This San Francisco startup has been banned, demonized, and sued—and it’s still going
Zenefits has been banned, demonized, and, as of last month, sued. The San Francisco startup’s public relations strategy is “manipulative and malicious,” argues one competitor. Its business model is a “threat,” according to insurance brokers. Two years into its life, Zenefits, which makes software to help small businesses manage their human resources operations, is bringing buzzy excitement to an otherwise dull sector. There’s even a touch of Hollywood, with actor (and Zenefits investor) Jared Leto tweeting furiously in support of the company in between his usual selfies.
Through it all, Parker Conrad, Zenefits’ 35-year-old founder and CEO, has colorfully defended his company’s right to disrupt. Insurance brokers? “Fucked,” he told Fortune last year. Regulators in Utah, which temporarily banned the company’s services? “Blatant overreaching,” Conrad says. The legislation itself? “Kafkaesque.” When Automatic Data Processing, the $40 billion HR services company, sued Zenefits in June, Conrad launched the Twitter (TWTR) hashtag #ADPeeved.
With its stated goal of eliminating middlemen like insurance brokers, Zenefits has become a threat to its entrenched competition faster than most startups. The company scored 10,000 customers in two years. It booked $20 million in revenue last year and says it is on track to quintuple that figure this year. Zenefits lured Silicon Valley heavyweight David Sacks, of Yammer and PayPal fame, to run its operations. (Sacks says Zenefits is “the coolest company I’ve ever seen, maybe ever.”) With more than 1,000 employees, Zenefits is adding people so fast it must onboard them in monthly batches of 150 at a time.
That growth has made Zenefits a darling of Sand Hill Road investors, who poured nearly $600 million into the company at a valuation of $4.5 billion. The lofty figure helps the startup gain credibility with potential customers and recruits. It also puts a target on the company’s back.
Hence the ADP lawsuit. The 66-year-old New Jersey company (which, for the record, takes in $12 billion in annual revenue) has charged Conrad and Zenefits with defamation, false advertising, intentionally interfering with customers, and unfair competition. (Zenefits denies the allegations.) When ADP blocked Zenefits’ access to its payroll data—for security reasons, it maintains—the startup escalated the squabble by offering 850 mutual clients $1,000 to switch to a different payroll provider.
Conrad—who graduated from Harvard after flunking out, beat testicular cancer at 24, and was pushed out of his previous startup, SigFig, by his own co-founder—isn’t one to back down: “If you’re dealing with a bully, you’ve got to fight them. You’ve got to punch them in the face.”
A version of this article appears in the July 1, 2015 issue of Fortune magazine with the headline “The Enfant Terrible of the Back Office.”