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Bringing Enlightenment to Payroll

Tomer London, co-founder of ZenPayroll, has a mantra: "Make it delightful and affordable and your customers will come."
ZenPayroll co-founders Edward Kim (left), Joshua Reeves (center) and Tomer London.
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Author Ray Bradbury once said that life should be touched, not strangled. That philosophy easily applies to ZenPayroll.

The San Francisco-based start-up provides payroll processing software-as-a-service for small business owners, but its goal is to make a complex and time-consuming chore that most entrepreneurs dread, downright pleasant and serene, says ZenPayroll co-founder and chief product officer Tomer London. London and his two co-founders offer the service at a fraction of the price much larger competitors charge.

"We wanted to understand the emotional connection small businesses have to payroll, which is often viewed as just painful and frustrating," London says.

So far, the 12-person company claims to have "thousands" of businesses signed up to the service, whose base cost is only $25 per month, compared to potentially thousands of dollars from much larger competitors.

Though ZenPayroll is not currently profitable, it closed its first funding round in April 2012, worth $6.1 million, from investors including chief executives of Box, Dropbox, Yammer, Yelp, a Youtube co-founder, and Google Ventures. That followed a stint in start-up accelerator Y Combinator, also in 2012.

Getting to launch certainly had its twists and turns. London, a native of Haifa, Israel, started programming when he was 12, designing an inventory system for his father's clothing store and then software that helped non-native speakers learn nuances of English, all before he attended Haifa's prestigious Technion Institute. He also started his own software company--one that helped call centers for big businesses--followed by a scholarship to Stanford's graduate school of engineering, where he met partners Joshua Reeves, now ZenPayroll's chief executive, and Edward Kim, current chief technology officer. Both had also started companies before attending Stanford.

The trio focused on payroll because they thought it seemed like an industry that was ripe for innovation.

"We had in our minds simple and delightful consumer products like Google or Facebook, and we envisioned building a new payroll product from the ground up, so that it would be fast and flexible," London says.

They're onto something. IT research firm IDC says payroll accounting is a large market, worth about $14.5 billion in the U.S. It's controlled by heavyweights ADP, Ceridian, Paychex and Intuit, which also focuses on smaller businesses with its QuickBooks product. These companies control 50 percent of the market, while 7,000 smaller vendors compete for the remainder.

ZenPayroll has an advantage because it can build a payroll processing product specifically for small businesses, says Mark Leslie, former CEO of Veritas, an angel investor, and a professor at Stanford's graduate school of business. Leslie provided guidance to ZenPayroll's founders.

"These guys can go to the bottom of the marketplace and solve a problem in an effective way for the small company in one location," Leslie says.

The largest providers have not innovated or streamlined their products in decades. Although they also have small business offerings, their products are part of a much larger set geared toward bigger enterprises, and hence more general, says Firas Raouf, venture partner at OpenView Venture Partners, based in Boston.

By contrast, ZenPayroll allows small business owners to get set up in minutes, using a template system based on simple questions that predict the kind of payroll features businesses will need. It's also paperless, making automatic deductions and payments for state and federal taxes, and giving employees access to their account information.

"Software has become something that needs to be a pleasure to use, rather than cumbersome," Raouf says. "That has happened with the consumer market and it's starting to seep over into the enterprise market, starting with small business."

And ZenPayroll's founders are very aware that they're on the cusp of creating just that. "Delightful payroll is not just marketing, it is the core of what makes us unique," London says.

Bringing Enlightenment to Payroll

Tomer London, co-founder of ZenPayroll, has a mantra: "Make it delightful and affordable and your customers will come."

Last updated: May 28, 2013

JEREMY QUITTNER | Staff Writer | Staff Writer, Inc. and Inc.com

Jeremy Quittner is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.




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