In this episode of "20 VC," host Harry Stebbings delves into the success of Ripling with Jeff Lewis, founder of Bedrock Capital. Jeff discusses his long-standing relationship with Ripling's founder, Parker Conrad, and how Parker's resilience and "power plant energy" make him a "narrative violation" and a driving force behind Ripling's growth. Jeff emphasizes Parker's determination to build one of the world's largest companies as a personal mission, and how Ripling's culture of former founders contributes to its relentless drive and execution. He also highlights the potential of Ripling's employee graph to revolutionize SaaS distribution, akin to "AdWords for SaaS." Despite macroeconomic uncertainties, Jeff is bullish on Ripling's ability to thrive by helping businesses do more with less, citing their impressive upgrade rates and cost-saving tools. Jeff's venture firm, Bedrock Capital, has significantly invested in Ripling, seeing it as one of the best growth-stage assets globally with a clear path to a tenfold return.
Welcome back to 20 vc the memo.
This week we are doing a deep.
Dive on the incredible journey of Ripling.
The podcast episode focuses on the company Ripling and its founder Parker Conrad.
And today we're joined by one of Ripling's largest investors, their series D Colead, and a close friend in the form of Jeff Lewis, founder and managing partner of Bedrock Capital, one of the breakout and new venture firms of the last decade. Famously in search I love this, of narrative violations, which we discuss in the show.
Jeff Lewis is introduced as a significant investor in Ripling and the founder of Bedrock Capital, which is known for looking for narrative violations.
But before we dive into the show today, we all hope we never need life insurance. But for me, nothing is more important than my family and knowing they will be protected and looked after.
The host takes a moment to discuss the relevance of life insurance and introduces PolicyGenius as a recommended service for obtaining life insurance quotes.
You know, it's a situation where I actually heard about Parker. I heard of him before I met him.
Jeff describes his first encounter with Parker Conrad's reputation before meeting him in person.
Well, many reasons, I'd say. The first reason is it's always, how does an entrepreneur view themselves? And one of the things Parker has consistently said to us is, I am the ultimate narrative violation.
Jeff Lewis explains why he views Parker Conrad as a narrative violation, highlighting Parker's self-perception and entrepreneurial drive.
I try to anchor myself to ancient things, ancient beliefs about the world. They've helped me to really overcome feelings of vengeance that I had earlier on in my life and my career.
Jeff Lewis discusses his personal experience with vengeance and how he has moved past it to find other sources of motivation.## Growth and Motivation
"And over the last few years with bedrock as we've really scaled things, and I've really grown a lot and feel motivated by the team, growing other people, helping them figure out their life's work and express their investing style in their own unique ways, that's become my North Star motivator early on."
Jeff Lewis discusses his evolution from being motivated by a chip on his shoulder to finding his North Star in mentoring his team and helping them grow in their careers.
"It basically means that they are trying to become truly the employer of record. Not just SMBs, not just mid market, but upmarket as well."
Jeff Lewis explains that Ripling's goal is to become the main employer of record for businesses of all sizes and that their model involves offering multiple products that work in a synergistic manner.
"What I'm most excited about with rippling, actually, I didn't learn. We didn't learn at bedrock until March of 2022."
Jeff Lewis expresses his enthusiasm for Ripling's vision and growth, particularly their potential to influence how business software is distributed through their employee graph.
"The infrastructure, though, that you need to build out a ripling for Europe on a per country basis, given Europe's different regulatory provisions in each country, super hard."
The conversation touches on the complexities of expanding a business like Ripling into Europe, considering the varying regulatory environments across different countries.
"For us, the question always, is there a ten x from here?"
Jeff Lewis shares Bedrock's investment philosophy, focusing on the potential for significant returns and the importance of a company's ability to scale without excessive reliance on venture capital funding.
"We at Bedrock have only lost a few million dollars. We've invested hundreds of millions of dollars over almost five years. At this point, I think our loss ratio is less than 50 basis points."
Jeff Lewis highlights Bedrock's successful track record and low rate of capital loss, attributing it to careful investment decisions and a focus on controllable factors.
"So look, we tried to lead the series a in 2019, and the post mortem from that was every round in ripling is going to just be priced to absolute perfection."
Jeff Lewis recounts Bedrock's decision-making process regarding the investment in Ripling's uncapped note and acknowledges Ripling's strategic fundraising expertise.## Valuation in Normal Markets
"My post mortem and our bedrock post mortem from that was every round in normal markets will be priced to absolute perfection."
This quote highlights the lesson learned about the importance of precise pricing in investment rounds during normal market conditions.
"By the time a company's in a formal financing process, it's kind of dead to us."
This quote explains the firm's stance on not engaging in competitive financing processes once a company is widely shopping its investment memo.
"We talked ourselves out of it, but we did try to do it at a lower price."
This quote summarizes the firm's internal debate and decision-making process, which ultimately led to not proceeding with the investment at the initially agreed valuation.
"We wanted to back our truck up into the most resilient founder we knew, running the best growth stage company we could find."
This quote reflects the firm's conviction in Rippling's potential and their decision to invest heavily despite market conditions.
"No one knows where these prices are going to land two years from now."
This quote encapsulates the uncertainty in the growth market and the difficulty in predicting future valuations.
"We're going to do what's best for maximizing the multiple of the fund, because ultimately that's where our interests are aligned with our lps."
This quote explains the firm's rationale for prioritizing fund performance over immediate LP satisfaction through distributions.## Ripling's Market Environment Impact
"I think it's great for Ripling. I mean, it's going to be challenging for Ripling's customer base. The reason that it's good for ripling is because they actually allow their clients to do more with less."
This quote emphasizes the advantage Ripling has in enabling clients to operate efficiently, which is particularly valuable in a challenging economic environment.
"If you save a company money when they're trying to save money by reducing administrative work, that benefits ripling."
The quote explains how Ripling's platform is positioned as a cost-saving solution, which is attractive to companies looking to cut expenses.
"I don't believe that's the future."
Jeff Lewis expresses his belief that despite economic challenges, the demand for workforce management solutions, like those offered by Ripling, will continue to be strong.
"Well, that's definitely been true historically. The question is, is it going to be true in the future?"
Jeff Lewis acknowledges that optimism has historically been profitable in venture capital but questions if it will remain so.
"You have to be optimistic that people have agency and can do great things."
This quote highlights the importance of believing in entrepreneurs' capabilities as a venture capitalist.
"Very little for me to do. It's an absolute dream."
Jeff Lewis expresses contentment with his limited role in Ripling's ongoing management due to the company's strong leadership.
"He doesn't need my help. If he wants my help, I'll give it to him."
This quote reflects the hands-off approach Jeff Lewis takes with Ripling, offering assistance only when requested by Parker Conrad.
"So, yes, we agree with him."
Jeff Lewis concurs with the statement about the dangers of capital concentration but notes that Bedrock has still chosen to concentrate its investments.
"Every company is its own worst enemy."
Jeff Lewis points out that Ripling's biggest barrier to success is the potential for internal issues that can arise with fast growth.
"There's no other company that's going to be able to out execute this founder in their market."
The quote expresses Jeff Lewis's confidence in Parker Conrad's ability to lead Ripling to outperform competitors in their market.
"Culture wise, it makes it a culture of people that have a chip off their shoulder and need the business to be massive in order to self actualize."
Jeff Lewis describes how Ripling's culture, influenced by former founders, is driven by a sense of purpose and the need to achieve significant success.
"I think owning the employee graph, the potential you have to become, the way SaaS gets distributed, could be just a huge incremental lift for the business."
This quote highlights the strategic opportunity Ripling has in owning the employee graph and its potential to transform SaaS distribution.
"This is a rare human who, to wholly self actualize, has to build one of the largest companies on the planet and he has the ability to do it."
Jeff Lewis expresses his belief in Parker Conrad's unique drive and capability to grow Ripling into one of the world's largest companies.