a16z Podcast | How One Startup Went from Being Banned by Regulators to Being Open for Business | Summary and Q&A

TL;DR

Zenefits faced regulatory issues in Utah for providing free HR management services, but successfully rallied support and resolved the situation.

Key Insights

• 😀 Startups in the tech industry may face regulatory challenges from incumbents seeking protection from the shifting market.
• 🖐️ Utah's tech community played a vital role in rallying support for Zenefits and highlighting the impact on economic development.
• 🧑‍💻 Constituencies, including the tech community, customers, and political organizations, can create a significant positive impact in resolving regulatory issues.

Transcript

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Questions & Answers

Q: What is Zenefits and what issues did they face in Utah?

Zenefits is an HR management service provider, offering various functions in one place. In Utah, the insurance commissioner claimed that Zenefits had an unfair advantage and demanded they start charging for their service.

Q: How did Zenefits handle the regulatory issues in Utah?

Zenefits initially went through the ordinary legal process but soon realized it was a political battle. They reached out to more senior officials and rallied support from the tech community, customers, and conservative political organizations, leading to a successful resolution.

Q: How did Zenefits maintain a positive relationship with insurance regulators in other states?

Zenefits proactively reached out to insurance departments in other states, attending meetings and providing information about their service. This helped them establish early relationships and address any concerns.

Q: What advice does Parker have for other startups facing similar regulatory challenges?

Parker suggests identifying whether it's a legal or political battle early on. If it's political, reaching out to senior officials is crucial. It's essential to identify and rally support from constituencies, such as the tech community, customers, and political organizations. Proactively engaging with regulators in other states can also help prevent issues.

Summary & Key Takeaways

• Zenefits offers a centralized HR management system for companies, providing various functions such as payroll, medical insurance, and time and attendance software.

• In Utah, the insurance commissioner claimed that Zenefits had an unfair advantage over other brokers and demanded they start charging for their service.

• Zenefits faced anxiety and fear initially, but through a strong response from the tech and customer community, along with the support of influential politicians, they were able to resolve the issue.