David Sacks joins Zenefits as COO, board member, and investor. Is compared to LeBron James and Jay Z

By Michael Carney , written on December 10, 2014

From The News Desk

“When you have an opportunity to hire LeBron, you hire LeBron.”

It was with this matter-of-fact explanation, that Zenefits co-founder and CEO Parker Conrad summed up what might be the most impactful decision in his already impressive company’s young history.

Beyond raising nearly $84 million in less than two years since first launching the small- and mid-sized business (SMB)-focused SaaS HR platform. And, beyond growing faster than any enterprise software company in history – a staggering 30 percent month-over-month – including recent darlings Workday, Yammer, and NetSuite. Conrad and the company’s board are betting Zenefits’ ability to maintain, and dare they predict accelerate this growth on the addition of their LeBron: David Sacks.

Sacks, the founder of Yammer (acquired by Microsoft for $1.2 billion) and former PayPal COO, has agreed to join Zenefits as its Chief Operating Officer, and will also be joining the company’s board of directors and making what the parties describe as “a significant [but unspecified financial] investment.”

It’s a bold move for a company that is by all measures a rocket ship, with a product-focused CEO who is by all accounts a rockstar, to bring on another enormous personality with many of the same attributes. But at the same time, the alignment between Sack’s experience and Zenefits’ current direction and growth-induced challenges could not be a better fit. Conrad and Andreessen Horowitz* (A16Z) partner Lars Dalgaard, along with the rest of the board, are betting that Sacks’ addition will be exponentially additive to the business.

“Parker [Conrad] is a world class product builder,” Dalgaard says. “Add in Sacks and, holy shit, the synergy is going to be insane. I mean look at the things he’s been involved in – PayPal, Uber, AirBnB, Yammer. I’m quasi-jealous that I don’t get to work on the front lines along with both of them.”

Where Zenefits and Yammer share similarities is in the two companies’ effectiveness in delivering consumer levels of product usability to solve enterprise problems. Sacks is credited with pioneering this type of approach at Yammer, and Conrad has grabbed the baton and continued running. Together, the theory goes, Zenefits will have two product visionaries and twice the leadership muscle available to execute those ideas.

But with any change as significant as this one atop an organization, there’s reason to give pause and ask, what could go wrong?

It has been since Sacks left PayPal in 2002 that he has been anything other than the senior-most decision-maker in any sizable company. It’s also been at least that long since he’s held a senior management role at a company that he didn’t found. The act of buying in, wholeheartedly, to another founder’s vision, and then answering at the end of the day to that person, as your boss, will no doubt be a different experience – especially for someone as successful and highly-regarded as Sacks. Put another way, that’s a lot of ego and personality to fit in one C-suite.

Dalgaard seems unfazed by this possibility. In fact, if I had to describe his attitude toward Sacks joining the Zenefits team, I’d call it jubilant. Or maybe ecstatic. Or out-of-his-goddamn-mind-excited. At least, that’s the way it came across when we spoke over the phone earlier this afternoon.

Like most people, Dalgaard has enormous respect for what Sacks has accomplished. And, coming from the founder of SuccessFactors, which achieved its own $3.4 billion, that’s high praise. But where Dalgaard had the most good things to say about Sacks was around his approach to this new role and in the way he and Conrad have begun to mesh.

“This could have gone so many other ways, when you put two rockstars together like that,” Dalgaard says. “But they remind me of Jay Z and Timberlake. Did you go to that concert? When they were up on stage together, they wanted to play together, to share the stage. It made it so much better for all of us in the audience. And that kind of thing is a leading indicator of how revolutionary businesses will be built. The modern world of management is collaborative. Sachs is about, ‘Whatever needs fixing, I’m gonna jump in and fix it,’ rather than complaining about ‘Why don’t I have sales?’ It would have been much harder to convince Parker if it wasn’t David we were talking about.”

As Dalgaard pointed out later, Sacks has nearly unlimited choices about how to spend his time. With more money than he could spend and, by his own admission countless offers to become a VC, the very fact that he’s joining Zenefits – and also investing his money into the company – represents a major vote of confidence.

About that investment, Conrad tells me that he was initially surprised by the suggestion – after all, incoming executives typically get equity grants as part of their compensation package, they don’t buy shares. But the opportunity to have Sacks involved in any way possible was a welcome one.

“For me, investing is a sign of my commitment to the company,” Sacks tells me. “If I’m going to invest all of my time, I wanted to make a financial investment as well.”

“It’s more common than you’d think [for incoming execs to also invest],” Dalgaard says. “The only reason it’s somewhat uncommon is that few people have the money to do it when taking a role like this. To me it just says that he want to maximize his ownership benefit and that he understands secret economics of, ‘when you find the right one, go after it with everything you’ve got.’ Sure, as investors, we don’t like to get diluted. But we just ask, 'Will this person be worth the dilution?' We think that David could make this a $50 billion company, which would be a first in this category.”

As Dalgaard notes, Sacks won’t be a traditional COO in the (Steve Jobs era) Tim Cook or Sheryl Sandberg sense, meaning he’s not being hired to keep the trains on track while some mad scientist CEO focuses on the big picture. Rather, his role will be to act as more of a fixer or pinch hitter executive – Conrad used the word “partner” – to take on and own whatever area of the business needs his attention at any given moment. In broad strokes, he will be involved in product, operations (including customer support and account management), and finance. But, from the sounds of it, those are hardly lines drawn in permanent marker.

“I’ve had a lot of those conversations [about becoming a VC], but I realized I like operating a lot better,” Sacks says. “Sure, it’s fun to be an investor because you get to participate in a lot of things in a lot of small ways. But for me, it’s more fun to be a big part of companies, particularly ones growing at breaknet speed. The thing that impressed me is that Zenefits has done in one year what it took Yammer three years to do. They’re resetting all the benchmarks. They’ve grown something like 20-X in the last year.”

Zenefits' growth has been truly otherworldly. In addition to 30 percent monthly revenue growth, the company has grown its user base 1,600 percent this year, reaching 2,000 businesses with over 50,000 employees across 47 states. And after starting the year with 15 employees, Zenefits now has grown its full-time headcount to 470 (including 120 in a Phoenix satelite office) and has sights set on reaching 1,300 by the end of 2015. With that kind of scale and pace comes an entierly new set of challenge, ones that few people have ever seen. Sacks, it just so happens, has seen them twice and found success both times.

A16Z took the unusual step of leading both Zenefits' Series A and Series B rounds (coming in January and June of this year, respectively), making the firm far and away the largest outside shareholder in the company. Dalgaard says he’s met with Conrad at least once a week, each week, for the last year – an unsurprising fact given the promise and pace the business has demonstrated.

“The thing is the management team is executing, and we’re happy, so this isn’t a situation where we’re saying we need to fix this,” Dalgaard says. “It just that the growth is so big. Really, it’s that there’s so much to go after, that we can’t go after it all with the current structure and the current team. But we can go after more of it with [Sacks.] Blasphemous as it sounds for a technology startup, sometimes you actually have to consider not growing so quickly unless you have the right people. Now we have the righ people. David has that special X-factor. Everything he touches is just magic, he has magic coming out of him.”

Zenefits already appears destined for greatness, so it’s hard to imagine things could get much better. But, just as when aiming a rocket ship for the moon, it only takes one small wobble for things to end up massively off course. Adding Sacks to an already well-oiled machine is certainly a gamble. But it’s a calculated gamble Conrad and Dalgaard appear eager to make. Sacks too, is voting with both his time and his wallet.

[*Disclosure: Andreessen Horowitz partners Marc Andreessen, Jeff Jordan, and Chris Dixon are investors in Pando.]