For employees, there can be nothing quite like the paperwork of HR and benefits, and for employers it can be expensive, especially with new ACA reporting requirements. Internet companies are trying to cash in on that, and could also shake up the insurance broker business.
A San Francisco-based company started called Zenefits, offering free online HR, payroll and benefits software, has garnered $66.5 million in a second round of venture financing, bringing its total to $84 million.
After launching in 2013, the company has signed on 2,000 company clients with 50,000 employees, business growth that's attracted the VC firm Andreessen Horowitz, which led the two financing rounds.
While Zenefits' highlighted clients are small tech sector employers like website builder Weebly, the company and others like it are hoping to offer corporate America inexpensive software and apps that streamline that often complicated, paper-based processes that support HR, payroll and benefits.
In the last two years, established tech giants like Oracle and SalesForce.com have acquired internet-based HR software firms to pitch to their client bases, the former at a cost of $1.9 billion.
Zenefits is pitching its online platform as both free and simple, with no paperwork for employee on boarding or off boarding, direct deposit, automated deduction and 1099 filing, state and local taxes, and benefits and insurance management. It draws a revenue stream by acting as a broker between clients and third party servicers and is licensed as a group insurance broker.
The company's CEO is co-founder Patrick Conrad, who previously worked as a product manager at biotech company Amgen and started a free personal finance software. He's one of a number of entrepreneurs trying to make the paper and manual-based processes cheap and easy for American companies -- which are increasingly looking to save on healthcare costs and reduce the costs of compliance.
The group insurance market is one industry poised to change if employers buy into online, outsourced HR, especially amid the rise of exchanges, leaving insurers with new online broker partners but also uncertain membership.
Researchers at S&P Capital IQ estimate that as many as 90 percent of the S&P 500 companies could end their current insurance benefits and move to public or private exchanges by 2020.