We're just completely accelerating everything by a factor
of 10," said Lars Dalgaard, a partner at Andreessen Horowitz,
which led the latest funding round.
Consider the photo-sharing app Snapchat. When it raised its
Series B last June, six months after its Series A, it already
had 200 million users.
Other companies that recently raised Series B just months
after Series A include Coinbase, the company trying to make
virtual currency bitcoin more accessible to consumers; Hampton
Creek, the food company; and Homejoy, the cleaning service.
Dalgaard believes the trend will accelerate for enterprise
companies, particularly given they no longer need to justify
cloud computing to customers.
The cloud technology that allows servers to operate
remotely, and with more flexibility and efficiency - makes many
of the new breed of enterprise companies possible, and drives
their growth into unexpected business areas.
Other investors in the Zenefits funding round include IVP,
which normally invests in companies at later stages of growth;
SV Angel; and Hydrazine Capital. Academy Award-winning actor
Jared Leto is also an investor.
(Reporting by Sarah McBride)