20VC Rippling’s Parker Conrad on Why The VCFounder Marriage Analogy is Weird, Why The Notion of Focus, Focus, Focus is Overrated, Why Narrow Point Solutions Are Not Best in Class Products & The Rise of the “Compound Startup”

In this insightful conversation, Harry Stebings interviews Parker Conrad, founder and CEO of Rippling, an employee management platform. Conrad discusses the unique challenges and advantages of building a "compound startup," which integrates multiple business systems to solve broader problems. He emphasizes that contrary to traditional advice, focus on a narrow solution may hinder industry progression. Conrad also shares personal reflections on leadership, the impact of past failures, and the drive to prove oneself. Additionally, he highlights the importance of working with a team that aligns with one's values and the complex relationship between founders and investors. Conrad's perspective on the criminal justice system and his aspirations for Rippling's future, positioning it as the Salesforce for employee data, round out the conversation.

• Parker Conrad is the founder and CEO of Ripling, an employee management platform.
• Ripling integrates payroll, benefits, devices, and more into one system.
• Parker Conrad has raised over $197 million in funding for Ripling.
• Prior to Ripling, he co-founded Zenefits and is also an angel investor.
• Parker has invested in Census, Pulley, Agent Sync, and True Norse, among others.

"I'm thrilled to welcome Parker Conrad, founder and CEO at Ripling, the employee management platform, allowing you to manage your employees payroll, benefits, devices and more all in one place."

The quote introduces Parker Conrad and highlights the comprehensive nature of Ripling's platform, which consolidates various employee management functions.

• The core insight of Ripling is that employee data is distributed across the company, not just within the HR department.
• This distribution of employee data makes it the foundation for a broader business systems management platform.

"So I think Ripling has one secret underlying insight, which is that employee data is a lot more distributed across a company than most people realize."

This quote explains the foundational insight that led to the creation of Ripling, emphasizing the widespread distribution of employee data across various business systems.

• Parker Conrad reflects on his personal growth and leadership style.
• He believes he hasn't changed much as a person over the past ten years.
• He questions the Silicon Valley platitude about learning from failures, stating his main takeaway is to avoid failure due to its unpleasantness.

"I'm not sure that I'm that different as a person today than I was ten years ago."

This quote conveys Parker's perspective on his personal development and consistency in character over time.

"The only thing I've ever really learned from failure is how much it sucks and how much you don't want it to happen again."

Parker Conrad expresses his view on failure, suggesting that the primary lesson is the desire to prevent future failures rather than gaining extensive insight from the experience itself.

• Parker Conrad challenges the traditional advice that startups should focus on a single product or service.
• He argues that in B2B SaaS, the biggest problems span multiple systems and require integrated solutions.
• Conrad refers to "compound startups" as companies that tackle several areas at once, creating seamless interoperability.
• He believes the industry is held back by narrow point solutions that don't interoperate well.

"I think it's actually wrong. It might have been true at one point in the past."

This quote challenges the conventional wisdom on focus and suggests that the business environment has evolved, making the traditional notion of focus less applicable.

"The traditional advice to focus is actually really holding back the industry, because it's leading everyone to build these very, very narrow point solutions that don't interoperate."

Parker Conrad criticizes the traditional focus on narrow solutions, advocating for a broader, more integrated approach to solving business problems in B2B SaaS.

• Parker Conrad acknowledges that some companies succeed by starting focused and then expanding.
• He believes there is room for companies to succeed with a compound approach, especially as opportunities for narrow SaaS solutions become scarce.
• Conrad suggests that solving broader business problems requires taking on multiple business systems at once.

"I think that there are some that succeed that way doesn't, to me, change the fact that there are a lot of companies that could succeed, particularly now with a more compound approach."

This quote acknowledges that while some companies do succeed with a focused approach, there is significant potential for success with a broader, compound approach in the current market.

• Parker Conrad argues that the best products are those that integrate seamlessly with other systems, challenging the belief that narrow point solutions are superior.
• He believes compound startups can offer superior products due to seamless integration and interoperability.

"But what if that's actually wrong? I think that the best products are the ones that interoperate seamlessly with a lot of other systems in ways that are almost impossible to do when you build them as standalone point solutions."

The quote suggests that the traditional belief in the superiority of narrow point solutions is flawed and that the best products are those with seamless integration across systems.

• The shift in the funding environment allows startups to pursue more ambitious projects.
• Parker Conrad discusses how to communicate a compound startup vision to investors without appearing overly ambitious.

"How does the difference in the funding environment today enable this different approach?"

This quote prompts consideration of how changes in the funding landscape have enabled a new approach to building startups, allowing for more ambitious and integrated solutions.

"You actually can raise the capital and the resources to go after something a lot more ambitious."

Parker Conrad explains that the current funding environment supports the pursuit of more ambitious and integrated startup projects.

• Compound startups require a clear point of view on why multiple product offerings make sense together.
• Execution is more challenging as it involves being proficient in several areas simultaneously.
• A successful compound startup has the advantage of being transformational, attracting capital and talent.
• Big companies like Microsoft and Salesforce exemplify the success of compound startups through their broad product portfolios and interrelated products.

"You have to have a sort of clear point of view around why it makes sense to do all these things together."

This quote emphasizes the necessity for a compound startup to have a coherent rationale for offering multiple products or services that complement each other.

"But if you can do it effectively, the upside is that you win because you're building something that is usually better in a fundamental and foundational way."

Parker Conrad points out the potential reward of a compound startup - creating a superior foundational product that stands out in the market.

• The integration of different systems is a key product feature in compound startups.
• Deep integration can unlock capabilities across a range of business systems, enhancing product functionality.
• The integration is based on employee roles, which can influence policies, workflows, approvals, and reporting.

"And for us, the underlying thesis is that deeper integration with the employee record unlocks product capability that is critical across a wide array of business systems."

Parker Conrad explains how integration, particularly with the employee record, is central to their product's value proposition, enabling a range of capabilities across various systems.

• Compound startups can leverage their broad product range to offer competitive pricing.
• Pricing can be based on the value of the entire bundle rather than individual products, potentially undercutting competitors on a single product basis.
• A compound startup's diverse product portfolio allows for flexibility in sales and marketing strategies.

"So I think one of the biggest advantages that you have as a compound startup is that you can run circles around competitors from a pricing perspective, because you can maximize the price of your bundle rather than the price of any one SKU."

Parker Conrad discusses the strategic pricing advantage of a compound startup, which can offer more value through bundled pricing compared to competitors with fewer products.

• Marketing a compound startup is challenging due to the breadth of products and services offered.
• The marketing message must focus on the overarching problem the startup is solving, rather than individual product features.
• Rippling positions itself as an "employee system" that addresses fundamental issues across multiple business functions.

"You got to step back and talk about the bigger problem that ties all these different things together rather than talking about like, well, this is a time tracking system or this is a payroll system or this is single sign on or device management or whatever the individual product is."

Parker Conrad highlights the importance of framing the marketing message around the comprehensive solution the compound startup provides, rather than focusing on individual components.

• The sales cycle in a compound startup may be extended due to the need for customer education.
• Customers should be able to purchase individual products or the entire suite, with upselling opportunities over time.
• Having a variety of products allows for reaching out to different stakeholders within a potential client's organization.

"I think in the sales motion you got to do a couple of things. And one is ideally you want to make all of the different buying decisions separatable."

Parker Conrad discusses the sales strategy for compound startups, emphasizing the need for flexibility in purchasing options and the potential for upselling.

• Compound startups aim to retain the overall customer relationship even if individual products are churned.
• Tracking product churn separately from logo churn helps understand customer behavior and preferences.
• The central system or service provided by the startup often remains integral to the customer's operations.

"With compound startups you want to allow customers to churn individual products without the logo churning."

Parker Conrad explains how compound startups manage churn by allowing customers to discontinue specific products while maintaining the core relationship with the startup.

• Compound startups face the challenge of excelling in multiple areas simultaneously.
• A business unit organizational structure can provide focus for teams working on specific products.
• Cross-functional teams are essential for maintaining focus and advancing multiple fronts within the company.

"I think with a compound startup the biggest thing you have to overcome is how can you be good at multiple things at the same time?"

Parker Conrad identifies the primary challenge for compound startups and suggests organizational solutions for managing diverse product development effectively.

• Early stage companies are increasingly adopting a compound startup approach, tackling a suite of products rather than a single offering.
• Notion is an example of a company taking on a productivity suite with multiple products.
• Amp is another example, dealing with corporate cards, expense management, and bill payment, addressing a broader aspect of the general ledger system.
• This approach is driven by the need to address a customer pain point comprehensively, involving several interconnected systems.

"Yeah, I think there are a number of companies that seem to be trying to take on a whole suite of products."

This quote exemplifies the trend of startups aiming to offer a comprehensive suite of products to solve interconnected customer problems, rather than focusing on a single product.

• Parker Conrad discusses his impatience and drive as key factors in his work and the ambition of his company, Rippling.
• His experience with cancer at a young age has given him a sense of urgency to achieve his goals without delay.
• Conrad's past experience of being ousted from his previous company motivates him to prove what could have been achieved had he remained.
• Winning and building a product he believes in, alongside a team he enjoys working with, are significant motivators for him.

"I've always been incredibly impatient... I had cancer when I was 23 years old... I've always wished there was a way... to sort of rewrite history."

This quote reveals personal motivations driving Conrad's ambition and sense of urgency, including his health history and desire to rewrite past professional experiences.

• Conrad finds the marriage analogy for founder-VC relationships to be inaccurate and prefers the general contractor analogy.
• He feels that the power of investors comes from a moral authority, especially once they are on the board of a company.
• The asymmetry of power between investors and founders is highlighted, with investors having a portfolio to absorb risks that individual founders cannot.
• Conrad suggests that legal structures like board control or voting rights are insufficient to counteract the moral authority investors hold.

"The power that investors have over you is more than anything, a moral authority... None of those things actually really matter."

This quote underscores the significant influence investors can have on a company, which goes beyond formal legal structures and is rooted in the perceived moral authority of being on the board.

• Conrad values board members who can provide emotional stability and perspective during the highs and lows of startup life.
• A board member's role can be likened to a shock absorber, helping founders navigate through emotional swings and maintaining focus on the company's trajectory.
• He appreciates board members who can be stabilizing forces without overstating the good times or overstressing the bad times.

"Being sort of a stabilizing force can be extremely helpful."

This quote highlights the importance of emotional support and stability provided by board members, which is a valuable aspect of their role in guiding founders through the challenges of startup life.

• Conrad's motivations are complex, involving both personal satisfaction and external validation.
• He enjoys the process of building and winning, despite the frequent losses encountered in startups.
• The relationships and team dynamics at Rippling are crucial to him, with successes often being associated with bringing on people he values working with.
• Disappointments are also tied to interpersonal aspects, particularly when he is unable to bring desired individuals on board.

"I really love winning... But I really like doing that with a group of other people."

This quote reflects Conrad's dual focus on achieving success and the importance of the team and relationships built within the company, indicating that collective effort and camaraderie are integral to his vision of success.

• Parker Conrad hired Matt as COO earlier than usual for companies.
• Matt and Parker have a long-standing friendship and work history from college.
• Matt's advice on financials during the Series A fundraising was pivotal.
• Parker saw Matt's skills in operations as complementary to his own.

So I hired Matt for a few reasons. And one is that he and I have been friends for a long time... And the thing that convinced me I should hire him is when I was raising my series a... he said, you better make sure that you've really nailed down your p l.

The quote explains Parker's rationale for hiring Matt based on their personal relationship, work history, and Matt's operational expertise, particularly in financial matters.

• Parker Conrad's financial situation has improved, but he hasn't experienced a significant financial event.
• He describes his relationship with money as inattentive, exemplified by a credit score incident.
• Building the company is more important to Parker than financial outcomes.

I'm in a better situation financially than I was in ten years ago... I would describe my relationship to money as inattentive.

This quote reflects Parker's lack of focus on personal wealth accumulation and his prioritization of company growth over financial concerns.

• Parker Conrad values impatience, a sense of humor, and curiosity for his children.
• He believes these traits are important for personal development.

Probably impatience, a sense of humor, and curiosity.

The quote identifies the three traits that Parker hopes to instill in his children, highlighting his perspective on important characteristics for success and well-being.

• The importance of working with enjoyable people has been a key lesson for Parker.
• Relationships formed through work are valued highly in his career.

I think that the most important thing to me was going to be working with people that you enjoy spending time with.

Parker's quote underlines the significance of positive work relationships and their impact on career satisfaction.

• Parker Conrad has a strong stance against the incarceration system in the U.S.
• He believes in the future, society will look back with horror at the practice.
• He advocates for a justice system that considers individuals beyond their worst actions.

I think that the fact that we lock human beings in cages for these extended periods of time is such an awful thing...

This quote reveals Parker's critical view of the U.S. incarceration system and his empathy for those affected by it.

• Prosecutors hold significant power in determining sentences due to the high rate of plea deals.
• Parker supports the idea of prosecutors with defense attorney experience.
• The current system rewards prosecutors politically for harsh sentencing.

It's because what happens is prosecutors have such discretion and the sentencing has gotten so incredible that everyone gets an offer they can't refuse.

The quote emphasizes the disproportionate power of prosecutors in the legal system and the consequences of this power dynamic.

• Parker is currently focused on his startup, but is interested in social causes.
• He is particularly interested in criminal justice reform.
• Financial stability may allow him to support causes he believes in the future.

I think that is definitely the one that I'd want to get involved in.

Parker expresses his future interest in engaging with criminal justice reform once he has the resources to do so.

• Parker Conrad envisions Rippling becoming the Salesforce for employee data.
• He sees a need for business process and workflow tools based on employee data.
• Rippling aims to provide a system similar to Salesforce but focused on a different data set.

I think ripling is going to be the Salesforce for employee data.

The quote outlines Parker's ambitious goal for Rippling, indicating his strategic vision for the company's growth and impact.