
ZenPayroll raises seed round from the Mt. Rushmore of Valley entrepreneurs - edawerd
http://pandodaily.com/2012/12/11/zenpayroll-raises-ycs-largest-seed-round-from-the-mt-rushmore-of-valley-entrepreneurs/
======
loganfrederick
"Needless to say, it’s a big market. One dominated by not 800 pound, but by
800,000 pound gorilla’s. ADP. Paychex. Intuit. Combined, they represent $50
billion in publicly traded market cap. They also represent slow-moving
incumbents, disincentivized to pursue innovation."

The last sentence is why I have not added PandoDaily to my feed subscription
list. The fact that they list three companies competing in a market means they
are unlikely to be "disincentivized to pursue innovation." In fact, Intuit has
regularly been acknowledged by the likes of Forbes[1], Inc and Fast Company
and Eric Ries's Lean Startup book as being one of the most innovative public
companies. Not only does it show a lack of critical thinking on the subject at
hand, but it's passing that lack of knowledge onto the reader.

ZenPayroll is tackling a huge and highly profitable market. They're probably
attacking it faster than their public counterparts. But to say a company like
Intuit, along with Paychex and ADP, are not innovating because they're
"disincentivized" does a disservice to ZenPayroll and its competitors.

I'm just guessing, but I don't think ZenPayroll takes any of its competition
lightly and is working as hard as it can to break into this market precisely
because it has formidable competitors.

[1]: Why Intuit is More Innovative Than Your Startup:
[http://www.forbes.com/sites/bruceupbin/2012/09/04/intuit-
the...](http://www.forbes.com/sites/bruceupbin/2012/09/04/intuit-the-30-year-
old-startup/)

~~~
cullenking
For what it's worth, I use intuit's payroll (formerly paycycle) and while it's
functional, it is neither innovative or progressing. It's very much stagnant,
with a UI straight from 2000. I've been with them for two years and _nothing_
has been changed.

I can't speak for the others, but there's very much a "it works, lets not mess
with it" vibe from Intuit's offering.

~~~
goronbjorn
Intuit acquired Paycycle in 2009 and the entire company left to do another
startup. That might explain why it hasn't changed much.

~~~
yzap
Errm, that really isn't true. The vast majority of the Paycycle engineering
team is still at Intuit and working on Intuit Online Payroll and/or related
projects. The amount of people that have left over the past few years feels
inline with normal attrition rates (or slightly better than).

~~~
goronbjorn
Well a lot of the founding team went over to bill.com, I think.

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supercanuck
I am a one-man-band with an S corp. I would love, love love it if something
like ZenPayroll would help me with the 941's, state taxes, and eftps but its
too hard to justify offloading that stuff at $30/mo ... $360/yr... when Bank
Of America offers their kludgy software for free with my business checking
account and when that fails, just manually process them.

It has been a constant inconvenience of mine since I incorporated myself 6
years ago.

~~~
rabidonrails
I'm with you! I just posted this on the other ZP thread:

"I setup payroll awhile ago and it took me a long time to find a provider. I
remember looking at Intuit, ADP (for a second), and SurePayroll; I think I'm
also on the ZenPayroll invite list.

After going through some of the threads on HN I decided to use BOA -- which is
essentially Intuit -- and although it was a pain to setup, it does seem to be
working. (Total cost: $30/month)

However, the Wave Accounting team reached out to me recently to let me know
that they'll begin a full service payroll SAAS in January with pricing at
$5/person. You can bet I'll be trying it out.

Sadly we're too small for ZenPayroll's pricing to make sense at this time."

~~~
edawerd
I just shot you an email to try to see if you'd be interested in trying out
ZenPayroll as well! We strive to be the most delightful payroll software out
there. Part of this is making the initial setup process as painless as
possible. Getting setup takes less than 10 minutes for most companies we've
onboarded.

~~~
rabidonrails
Thanks for the email. I'm happy to poke around ZP but for me to switch from
what we have "working" to ZP (which would cost more, means that ZP would need
to blow my pants off amazing).

Up for the challenge?

~~~
edawerd
Definitely up for the challenge :). Our goal is that our software isn't enough
to just "work". It has to delight you as well :)

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judegomila
I've been using crappy Paychex for 4 years. Sometimes their software doesn't
even work in any (yes any) of the current browsers. Their support wanted me to
downgrade my browser to an older version of IE9 so that I could run their
software error free. Could not use Chrome, Firefox or Safari and Microsoft had
moved onto IE10 at the time. Time for change. Time for disruption.

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mriley
Congrats to ZenPayroll. We've been using them at Swiftype since early this
year and they really do provide an excellent service. We love the fact that
it's easy to use and inexpensive, but more than anything else, they've saved
us countless hours by automating so many of the tedious details required to
process our payroll. As a young company that is already time constrained, that
has been huge for us.

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ajaymehta
We're happy ZenPayroll users. It's my first time dealing with any sort of
payroll, and I haven't had to worry about it once. And the service (online +
offline) is amazing.

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greattypo
After experiencing other kludgy payroll systems, I decided to try ZenPayroll
at my current company. So far I've had zero regrets. Delightful is a high bar
for payroll, but so far they've hit it for me.

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jspaur
I'm really curious how they're doing things such as unemployment insurance
filing, local taxes, garnishments, etc.

This is a world that is RIPE for the taking if you can do it right, but for
$154/month @ 99 employees, they should be aware they're going to blow 3 times
that in support costs (for instance, how do integrate this into GL using
Quickbooks? How can I set up my Vacation accrual rule for employees that isn't
straight forward, etc.)

~~~
edawerd
I'm one of the co-founders of ZenPayroll, and I'd be more than happy to help
clarify.

For all federal, state and local taxes, we automatically debit the tax amount
(along with employee pay) during each pay period. We then deposit your
employee's pay into their bank accounts. Finally, we pay your payroll taxes to
the various government agencies before they are due.

In addition to making all tax deposits on your behalf, we automatically file
all required government forms, such as 941s, DE-9s, DE-34s, W2s, etc. Wherever
a signature is required, we allow you to e-sign the forms right from our site.

We also handle benefits, garnishments, and vacation/sick accrual.

Integrating with Quickbooks is a feature that is coming very soon. Hope that
helps!

~~~
jspaur
So you guys handle all states and all localities (and the corresponding tax
table updates, etc?)

For instance, I have an employee in Florida so I have a UCT-6 for SUI, and
also a couple employees in PA (so local taxes galore)

How do you handle a state such as California where the employee has to OPT OUT
of receiving a paper paystub?

Don't take this as me bashing what you guys are doing, I'm just genuinely
interested as this is a little bit of a hobby of mine (payroll consulting)

EDIT: I just read that they only support California at the moment. Bummer.

~~~
edawerd
You are correct, we only support California at the moment. However, we'll be
rolling our more states in Q1, and will have full 50 state support in Q2.

For California (and for all other states we will support in the future), we
handle all the tax deposits and forms for you, including all tax table updates
throughout the year. We'll even take care of payroll compliance for you, such
as filing new hire reports to the state.

Our goal is to really abstract all the complexities of payroll into a really
simple, and easy-to-use web-app. Part of that is making sensible assumptions
about things (like paper paystubs), while making sure the employer is always
100% compliant.

p.s. We love payroll consultants, as we have several of our own to navigate
all the intricacies of payroll!

~~~
imroot
Curious to know how you'd handle small county/town Kentucky, where you can
only file the forms in person, and only on Wednesdays.

(I've had to deal with this a few times when working remotely for companies in
town...)

Seriously, though, congrats on the funding, and let me know when you support
KY :)

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DesaiAshu
We just completed the process of switching over from Paychex to ZenPayroll.
It's now clear to me why companies like Paychex should be very worried.
ZenPayroll's online dashboard is orders of magnitude simpler and more
intuitive than Paychex'. By automating most of the process (in lieu of a
payroll specialist calling you every 2 weeks), their cost structure will
enable them to always beat Paychex on price.

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DanielBMarkham
I create websites in my spare time, and one of my websites was generating a
lot of traffic in people looking for payroll services.

I approached all of the major payroll companies looking for a partnership and
got nothing but static. Their partnership models look like they were created
sometime around 2005. Intuit, in particular, was looking for partners that
were accountants. The thought that a social/content site would generate
legitimate payroll leads didn't seem to track with them, even after I was
showing them hard numbers of dozens of sales per month.

I even thought about coding up a payroll solution on my own, but the legal
overhead looked like a bitch.

So I finally gave up. I did not find the major players to be innovative.

Best of luck, guys. I hope we can work together sometime. To me it looks like
a field ripe for innovation. There are a lot of things you can do to really
kick butt here. Look forward to seeing some cool apps (and trying them).

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jasonwilk
We currently use ADP as recommended by our first CPA, so was curious to ask
our new CFO what he thought about switching to such a service. His response:

"There are a few small payroll companies with similar offerings. However, I
have had bad experiences with self-serve payroll services and this is one of
the functions that you do not want to deal with, especially when
mistakes/adjustments are made. The penalties are high for non-compliance and
you want the ability to have a "live" person to deal with when problems
surface. In the end, I highly recommend paying for the service as the costs
are not extremely high. You can save a few dollars but it is not worth it.
There are so many payroll companies out there and I'm surprised the VCs are
backing this one"

Team have thoughts on this?

Regardless, congrats on the fundraising.

~~~
edawerd
Thanks!

You're absolutely right.

Many other self-serve payroll services that your CFO might be referring to
place the burden on the employer to ensure they are compliant. These companies
might only send you an email reminder to pay your taxes along with the amount
to pay. If you forget or don't have the money, then you're out of luck and can
face hefty government fines, just as your CFO says.

We've built our system to ensure that the employer is 100% compliant. One way
we do this is we actually impound all the taxes from the employer and pay the
tax agencies ourselves on the _employers_ behalf. We also file all forms on
the _employers_ behalf (after getting the necessary authorization to do so).

Hope that clarifies a little bit how we are able to claim the same amount of
service/compliance as more expensive options out there!

~~~
jasonwilk
Absolutely! Thanks for the clarity. Hope my comment was helpful to you guys.

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tedyoung
As an employee of a company that uses ADP, I can certainly say that their
software has a horrible user interface and its login authentication system is
from 1996. So, having two other large payroll companies (Paychex and Intuit)
certainly hasn't pushed ADP into improving their UI.

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tatsuke95
Cool product. Tough market. It will be essential to focus on small business
targets. Too bad the article centred on competing with the big guys. I don't
think that's where the easy money is at.

I'm currently in the middle of an ADP implementation for our company (120
employees), so I have a bit of insight into this. Once you reach a certain
threshold of costs associated with payroll, it's very hard to beat the big
players:

> _"These legacy companies rely on selling to other enormous enterprise
> clients whose opportunity cost of switching services provides a sufficient
> lockin"_

I don't know about this. How am I locked in? Sure, there is some labour
associated with moving employee files from one provider to the next, but you
have to do the same to get your data into ZenPayroll. ADP required me to fill
out a spreadsheet with the required employee information. Once the data is in,
you flip the switch and you're up and running on the new system. I don't see
any lock-in whatsoever. I still have my employee information spreadsheet,
ready to pass to the next competitor. What am I missing?

> _"Faced with expensive and complex software options"_

Not really complex. We worked with an ADP "implementation specialist" to
design the earnings/deductions rules (customized to our specific needs), which
took about a week. Now we enter hours in a text box, and adjust parameters as
needed. Sure, the interface isn't pretty, but we're talking about tab-ing
through text boxes and entering numbers. Can't be much more intuitive.

> _"With ZenPayroll, companies can handle the standard functions of adding
> employee hours, overtime pay, bonuses, reimbursements, garnishments,
> benefits, etc., and issuing periodic payments via check or direct deposit."_

This is standard for payroll systems.

> _"Where ZenPayroll really sticks its head above the crowd is in the long
> term tracking and management for both employees and employers. On the
> platform..."_

Standard features, at least with ADP.

We made the decision to switch from manual payroll to a payroll service when
the cost/benefit made sense. I can understand that that threshold is far, far
lower for the multitude of 1-50 employee sized businesses out there.
ZenPayroll looks good there.

But the big players can offer something I can only assume ZP can't: support.
We have two agents, ready to handle whatever crazy questions our staff has.
That's vitally important to an enterprise. Although the author sees payroll as
"evil", we're talking about other people's livelihood. It's not to be taken
lightly. I don't see one mention of support in the article.

For $30/month, there's a market, and a big one. But let's not fool ourselves
into thinking that the big players have nothing to offer. And they won't be
easily displaced.

~~~
edawerd
These are all really great points you bring up -- we definitely aren't taking
other payroll companies lightly, and providing amazing customer support for
both big and small companies is one of our core-tenants.

One of the things that the article didn't mention that I think is worth
bringing up is how we eventually plan expose parts of a "payroll API" which
can make managing payroll much easier. For example, I would imagine that
tabbing through text boxes to enter hours for 120 employees every 2 weeks can
get pretty tedious and error-prone. Well, we actually have a (currently
internal) API for that, which can eventually be integrated into, say, time
tracking software. We believe similar benefits can be realized by integrating
our API with accounting software, expense reporting software, etc.

In fact, we've architected our system to be an API from the start, and our JS
web-app is just a consumer of our API.

I'd love to hear some other ideas people might have that could take advantage
of a payroll API!

~~~
tatsuke95
> _"we definitely aren't taking other payroll companies lightly, and providing
> amazing customer support for both big and small companies is one of our
> core-tenants."_

Good stuff. I'm going to keep my eye on this. Having gone through it, it's an
interesting space. I think it can be done better than the incumbents, and
that's key, right?

My point was that there's a _bit_ too much "shoot-for-the-stars" mentality
when great start-ups are on the rise. Players like ADP are slow because they
are large. But they got large because, at the end of the day, they offer a
good product (maybe a tad pricey). $30BB in market cap ain't easy to achieve.

Anyway, I believe there's a big hole ZP can fill, especially if you can market
to businesses that can't justify spending thousands per year on payroll. It
didn't make sense for us for a long time. It's nice to see a relateable
problem being solved. Congrats on the round, and good luck.

~~~
mbesto
Curious - do you see price as being the _only_ differentiator?

To the representative of the company - does anyone on your team have industry
experience and/or have been a HR (or possibly finance in smaller companies)
director?

~~~
edawerd
Price is most definitely not the only differentiator for us, though we do see
it as one of main benefits of using us, especially for smaller businesses. One
of our main differentiators is having much more intuitive, simpler, and
beautiful payroll software.

~~~
electic
I think if you are banking on something being simpler and "beautiful" as your
key differentiator then you are not in a good place. A lot of solutions on the
market are not hard to use and they are very entrenched. Sure, they don't look
great but at the end of the day you need to realize this is payroll software.
People don't live in these systems like they do with Apple products. Not to
mention, most of the current companies will have a trained tech setup your
account. You really don't have to do much. All customers want is:

a) Flexible. Can handle my current and future employee payroll needs. b)
Accurate. c) Reliable d) Great customer support. This includes people who are
very knowledgeable with what Congress is up to, taxes, etc, and can make sure
I am always in compliance.

I agree with a lot of the comments above. I am not sure with the ROI is from
your system vs. PayChex or ADP.

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hkhanna
This is awesome. My family's small business has really been dreading
automating our payroll. We use Quickbooks, and every year I swear I'm going to
sign them up for Intuit's system, but every time I try, I can never figure it
out.

So I signed up for an invite, and I'm hoping you'll let our (very) small
business be a part of this! We have less than 5 employees, and we're in
Fremont, CA.

One question: how easy would it be to get the data for each transaction into
accounting software like Quickbooks?

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geori
Congrats to ZenPayroll!

Side note: Since when is $6.1M a seed round?

~~~
accountoftheday
My guess: when zero board seats go to investors. Please correct me if I am
wrong.

~~~
StuieK
Board seats go out in seed rounds. There is no hard rule for naming the
different rounds, in this case it is just their first round of institutional
capital.

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jordanlee
Extremely well-deserved! We use ZenPayroll over at <http://collections.me> and
it 100% lives up to the hype. It's going to be a true pleasure watching it
grow into a titan of the industry.

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getmdchat
We're Zen Payroll users and have had a terrific experience with them. Their
support is amazing. I have no doubt they can and will take on the big players
successfully.

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axolx
Sounds coo but as a small business owner who uses online payroll I could care
less whether this is "cloud based" - what will this do better than Intuit
online?

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scottmagdalein
No native mobile app (which is a good thing). Looks like "mobile first" is no
longer a requirement to land a big seed round.

~~~
jordo37
Mobile first still makes sense when you are talking about consumer products.
This is a B2B product and sales approach where mobile does not matter as much.

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snuze
Does ZenPayroll offer time tracking? The company I work at uses SpringAhead to
enter time sheets and Paychex for payroll.

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lyime
Congrats Eddy and co!

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PhrosTT
I hope one day I have to use this : )

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epa
Wish i could down vote this. Seems to be written like an ad.

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sbanker
rock on guys.

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wilfra
Article says direct sales doesn't make economic sense in this market. ADP
employs an army of well payed outside sales reps. I interviewed there out of
college. Seemed like a good job. What's the difference between the businesses
that ZP can't support that long term?

I know tech companies hate that and want to automate everything, but some
products need sales reps.

~~~
wiredd
I think it depends on the size of company that ZP wants to target. I did a
payroll processor evaluation for my startup 2 years ago and the upfront
pricing and lighter (less time consuming) sales process that surepayroll
offered compared to paychex and ADP was one reason we chose surepayroll over
those companies.

Surepayroll also offered much better online tools and better pricing than
either Paychex or ADP at the time. Now that Paychex has acquired Surepayroll
it's good to see another online friendly option being built. Now if somebody
would just build an online friendly way of managing 401Ks for small
businesses.

