Zenefits, the 2-year-old San Francisco cloud software company, announced $500 million in new funding, pushing its valuation to $4.5 billion.
Fidelity Management and TPG led the funding round, with participation from Founders Fund, Khosla Ventures, Insight Venture Partners, and Sound Ventures, the investment firm of Ashton Kutcher. Existing investors Andreessen Horowitz, Institutional Venture Partners, and actor Jared Leto participated. Zenefits noted that this round represents Andreessen Horowitz’s largest ever deal.
With this latest deal, cofounder and CEO Parker Conrad could become a billionaire. He tells Forbes that he remains the largest individual shareholder of Zenefits, although declines to cite his exact ownership percentage. The 34-year-old is now running a company with approximately 1,000 employees. He was previously the cofounder of Wikinvest, which became Sigfig, before getting kicked out in 2013.
“If you think about it like we’re driving a car, we want to go extremely fast at an extremely high speed, and go very far,” Conrad said. “And if you want to do that you’re gonna burn a lot of gasoline. So this round we had to do the mother of all pit stops for gas and beef jerky, to continue building at the speed that we’re going.”
Zenefits gives away its software for managing employee health benefits, time and attendance tracking, flexible spending accounts and other benefits. The chief way it makes its money is by acting as an insurance broker. Companies who use the software have the option of buying their employee health insurance through Zenefits, which resells policies from health insurance companies and books a percentage of revenue from the sale.
Investors tend to like cloud-based software companies for their predictable streams of revenue. Zenefits has benefited also from being free to use, increasing its appeal for smaller companies.