Jason Lemkin and Aaron Ross interviewed CEO Parker Conrad and VP Sales Sam Blond about Zenefits’ growth from 0 to 100 reps in 2014. The interview took place at the SaaStr Annual Conference on February 5, 2015. For more details, visit www.saastrannual.com.
20x Growth in 2014
Zenefits had a phenomenal 2014, growing revenues from a $1M to $20M run-rate. Six months earlier, in mid-2013, Zenefits was doing just $15K in MRR. Comparing Zenefits to his previous job at Echosign, Sam thought “it’s harder to create urgency in adoption of a free product.” Without discounting, it’s tougher to get people across the finish line.
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Doubling the Revenue Plan for 2014 Mid-year
The plan for 2014 was originally to get from $1M to $10M. When Parker and Sam sat down with Lars Dalgaard (their investor, Andreessen Horowitz) early in the year to review their already aggressive 2014 plan, Lars called them “bush-league.” “Why only hire 20 sales reps? You guys should be at 100 reps by the end of the year.”
Lars' callout got Parker and Sam thinking: “What if we had to hit a $20M run-rate? We’d have to split our salesforce in two to manage the smaller and larger clients separately.” As they started mapping it out, it actually looked doable. There was push-back internally; people thought it was crazy; and they didn’t tell anyone outside the company until Parker started telling his investors a month later. At that point, a $20M run-rate became the goal. Over time, people internally had become comfortable enough with it.
Parker and Sam wound up hitting the doubled plan, knowing that, if they missed it, they’d still consider the year a win.
Hiring 100 People per Month
Zenefits hired 600 people in 2014, growing the company from 50 to 650 people. At the time of the interview (Feb 2015), they were hiring 100 people a month.
San Francisco was proving too expensive and tight a labor market to hire sales reps at the velocity that Zenefits needed. So they opened an office in Phoenix, and things there have worked out great. The talent has been impressive, with many reps in Phoenix even beating reps in SF.
Parker and Sam were wary of knowledge getting lost between the two offices, so they sent 15-20 people from SF to see the Phoenix office. Parker: “It’s hard to do things at a distance until it’s rinse, wash, repeat.”
Sales Development Reps Report into Marketing
Zenefits has never been top-of-the-funnel constrained. Due to fantastic marketing, there were always enough leads to go after. So growth challenges have mainly been around recruiting and training.
As of Feb 2015, Zenefits had 50-70 SDRs, growing from 0 at the beginning of 2014. It’s a numbers game; they know that one SDR will create X leads that can feed Y sales reps.
SDRs report into the marketing department at Zenefits because marketing has a lead commit to sales — just like sales has a revenue commit to the rest of the company.
What to Do with All that Money?
Zenefits raised $66M in June 2014 and reports suggest that another monster round is on the way. These capital injections of course allow the company to hire more engineers, spend more on marketing, etc. But such capital is especially necessary to support growth in the sales team. At Zenefits, cash comes in monthly (from insurance providers and other third parties), as opposed to many other SaaS businesses that receive upfront payments annually. As Parker Conrad points out, Zenefits has a greater cash need to scale:
The more business we close, the more successful we are, the more money we lose in the near term. There were points where our success could actually put us out of business because you close so much business that it puts you into such deep negative territory.
The Real Bottleneck: Hiring and Training
Today, Zenefits’ biggest bottleneck is candidates coming in the door. According to Sam, “We’re tripling internal recruiting resources on the sales side… and we’re paying employees more for candidate referrals.”
Training was also becoming a big bottleneck on the sales side, where multiple new hires were joining every single day. In just a few months, Zenefits went from having no trainers to having an entire training department, led by a VP of sales enablement.
Competition Isn’t a Problem
Zenefits is in a competitive space, with large entrenched competitors. While Zenefits sees vicious competition from insurance providers, Parker and Sam think they have a unique foothold with their all-in-one, integrated system of record, rivaled by very few companies. Parker explains that, most of the time, conventional wisdom is to focus on a specific product or category. Zenefits, on the other hand, is tackling the problem of unifying HR systems so that customers don’t have to.
Parker himself doesn’t get very involved in sales; he tends to spend more time with customers post-sales because that’s where most bottlenecks are. Parker does underscore the importance of listening in on enterprise demos once every 1-2 weeks. He especially wants to hear why potential customers say “no.” It’s hard to get that feedback second hand (because people ask for a faster horse) — the solution may be non-obvious, so he wants to hear feedback first-hand.