New year, same struggles for Zenefits, the scandal-ridden HR startup once valued at $4.5 billion.
On Thursday, the company announced it is laying off 430 employees — roughly 45% of its workforce.
Zenefits, once a Silicon Valley darling, sells software to help companies manage a range of administrative functions like payroll and health insurance. It was hailed as a fast growing startup disrupting a staid industry. But its trajectory hit massive roadblocks after a Buzzfeed piece that exposed the company’s disastrous company culture and fraud at the hand of its CEO and founder Parker Conrad.
The company, which employed roughly 1,500 people in early 2016, suffered two rounds of layoffs last year. It saw its valuation cut, and in November, it agreed to a $7 million fine as part of a settlement with California regulators for helping employees illegally get licenses to sell insurance.
Thursday’s layoffs are its third — and largest round — in a year.
The news, first reported by Buzzfeed, comes days after Jay Fulcher came on as CEO, replacing David Sacks. Sacks, who’d been CEO for less than a year, had been working to repair the company’s culture and refocus its mission. The company said that the layoffs are still part of that plan and predate Fulcher.
“It is part of an overall turn-around program that began a year ago to correct regulatory compliance issues, reset our culture and values [and] increase operational efficiency,” Fulcher wrote in a memo sent to employees and obtained by CNNTech.
Zenefits said the layoffs will help it centralize its operations in Arizona. It also plans to build out product and engineering teams in Vancouver and Bangalore, in addition to its San Francisco team.
“Today’s action aligns our costs more closely to our business realities and gives us the runway we need to build the business properly for the long term,” Fulcher wrote.
