By Alan Murray and Geoffrey Smith
September 25, 2017

Good morning.

One thing that distinguishes the current tech boom from the bubble of 1999 is that, on occasion at least, sanity has asserted itself without the impetus of a mass market meltdown. Uber is the most recent example – its scandals have subtracted billions from its inflated market value. Zenefits was an earlier case in point. The highflying HR software company, with a freemium model that made its revenue from commissions as a benefits broker, saw its value cut by more than half last year after reports of an out-of-control culture – remember condoms in the stairwell? – and regulatory problems tied to health insurance sales.

While in San Francisco last week, I visited with Jay Fulcher, who became CEO of the company in February. He’s turned Zenefits into a software-as-a-service model, and last week announced he was abandoning the brokerage business altogether, and instead will allow existing brokers to use the software platform.

“We have pivoted from being a digital broker ourselves to being a platform for all the brokerages,” he said. That will enable the company to scale without having to invest in the service-and-people heavy brokerage business, and make its money by selling what it does well – software. Zenefits now has more than 10,000 small and medium sized companies using its software, “and we’ve only gotten started,” says Fulcher.

Investors – which include Andreesen Horowitz, Fidelity and TPG – have got to be happy with the switch. The company may only be worth half what it was deemed worth at its fever-crazed peak. That’s a correction of sorts. But it comes without the chaos of a bursting bubble.

By the way, it was interesting to hear Fulcher talk about how Zenefits helps drive “purpose-driven” company cultures, with “social responsibility” at their core. That sort of talk is becoming more common, not just in the tech sector, but across all industries. And that’s why this morning, Fortune is assembling about 100 CEOs in Manhattan, as part of its new CEO Initiative, to focus on how to turn such talk into action. I’ll report on the day in tomorrow’s newsletter.

News below.


Alan Murray



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