Troubled startup Zenefits just laid off almost half its staff — here's the full email sent to employees

REUTERS/Beck Diefenbach

The roller-coaster ride of a startup known as Zenefits is not quite down with its dramatic drops. The company is cutting 45% of its workforce, it confirmed to Business Insider after a report by BuzzFeed's William Alden.

The full email sent to the Zenefits troops is below.

Most of the cuts — about 250 people — will be within its headquarters in San Francisco. Another 150 will be cut from its office in Tempe, Arizona.

The memo says a handful of others will also go — 430 people, all told.

Zenefits will have a workforce of about 500 when done. However, it plans to hire more people for its engineering teams in Vancouver, Canada, and Bangalore, India.

Zenefits offers HR software and sells insurance to small businesses, and it was known for some time in Silicon Valley for its skyrocketing growth. Venture capitalists plowed $582 million into it in its first two years, valuing it at a stunning $4.5 billion.

With all that cash, the company quickly crashed and burned. It hired like crazy, bloating its payroll to over 1,600 people, and chaos ensued, with no one knowing what other workers were doing. Zenefits became known for its parties, drinking during the day and taking shots to celebrate contracts.

Zenefits missed its sales goals, and founding CEO Parker Conrad was forced to resign after the company was found to have sold software in some states without proper licensing. The company also accused Parker of writing a software program that helped employees skirt the law when studying for their insurance licenses.

A year ago, COO and investor David Sacks took over as CEO and began whittling the company down, at first by offering employees a chance to voluntarily resign, then with rounds of layoffs. He renegotiated with investors to give them a bigger stake and cut the valuation to $2 billion. He put license compliance in place, negotiated settlements with states, and released a new version of the core product.

In December, Sacks announced he was leaving, too. Some speculated he was leaving to take a role in President Donald Trump's administration, as Sacks is close friends with Trump adviser Peter Thiel, who has acted as a liaison between Trump and Silicon Valley.

This week, Zenefits appointed a new CEO, Jay Fulcher. However, the company says this round of layoffs wasn't his idea alone, and that it had been planned by the board and Sacks.

Here's the full email sent to Zenefits employees:

"Today, we took a hard but necessary decision to position Zenefits for long-term growth. We are saying goodbye to 430 employees. This has been planned for some time and is the result of a lot of hard work over the past year to improve our products and service and make the operations of the company more efficient. As a result, we have a dramatically improved cost structure, the ability to deliver a market-leading product roadmap that exceeds customer expectations, and enough cash to fund our operations for years to come.

"There are a number of important factors that went into our decision to reduce the headcount in our company.

"First, we decided to centralize our operations organization in Arizona. Additionally, we will be partnering with third parties for some of the seasonal work we do around insurance operations.

"Next, we will be building out our product and engineering teams in Vancouver and Bangalore to better complement the already established and proven team we have in San Francisco.

"Finally, our market (small- and medium-sized businesses) is very cost sensitive and requires the lowest cost, highest value solution possible. These changes are going to allow us to continue to build and deliver the industry's best all in one HR platform and service.

"Today's actions have been planned for some time by the board, the prior CEO David Sacks, and the executive team, to put our new CEO Jay Fulcher and the organization as a whole in the best position for long-term success. This reduction in force is consistent with 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 product and business model. All of these changes gave us the opportunity to attract a top-notch operator like Jay Fulcher, who will lead the company to the next stage of growth and profitability."

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