San Francisco Startup ZenPayroll Raises $20M, Finds Novel Ways to Lure Workers
blogs.wsj.com
blogs.wsj.com
As some quick history, the company is a little over two years old and we were a part of the YC W12 batch. My co-founders and I started the company because we had felt the pain of using existing solutions at our previous startups. We also have family members running small businesses, and we had been exposed first-hand to the frustration of doing payroll manually (which is still how many companies in the US do payroll).
We felt that modern software could make this complex process much simpler. It's been fourteen months since our launch and we're proud to be processing hundreds of millions of dollars in payroll, and serving countless small businesses across the country. I remind the team often that building a great company is a marathon, not a sprint, and we're still at the early stage of our journey. We have much more to do!
During this interview with the WSJ, I talked at length with Debbie about some team programs we put in place. People are the foundation of any great company and the ZenPayroll team is the entire reason we've been able to do what we've done over the past two years.
I wanted to clarify some of the programs she wrote about:
(1) Housing stipend -- the main driver of this perk is actually the desire to have folks live near the office. We would offer this type of program regardless of where our office is located (even if it was in a lower cost area) because we see a big benefit to folks not having to commute. We realize that not everyone can live nearby, and several of our teammates actually live on the Peninsula, East Bay, or other parts of SF. Our inspiration for this perk was the housing stipend Facebook provided it's employees early on, when they were located in downtown Palo Alto.
(2) Flight at one-year anniversary -- it’s easy in startup life to become caught up in the day to day. We’ve always found it rewarding to travel because it gives everyone perspective, and taking a step back can help people better understand what’s important to them, which makes them a better teammate as well. We put the two-year expiration in place as a specific restriction so teammates have to do a trip during that year. They don’t have to go of course, but we do everything we can to encourage them to do it.
(3) Workation -- similar to #2 above, we’ve found that changing our environment helps us think about things differently. Many other startups do similar types of retreats, and we’ve really enjoyed going away as a team for 5-6 days and working on smaller cross-functional projects that can be completed during the workation. It’s also a team bonding event, and yes, many folks in the office like to cook breakfast. :)
1) Housing stipend of $500/mo if employees live within a 10-minute walk of the office
2) A semi-annual retreat / hackathon where employees cook meals, hang out, bond, code, and present their projects
3) Plane ticket anywhere in the world that must be used between their 1 and 2-year anniversary at the company.
I know of many companies that already do #1 and #2, but I suppose I haven't heard of this complimentary vacation ever before. Seems like a pretty awesome perk, which shows they respect and value work/life balance.
He also put a ton of emphasis on it being a "start-up" and essentially said something along the lines of "in this type of culture its expected that you earn less". I can only guess they passed on me because of my salary requirements which are ~20k under the average. If that is the case which I can only guess it was, not exactly filled with respect or value for work/life balance. /2 cents
EDIT: and jeez they are pushing themselves hard on ycombinator lately.
"in this type of culture its expected that you earn less"
It's easy to get lured into the excitement of working in a "start-up culture" but you will recognize the red flags after one has sucked you dry without adding much to your finances.
(This is not meant as a criticism of ZenPayroll or their front-end lead in particular, especially since this instance is just hearsay, but I've come across the attitude described before and have found it personally baffling every time.)
To flip your question around: Is there any other for-profit industry where employers wouldn't laugh in your face for saying you would like 0.8% of the company worth in stock options in addition to your salary...
It all boils down to whether you believe in the company you are building. If it is positioned to do great, then of course you would want the equity for that IPO. If you don't have that faith, then what are you doing interviewing at that company anyways...Use your skills to get a higher paying job without the options.
If you boil it down to numbers, the most you're looking at is a $2000 round-trip ticket to Japan. So it could be similar to a ~2% salary bonus your first year. But of course in practice, most people will get cheaper tickets, and this bonus doesn't give you anything after year 1. Compare this to the $500 stipend - that's $6k every year, and it directly affects your checkbook, instead of being a perk you may be able to enjoy.
The spirit of it is very nice, as a reward for loyalty. But I think it's always useful to look at the bottom line as well.
E.g., they would be incentivized to raise rents $500, but then one of then could get more business by only raising it to $450 letting the employee capture $50 a month, and so on and so forth.
1) turns your employees into neighbours
2) reduces wasted commute time
3) increases exercise compared to drivers (10 mins is better than nothing (edit: twice a day!)) thus reducing medical costs
4) reduces absenteeism due to dental appointments, kid concerts, etc that tend to be near home. Improves family life.
5) reduces the carbon footprint of the business
6) reduces the car-related absenteeism: breakdowns, maintenance appointments, even injuries and deaths.
Increasing salaries would do none of these things.
Some parents with young children find it difficult to get time to be alone in private while not exhausted. This can cause awful stress on a relationship. "Lunchtime" with a partner at home can make a big difference.
This might not sound like a big deal to the pre-kid people, or those with tons of energy after the kids are in bed, but for some people this is a relationship-saver.
Besides, how reasonable is it to expect to be able to raise a family in downtown SF? Surely if you want space, good schools, and room to grow an extra $500 in downtown rent terms isn't going to make that much of a difference.
Edit:
(* ok, maybe $300 difference after taxes.)
Some companies give stipends to employees who commute using public transportation. They could just give everyone a raise to cover those fees, but tying the stipend to the behavior actually encourages people to do it.
After all what voter is going to argue with clamping down on tax avoidance if it means that the increase in property tax isn't as big this year or that the federal government can use this additional tax to reduce the deficit (or more likely for pork in some agricultural state)
Either way, health care is the precedent here. Wage freezes in WWII resulted from FDR's Executive Order 9328[1] left employers in a lurch. The government had control of all wages, earnings, etc., and those wages were (basically) frozen by position. A tax man made $x, while an ad man made $y, no matter where they worked.
This put employers in a tough spot because, so long as incomes were the same everywhere, hiring was difficult because they couldn't raise wages to attract candidates, so they petitioned the government for an exemption on health care benefits, as a way of attracting new hires and competing in the market place. In competitive industries, as these benefits were given in lieu of free market wages, benefits became fairly lavish, and for competitive positions, health care benefits became the norm even after the wage freezes were eliminated, but the net result was that health care as a benefit grew 700% in a 20 year span.
The sum of all that of course is the system we have now, where health care is so broken as a system that we're going to 'fix it' with more of the same, but that's another discussion.
[1] - http://www.archives.gov/federal-register/executive-orders/19...
Taxing the benefits is the fairest way to do it.
You could handle this by moving to a system similar to the UK PAYE - any benefits in kind are identified to the Tax man by your employer (via the P60 form) woudl simplify the federal tax system.
1: Free EcoPass and/or free parking - EcoPass is a pretty killer bus pass that lets you take the express routes and you can even do long trips for a severely discounted price. The airport from downtown, for instance, runs $11. With EcoPass it's $2.50. We've found that many people would rather take the bus than drive, even if driving and parking in Denver isn't nearly as much of an inconvenience as it is in SF. It also solves the "car trouble" issue for most people.
2: $7,500 each year for vacation - In a startup, you're going to work harder, probably for a bit less money, than anywhere else. Burnout will happen. This is our way to combat it. We remove the obstacle of "can't afford a vacation" by actually paying you to take one.
3: Powder Day Policy - There's 8 inches at Vail and you can't stand to be inside? Go. Take the day. Just don't screw over your team and make it up in the next two weeks. The same holds true when it's 72 and sunny for the first time in a month and you need to just get away.
What we found - First, the obvious. Recruiting engineering talent isn't easy. The same can be said for just about every position that a company needs to fill, but engineering is especially difficult. By way of comparison, we have 9 positions open right now and almost 3,000 applicants. Of those, only 2 percent have applied for the engineering positions.
79 percent have applied as "I just want to work at FullContact".
While that's a drastic difference, it's also better than what we were seeing prior to adding the "non-traditional" benefits as part of the recruiting/retention plan.
The real questions that will hit ZenPayroll (as they have us) are these - You're going to start getting a LOT more applicants. How much time do you have to put in to filter them? Are you going to start getting a lot more GOOD applicants? How many of them just want to game the system for a year to get a taste of the good life? Are your processes good enough to weed them out?
As an outsider with common ground, it's good to see even more companies taking this approach. But as an insider to the turbulence that they can create, I would urge them to make sure that they're as prepared as they can be for those bumps.
I'm a software engineer at ZenPayroll, and it's truly an awesome place to work. The founders and team have taken great care to build an amazing company culture, and I'm really excited to see us grow over the next few years.
But I should stop before this turns into a full on rant...
I feel like a have more control over my schedule which in turn gives me a better sense of ownership over what I create.
If you've ever done freelance work it's very similar in that it gives you freedom to create your own schedule while providing a more stable form of income. That's not to say I wouldn't go back to freelancing I'm just enjoying the current situation I'm in.
We're not interested in a candidate's ability to write sorting algorithms, because those aren't the kind of problems we're solving. Our technical interviews are working on a problem with an engineer. We care a hell of a lot more about how you think than regurgitating Big O notation.
We work in Ruby and CoffeeScript, but we've hired engineers without direct experience in either because we knew they could translate their ample programming knowledge. We're looking for smart people that want to do the best work of their lives. That sounds like bullshit, but we're pretty serious about that. Turns out you can hire smart, passionate people and they'll naturally do awesome things.
For a more in depth look at how we think about hiring, you can check out:
ZenPayroll Is Not Hiring Hackers https://zenpayroll.com/blog/zenpayroll-is-not-hiring-hackers...
The Value of Cultural Interviews https://maddo.xxx/thoughts/how-to-conduct-cultural-interview...
If you have any questions, shoot me an email. I'm chris@
The question is whether or not I'm a "hacker" :)
More to the point (yes, I worry that I'm not being pointed enough ;) ) I have worked with plenty of people that weren't a 'cultural' fit with me, and we did great things. So, I have evidence in direct contradiction of your claims.
It comes down to the way you want to spend your time. If all you want is a paycheck, that's fine. Take the money, go do something else you feel is more important. I don't mean that we are a family in that we're trying to replace your actual blood relatives.
If you're spending 10 hours a day with a group of people, would you rather give yourself to a cause with a group of people you trust, believe in, who you genuinely want to see succeed beyond any selfish desires of your own, or a group clocking in for a paycheck? Ultimately, which situation do you think will make you happier?
I'm not asserting that it is what everyone wants, but these are our values. This is the type of company we want to build.
If the company is awesome, just suck it up for a day. Once you join you can try to change the interviewing process.
I think the thing most people don't realize is that these traditional "interviewing" techniques (like whiteboard coding) are just what gets you in the door. Your real interview starts on day 1, and if you don't perform at the real task, you'll be asked to leave.
Writing sorting algorithms is like tuning a guitar. It's true there exist people who are good at tuning but actually terrible at playing (ie: good at puzzles, but lousy programmers).
But there are few, if any, amazing guitarists who can't quickly tune an instrument. It's a signal.
If my application essay was graded for spelling, grammar, sentence construction, complexity, and other features like I were writing for the AP English exam, I would agree completely with that statement. However, the purpose of such an essay is to communicate why you will succeed in your studies and why the university should admit you. Yes, it takes a minimum level of writing proficiency to do this, but that should be secondary to the message. If you are a university admissions officer who is grading essays on proficiency you should be fired for not doing your job properly.
> If the company is awesome, just suck it up for a day. Once you join you can try to change the interviewing process.
Which just perpetuates the system.
> I think the thing most people don't realize is that these traditional "interviewing" techniques (like whiteboard coding) are just what gets you in the door. Your real interview starts on day 1, and if you don't perform at the real task, you'll be asked to leave.
Then why the hell are you doing them? Just randomly choose a resume that has enough buzzwords and make that person an offer.
> Writing sorting algorithms is like tuning a guitar. It's true there exist people who are good at tuning but actually terrible at playing (ie: good at puzzles, but lousy programmers).
> But there are few, if any, amazing guitarists who can't quickly tune an instrument. It's a signal.
Writing sorting algorithms for a software developer is like tuning a guitar for a musician. Both are broad terms that cover a number of specialties. Most specialties of software developer can write efficient sorting algorithms, but some can't because they have no need to. If you want to hire a guitarist, advertise that you are looking for a guitarist; don't advertise that you are looking for a musician and reject everyone who isn't a guitarist at the interview stage.
No. Thank you, but no.
The interface was confusing, web-unfriendly, and left me questioning how much money I needed to budget for quarterly taxes (both state and federal) and why we were sending so much money to the IRS for such a small startup. At the end of the day, I always felt captive to QuickBooks. Software should be empowering, not shackling.
And to take "some responsibility", he made it easier to push housing prices even higher by subsidizing already well-off employees?
*correction: as explained elsewhere, this is potentially a misquote: https://news.ycombinator.com/item?id=7265916
Why have people started talking about responsibility to your environment as if it's something new?
If I create a startup and hire 20 people, and some of those 20 people like to eat some particular type of food for team lunches, and their presence at that eatery makes the lunch line longer for other patrons, do I have some obligation to apologize to those patrons for the long line?
If my 20 employees don't elect my $500 stipend to live within walking distance, what pennance would adequate for me to apologize to citizens of earth for the increased CO2 emissions from their driving and to the citizens of San Francisco for the extra 40 vehicle trips that would be foist upon the city? For good measure, he's paying people $500 a month extra to live within walking distance. For this, he gets a river of crap?!
At some point, companies employ people, those people get paid, those people spend their money consuming other items, but the company has no responsibility to apologize for that 3rd level effect consumption, IMO.
I was born in San Francisco, but grew up in the suburbs. When I was in college, I used to travel through San Francisco to visit my family and I told the reporter it's been amazing to see all of the neighborhood changes over the years. SoMa used to be much emptier, and was not a very residential area. After they built the Giants baseball stadium, there was a big building boom, and Mission Bay is now rapidly developing as well.
Separately, we discussed our housing stipend program. This perk was actually inspired by Facebook, which used to give a housing stipend for employees that lived within one mile of their office in downtown Palo Alto. We would do this program regardless of where our office is located (in SoMa or elsewhere) because we see a big benefit to folks not having to commute.
The reporter at the WSJ merged these two concepts, hence the quote you listed above.
The current major companies offering payroll (SurePayroll and ADP) are both expensive difficult to use. I'm currently with SurePayroll and it sucks major balls. It's expensive, (I have 1 full time employee and 1 part time employee that I pay both by check and I think it's upwards of $80 a month for the two of them). Simple tasks that should be easy take multiple steps. I tried updating my bank account information and they required me to fax it in. I'm under 30 and have never used a fax machine. Huge time drain just to update an account and routing number.
I want so badly to switch to ZenPayroll, as I've read so many great things about it. I'll keep crossing my fingers they'll hurry up and get more states on board. The online payroll space is absolutely ready for a game changer, and a company that gets it right will make a ton of money.
The death of ADP and its ilk can't come soon enough. Payroll might not be as 'sexy' as some other markets, but you're right that whichever start-up can battle the big guys here will absolutely make a lot of money.
ADP is targeted at corporations with payroll across multiple jurisdictions. The Apples, Googles, and Microsofts. It's not targeted at, nor intended for small businesses, even though they offer a SMB product. If you're not at least dealing with payroll across multiple states, you should be using a your bank's payroll service offerings, or (if you trust them) a local payroll service provider or a payroll SaaS.
Pretty good perk for now though, I'd take it.
Here's a link: https://news.ycombinator.com/item?id=7265814
There are also two recent blog posts we've made which might be helpful. The first is about the funding, and second is our 2013 Year-In-Review, which highlights what we've been working on.
https://zenpayroll.com/blog/series-a-funding https://zenpayroll.com/blog/zenpayroll-2013-year-in-review
Hope this helps!