Thursday marked the latest blow for the start-up company Zenefits with an email direct from new CEO Jay Fulcher explaining that they would soon be laying off another 430 members of staff, almost half (45%) of their entire workforce.
As of late, the start-up have been struggling with weakened sales and regulatory issues. In the email, Fulcher blames this decision to cut staff on rapid growth in the amount of employees during the start-up’s early days which led to the company failing to reach their 2015 target of $100 million in annual revenue.
“In 2015, Zenefits grew too quickly, hiring employees to support revenue projections that far surpass where we are today,” stated Fulcher in a report to Forbes. “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. It is part of an overall turn-around program that began a year ago to correct regulatory compliance issues. reset our culture and values, increase operational efficiency, and introduce a new SaaS platform and business model.”
Zenefits offer HR software and specialize in selling insurance to small businesses. In its first two years it saw its value rise to an impressive $4.5 billion thanks to money given by venture capitalists. Not so long after, the company began to crash and burn and this was largely blamed on their over ambitious payroll of over 1,600 workers.
The coming lay offs are said to affect all departments, but particularly within Zenefits’ headquarters in Chicago where 250 people are expected to lose their jobs. This leaves a workforce of only 500 once the cuts have been made. However, Fulcher further explained that the company would be moving from San Francisco and instead “build out our product and engineering teams in Vancouver and Bangalore.” In addition, the operations side of the company will relocate to their office in Tempe, Arizona with a plan to bring in a “seasonal employment model” for busier months of the year.
Under former CEO David Sacks, Zenefits also saw layoffs in 2016, with a cut of 250 staff members within the sales department followed by a closure of their Arizona office, which meant the loss of another 100 employees. This most recent news comes almost one year since the scandal that outed the company as creating software that skirted laws when it came to selling insurance and led to the resignation of Parker Conrad, the company’s co-founder.