Andreessen Horowitz Invests in Human Resources Firm Zenefits

Venture capitalists, it seems, are crazy about human resources software.

Zenefits, a start-up whose cloud-based software helps small businesses manage compliance and human resources-related tasks, said on Wednesday that it had raised $15 million in a financing round led by Andreessen Horowitz. The deal, according to Lars Dalgaard, an Andreessen Horowitz partner, was unusually competitive.

“I’ve never seen a deal like this,” Mr. Dalgaard said. “The top five firms all asked me personally whether they could get a chance to get in.”

Investors, Mr. Dalgaard said, were looking for “every creative way in the world to try to get a piece of it,” including by asking to buy out seed investors in the company.

In addition to Andreessen Horowitz, investors in the financing round included the investment firms Maverick and Venrock. Zenefits, which is based in San Francisco, did not disclose the valuation at which it raised the money. The latest financing round brings its total amount of money raised to $17.1 million.

Though the human resources business may seem “boring,” it is ripe with opportunity, especially in relation to small and midsize businesses, said Parker Conrad, the chief executive of Zenefits. The Affordable Care Act, for one, is poised to created a flood of additional compliance tasks for companies, he said.

“We see this opportunity to be the service that automates and mechanizes all of that for small businesses,” Mr. Conrad said.

Zenefits offers free software to companies. It makes money primarily as an insurance broker by selling health insurance plans to businesses. The company says that, from its start in early 2013 through the end of November, it has doubled the number of employees using its service every six weeks.

A larger rival, Workday, has been a stock market darling since its initial public offering in 2012. The stock, which had its debut at $28 a share, closed at $93.15 on Tuesday.

Mr. Dalgaard, the Andreessen Horowitz partner, is joining the board of Zenefits in connection with the investment. The founder and former chief executive of the human resources software company SuccessFactors, Mr. Dalgaard is seen by Zenefits as a valuable adviser.

That may help explain why Andreessen Horowitz’s bid in the financing round was the lowest among the lot.

“We feel there should be a price for the support function that we offer,” Mr. Dalgaard said.