In August 2020, Zenefits CEO Jay Fulcher posted on LinkedIn, saying, “Success takes work, study, time, grit, courage, experimentation, resilience, and a belief in yourself that may not always be steady but never goes completely away … there are no shortcuts.”
Garnering nearly 1 million views, 14,000 likes, and more than 1,100 comments, his message clearly struck a chord. As a longtime Core Member, we asked him to join our Go-to-Market Core Forum to share his thoughts on this theme and more.
No Shortcuts Allowed
“Entrepreneurs are inundated with the suggestion that there’s a growth hack or shortcut for everything,” says Jay. “This idea can only be described as complete garbage. There are no shortcuts to building a business.”
It’s important to experiment, be open-minded, and act with urgency, but a “growth at all costs” mentality is doomed from the start. It insinuates that you can be reckless and take shortcuts.
“I’ve talked to countless entrepreneurs who are anxious about the next step—first seed round, hiring a team, landing a board member, etc.,” says Jay. “However, if the basic ingredients for growing a sustainable, high-performance business are missing, you’re setting yourself up for frustration.”
A Cautionary Tale
That’s exactly what got the former Zenefits leadership team into trouble. “It’s no secret that Zenefits went from a big high to a big low a few years back,” says Jay. A clever business model enabled the company to be “the fastest-growing software company on the planet,” he says.
However, this model was unsustainable. The company had created no guidelines for how it would operate. Every deal was a good deal. Every customer was a good customer. Building strong, healthy partner relationships took a back seat. Furthermore, the company grew so quickly that it struggled to keep pace with compliance and governance, which was dangerous in a regulated industry.
When Jay joined Zenefits in 2017, he did his research, reset operations, and put in place the organizational building blocks that enable scalable, sustainable growth.
The Building Blocks of a Scalable Company
As you start to develop a go-to-market strategy, “make sure to think through the process holistically,” says Jay. Instead of taking a reckless approach, it’s critical to make sure you have some key building blocks in place before going to market.
“It’s not just about delivering a superior product to the marketplace; rather, several stars must align,” he says. These include Company Culture, Business Model, Value Proposition, Partner Relationships, and Sales Strategy.
1. Company Culture
Jay knew his first task would be to reset the company culture. He credits his friend Ben Horowitz for outlining 4 steps for successful resets:
- Keep what works. If you’re growing, some things are working.
- Institute new operating rules. Have an intentional idea about how you want to operate both internally and externally. At Zenefits, some of these seemed shocking, like firing customers or getting rid of brilliant jerks.
- Introduce new leadership. New leadership brings fresh thinking, energy, and the ability to rally a team around a new culture. Jay started building a team that truly understood what Zenefits could do in the marketplace.
- Make all decisions in line with your priorities. Be decisive about connecting your business strategy and your culture so it’s clear to all employees how you’ll treat each other and your customers. “I made it clear that we want to be a company of integrity,” says Jay.
It sounds simple, but there were plenty of hard decisions involved, notably laying off roughly 40% of the company on his third day. These cuts led the company to be hyper-focused on hiring the right people. They thought through three key questions:
- Who could drive the business in the new operating way, rather than in the old way?
- Which existing talent could make the shift?
- How could they augment this team with culture-fit talent from outside the company?
2. Value Proposition for Your MVS
In identifying pain points and mapping a solution, Jay recommends talking to at least 100 customers to gain true clarity. “I press on this with the entrepreneurs I advise, because so few have actually talked to 100 customers,” he says. “It’s a lot of work, but you have to do it.” This clarity puts you on the path to product-market fit.
- What problem are you solving?
- To develop a Compelling Value Proposition, zero in on this question. Find a problem that is Unworkable, Unavoidable, Urgent, and Underserved.
- Who is your buyer?
- What do they want from this solution?
- Who else cares about this problem?
- Who influences their decisions?
- Especially for B2B customers, there are typically several people involved in a purchasing decision. Who is in this Decision Making Unit?
- How do you cater to all these interests?
At Underscore VC, we call this your Minimum Viable Segment (MVS)—a focused market segment of potential customers that have the same needs—and a lot of entrepreneurs struggle with it.
Zenefits wanted to provide a single, integrated set of applications to manage a workforce—and payroll, HR, and benefits became the core. “For us, it was a ‘core vs. context’ decision that needed to be made,” says Jay.
3. Business Model
When Jay took the reins, Zenefits had an unsustainable business model, including too many employees and an undefined market segment. “If a prospect had a pulse, we were interested in selling to them,” says Jay.
Jay went about building that methodology and gaining clarity, asking and answering: Which problems will you solve, and which problems are out of scope?
He shifted Zenefits from a service-heavy business to a SaaS model. “We no longer served as brokers, so we collaborated with them instead. We went back to our core—a software company.”
This improved Zenefits’ operating expenses by 70%. In the process, they went from offering free software to a paid SaaS model. 70% of customers migrated with them, “which validated the value of the product,” says Jay.
Another way to think about this is: What are your Capabilities of Really Exceptional (CORE) value? Figure out the unique value you can provide—and build on it.
4. Partner Relationships
As you think about your customer’s ecosystem—consider all players involved. What needs to happen for your customer to realize their goals? Building partnerships with the right players can help increase revenue, expand reach, boost credibility, and speed time-to-market. But in its “growth at all costs” days, Zenefits had antagonized the insurance industry.
Once he joined the company, Jay spent a lot of time with regulators, trying to understand what went wrong and how to right the ship. His new team swung into action, building two open-source products intended to help companies with compliance issues and gave them to the industry for free. “It was important to us to become good corporate citizens in the space,” says Jay.
By cooperating and building relationships, Zenefits was able to build a powerful ecosystem. “Even more validation came when regulators across the country praised Zenefits for resetting its values, culture, mission, leadership, and governance,” he adds.
5. Sales Strategy
“People these days will talk to a product expert who can provide them consultative advice, but they don’t want to talk to the ‘typical salesperson,’” says Jay. How you guide people through the buying experience is extremely important.
How do you best enable customers to envision solving their problems with your product?
Jay cites product-led growth as a key strategy. “It’s not a sales or marketing motion alone,” says Jay. “It combines sales, marketing, and R&D, meaning you’re enabling customers to figure out how to use your product to solve their problem.”
This self-service concept goes beyond the buying experience and extends to how customers eventually implement and support themselves. Jay mentions that more than 60% of Zenefits’ customer’s self-support through tools augmented by AI/ML.
These Building Blocks Lead to Repeatability
“It’s essential to perfect all that early-stage stuff before you are in a position to scale,” says Jay. If you skip some of those steps, you run the risk of having to go back and relearn what you missed. “That costs time, momentum, and other painful things.”
Plus, placing these building blocks leads to repeatability. “If you’re doing something that’s unique every time you do it, that’s a hard business to scale,” says Jay. “By definition, you’re a consultant. But if you’re trying to be a SaaS business, you have to find a way to do that in a replicable way.”
This is all part of the founder’s journey to building a business that is Repeatable, Scalable, Valuable, and Predictable.
You’ll Make Mistakes (That’s OK)
Ultimately, “founders should remind themselves that they don’t have to have all the answers,” says Jay. “What you do need, however, is to be intense, prepared, work hard, and be open-minded about the job and yourself.”
“You’re going to make mistakes, but bad decisions usually serve a purpose down the road. Those twists and turns are helpful. They help you be more resilient, grittier, and more humble. It’s powerful when you can admit that something wasn’t great.”
With the right building blocks in place—Culture, Business Model, Value Proposition, Partner Relationships, and Sales Strategy—you’ll set a company up for sustainable growth. And as you regularly re-evaluate your model, you’ll adapt where necessary.
This blog was originally authored by Underscore VC. Republished with permission.