# Rippling's Parker Conrad on The Four Main Benefits From Building a Compound Startup Why There Should Never Be a Trade-Off Between Speed and Quality · How Zenefits Gave Parker a Chip on the Shoulder and Why That is so Important? 20VC · Oct 3, 2022 · 45 min · 9,147 words Speakers: Harry Stebbings, Parker Conrad Source: https://www.996.fm/episodes/20vc--ep-95c6b6ff/ ## Cold open **Harry Stebbings** [0:00]: This is 20 VC ## Intro **Harry Stebbings** [0:01]: with me, Harry Stebbings. And this week, we have a special two part episode focused on the incredible business that is Rippling. Over the last few weeks, they announced their entrance into spend management and another step in their mission to build the App Store for business. And so today, I'm so excited to welcome back to the show, Rippling founder and CEO, Parker Conrad. For those that don't know, Rippling lets you easily manage your employees payroll, benefits, expenses, devices, and apps in one place. To date, Parker has raised over $697,000,000 for Rippling from some of the best, including Sequoia, Founders Fund, Greenoaks, Bedrock, Kleiner Perkins, and Initialized to name a few. And prior to founding Rippling, Parker was the cofounder and CEO of Zenefits. And if that wasn't enough, Parker's also a prominent angel, having invested in the likes of Census, Pulley, and then also AgentSync and TrueNorth alongside 20 for the last two. I wanna say huge thank you. This was such a team effort on the schedule. Neil at Greenoaks, Gary Initialized, Mamoon at Kleiner, Ben Ling, and many more for some amazing questions, suggestions today. But before we move into the episode today, ## Sponsor read **Harry Stebbings** [1:03]: Harvard management company is constantly seeking out the next generation of great investors and entrepreneurs. HMC has managed Harvard University's endowment for nearly fifty years and was one of the first institutional investors in venture capital. 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So head over to marketxventures.com to unlock a world of incredible later stage private market investments. That is marketxventures.com. But now I'm so excited to hand over to the one and only Parker Conrad, founder and CEO at Rippling. Three two one zero. You have now arrived at your destination. ## Conversation **Harry Stebbings** [3:26]: Parker, I am so excited for this. I loved our last discussion, and so I was desperate to make this one happen. So thank you so much for joining me once again, Parker. Thanks for having me. Not at all. I did a lot more work this time, and I have a lot more research notes, so this should be more in-depth. For those that missed the first show, how did you make your way into the world of startups and how did you come to found Rippling most recently? **Parker Conrad** [3:46]: So I started Rippling really, I guess, sort of around two after my last company that ended in a lot of ways that were unpleasant for me, but also really unsatisfying. And so I started Rippling really with this thesis about employee data and what the market that we're in really required. And the idea was that employee data, because it's a lot more distributed than just the HR department and HR business systems, companies need a system that manages employee information in a way that's not merely just about HR that sort of also cuts across a lot of the other functions of the company. And when you hire someone, sets them up in all the different business systems in your company and manages a lot of employee data across all these different places, across IT, finance, you know, things like that. **Harry Stebbings** [4:31]: So this is quite a deep question given it's like the first question, but I find it very revealing of one's character. We're all a function of our histories. So what are you running from and what are you running towards? **Parker Conrad** [4:42]: There was definitely a moment after I was forced out as Zenefits when there were a whole bunch of reasons like legally and different restrictions I was under that prevented me from really talking about what happened and the proverbial sort of like my side of the story. And there was this period of about six to nine months when there was just this overwhelming institutional apparatus that was a raid against me and sort of writing this narrative about what had happened. And I sort of watched that unfold from the basement of my house with this sort of growing horror. At a certain point, I kind of decided that the only way I was going to be able to talk about what was happening, tell my side of the story because you know, I wasn't in addition to just the restrictions I was under, it's not my sort of forte doing that media PR jousting. And I sort of decided the only way I was gonna be able to communicate about this to people in the tech community, to the world more broadly than that, was to build this specific company, try and make it into like a really big, you know, 100,000,000,000 outcome. I don't know if that's something I'm running away from or running toward, but it was really sort of deeply motivating for me about just this period of time when just kind of like putting one foot in front of the other and getting out of bed in the morning was a struggle. But for a long time, you know, that was sort of what was getting me going in the morning. **Harry Stebbings** [6:06]: Parker, I love a quote from Joshua Footlux. He says, chips on shoulders, put chips in pockets. I totally agree with you. You need that fuel. I remember I once lost a load of weight because a girl dumped me and I thought, I'm gonna prove you wrong. And it turns out she just disliked my personality, not my weight. I I wanna ask, just kind of speaking of that, I did speak to Gary Tan before the show and he mentioned that tough time. My question to you, which is like, in that moment, what do you tell yourself? What's your mind speak? **Parker Conrad** [6:34]: It was hard. I think that as a founder, it's really hard to watch someone else like making decisions about your company. It was sort of, I got to this point where I was convinced that David was not really interested in making Zenefits successful. Almost every decision he made at the company was wrong. The decisions he made from a product perspective, from a strategy perspective, the people he fired, the people he promoted, like almost all of it was just like completely wrong. And I sort of felt like, well, I think there's a huge market here and a huge opportunity that's now going to go unfilled unless, you know, I was talking with Prasanna, said, unless you and I kind of jump in and do this, this is never going to happen. And there's like a $100,000,000,000 like sitting on the floor over there and nobody can see it except for us. And we just have to figure out a way to sort of walk over there and like and pick it up. And like we know that if we sort of do these things, it's gonna work. And so whether it was like delusional or sort of extreme confidence in what we were doing, that was sort of what what kept me going. **Harry Stebbings** [7:36]: I totally get that. You said about kind of seeing the $100,000,000,000 on the floor. I get that. That's insight, but you need execution and performance to actually achieve that and to achieve the vision there. When I say high performance to you, what do you think and what do those words mean to you? **Parker Conrad** [7:50]: For me, it's actually sort of very related to what you talked about with sort of chips on shoulders. Because I think that people are capable of so much more than they believe themselves to be capable of. One of your jobs as a founder or as a CEO of a company is to find ways to sort of pull that out of people. And a lot of times I think people think the same set of people or the same organization, maybe it's like if you work really hard and you sort of burn the midnight oil, maybe you get 20% more done. And the difference between organizations that really accomplish a lot and the organizations that accomplish very little, it's orders of magnitude difference in output. There are just so many great examples of organizations institutions that accomplish incredible things in a very short period of time, as well as like organizations and institutions that accomplish almost nothing with sort of a lot of effort and money and energy expended. **Harry Stebbings** [8:38]: Sorry. I'm too intrigued. On people being able and more more not willing, but like having the potential more than they think they do. What do you think you do to pull out people's brilliance or talents in a way that they might not elsewhere? How can I do the same? **Parker Conrad** [8:51]: One thing that I think happens sometimes in companies is people come to you and they want to do what I call like the CEO in a box where they sort of say, look, we can do A or B, like, would you want us to do A or do you want us to do B? We could do it quickly or we can do it high quality. We can do this thing or we can do that thing, but we can't do both. And I think like my general reaction is I don't want to have to make that choice. Is it like the second law of thermodynamics that's violated if we do A and B? Like what is the sort of fundamental impossibility of getting both of those things done? Often I think people will sort of go back to the drawing board and think about a different approach or reconceive of how this might happen and find ways to sort of do both of those things in both A and B in the timeframe that you have. So I mean sometimes that can be unreasonable CEO, but often I think it really forces people to sort of think about and pressure test like their underlying assumptions about what's possible and what would be required. That's probably one of the biggest refusing to accept the set of implicit assumptions that people come to you with about why certain things are possible and certain things are not possible. **Harry Stebbings** [10:02]: How do you give that effective feedback? How do you push them and challenge them? How do you give that effective feedback and direction that's kind of the middle ground? **Parker Conrad** [10:10]: It's about sort of articulating the sort of genuine and real consequences of not being able to do A and B, what that leads to, what the sort of upside is if we can get it done, what sort of bad thing happens to the company if we can't do it, and also sort of trying to understand why. Because sometimes just asking why you can't get both of those things done can reveal, you know, maybe it's like, well, you know, to do that, we'd have to do x or we'd have to find a way to move someone on the you know, and and sometimes it's like, well, maybe we should do that. You know, maybe those are things that make a lot of sense to do and you can sort of find ways to square the circle. **Harry Stebbings** [10:45]: How do you think about the balance between speed and quality of execution? I always say, like, speed of execution is the only thing that matters. Like, go, go, go. Better to get it 80% done than 99% perfect. How do you think about instilling urgency versus instilling perfection? **Parker Conrad** [11:01]: I don't really agree with that trade off between speed and quality. Yes, it's possible to do things fast and bad. It's also possible to do things like slow and bad. I think that speed is often more sort of aligned with quality than the other way around. It's very rare that you see projects that like really move slowly that end up just really nailing it at the finish line. Like usually what happens is they're slow and then when they get done, they're also bad. I think that having a lot of urgency on fixing underlying issues and building a high quality product is a virtue and being sort of slow or lackadaisical about addressing underlying problems is like not a virtue and doesn't sort of result in higher quality products. **Harry Stebbings** [11:44]: I think impatience actually is good in many ways too. I think in terms of like the thing that makes me think about is prioritization. And many of your investors told me that kind of your ability to prioritize efficiently is one of your biggest skills. I wanted to know, how do you determine, like, which new efforts to prioritize? And what's that decision making framework around where you focus? **Parker Conrad** [12:04]: So one of the things that's unusual about Rippling is that most people think that the right way to do a startup and to build a tech company is to do one extremely narrow thing and focus on that one thing. And Rippling is a little bit different. I sort of take a very different point of view and I call it building a compound startup, which is building multiple different products in parallel, focusing on sort of breadth versus doing one extremely narrow thing. There are some distinct advantages to the compound approach to building a couple of different things in parallel. My view is that the way that we make decisions about what products to build are sort of really focusing on what I think are the four critical advantages of a compound product or a compound company. And you want to build products that maximize those four advantages. And those four advantages are, in my view, first, like much deeper integration, both with the other products and usually with some underlying system of record, in our case employee data. So generally speaking, that means like we like to build products where that integration matters, where employee data is really relevant and important and can improve the product that we're building if it has like a much deeper connection to that underlying employee data. The second is that when you're building a lot of products in parallel, you can often sort of abstract out repeated or common functionality. And so with B2B software, for example, there are a lot of patterns that get repeated across many different sort of b to b software verticals. Things like reports and analytics, role based permissions, workflow automations, approvals, policies and policy assignment. And when you're building a bunch of different products, can start to think about what are these things that we can actually build once and build them like a 100 times better because we're gonna just make a much deeper investment rather than building reporting, for example, as an afterthought. You can go really deep and start to think about how would we build reporting capabilities that would compete with Looker and then make them available across all of our different product lines. And so you want to build products where what we call the middleware capabilities that we've built are relevant, where, you know, reports and analytics and workflow automations and role based permissions are really critical for those specific products. **Harry Stebbings** [14:14]: Does that not hinder speed? If you're gonna go for real granularity and depth on things like reporting, things like RBAC, things like that are template able but also kind of common across other products. Does that not massively hinder your ability to move fast if you're spending huge amounts of time making them as good as the best in class? **Parker Conrad** [14:34]: The advantage is that we get to build once and then reuse that across every single product that we build. When Rippling builds a new product, our goal is to be able to match or really exceed in a lot of ways the capability of the current sort of best in class products in the market with like 20% of the R and D investment. Because so much of building a new B2B software product is building these fundamental concepts that when we have a team that's going after a particular area, they get for free. They don't have to build reports and analytics. And so as a result of that, for example, we're very close to launching and I think by the time this comes out, we'll already have launched our spend management, what we call our finance cloud vertical, which is corporate cards, expense reimbursements, bill pay. And when you think about that product, so much of it is built on capabilities that we already have in Rippling. It's like, you you need really strong concepts of approvals. Is this expense valid? And those approvals are often need to be routed based on role. And those relationships between employees in your company are not really well understood by other systems. Maybe they know who your manager is, but they don't know who the VP of your department is. You need analytics and reporting to sort of understand what are you spending and by department, like who's spending what you need role based permissions because you want your CMO to be able to see all of the marketing spend and and just have that happen automatically out of the box. **Harry Stebbings** [15:55]: Are you displacing Braxton ramp with that product? And why do you think that your insertion point with Rippling is the core is naturally more advantageous to then layer on banking to displace them? **Parker Conrad** [16:07]: I do think that spending, things like corporate cards and expense reimbursements, just has an incredible nexus to the employee record because so much of like who's allowed to spend money on what, what approvals are required is about your role within the organization. A lot of sort of how you can dial in and just change the amount of time you need to spend on this stuff is having a system that fundamentally understands role within the company. One of the most interesting things about Rippling right now, obviously because of the changes in the macro environment, everyone's trying to sort of look at in their product, how do we pitch someone on the sort of ROI and the cost efficiency of our service? Those analyses, they always seem like BS to me. People come to you and they've got some like time tracking that shows that like, oh, you spend less time with our product. What we did is we we tried really, to look for something that would hit a higher bar. And so what we looked at is how many people do companies hire into a lot of these functions when they use Rippling versus when they use a competing product. And for companies that are on Rippling, we can look at the data inside of Rippling in the aggregate. And for companies that don't use Rippling, we can look at the data on LinkedIn. And what we found is that at almost every stage of growth, they have almost double the number of people in HR, IT and finance for companies that don't use Rippling than companies that do use Rippling. If you're a company between zero and twenty five employees on Rippling, you have an average of 0.4 people in HR, IT and finance, and you have an average of 1.2 if you don't use Rippling. And when you get up to a company that's 500 to 1,000, you have an average of 24 people in those functions on Rippling and an average of 45 if you don't use our system. It's a really dramatic difference and it's because so much of the work that people in these functions are doing is managing employee data broadly across your company. **Harry Stebbings** [18:03]: How truly effective is the cross sell? You know, when you think about the compound startup and the multi product line that one has with a compound startup, you think about the cross sell being so natural. It's never as easy as it sounds in the, oh, come in and buy everything. How effective is it? And what are the biggest barriers preventing adoption of full suite of products? **Parker Conrad** [18:21]: It's very rare for a company to come in and buy absolutely everything that we sell on day one. But one of the things that we spend a lot of time thinking about is how do we do this cross sell effectively? And the results are really incredible. I mean, we have millions of dollars in net new ARR every month from cross sell, which is selling existing customers on new SKUs within Rippling. The single biggest SKU is way less than 10% of that. And there are 25 different SKUs. And the secret to this is that what we call the employee graph, this data about employees, it is like the right underlying primitive for doing cross sell to an organization because we understand in our system all of the data about all of the employees in your company and that allows us to identify the exact right moment that we should ping you about a particular product that maybe you should be using in Rippling. And so one example of this, when you terminate a remote employee in Rippling, we have a product that we call inventory management, which basically you can think of it, we call it a Cloud closet. And what it is, is we ship a terminated employee a box and a shipping label for them to like put their computer in, and then it gets sent back to like our warehouse or one of our partners warehouses, where they sort of get it cleaned and configured for your next hire. And the next time you hire someone, you just can choose that computer in Rippling and send it out to your next hire. And you never touch or see that computer. It's all handled in the cloud for you. And so when companies that don't have this product, when they terminate a remote employee, we're like, hey, you're in San Francisco, this guy's in Montana, how are you getting that computer back? And by the way, we have a service for this like here, you can sign up right here and we'll manage this for you end to end. And we can do that for our own products. That one ad unit adds 300 ks a month in net new ARR for that SKU every single month like clockwork. And we can do that for partners as well. We have a partnership with a company called TILT that does parental leave management. Anytime someone has an employee that adds a baby to their medical insurance, we sort of know with some level of confidence that like, hey, this is a company that's probably struggling with how to manage parental leave right now. And we can reach out to the payroll admin and say, hey, this is something that you need help with, here's a company that integrates directly with Rippling that manages this for you. And so we can do this for like our own products and also for partners as well. And it's you know, for the companies that are integrated with Rippling and that we're sort of helping them sort of cross sell their products. It's become a pretty big channel for a lot of companies to sort of get new customers. **Harry Stebbings** [20:59]: When we think about margins, how do the margin profiles look along the different products that you have today? Obviously, you have physical products too where you're managing laptops coming back from Montana to a warehouse. Everyone associates that with low margin, tough, real world, low margin business. How do the margin profiles vary on a per product basis, And have they changed over time? **Parker Conrad** [21:20]: We try and maintain sort of 70 to 80% software margins for all of our products. The biggest exception to that for us is actually payroll. Payroll is much lower margin for us, but it's also like the core of what we do. And the reason it's lower margin is just the support burden is much higher. We sort of subsidize payroll from a margin perspective with the revenue that we're making from all of these other products that we sell. **Harry Stebbings** [21:43]: Were you able to have such high margins in the early days? Often, you kind of scale into those margins with time, with efficiencies of scale. Were you able to have them from the earliest days? **Parker Conrad** [21:52]: Understanding margins is something that takes a lot of time and a lot of maturity in the business to understand. And so I think we always had caveats early on about what our margins were and sort of our level of confidence that that's sort of actually what they were. I personally distrust what most early stage software companies say about their margins because I think you just don't understand it. But even if you sort of add up all the costs that look like cogs, one of the things that you find is there are lots of little things that like you have some engineers doing over here or that you as a founder are sort of handling as a one off when they come up that aren't getting counted in your sort of cost of delivering the service because you don't have a team doing it. It's not carved out in a way that you can allocate those costs in the right way. And so often early stage companies look like they have very good margins that then get worse as they scale. It can also really be hidden by growth, right? Like growth can sort of screw up your assessment of margins in a lot of ways. I just think it takes a long time for margin profiles of companies to stabilize and for them to really understand what they actually look like. **Harry Stebbings** [22:55]: My question to you is you mentioned about working with partners. Why work with partners? When you work with partners, obviously, you have revenue share, but you don't internalize the margin and enjoy, like, the full economic benefits of having it vertically integrated. Over time, do you want to own every provider service that you have inside the company? **Parker Conrad** [23:14]: Our goal is to have companies that we partner with that compete against internal Rippling products on even footing. And not just in the sense that you have access to the integration capabilities, but even access to sort of the distribution. When I talk about sort of the cross sell efforts that we have and the systems that we have to sort of target and figure out, hey, like this is a company that really ought to be looking at sort of maybe management or something like that. Our goal is actually to have companies that are competing with our own internal products that can be a part of that on even footing with our own SKUs. **Harry Stebbings** [23:50]: Can I ask, what are the biggest barriers to you building the App Store for business? Because that's kind of what I have in my head when I hear you talk now. What are the biggest barriers that would prevent that? And in your mind, what are the hurdles you need to overcome to fulfill that vision? **Parker Conrad** [24:02]: Look, there are lot of companies that talk about wanting to be like an an App Store for business software. And the problem is it's always clear why that's valuable to them. It's never been obvious like why anyone else wants you to be an app store for business software. And I think in Rippling's case, the sort of thesis on why this makes sense is is really the employee record. That employee data, it's not an HR department thing, it's a fundamental primitive for business software writ large. The analogy that I think of is like Facebook, that Facebook is such a powerful system for selling consumer products because the social graph has turned out to be this really powerful underlying system for selling consumer products. And I think in the same way, when we look internally understanding, hey this is a company that has a need for, they just hit a certain size and they need to offer a four zero one k. We can be like, did you know that you just hired an employee in California and California has this rule at your size that you need to offer a retirement plan and you guys don't appear to? Here's an easy way to get started with that. And here are sort of like three partners that we work with that you can get up and running with very quickly. It's an extremely effective way we can drive a lot of business to partners and also really help customers that need to get up and running quickly with sort of a lot of just sort of core functionality. **Harry Stebbings** [25:20]: Can I ask what gets easier over time and what gets harder? Everyone always says with leadership and with business and company building, oh, it doesn't get easier over time. I'm always a little bit skeptical. What does get easier and what gets harder? **Parker Conrad** [25:31]: Look. Starting a company is it's a real grind for a long time. I desperately want to never do it again and desperately wanted to never do it again the last time around. And unfortunately, I found myself in a position where that wasn't an option. But early on, it's just like such a grind. You know, some of the grind kind of goes away. Like early on, it's just it's so hard to convince, you know, everyone's skeptical, every customer, you know, every prospective employee, investors not as much, but like the difficulty with hiring, with convincing a prospect that getting that first customer, convincing them to use your it's so hard. Why would somebody in this company they've never heard of that no one else is using? That stuff gets easier over time. It does feel like the pace picks up over time. Just the fire hose that you're sort of drinking through gets sort of bigger and bigger and bigger over time and sort of finding ways to sort of deal with that is harder. **Harry Stebbings** [26:22]: Rippling has this incredible thing, which I think is that you have more founders as employees than like any other company. What does that do to an organization? **Parker Conrad** [26:31]: That's how I deal with that fire hose effect. And it's a big part of this kind of compound approach of building a lot of different products in parallel. For us to start a new product, step one is like finding someone to be the founder of that product within Rippling. And often that person has founded a company before, but not always. I mean, are people that are really successful at doing that internally that have not done that before outside of Rippling. And they run it. I mean, run it as a general manager, as sort of they recruit the early team. That wouldn't be possible if we weren't hiring people that were sort of preternaturally inclined to sort of do that. A lot of those people, they want to run something and they want to run something on their own, and we find ways to make that really compelling. Rippling last **Harry Stebbings** [27:13]: round was, I think it was an 11,000,000,000 valuation. Do you still have a chip on your shoulder, Parker? **Parker Conrad** [27:17]: It's interesting because the way you ask that question, it's sort of the implication is that raising money at a high valuation would like remove the chip from the shoulder. It is **Harry Stebbings** [27:26]: it is external validation that what you're doing is valuable. One would think that that makes a difference or does it not? **Parker Conrad** [27:33]: You gotta remember that I at Zenefits, I raised money at a massive valuation. It was then a lower price point, but probably in comparison to sort of where the markets were like even more extreme at the time. And less than a year later, was out fired, deeply depressed and worried about being broke. For me, there's like I have probably a bigger appreciation than most people about what financing round is and is not. It's money to kind of get where you're going and that's it. And I think people make too much of sort of financing rounds and sort of where people are raising on and what that means. And I look at it sort of very practically as like Rippling, one of the other things that's unusual about Rippling because of the way that we approach the market, because it's a compound startup is that our R and D costs as a percent of revenue are several standard deviations away from the mean. Now the average B2B software company between sort of 100 and 200,000,000 in ARR spends about 20% of their revenue on r and d. We spend now I think north of 60%. So it's highly anomalous. As a result of that, I need cash to sort of like continue to make that investment. And I think it leads to a lot of sort of really anomalous in a positive way underlying metrics. But it is, you know, as a result of that, I look at it as like, okay, I need cash to finance the business until, you know, a point where, you know, we turn cash flow positive. And fundraising is like nothing more than like doing that. **Harry Stebbings** [29:04]: Obviously, the markets have changed now. Are you a little bit nervous about scaling into the valuation? It is a big valuation. I think Twilio is valued 13,000,000,000 with 4,000,000,000 in ARR. Are you nervous about scaling into that valuation? And how would you advise founders today going, oh, I raised at a high price. How do you advise on that? **Parker Conrad** [29:21]: You know, we didn't raise in November. We raised in May. And, yeah, it's possible, like, maybe markets have deteriorated a little bit since then, but a lot of the deterioration happened before then. I think the investors that put money in at this valuation with the caveat that like, I'm a terrible investor, I never know like where prices should be or I'm sort of like a buy high sell low type guy. There's sort of rare occasions where I've tried to be an investor. But when I think about sort of the investors that decided to sort of bet big on Rippling, I think the reason that they did that was really a lot of the sort of data in Rippling about how successful we were at cross selling such a broader array of SKUs into our customer base. And that it was just really unusual. Like there aren't a lot of companies in SaaS that are able to do that. I think most companies struggle with sort of that second SKU or the third SKU. But at the time where you're sort of, there's like 25 different SKUs that you're selling consistently into your customer base. The only other company that I know of that sort of looks like that is Microsoft. That and sort of the NDR that we have and the sort of increase over time in the per employee per year amounts that we make because companies buy additional SKUs from us over time. You know, people thought of Rippling not as a SaaS company, but as a sort of an underlying machine or system that produces new SaaS businesses, each of which have sort of unusual sort of growth characteristics and require below average sales and marketing and R and D investment because of the way that they're being built on this platform. And so look, I don't know where valuation should be right now. But I do think that wherever you would value like sort of a singular SaaS company, a company that produces like a meta company that produces SaaS businesses probably should command I think a higher multiple. And that was sort of some of the thesis behind the round. I do remember though, this is not my first downturn. I remember sort of like the pain of in 2009 at my first startup being told, you need to go out and raise a round. And we went out with just a terrible business. I mean, business that was a consumer driven advertising model, went out and tried to with very little traction, tried to go out and raise money and talk to 70 different investors, all of whom told us no. But one of the things I remember at that time is I remember just the incredible sort of bearish sentiment that investors had that reminds me a little bit of sort of what I hear from some investors today. And I remember talking to a firm, a really big prominent firm back in 2009 that said, look, we think the new normal for a series A is going to be a $2,000,000 investment on a $2,000,000 pre money valuation. And that's what it's going to be. The bubble that we were going through in 2005 to 2007, that's gone crazy heady times. New normal is going be we're going put in 2,000,000, we're going to own 50% of the company. And that's where we think these markets are going to be. And there was a lot of consensus around that for a period of time. And most of the sort of most grim predictions about sort of where things would stabilize ended up being sort of way too negative. You know, things came back and valuations recovered and people look at sort of multiples and valuations in this sort of, you know, period of time and say, look, know, valuations got crazy and I, you know, I don't know, maybe they did. But at this time when valuations were lower for SaaS businesses, there was also a real belief that markets for software were much smaller than they turned out to be. That people believe that a lot of the SaaS software, the market for it was other tech companies. And normal businesses were not gonna do the whole cloud and SaaS thing. And I'm not sure that those multiples make a lot of sense either. **Harry Stebbings** [32:48]: I think one of my lessons is actually just from markets and market timings is, like, take money off the table in the good times. Blunty, did you take money off in the upswing? And how does that impact your mindset? How does taking secondary off impact your mindset? I sold some stock earlier on **Parker Conrad** [33:04]: before the most recent round. When I've done so, we've always offered it on basically the same terms to employees in the company. So I've never done it without employees being able to participate. You know, how has it impacted my mindset? I feel like it, you know, maybe it gives you a little more security. I mean, I get deeply paranoid about that kind of stuff. So for a long time, everything that I had sold in secondary was just sitting in a checking account. Again, I'm a terrible investor, not the right thing to do. I tend to think be sort of, like, fairly conservative about that stuff. **Harry Stebbings** [33:36]: Where does the paranoia come from on the money side? I am too. My family lost everything when I was young and I saw how painful that was for my family. And so I'm very much downside protectionist. Where do you think your paranoia comes from on it? **Parker Conrad** [33:49]: I guess it's probably like having, in my career, having seen, like, how low things can get. You know, I've had some big highs in my career, but also some really low lows where it felt like there wasn't really a path forward. There were just all the doors were closed. Sort of when I left my first startup before I started Zenefits, we had gone through this period of time where we had pitched 70 different VCs, mostly unsuccessfully, although we'd gone pretty deep with a number of them. And I remember when I left, I emailed like 70 of these partners at different firms that I had sort of met with and said, hey, really enjoyed getting to know you at SigFig and I'm starting something new and would love to meet with you, sort of get your advice and talk about it. And I think out of like the 70 firms that I emailed, I think I got one or two responses. One of them I remember was like from the folks at Bedrock who ended up investing in Zenefits as seed round. But for the most part, was really hard. And by the way, also I did not want to start a company because like starting a company, it was such an awful thing and had been just such a soul sucking experience. And I tried to apply for a bunch of jobs at other tech companies. And at the time I had been co founder of the startup seven years that nobody had ever heard of. And it was really hard. I didn't really get any job offers because people were sort of like, well what was I qualified to do? I wasn't you wouldn't hire me to sort of like be in any kind of leadership role at the time in any function. I wasn't qualified to sort of really run sales or engineering or product or anything like that. And so I always felt like I started my second company largely out of necessity. Similar kind of sentiment with the third. And so it worked out in different ways in both times. But, you know, for me, whenever entrepreneurs come to me and ask me, you know, they say, oh, they're thinking about starting a company. My advice is always like, don't do it. It's a terrible idea. And nobody ever listens to that advice, of course, because it always it only makes them like more inclined to sort of go down this path. But it's super hard. **Harry Stebbings** [35:43]: Final final one, I promise for a quick fire. You said there were about kind of 70 investors, one response. What would the advice be for me in terms of what I can do to be the best VC? What do your best VCs do for you? **Parker Conrad** [35:53]: One thing that I think is very real is that there are investors that bring this sort of brand imprimatur to a company that immediately this firm invests and suddenly things get easier. Like people that you email from prospective employees are more likely to respond to outreach about coming to interview. Other investors are more likely to respond to you when you reach out to them. Prospective customers are less skeptical about working with you. The media is more interested in speaking with you. It's this sort of magic pixie dust that gets sprinkled on your company when some of these firms with really big brand names invest and it's very real. It's not about the sort of particular behavior or competency of the investor. It's about like the brand halo that comes from that. But it's definitely a real thing. The second thing is I think that investors that I sort of really come to appreciate investors that are sort of fairly common even keeled that don't get sort of too excited when things are going really well and don't get sort of too down or negative about when things are going badly because that's definitely not me. I'm like very much like sort of like this. And so people who are kind of like a little more steady, whether people that I hire as executives or people that I work with as investors, that's something that I've found to be extremely useful. And then I think there are some firms that I found have just really been incredible from a recruiting perspective. Looking back, there are some really great hires that we've made at Rippling that we would not have made if it weren't for those firms like introducing us, connecting us, finding folks. Because if you don't do that, you're stuck with executive recruiters. And those firms are, I highly recommend hiring someone to sort of keep a process on track, but often like the best candidates are not ones that you find through exec recruiters. They they come in, you know, through personal networks or through sort of like GPs and investors and things like that. Is the **Harry Stebbings** [37:48]: Sequoia Pixie Dust the biggest? **Parker Conrad** [37:50]: I love all of my investors, and I'm deeply grateful of to all of them for believing in me. I think **Harry Stebbings** [37:56]: they're they're all really, really great. Brilliant answer. Listen. I wanna do a quick fire round. So you know the drill. I say a short statement, and you give me your immediate thoughts. So let's start with your favorite book and why. **Parker Conrad** [38:06]: My favorite book is always is always the book that I'm reading with my kids. So I'm reading Lord of the Rings with my daughter right now. **Harry Stebbings** [38:12]: What do you know now that you wish you'd known at the start of Rippling? **Parker Conrad** [38:15]: It would have been nice to know that that it was gonna work at least so far, knock on wood. I think that would have been sort of a huge relief and sort of picked me up early on when it is sort of really hard to get things going. **Harry Stebbings** [38:26]: What have you changed your mind on recently? **Parker Conrad** [38:29]: For a long time, thought that Rippling would be focused entirely in The United States and that it would be sort of like focused on this one geographical market. And I was very wrong about that. We're really looking at markets outside The US at this point. Penultimate one, what would you most like to change about the world **Harry Stebbings** [38:47]: of startups? **Parker Conrad** [38:47]: For me, I think that there's this sort of media view of founders. It's sort of like you're either a superhero or a supervillain and there's only room for those two. It's either like saint or supervillain and there's such a like thin fuzzy gray line between those two and you can slip so easily from one to the other. I think that like the reality is like, I don't think I'm a saint, but I don't think I've ever really been like a supervillain, but I have been portrayed as both in the media at various different points and I think that that's the thing I wish I could change. I wish that there was just like, look, like they're just people trying to do a job and the sort of the heroism and the sort of supervillainy, I wish that that dynamic was just kind of like out of the ecosystem. **Harry Stebbings** [39:31]: One of my friends is a supervillain right now and being portrayed as one, and and he's not at all. What advice would you give to him having been the supervillain before? **Parker Conrad** [39:39]: When things went south for me, like, one of the things that I deeply appreciated is there were a number of people that reached out that sent me sort of long emails that were just kind of like, look, this too shall pass. It will get better. People will move on. There will be more for you in the future. I so deeply appreciated it when they did that. And some of them like I didn't respond to for years. I remember Ron Conway in particular, who's often someone that people talk about as sort of just like a really genuinely decent person in the ecosystem reached out repeatedly and kept wanting to check-in. I was like mentally in this place where I couldn't, I didn't respond to anyone. I was just so depressed but it meant a lot to me. And so for people who are going through that, I think knowing that this will pass and and just you kinda gotta put one foot in front of the other and get through it. That's probably what I would tell them. **Harry Stebbings** [40:32]: I love that on Ron Conway. But I wanna finish on a final one which is 2027. Okay. Five years from now, we're gonna do round three. Where do you and where do you want Rippling to be then? Is it a public company? I **Parker Conrad** [40:43]: would hope so. Just to be clear, there's like no plans on any you know, people are gonna be like suddenly like timing our IPO and that's not there it's not something that we spend a lot of time thinking about. But I I would think that in that time frame, we would be. And I think that for Rippling to be successful, you know, other than metrics like, you know, revenue and profitability and valuations and things like that, I think that the real sign of our success will be this idea that I think of Salesforce as this sort of system for managing business process that's built on this underlying foundation of customer data. And I believe that there exists this entirely other side of the coin, this bizarro world version of Salesforce where you have a lot of the same tooling and a lot of the same functionality, but it's just built on a different underlying primitive. It's built on this understanding of your employees in your organization. And there's like a whole bunch of business process that you should be managing in a very similar way to like all of the business process that has to do with customers and customer interactions and support and sales and marketing all ends up being managed like inside of Salesforce or in systems that are deeply integrated with Salesforce. I think there's a whole bunch of stuff. There's the externally facing system and the internally facing system. And for Rippling to be successful, we really want to become that internally facing sort of other side of the mirror bizarro world version of Salesforce that's managing this host of other business process within companies that are more internally than than externally facing. **Harry Stebbings** [42:17]: Parker, I always love our chats. I've absolutely loved this. We've absolutely done a great job keeping it twenty minutes. So brilliant concision from me there. But thank you so much for joining me, and I so appreciate it. Thanks so much, Harry. I mean, just such exciting times ahead for Parker and for Rippling. I could not be more excited to see the coming five years. Again, a huge thanks to Parker for giving up the time today to join me on the show. If you'd like to see more from us, of course, you can on 20bc.com. But before we leave you today, ## Sponsor read **Harry Stebbings** [42:44]: Harvard Management Company is constantly seeking out the next generation of great investors and entrepreneurs. HMC has managed Harvard University's endowment for nearly fifty years and was one of the first institutional investors in venture capital. Their experience and long term investment horizon makes them ideal partners to get world changing ideas on a path to viability and success. They work as a true partner, providing insightful perspectives to help managers succeed. I personally have had the pleasure of working with the HMC team and can say that they are truly exceptional partners and savvy investors. 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