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PlanSource Raises $70M, Battles Zenefits
August 21, 2015
(c) 2015 Dow Jones & Company, Inc.
Human resources is still a paper-intensive business, despite the millions of dollars invested in software to automate it, and a range of companies are eyeing what they believe is a multibillion-dollar market.
The latest contender is PlanSource Benefits Administration Inc., which raised $70 million from Great Hill Partners for software that lets more than 8,000 companies administer human resources, payroll, talent, benefits and insurance on behalf of more than 3.5 million consumers.
Total funding in the Orlando, Fla.-based company is now about $94 million.
The company that has raised the most money in this sector is Zenefits, whose valuation shot up by about nine times in May to $4.5 billion after it raised $500 million in a round led by Fidelity Management and TPG.
Zenefits, however, competes against insurance brokers while PlanSource partners with them, along with insurance carriers and government agencies and some tech companies.
Those partnerships help fuel PlanSource’s business, according to Chief Executive Dayne Williams, partly because brokers come to PlanSource to get the tech tools they need to battle Zenefits.
Mr. Williams was part of a group that bought PlanSource in 2007. Founder Scott Carver is now PlanSource’s president. At the time there was little revenue and only partially completed software code, Mr. Williams said, but as the opportunity for PlanSource’s technology became clear, the group sold its HR services business in 2010 and its insurance agency in 2011 to focus solely on PlanSource.
“I was searching for a solution that could handle the complexity of complex benefits, [and until I met Scott Carver] all the solutions I found couldn’t scale,” Mr. Williams said.
Fueled by the rising cost of health care, the Affordable Care Act, the proliferation of new workplace benefits like pet insurance and the desire of employees to shop for insurance the way they do airline tickets or other goods.
The new money will be invested in operations, technology and in expanding distribution “deeper and wider across the country,” Mr. Williams said.
PlanSource is the second investment of this type for Great Hill Partners, which sold a health-care exchange company called Bswift to Aetna in November for about $400 million. Seven months earlier, Great Hill had invested about $50 million in Bswift, a company that Great Hill Partner Chris Busby called “very similar” to PlanSource.
“We knew the underlying trends had not changed,” Mr. Busby said. “The opportunity is still there, and during diligence we heard really positive things about PlanSource.”
As part of the investment, Mr. Busby and Great Hill Managing Partner Matthew Vettel join the board. Other investors in PlanSource include Lemhi Ventures and Timucuan Asset Management, which also have board seats.
Human resources and recruitment startups are drawing record investment this year from venture capitalists. In the first half of 2015, $811.6 million was invested in U.S.-based startups in the sector, according to data from industry tracker Dow Jones VentureSource.
The $70 million investment in PlanSource now puts 2015 above the $859.1 million invested in the sector in 2000.