SAN FRANCISCO -- Silicon Valley venture capital firm Andreessen Horowitz has placed a sizable bet -- twice -- that startup Zenefits is going to be the fastest-growing and biggest cloud software company the tech industry has ever seen.
"Those are really big statements, but that's what we've seen," said Lars Dalgaard, general partner at Andreessen Horowitz and a Zenefits board member.
Zenefits has raised $84 million and won the backing of big-name investors and celebrities including actor Jared Leto, and sailed past investor expectations just a year after it launched its software-as-a-service platform that helps businesses manage human resources services. On Tuesday, the startup announced that Andreessen Horowitz had for the second time in four months led a double-digit, million-dollar investment. The $66.5 million funding round follows a $15 million round that Andreessen led in January -- a rare practice for any VC firm.
"It's extremely unusual," Dalgaard said. "It's like a Halley's comet event for us."
Dalgaard said valley investors are battling for a piece of this fledgling company, which hopes to unseat Workday, a Pleasanton-based software service to manage human resources at big companies, as the darling of the cloud enterprise sector.
The startup's landmark funding also boosts the enterprise cloud sector just in time for Box, another Silicon Valley favorite, to begin trading publicly in the coming weeks.
Zenefits is growing about 30 percent month-over-month since its launch in 2013; by comparison, venture capitalists generally look for companies to grow about 30 percent year-over-year before they are considered healthy enough to go public. Zenefits isn't ready for an IPO, said co-founder and CEO Parker Conrad, but the company is on track to grow 1,300 percent in 2014 over 2013, and from April to May the company's revenue was five times greater than predicted.
"I'm focused 100 percent on growing the business and making a dent in the universe with this stuff," Conrad said.
Some VCs say Zenefits is an example of the new generation of cloud applications that is building technology for mobile devices and could make companies such as Salesforce.com, a pioneer of cloud software for businesses, obsolete. Employees with Zenefits, for instance, can track their pay and health benefits from a smartphone.
"The first phase (of cloud) was Salesforce," said Scott Sandell, chairman of the National Venture Capital Association. Now "we're seeing lots of things that just weren't possible before, and it's because of mobile."
Zenefits, which has headquarters in San Francisco's SoMa neighborhood, offers its software free to businesses, which use the platform to manage employee payroll and benefits. Zenefits makes money by acting as the insurance broker between companies and their health care provider, such as Kaiser Permanente or Blue Cross Blue Shield. The health care providers pay Zenefits a broker fee.
The model is unusual, and may be the first of its kind among emerging cloud software companies. "I think it's a genius stroke by Parker," Dalgaard said.
Contact Heather Somerville at 510-208-6413. Follow her at Twitter.com/heathersomervil.