VCs Protect Investment in Portfolio Companies by Outsourcing HR
Reduces Overhead and Risk While Helping with Retention and Growth
SAN LEANDRO, Calif. (TBD) Equity financed companies don't have the luxury of taking risks or making mistakes when it comes to their human resources needs. One misstep can lead to major legal and financial repercussions. Therefore, a growing number of venture capital managers and consultants are recommending that their portfolio companies partner with a recognized HR service provider such as TriNet-particularly when that provider can demonstrate a legacy of proven cost reduction and risk management.
Skymoon Ventures is an example of a TriNet customer that also depends upon TriNet's delivery to assist its multiple portfolio companies. Jackie Brown, Chief Financial Officer, points out: "Whenever we had a portfolio company ready to go, we had to run out and get competitive pricing for benefits and other HR services. At one point we were contracting all those services to different providers, and we'd end up with six contracts for every company-which, from an administrative and logistical standpoint, wasn't ideal at all."
Ms. Brown continues, "TriNet's online delivery made it easier for us because we were able to manage several portfolio companies from a single location. In a sense, we can incubate the companies and then move them off-site without having to disrupt the delivery of their HR services. Even more importantly, TriNet's ‘one-stop shop' allows us to avoid the administrative hassle of managing multiple vendors, giving us a cookie cutter approach to creating new companies."
Another example is the Massachusetts-based Draper-Fisher-Jurvetson New England Fund. Not only does DFJ recommend TriNet's HR services to their new and developing start-ups but they, along with the DFJ-funded Cambridge Innovation Center, are TriNet customers themselves. ""The cost for me to hire and pay people to handle this internally would be higher than the cost to have TriNet do it for us," says CIC's chief executive, Tim Rowe. "Besides, even if the costs were similar, we'd use TriNet for this function since the key for all companies these days is to keep teams small and focused. One should always outsource the non-core parts of one's business."
VCs and HR Providers: A Good Mix
What about retention? Successful startups need to recruit and retain highly competent personnel while keeping a tight rein on expenditures. By working with an HR service provider, many small firms can offer top-drawer benefit packages and insurance options that they couldn't afford otherwise.
Another reason HR providers are becoming more popular with VCs is the risk reduction factor, namely the reduced likelihood of employment litigation. "HR providers like TriNet contractually assumes certain legal and financial responsibilities regarding employer rights, legal compliance and risk management," says Greg Hammond, the company's general counsel and executive vice president of strategic development. "This presents a very tangible business case for growth and investment managers within the venture capital sector."
TriNet's HR Legacy
Emerging companies have been seeking outside solutions to their HR processing and compliance needs for several years. In response, TriNet provides client-driven services to small and mid-sized companies throughout the United States and Canada, many of whom are smaller firms in the technology, banking, venture capital, accounting, and professional services industries.
"This recipe for HR success is now becoming a highly sought-after alternative to building an in-house administrative department or purchasing costly self-administered technology solutions, where maintenance, upgrades and licensing fees can devour much of the desired savings," says TriNet President and CEO, Martin Babinec. "In addition, most of these companies have highly compensated professionals who demand the very best in benefits and service options. This is where TriNet truly excels."
About TriNet Group, Inc.
Founded in 1988, TriNet (www.trinet.com) delivers comprehensive human resource services to small and medium-sized companies. Its offerings include human asset administration, employer risk management, online HR services and support, payroll processing, tax compliance, workers' compensation, group health and welfare products, and strategic human capital consulting services throughout the United States and Canada. More than simply an HR services provider, TriNet contractually assumes certain legal and financial responsibilities regarding employer rights, legal compliance and risk management.