Zenefits hires Yammer founder David Sacks as COO

December 10, 2014, 11:00 AM UTC
David Sacks, chairman and chief executive officer of Yammer Inc., smiles during a Bloomberg West television interview in San Francisco, California, U.S., on Friday, Jan. 24, 2014. Yammer Inc. develops tools for internal corporate communications that bring together all employees inside a private and secure enterprise social network, which reduces the need for meetings, increases communication across silos, and connects remote workers. Photographer: David Paul Morris/Bloomberg via Getty Images
Photograph by David Paul Morris — Bloomberg/Getty Images

“David Sacks doesn’t need to do this.”

That’s Parker Conrad, the CEO of a startup called Zenefits, and he’s right. Entrepreneur and investor David Sacks has joined Conrad’s startup as COO, but it’s not because he needs the money, or the experience. He sold his last company, Yammer, to Microsoft (MSFT) for $1.2 billion. And he secured his place in Silicon Valley history as part of the PayPal (PYPL) mafia. (He was COO of PayPal until its sale to eBay.) The more typical career path for a person like Sacks in Silicon Valley is to become a venture capitalist, picking deals and pontificating about the future of technology on conference panels.

But the startup life was too appealing to Sacks, and in particular, the life of one particular startup. Just 18 months old, Zenefits has earned itself an enviable list of superlatives. According to its investors, it is the fastest growing software-as-a-service platform in history. Its last round of funding was, according to many, the hottest deal in Silicon Valley. It is breaking growth records. It is scaring health insurance companies. It is fighting regulators. Its biggest challenge is not finding customers or product-market fit, but scaling fast enough to meet demand. All of that made Zenefits more attractive to Sacks than becoming a venture capitalist.

“As a VC you spend most of your time talking to companies you don’t actually invest in and it seemed like a lot more fun to me to be part of the coolest company that I’ve seen, maybe ever,” Sacks says. Even cooler than the company Sacks himself founded. “Zenefits has done in one year what it took Yammer three years to do,” he said.

Indeed, Zenefits is on a tear. As I wrote last week:

Eighteen months in, Zenefits has 2000 paying clients and 450 employees. The San Francisco-based company has signed a development deal with Arizona to add 1,300 jobs there in the next three years. A June funding round worth $66 million valued the young company at $500 million.

Parker wasn’t planning to hire a COO until his investor, Lars Dalgaard of Andreessen Horowitz, suggested Sacks. “When you get a chance to bring LeBron on your team, you go get LeBron and bring him on your team,” Parker says.

Zenefits is in the middle of a regulatory fight with Utah, which has said the company’s practice of giving away the software for free is not legal. Utah governor Gary R. Herbert has expressed a desire to work with the company but hasn’t taken any official action yet. Sacks dealt with a similar issue at PayPal, where the State of Louisiana briefly shut down the payment service. Says Sacks: “Ultimately regulators want to do what’s in the best interest of the consumers.”

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