How To Build The Future: Parker Conrad

0:00A lot of that conversation around founder mode, I remember thinking to myself, you know, going all the way to the ground floor, particularly when something's broken. is like, that's the way to go. Like you gotta just really get your hands dirty, get in the weeds. AI is gonna help companies, like 2 ,000 person companies be run more like 200 person companies and 200 person companies be run more like 20 person companies. You need to make your business so good. It sort of doesn't matter whether you fit into whatever mold or construct the VCs are looking for.

0:41Welcome back to another episode of How to Build the Future. Our guest today is Parker Conrad, who's created a$13.5 billion company called Rippling. So thanks for being with us. Well, thank you, Gary. Rippling is sort of synonymous with HR, IT, if you want payroll, if you want to understand what's going on with your business. That's really what Rippling is. it's sort of the first thing people turn to, you know, how does it feel right now? I like that the business feels like it's more predictable and steady. Now, I mean, we're still growing very quickly, but, you know, at some scale where it feels like, you know, we have, we really understand like what we're going to do like a year into the future, as opposed to early on where it's kind of like, you don't know what's going to happen next week.

1:28And that, that's always, you know, a little terrifying. Yeah. Why don't we start off at the beginning? I mean, you know, what were some of your first memories with computers and tech just, you know, even as a child starting out? I mean, growing up, I didn't do that much that was super entrepreneurial. But I definitely, like, I kind of figured out, like, how to use a computer really early on. And I had, I guess, like, just made a bunch of money in, like, middle school and high school, like, fixing people's computers. There was like, you know, friends of like the family, like other like my parents' friends that like needed help, like getting a computer set up or figuring out how to get online.

2:08You actually were really, really into the Crimson and so much so that it actually took a drain on your studies at Harvard, didn't it? Yeah, I spent. So when I was in college, I started working on the newspaper there and got just like really into it. and spent all my time at the newspaper, didn't go to class, and they didn't like that very much. So I ended up getting kicked out and then came back and graduated after that. You know, a lot of what I liked about that experience was this sort of like esprit de corps of being in this group of people that was like taking on the administration and, And, you know, really like going out and taking on sort of entrenched, powerful interests, that sort of thing.

3:00And I spent a lot of time after college trying to get back to that sort of feeling. I decided kind of pretty early on I didn't actually want to be a journalist. But I sort of found that again when I was, you know, doing startups. You're taking on sort of usually some big entrenched, you know, incumbent of some kind. And that was like, OK, this felt like that experience that I had working on the newspaper at college. From there, you got a degree in chemistry. You know, you're in a biotech firm in L.A. You know, when did you decide to pivot over to entrepreneurship that you could start a company?

3:36Because it sounded like you had a lot of things figured out at the biotech firm. I didn't get a lot of job offers after graduation. And the job that I got was at working at Amgen in Los Angeles. I had a really great time. I was really enjoying myself, but it was also kind of like this very slow career progression. And one of my roommates from college who was working for Amazon came to me and wanted to start a company. And he was like, hey, let's do something. You know, I'll move down from Seattle. You move up from L.A. We both moved to San Francisco. We did exactly the wrong thing because we decided to start a company.

4:10And then we started trying to figure out what we were going to do. We came up with a bunch of ideas that sounded like good ideas, but were actually terrible ideas, which is usually what happens when you decide to start a company and then try and figure out what you're going to do. I did it because I felt like, man, my career is like, you know, it's going well, but you know, I'm not going to, it's going to be a long time before I get anywhere in my current job. And if Mike does this and I don't, I'll be like an old man kicking myself for not having taken that leap. And so we did it. And then it was like seven years of slow grinding failure of just like rejection after rejection after rejection with like nothing working and pivot after pivot after pivot.

4:54What was the original idea and how did it change? The original idea was that it was right around the time that Wikipedia had really taken off. And we were like, okay, we're going to be a wiki for stock research. And we were like, here's this like sort of really valuable vertical. People love talking about stocks. We get a bunch of people to produce really valuable content for free. Wasn't super clear why people would do that, but like, hey, they were doing it for Wikipedia. So why not do it here? And it just like never really took off. It never really worked. I think a lot of consumer businesses end up being kind of random that, you know, whether things sort of work or not It feels like very much outside the control of the company.

5:38It's one of the reasons I hate consumer businesses. And I think a lot of entrepreneurs that start in consumer end up discovering that and just like completely pivoting their careers to work on B2B as a result of that, because it feels a little less random, which is what I ended up doing with my next company. I mean, there are lots of things from that era that did seem to work. Like, I mean, I think Reddit was then or Dig or these other things. I mean, they were all - Huge consumer successes. All UGC, right? Yeah. And so, you know, it might maybe those entrepreneurs knew they knew what they were doing and we didn't, which actually that's probably what it was.

6:12Sometimes when I look at consumer companies, it feels a little bit like, hey, you know, there are a bunch of businesses that are all going after something similar. And why one of them takes off and one of them doesn't is like it's a lot of like sort of butterfly effects of like, you know, little things, small differences in the starting conditions that lead to like this one working and that one not working. So it's just a little bit less predictable. Yeah. I mean, it sounded like that was one of the bigger challenges that you had to face was, you know, pitching 75 investors back to back on this idea.

6:50We raised a small amount of money up front and we actually on a pitch deck with nothing built. We raised a two and a half million dollar seed round at a seven and a half million dollar valuation. And I was like, oh, my God, we are rich. Like we this thing's worth seven and a half million dollars. I was like adding up, you know, how much of it I owned. And like, I mean, this was off of a pitch deck, right? It was very exciting and heady. And it was like all downhill from there. You know, nothing that we did ever really worked. And we kept pivoting and changing the story. The company's still around.

7:25It ended up being renamed SigFig. And it right now, I think they make really like back office financial software for banks. And credit to my co-founder who has stuck with it for, you know, a long time. So we pitched like 70 different investors that all told us no and went out, you know, really in 2009 at the worst possible time. No one was investing in anything, but they were definitely, definitely not investing in subscale consumer driven advertising content plays. That was like the worst place to be of all. And so we were definitely not going to raise money from anyone. But we didn't know that.

8:04And so we were dutifully like marching and, you know, like all these different, we thought like, well, to raise money, we just need to pitch more investors, which was absolutely the wrong idea. We should have taken a hint after we talked to two or three and nobody was interested that like, it wasn't going to work. You know, having gone through that experience, all of these investors, they always, they always had something that they were really focused on. Like, you know, there was, there was a flavor of the month, like, you know, what is there like a, is there a Facebook app angle to this? Is there, what's your, what's your social local mobile thing?

8:38And those were kind of like the, the sort of generative AI, like web three augmented reality, kind of like memes of the day within the investor class. And, but it sort of changed every six months. It was like a different, like, and even, I think you see that today with AI where, you know, there's like, at first it's all about these sort of, you know, wrappers around sort of GPT. And then it's like, oh, that stuff actually, that's not going to work at all. And it's all about data gravity. And then it's like, you know, people keep sort of moving around. But, you know, investors sort of shift their view of what's going to work every six to nine months.

9:12And I was like, geez, it takes years to build a company in these spaces. And so there's no way, you know, the attention span that investors have on this stuff is always so much shorter than the time that's required to build a business. And so I walked away from that experience deeply cynical about fundraising. Do you think a lot of startups die actually literally because of this fickleness or this trend-chasing behavior? I don't think so. I think the answer is it doesn't really matter what investors think. You can't focus on the thing that they're excited about in the market. You have to be so good that they can't afford to ignore you.

9:55You know, because I mean, a lot of times people ask me for advice about fundraising. And, you know, I usually think that people should not spend any time trying to optimize for like a fundraising outcome. And like, you should just basically wait until you're getting investors that are emailing you term sheets that are signed with like a blank for the valuation. And they say, just fill in the valuation and send it back to us. And like when they do that, like then it's time to fundraise. And like until then, you should probably just focus on making your business better and stronger. And if you can make your business really good, then, you know, things will happen at that point.

10:37And it was really in that context when I left SigFig, you know, and I started, I started Zenefits that, you know, I sort of thought, man, if I can just like, you know, I can make so much money as an insurance broker. that, you know, I had this idea about sort of doing all-in-one sort of HRAS with, you know, that also managed like insurance and benefits and like a bunch of other things that were actually completely separate for companies at the time. And that were a lot of headache that were mostly offline and a bunch of administrative work. And I was like, if I could do them all together, I could really just make this so much easier and I can make all this money on the insurance.

11:16and it's like, oh man, if I could just get a few hundred thousand dollars to start off, then I would never need to raise money again and I don't need to talk to any of these VCs to kind of get off the ground. And that became the impetus for doing YC, that it was like, okay, well, it seems like YC has this program that, you know, sort of it's pretty reasonable to think that I'd be able to at least get that done and then just like never think about this again. I remember reading your application and saying, yes, I want to meet you. That's awesome. Well, thank you. But that, you know, so that was why I did YC.

11:51And that ended up really not being the right reason to do YC. Like it was, I think it's the reason that a lot of people decide to do the program. The real reason to do it was just the intensity of the program and the, how much it sets the company up for success by just getting you in this groove of like really delivering and executing and a lot of urgency in the business. And like that, that ended up being the most powerful thing about it. You know, I remember meeting with PG and, and I was a solo founder early on. And then my co-founder joined a few weeks into the batch and I had very little built.

12:29It was like a prototype, but there was a lot still to build. And I told PG, I was like, okay, I've done the math and I think we can get something live a week before demo day and have like a week to kind of try and get customers before demo day. And PG was like, that'll never work. Like, you've got to figure out how to launch. You know, this was the second week of January. You've got to figure out how to launch the first week of February. And I was like, that's in like three weeks. Like there's, there's just no way. And PG was like, well, I don't know what to tell you. You're screwed then. Like, I don't see, like you might as well give up now and go home.

13:05Like if If you can't do that, and you've got to understand, I was coming off of seven years of failure. I remembered, I was like, okay, this time it's going to work. And suddenly, two weeks into it, it's already over. And I remember going back and we sort of figured out a way by hook or by crook to launch. It wasn't the first week of February, but it was the second week of February. it ended up making a really big difference because, you know, we launched a few weeks ahead of another competitor in the market that, you know, that and the TechCrunch article about Zenefits was like, oh, this interesting company doing, you know, online health insurance and a bunch of other things.

13:49And, you know, and then this other company launched a few weeks after that, I was like, well, what's this weird company that's trying to copy what Zenefits is doing? And so, you know, getting that pace and urgency, you know, just making it a part of the fabric of the company really early on is like a really, a really hard thing to do when you're starting a company. Because it feels a lot like being unemployed. Like you kind of start out and you're kind of like, well, okay, like, what am I going to do today? And it's like, you don't have any customers. if you don't get anything done, nobody really yells at you.

14:19You know, the expectations are very unclear. A lot of people are coming from an environment where there's a very clear deliverable every day, you know, on like what they need to do for their job. And YC is great at just injecting the right level of like urgency and pressure into the system to kind of get you going early on. So Zenefits at the time, you know, coming out of YC, one of the fastest growing software companies of all time. How would you explain that first meteoric rise? I think the sort of insight, the thing that really worked at Zenefits was this idea that like, hey, there was a lot of work kind of like getting set up with all of these different things that you needed for your company.

15:02And then they all kind of needed to talk to each other in some way, but didn't really. And so that you ended up having to do that manually, you know, whether it's, you know, going to the insurance company and figure out, okay, this is the list of people in my company. And then, you know, these are the plans that they're selecting, but then going back into payroll and figuring out, you know, what the deduction should be based on what they selected. And that if you just did a lot of these seemingly different things in one system, you could just cut out a lot of the administrative work involved in running a business.

15:37That was the insight that really worked for us. But there was this kind of magic button to hire an employee, and then they sort of got set up everywhere. And that very much became the sort of key insight behind Rippling, that Rippling is like really a continuation of Zenefits from a product perspective. And then it was like, hey, for the same reason you want this one place to manage, you know, payroll and benefits and a few other things and offer letters and stuff like that, you actually also want to be able to ship someone their computer or get them set up with access to email and Salesforce and GitHub and like a bunch of other stuff around your company.

16:18And that, you know, over time that became what I now call like this idea of like a compound software business that, you know, a lot of the sort of deeper problems within organizations can't really be solved by very narrow point solution software products. And that if you can build a whole suite of really seamlessly interoperable applications, you can build much better products for businesses. And that sort of ultimately became like the sort of thesis of Rippling is that we should be building software in that way, rather than in the way that we've been building it, which is to sort of focus very narrowly.

16:55And that really came from like insights really early on at Zenefits. What did product market fit feel like? I mean, that's one of the more common questions when people try to release a product. They're like, is this it? Is this it? If you have product market fit, are you asking yourself that? We would always have, like, we always had plans and we always had, you know, five ideas that we thought would work, you know, that we have things we could try to try and get customers or get users. And those five things, like four of them would just completely fail. And one of them would mostly fail, but maybe there was some glimmer of hope somewhere on the edge of that idea that would lead us to pivot and say, okay, we're going to do something.

17:40We're going to build something around that for the next six to 12 months. And then we're going to launch again, and that's going to work. and we'd have five new ideas. And it was just that repeated every year for like seven years. You know, there's a lot of advice out there to kind of stick with it, keep going, don't give up. And I think it's terrible advice. I think if it's not, if it's not working, like give up immediately. You know, it very rarely happens that people, you know, with something that's not working, end up pivoting the business in a way that eventually it starts working. You know, there's always that Airbnb story, but most of the time that's not what happens.

18:18And so with, with Zenefits, it was the exact opposite. I mean, we, you know, we had sort of five ideas of things we thought would work and they all worked unbelievably well, just unbelievably well, like wildly exceeded every expectation that we had. And we would try one or two things that we thought probably wouldn't work, you know, but let's give it a shot. And like those things would work unbelievably well as well. And so it was just this sucking sound with the market kind of like pulling the product into existence because it was so clearly like, you know, what everyone wanted and how they wanted this to work.

18:57That's how you know if something's working. And that's, you know, obviously, I think if you have that, then you want to keep going. If you don't have that, you probably want to start over somewhere else. So when Zenefits was sort of really hitting, what sort of growth rate were you looking at both from the revenue side and from sort of growing the team side? We kind of exited YC like six weeks later with like$200 ,000 in revenue, which felt like an enormous amount of money at the time. And then by the end of that year, we were at like, you know, I think about 1 million in revenue. Zero to a million in a year.

19:35Zero to a million in a year and felt really good. And then the next year we went from one to 20. That's really fast growth. That was very, very fast. And then the next year, our plan was to go from 20 to 100. And we ended up going from 20 to 65. And I got fired basically within a week of the end of the fiscal year. And there was some weird stuff about this. I mean, obviously, you've talked about this very publicly. From my perspective, I remember talking to you very briefly that there was a CEO transition happening, but then there was a shift. So normally when there's a CEO transition, there is a mutual non-disparagement, meaning, hey, we're going to set the company up for success.

20:27I'm moving on, but David Sachs is the new CEO. Support him. Everything's all good. But sort of at the 11th hour, things took a turn. The sort of seeds of the kind of downfall of the company were that things that were working so well for us, Top of Funnel stopped working. And there were a bunch of reasons for that, but it was right after people had invested at this crazy high multiple on, you know, underwriting an enormous amount of future growth that suddenly was not materializing. And it was in that context that a lot of this, a lot of these compliance issues came up. Um, and, uh, and I think people got like investors got very nervous and sort of, uh, lashed out a little bit.

21:19And then, um, I ended up getting forced out. Um, David came in as CEO and I think there's a world where that could have like worked out for everyone. Um, and you know, the company could have moved on and, you know, would have been like, okay, you know, well, I'm a major shareholder. That's great. And instead what happened is like, you know, I mean, David really sort of, he hired a sort of comms person that he works with a lot, this guy named Lanny Davis. And they just focused on like attacking me like over and over and over again for like six months. And it became this huge thing. And David, he wasn't just attacking me, was attacking the company that he was the CEO of.

22:06And so I think that really drove the company into the ground in a way that I think they could have done quite well had they not done that. Yeah, that was wild to see that. I mean, even maybe from your days as a journalist, it's sort of this is the matched pair to that. If you get a story out and a few publications publications, published things, you know, some of which are totally untrue. That just becomes the thing that everyone repeats, you know, that sort of narrative control, you know, pretty potent. Yeah, no, it was eye-opening. And like, I mean, some of it was, I think, I mean, there was definitely like a real pile on, you know, for a long time.

22:45But also like, I just wasn't, you know, I was under all these legal restrictions. I wasn't allowed to talk about it. And so it was this very one-sided thing that was, like I was this thing that I watched kind of helplessly happen, and I wasn't really talking to reporters in the same way that David and some of the other folks were. And so it was just this one-sided thing that was being, I was just getting hammered and hammered and hammered. And it took a long time to sort of crawl back from. I mean, it was amazing, really you and why Everyone at YC really invested in Rippling at a time when it was extremely unpopular.

23:26And now it feels like, oh yeah, of course, successful company, blah, blah, blah. But it wasn't at the time. Yeah, I remember that being a really big fight. And then some things are really worth fighting for, honestly. So I had seen what it was like to work with you at YC. I saw that you had created, you know, you, you know, Zenefits would not have existed or created any of that enterprise value without you. And to see what they did to you, it was deeply unfair. And, you know, it wasn't just me and you. It was also like I, you know, I knew locks. I knew tons of your executives. And it was just kind of clear that, you know, the reality is something that you just wasn't what was out there in the press.

24:11And certainly the narrative that had won out there was exactly the opposite of what you and I lived and experienced. So it was a real honor to be able to just say, hey, you know what? Like, this is actually what happened. Well, thank you. You sort of took a little bit of a break, but then almost immediately realized you had seen the inside of the idea maze. And you had gone so deep into it, 65 mil ARR, like you knew what to do, basically. Like, and at that point you said, I'm just going to walk all the way back. I'm going to take all the twists and turns. I'm going to skip all of the sort of missteps and the dead ends that we did along the way.

24:53And we're just going to skip directly to where we were before, but we're going to do it 10 times better. Yeah. I mean, I, you know, I had either the advantage of, or the misfortune to build the same company twice in some ways. And so not a lot of entrepreneurs get to sort of go back and rebuild. And I would advise everyone not to go back and rebuild because it usually means that something has gone very, very wrong. But because of that, I felt like I had a lot of insights about the market and what was needed and very little self-doubt this time around versus the first time when you have a lot of ideas and a lot of hopes and beliefs.

25:38but like not much like certainty around exactly how things are going to play out. And the second time around in this particular space, I felt like, you know, I just had deep conviction. And I remember talking to Presano, who's my co-founder at Rippling, where he said, well, why do you want to, why do you want to do this in the same space that we worked in? He had worked with me at Zenefits. And I said, look, there's a hundred billion dollars just like sitting right there on the floor and nobody can see it except for us. Everyone's just walking by oblivious to it. And all we have to do is like walk over there and pick it up.

26:13Like we know exactly what we need to build. We know exactly what people want. We know exactly how to make this work. And at that point, I think, you know, like it, like I thought when I left Zenefits that David was going to continue and make Zenefits extremely successful. And then it became clear in a few months that that was not what was going to happen, that it was just being driven right into the ground. And so I, you know, like at that point, I had sort of decided Zenefits was going to go to zero. I don't think they had decided that yet, but like that ended up being what happened. And so I was like, look, they're going to go to zero.