Zenefits' founding CEO, Parker Conrad, who resigned in February in a scandal involving selling insurance without proper licensing, started the company when he was pretty much broke but left it financially secure.
New details are now emerging about how much money he made: well over $10 million, as first reported by BuzzFeed's William Alden.
Business Insider had previously reported that, as a condition of his resignation, Conrad negotiated a "generous severance" package. This included a severance of $130,000, Alden reports. Plus, Conrad retained his Zenefits stake, including some options that hadn't yet vested.
But Conrad's biggest payoff came well before he was ousted from the company, and actually occurred in May 2015, a few weeks after the company had raised a whopping $500 million funding round that valued Zenefits at $4.5 billion, multiple sources confirmed to Business Insider.
Approval to cash out
More investors wanted to jump into that funding round than the company was prepared to sell equity to. Conrad had originally been seeking $300 million to $400 million. But he ended up raising $500 million and investors still wanted more.
As part of that first $500 million, Conrad had not cashed out any of his equity, he told Business Insider in an interview at the time.
He joked with us that, despite running a $4.5 billion company, he wasn't living the high life.
"I tried paying at a restaurant with stock options. It didn't work," he told us.
He also told us, more seriously, that he was expecting his first child and driving around in an old jalopy and couldn't afford a new car.
A few weeks later, he could afford one -- and then some.
It turns out that Conrad had gained approval from "the majority" of his existing investors to cash out $10 million of his stake as part of that May round, sources have confirmed to Business Insider. Cofounder Laks Srini also sold some of his stake, one person told us. Conrad lobbied board member and investor Lars Dalgaard to allow other employees with vested options to sell stock, too, this person told us.
All told, including the shares that Zenefits employees sold, investors actually bought $512.57 million worth of Zenefits stock, which was 11.4% of the company. After the deal closed, investors owned 43% of the company, according to PitchBook, and the 2-year-old Zenefits had raised a total of more than $596 million.
That was the company's high point.
After raising that money, Zenefits started hiring like crazy to grow revenue as fast as possible.
That hypergrowth caused the company to spiral out of control, as did some questionable decisions about how the company was training salespeople to obtain their insurance licenses and how it was allowing unlicensed salespeople to participate in sales.
After Zenefits missed its internal sales projections, Conrad was replaced by COO David Sacks in an ugly scandal. Sacks promptly laid off 17% of the workforce, though we understand that Zenefits is hiring again,particularly veterans.
As of March 31, 2016, the company was valued at $5.31 per share by Fidelity Investments, representing a 64.36% markdown from the Series C investment, PitchBook reports.