Zenefits is letting go of 250 people, according to TechCrunch citing an email from CEO David Sacks to company employees.
It read:
“When I became CEO of Zenefits, I promised on Day 1 to reset our culture, refocus our strategy on serving small businesses, and create a new beginning for success in the future,” Sacks wrote. “Today I have to make a very difficult set of decisions about how we do that. In fact, this is the most difficult decision I’ve had to make in my career, but it is necessary for Zenefits to move forward successfully.”
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The article, citing the memo, said one reason behind the layoffs was that the three year-old company grew too fast. That’s interesting because it reflects the criticism some investors make when they see companies raising too much funding too early. Inevitably, they hire too many people and are forced to make cutbacks, although the reductions could just as likely be due to a decline in business.
Zenefits problems from investigations over its alleged use of unlicensed brokers to tales of a freewheeling culture have been received with some glee from community-based benefit brokers, members of the industry the company vowed to change.
Former CEO Parker Conrad, who exited the company earlier this month, spoke at a TechDisrupt conference in October where he addressed the growth issue. He said, “the only thing worse than growing is not growing quickly.”
The company’s rapid growth, raising $582 million in three years and employing more than 1,600 people, suggests investors more interested in growth and less interested in outcomes or actually needing proof that its approach works.
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Zenefits is getting the kind of negative attention that Theranos and 23andMe have received. The question is, what will be the impact on other digital health companies? Is this a wake up call for the need to respect regulatory hurdles instead of ignoring them? Or a cautionary tale about the need for restraint when it comes to healthcare entrepreneurs and what they can realistically deliver to investors?
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