It’s not enough to compete for talent on salary and stock options anymore — early startups are expected to offer the full suite of benefits that gained popularity with the rise of tech behemoths like Google and Facebook. But early startups relying on limited funds can’t shell out for a fleet of private commuter buses or daily catered meals. Enter Zestful.
Zestful lets small companies like startups pay a monthly fee to offer employees a range of perks and benefits like monthly subscriptions to Netflix or email service Superhuman. On Tuesday, the 3-year-old startup announced it raised $5 million in seed funding led by Thrive Capital with participation from Box Group, Y Combinator, Matchstick Ventures, Third Kind Capital, and Shrug Capital.
“A Series A says you figured it out and you’re doubling down on the growth phase, and to me, that means we are doubling down on trying to be everywhere,” Zestful founder and CEO Mat Vogels told Business Insider. “But sticking with seed funding means we want to focus on the product and build it before we go with a Series A.”
New workforce, new rules
Vogels said he had seen the competition first-hand when he was working in San Francisco’s Bay Area, as startups struggled to attract and retain talent. He explained that those first hires are the most important to the company’s success, but it’s easier than ever for talented employees to take higher paying or more flexible roles at other companies if the startup can’t keep up.
“We may not have all the bells and whistles and features but what we’ve built is for the employees, and we have the numbers to back it up,” Vogel said. “That’s what the head of HR or People Ops care about most. They want people to be happy with it.”
As the workforce gets younger, Vogel says that employees will demand personalized benefits like those in Zestful more and more. Gen Z’ers and young Millennials see work as an extension of their personal lives instead of being a completely separate endeavor, studies have shown, and they want an employer that recognizes that, Vogels said.
“Millennials don’t need a high salary, but the company needs to invest in things they care about,” Vogel said. “Employees are not one size fits all, so the benefits shouldn’t be either. They just want to feel good and appreciated by the company.”
$5 million can pack more of a punch outside of Silicon Valley
After being initially rejected by Y Combinator’s accelerator program, Vogel took Zestful out of the overly competitive San Francisco ecosystem to Denver, Colorado, where he’s built the company over the last three years. Zestful’s funding, which is large for a seed stage even by Silicon Valley standards, is one of the largest in Colorado history.
“Investors are trying to get out of the coasts and outside of expensive cities,” Vogel said. “The $5 million will last us five or ten times longer than if we were in San Francisco, or New York, or Chicago, and they appreciate that idea because they get more bang for their buck.”