Intro: Welcome to the Logan Bartlett Show. On this episode, what you are going to hear is a replay of a discussion I had with Parker Conrad Parker is the founder and CEO of Rippling, a $10 billion plus private company focused on HR and a number of different operations for businesses. Parker talks about his concepts behind building a compound startup that has led Rippling into the juggernaut that it is today, as well as for the first time, a behind the scenes account of what it was like when Parker was ousted from his prior company, Xenefits as CEO, and replaced with David Sachs, who many know today as a VC at Craft Ventures, as well as a podcaster on the All In Pod Parker tells about how his version of events was vastly different than what was publicly communicated by David, and that was something he shared for the first time.
On this episode, you'll hear that discussion with legendary founder Parker Conrad. Now.
Logan: Well, Parker, thanks for doing this
Parker: Thanks for having me.
Logan: in Tripling's office,
Parker: Yeah,
Logan: uh, doing this stuff.
IRL is, uh, yeah, it's interesting getting back to real life and doing this. We were supposed to do this in New York, but uh, you unfortunately got
Parker: got sick. So,
Logan: So now here I am weathering the, taking the chance, you know, it's all about the chemistry in person.
Parker: yeah, of course,
Logan: thanks for doing this. Um, so maybe let's start, uh, personal background a little bit.
So, in prep for this, uh, I guess two things sort of stood out. One, you, you had an interesting story at Harvard, uh, with the Lampoon, right? Uh, and
Parker: man. The Lampoon, you've got that totally, totally wrong. I worked on the Crimson and the, the Lampoon people. And the Crimson people, they hate each other. There's like a big rivalry between the Lampoon
Logan: Crimson. Crimson Serious and Lampoon satirical.
Parker: Lampoon's funny. And the Crimson the Crimson people take themselves very seriously.
Logan: That's interesting. So you were, you were on the serious side of all this.
Parker: I, I was, yeah. Actually my COO at Rippling and I worked together on the Crimson and that's how we met
Logan: But you overworked on, so you were a chemistry major at Harvard
Parker: Yeah.
Logan: and Overworked on the Crimson to the point that your grades actually suffered
Parker: Yeah. I mean, I, I was just having a lot more fun on the newspaper than I was doing problem sets and response papers, and so I just kind of stopped doing them,
Logan: and, and then they said.
Parker: and then they said they, uh, they said they kicked me out. I had to take year off. Um, and I, I actually, I got hit with like. It was like the worst possible class to fail out on. There was, um, this really notorious gut at Harvard, um, that was, I can't remember the real name, but it, it, the, the, the sort of joke name for the course was the Bible.
Um, and it was sort of like a, an academic look at, you know, like the old Testament. And I took the course because I looked at it and there were 10, uh, there were 10. Uh, what do you, what do you call the, like sessions where you, like, you meet, um, like sections where you meet, like in a small group. There were 10 sections, uh, 10 response papers and, uh, a midterm and a final exam.
And I did the math on this. And the, the, the response papers were part of your section participation grade. And I did the math and I was like, if I don't do any of the response papers, and I show up at these sections and take the midterm and the final. Cram for them the night before, I'll squeak out like a B- and do almost no work.
And they didn't look, they didn't like that. They looked at it as I had not done, I had not finished the response papers, and so I had not finished the class and they failed me and then made me take a year off.
Logan: So you took a year off and you went to go work at a newspaper?
Parker: did. So it turns out that like failing outta school, I was managing editor of the paper and uh, it turns out that a lot of managing editors of the Crimson end up failing out. It's like a pretty, it's a common theme. And so
Logan: What's, what's the, what's the consistency there? Is it just, is it actually like a pretty brutal time commitment or is it a type of person that decides to be the managing
Parker: I think it's, it's, it's a little bit of both and it's a little sort of all-consuming. Um, and so there were someone a few years, uh, before me that had failed out. There was someone I think two or three years after that failed out. Um, and so there was a whole network of people that were like. Hey, like, you know, will, um, some of those sort of Crimson alums like, help me get a job at this, uh, this newspaper in Little Rock Arkansas.
Logan: you're an Upper East Side, New York City kid.
Parker: I don't really think of myself as an Upper East Side. I was a very bad Upper East Side New York City kid, but, but yes, I did grow up
Logan: student, going to Little Rock to work on Little Rock to work on a
Parker: That's right. Yeah. So I moved to Little Rock. I didn't know anyone in Little Rock. I didn't know anyone who knew anyone in Little Rock. Um, showed up there was covering night cops and crime. Uh, and uh, you know, like the, actually Little Rock turns out was a, a big epicenter of a lot of gang warfare. I think it still is.
Um, and so it was covering like shootings and, you know, things like that.
Logan: And and did you think you were going to be a journalist? Like what was your path, your entrepreneurial path to actually starting companies?
Parker: Well, the, the thing that I found, you know, when I was in Little Rock, all of my friends there, there were a lot of other really early career journalists there, um, who had not, not failed outta school. And they, I mean, most of them wanted, had these sort of literary aspirations. Like they wanted to be, you know, Ernest Hemingway and, you know, they wanted to, you know, write like Faulkner or, and that was never in, like, what I liked was sort of being part of this like, group of people at the Crimson that were trying to like, basically tweak the administration.
Um, and that was really fun, you know, it was sort of like running that little organization. Um, and I spent a bunch of time, like after college trying to like, get back to that feeling of sort of like taking on, you know, something, the establishment, you know, whatever it was. And, and, uh, you know, doing startups was sort of what, what sort of scratched that edge for me?
Logan: And, and you also, uh, uh, hopefully you're comfortable asking about this, but, uh, you, you, you had cancer when you were really young too,
Parker: Yeah. I had, um, I had cancer when I was twenty-three. Um, and, um, I mean, look, it was a, it was a very curable type of cancer. So
Logan: I mean, cancer's cancer,
Parker: yeah, cancer's cancer, um, um, and, but it was scary for like a week or two until, until it was clear that it wasn't gonna be a big deal and, you know, did some, you know, surgery and radiation and that kind of stuff and then, then was fine.
Logan: Did that impact your perspective on like a, anything career wise or, uh, attitude towards, I mean, it has to be pretty impactful of like how you view the world, I would assume.
Parker: I mean, I think for me, um, I. It probably, um, it probably gave me a little bit of a, a kick in the pants from a career perspective because it, um, I remember sort of like, you know, I was in a job, um, working for a pharmaceutical company in Los Angeles. Um, and, um, I, you know, I kinda looked at the sort of career path at that company and there were all these rules about, you know, spending a certain number of years in this role and then in this role and, and then, you know, sort of you could move up only with a, you know, you know, once every two or three years or something like that.
And if you add up like all the steps, I was like, geez, I'm gonna be dead before I get to the top here. Um, and that was sort of the real impetus for me to, you know, to leave. And, and one of my roommates from college wanted to start a company, um, and I thought, man, if, if this thing works and I don't, and Mike does it and I don't, I'm gonna be an old man, like kicking myself over, like what could have been.
Logan: minimization. Just like,
Parker: That's right. Of course it was a terrible idea and I should have stayed in my job. Um, but that was,
Logan: for you.
Parker: yeah, well, I mean, you know,
Logan: but it it led you to an
Parker: who knows? They're still, knock on wood, we're still, you know, we're still still trying to figure that out. Yeah. Um,
Logan: And so that led you to doing this entrepreneur, so what was the name of that company?
Parker: it, um, it's, it's now called Sigfig, so it's, uh, it's still around. My co-founder is still there. Um, it's sort of like a wealth front competitor.
Logan: And so, so you did that for how long?
Parker: I was there for about seven years of slow grinding failure, um, of just constantly being, you know, months away from not being able to make payroll. Um, we went out to raise, um, to raise a round of financing in 2009. Our, our investors at the time told us, look, in Ja, they told us in January of 2009. We're not gonna support you guys, so you better go out and talk to every investor that you can to raise money.
And so we dutifully went out and like marched into like machine gun fire, trying to raise money for an ad support. What was at the time an ad supported sort of content play.
Logan: at the time, I mean, this isn't today there, there aren't 300 VCs or whatever it seems to be. There's probably like 30, 40,
Parker: Oh, there's at least 75 because that's how many that, that's how many, that's how many we pitched. We pitched like every single one of them. Um, and got told, you know, maybe to know by everyone.
Logan: Yeah. Which is, which by the way, the, the maybe is worse than the No. Right?
Parker: no. Yeah, no, there were, there were people that we spent lots of time went super deep with. We spent two years doing this. Um, and to get to like conclusive knows from everyone. So I, you know, I have some memory of like what it was like to raise money in Silicon Valley, you know, back when it wasn't sort of 2013 through, you know, 2021.
Logan: yeah, yeah, yeah, yeah. Uh, that's inter. And so, so then after that, zenefit, uh, what was the originally idea? Idea for Zenefit?
Parker: Well, the idea from Zenit for Zenefits was really, you know, I had had all this trouble raising money from VCs, and when, when I met with them to raise money, you know, everyone, there was always something that was sort of, um, a theme that they were investing in. So we would get these questions and that would be like, well, is there, you know, what's your like social local mo social local mobile angle to this?
Or like, do you have Yeah, exactly. You know, or the augmented reality of, you know, it was like, what's your do, what's your Facebook app strategy? Or like, you know, and, and it was always like, it's Jesus Christ. It's an, this has nothing to do with those, those trends,
Logan: Then you come back, you come back a month later with that strategy and they're like, no, no.
Parker: And six. That's right. And six months later it was a completely different thing.
And so I, I sort of developed this, like, this view that like VCs, it was impossible to build a company that would ever fit into the thing that investors wanted to invest in. And so at that moment, 'cause like the, the, the, the, the time that it takes to build a business is too long. And the, the half-life of these trends is too short.
And so, um, you know, I, I had had this problem managing health insurance for, um, for the company, for Sigfig. You know, anytime we needed to hire a new employee, um, you know, they had to fill out their, their paperwork to enroll in health insurance. And, uh, I needed to like stop off at Kinko's to like fax in the application because that was the only way to kind of get it in the insurance company at that point.
And, you know, I thought like, geez, maybe this makes no sense. Like this has gotta move online. And had had sort of talked with a few different insurance brokers and realized what an incredible amount of money there was to be made being a broker. And so I sort of thought, look, VCs are completely unreliable.
Um, I'm gonna apply to Y Combinator, I'm just gonna try and raise, if I can raise like just a few hundred thousand dollars, then I can make enough cash off of this business that I can grow it. And I'll, I'll never be able to raise money because I just know that I'm never gonna be able to do that. And, but at least I can like, you know, generate a business that works and I'll be like, I'll be like the local insurance broker that has some technology.
And that was sort of like the goal. And of course, like it turns out that, you know, when we had that type of business where there was sort of all of this money flowing in, those were exactly the kinds of businesses that VCs wanted to invest in. And, and we were able to raise enormous amounts of capital.
Logan: Probably had the attitude too. It's like, I don't need your money, and so therefore VCs are like, well, you have to, you
Parker: Well, I don't, I mean, I, I mean, I like to think I didn't have like that attitude, but like, um, I mean, I, I, you know, look, there, there have been times when I've raised money where it's incredibly easy to raise money and there have been times to raise money where it's like incredibly, incredibly hard. And like you, you sort of never forget the times when it's hard.
And so, you know, you hopefully never get too, sort of like full of yourself when, when things are going well,
Logan: So it became, it was easy and you went from the mindset of if I can get a couple hundred thousand dollars. I can, you know, turn this into a, I don't mean to use this in the pejorative term that it gets used, but something of a lifestyle. Yeah. I, which I think is condescending. 'cause most businesses are, but still, that's the, that's the term as it's known.
And then, uh, you went from one end of the spectrum to the other and you raised a bunch of money and went really fast to, I mean, one of the fastest growing companies ever from a software standpoint. Right. Through that period of time. And what was the, was it a shift in mindset that said, Hey, the capital's there and we need to do it?
Was it that the market opportunities there
Parker: well, I, I mean, I always wanted to try and build something bigger. It was, it was more that the, the fundraising, the reliability, like, like I, it just seemed like the capital markets were too unreliable to count on it. And so like, being able to run it as a lifestyle business was like the fallback, you know, that if I couldn't, if I couldn't raise money to sort of grow.
And then what happened is, like early on in benefits is it was just way too easy for us to close business. Um, you know, we would, um, at my previous company, I went through seven years of this thing where we would sort of have five things that we thought. These things are gonna work. We're gonna do these five things.
And four of them would fail utterly and completely. And one of them would like mostly fail. But in that failure, there was some tiny glimmer of hope
Logan: A little nugget that.
Parker: that would give us like five new things and, and just keep us going for another six months to try the next thing. And at Zenefits we would try five things and all of them would work, like every single one of them.
And we tried two things that we didn't think would work just because, and those things would work spectacularly well as well. Um, and so it was just like a very different feeling. Um, and, and what, um, I got this advice I remember from, from Peter Thiel, um, that he said, look, you've uncovered this sort of pot of gold, um, in, in these sort of insurance revenues.
Um. And, uh, other companies, now that you've discovered this, other companies are gonna pivot into the space, um, which they did. You suddenly had other competitors that moved in to sort of do what Zenefits was doing. Um, and, uh, you need to soak all the oxygen out of the, out of the market for this. And that was, that was sort of what, and, and then I sort of, I made this decision, which in retrospect proved like, uh, really incorrect, which was that, know, it was so easy to close business that we were going to scale in advance of the engineering capabilities of the company.
Um, and so, you know, we had the, the problem that we solved was really that, that there was all of this administrative work inside of a business related to, you know, initially enrolling people in insurance. And then the mandate sort of brought into kind of getting them up and running in HR systems more broadly than that.
Um. And sort of our plan was like, look, we're just gonna take on all of that administrative work. We'll do it for you, and then we're gonna sort of, you know, build the engineering team in the background to automate all of the sort of ops work that we're taking on, on your behalf. And the problem with that approach, and there are a lot of companies that I think still do this, and it, it always ends in disaster, almost always ends in disaster because it, it gets much harder to automate something once you scale it up.
And so it's a huge mistake and it's, it's the, the, the, the biggest thing that we did very differently at Rippling is we decided on day one there was gonna be no internal ops at the company. And, and we held that for like a really long time to such a long time that we were about, I think, 5 million in ARR before we hired our first support rep.
Um, and until then it was like me and the engineering team doing customer support. Um, and, but it meant that like the, it was software like end to end, um. It's much easier if you can start with software and gradually grow the software than if you, the, the sort of, if you have this approach that you rely on manual ops, these teams kind of take root and they're, they're very hard to dislodge.
Um, because it's very hard to build automation at scale. It's just the process gets like too complicated.
Logan: Is it because it, it is not the change management of like replacing people's jobs that are already doing this to some functional way. It's actually that the software, uh, the, there's a sprawl of problems they're solving and so better to start with something
Parker: It, it just, the complexity is too large. You get, you get in this situation where there's this like blind man in the elephant problem where no one understands the full scope of like, everything that the software needs to be able to do. And so you spend all this time building something to automate something that the team is doing and, and you take, you spend months doing this and then you turn it on.
And it's just completely broken because there's, you know, 30 things that you didn't account for or did edge cases and then, and so then you have to turn it off and you have to go back to the drawing board and start over again. Um, and so the automation around this stuff was, was perpetually behind its benefits.
And that led to a number of problems. Um, one of which was that there was, you know, any process that you're doing manually, there's, there's an error rate around it. And so the question is not like whether your manual process is, is broken, it's about how broken is it? You know, it might be, you know, you might be right 90% of the time.
You might be right 99% of the time, but it sure ain't a hundred. And that was a problem in the context of like what we were doing for clients. Like it had to be a hundred percent and we couldn't make it a hundred percent. Um, and then the other problem of course is you get, you know, our, we were upside down on gross margin.
We had these sort of ballooning sort of cogs, um, as the business was scaling very, very quickly from a top-line perspective.
Logan: linear with head count for the most part.
Parker: That's right. Yeah. Um, and, uh, and then, you know, it, it, it reached a certain point when the, there was sort of this conventional wisdom in the market that the idea behind Zenefits was great, but you know, the execution left something to be desired.
And when that happened, everything that was sort of working so well for us from a top funnel perspective, that all started to dry up. Um, and it happened at the worst possible moment, like three months after we'd raised this like massive, massive round.
Logan: I don't wanna make you relitigate. I'm sure you've talked about this ad nauseum, but at that point in time, um, I assume as a former, you know, journalist or someone that spent a lot of time in this, and I've heard you talk about like narratives, right? And like how important between media and VCs and startups and how narratives all kind of manifest themselves.
And so was Xenefits in, in your mind when you sort of play it back out like the, the, there was this manual thing that you've now internalized and, and done differently, but then also because of that, the operational complexity and all that stuff, the narrative kind of got away from you. And then there were elements of people that, you know, started to shoot spitballs and, uh, start to point at things that maybe they knew otherwise in the past, but decided to raise them as issues.
I.
Parker: I mean, I, I look, um, there, there's a lot about the public sort of story about Zenefits that I just vehemently disagree with. Um. Um, I think, you know, one, one thing I'll say about this is that when things go wrong at companies, um, there are people who have, like, who have institutional apparatus behind them.
You know, they have, you know, crisis PR firms and, you know, sort of hot and cold running, you know, PR departments and, you know, deep investments in media relationships. And, you know, all of those things were true for Andreessen Horowitz and for David Sachs who replaced me in Centifitz. And then there was me and I was like hiding in my house, like not talking to like anyone, like not friends, like barely even family, just kind of like hiding from the world, um, and super depressed about the whole thing.
Um, and, and then sort of watched this whole thing unfold and, and the story unfold around me with this sort of growing horror of sort of realizing sort of what was being told about this. Um, and one of the things, I mean, I even talked a lot about sort of how the sort of moment when I was forced outta the company, but there was this board meeting, um, and at the board meeting, um, Andreessen, Horowitz, Lars and Ben, um, tried to convince me to stay on.
They wanted me to be, they wanted me to stay on the board. They wanted me to stay on and run product. And I sort of said, look, I had this experience at my last company when I left of being sort of like demoted, but kind of like still hanging out. And it was not a positive experience for me, um, the company before Xenefits.
And, and so I said, look, if I'm out, I'm out. Um, and, uh, and y you know, I remember like in, in that board meeting, um, you know, they said, well, what are you gonna do? And I said, well, I think I'm gonna start another company. And Lars looked at me and he said. You don't have another company in you. Like there's just no way.
Like I know when people have another company in them and like, you don't have it in you. Um, and, uh, and I, you know, so we, I agreed to step down under a lot of pressure, um, at the board meeting and we drafted this press release that was a friendly press release. It was like I said, you know, great things about David and you know, they said good things about me and like, you know, sort of the kind of anodyne sort of stuff that people say normally when people leave companies that are like, ah, you know, like new leadership needed for whatever reason.
And there was this sort of agreement that we were all gonna kind of march for arm in arm over this transition. And, uh, David just issued a different press release, like literally just a different release than the one that we had agreed to.
Logan: Like, like right after that.
Parker: Like the day I signed the paperwork on a Monday and on a Monday afternoon.
Um, like a few hours later, the release came out and it was not the one that we had drafted,
Logan: So just to level set, I
Parker: and the release was like, look, the company has all these compliance problems and it's all, it's all because this fucking guy doesn't care about compliance.
Logan: And so, so just, just to level set the personalities, I realize most people probably know this, but David Sachs was your COO who's now a, uh, media personality himself as well as a started craft Ventures. Lars Dahlgaard was the former CEO of SuccessFactors, who is your
Parker: Board member from Andreessen. Horowitz
Logan: was obviously is Horowitz of Ben Andreessen
Parker: Horowitz. Yeah.
Logan: Was that did, did the Andreessen Horowitz guys know that he was gonna do that? He was your COO. He was gonna step into, he stepped into interim CEO. Was that the original title?
Parker: Yeah. So the, the original, what, what Andreessen Horowitz pitched me on in that board meeting was that, you know, David would step in. For six to 12 months, they were like, look, there are these compliance issues. We want David to come in for six to 12 months and, you know, clean this stuff up, turn sales around, you know, like sales were really sort of, you know, starting to collapse and then in six to 12 months we're gonna bring you back as CEO.
And like that was sort of the, what was pitched to the board meeting. I was like, you know, I don't know if I believe that, but that was like sort of what they sort of like laid out on the, I mean, it was a very friendly conversation agreement until the day that it got announced. Um, and, and so it's, when I, when I, and I talk about this mostly to emphasize just the level of like horror that I saw, like when this stuff did in fact come out because it was not what I was expecting when I, when I resigned.
Logan: And, and the compliance stuff, and I, I don't need you to go down the whole rabbit hole of this, but there was elements of that that was known to the board, right. And, and there was some stuff that was, you know, people kind of knew that, hey, these people were licensed in some states, but not the other, and we probably have to pay, pay a fine for it.
But there was a level of, it wasn't, you were hiding this from, from the entire company or something.
Parker: No, I mean there were, there were a few, um, there were a few different things that came out, like, at least in the media about Santa Fe. And one was, um, this sort of licensing compliance issue and like, broadly speaking, um, and there were a few exceptions, but, but for the most part, reps were properly licensed in their home state and they, they weren't licensed in other states around the country and they, they weren't licensed in other states, um, largely because like we didn't think that they had to be.
Um, and we got that advice repeatedly and in writing from our lawyers on this. Um, and, uh. Look as CEO of the company. I own those mistakes, but there's a very different sort of moral character, I think to like, Hey, we made a mistake and we screwed this up because we, we didn't realize what was required. And like, setting out to sort of like subvert like the regulatory regime, which was like never the intention.
Um, it was just a, a pure mistake. Um, and, uh, but that, you know, that like I was never allowed to say that. I mean, that was like, you know, and the company was very, and like under David was extremely set on me not being able to say like, what I just told you. And in fact, so set on it that I would meet with regulators and the company would send their lawyer and their lawyer's job, their only job was that when I was asked, well, so like, why weren't people licensed?
Um, they would sort of say, look, objection. That's attorney-client privilege communication. The company owns that privilege, not Parker. And so we don't want him answering the question, and I was told I couldn't answer it. Um, and what was literally not allowed to sort of say, um, what, what I thought was sort of exculpatory, at least from like a motives perspective, um, and, um, why they did that.
Like, you know, I don't know, like, uh, did and, and did like a-sixteen-Z did they know that David was gonna go down this path? I, I sort of have to imagine that Andre Sohorowitz did not realize that David was, I think he sort of decided to burn the company to the ground so that he could come out of that situation as the White Knight of compliance, you know, mister sort of compliance and go on and raise his VC fund.
Um, which worked out extremely well for him. Um, and, uh. You know, I mean, David used to have this like, sort of way of talking about this. Like he, um, there's this great slide that he had a TechCrunch Disrupt, um, when he was being interviewed by Connie Laszloz. And the slide had these like three bullet points.
And the bullet 0.1 was like, um, you know, it's no secret, um, that Zenefits has a bunch of compliance issues. Um, bullet 0.2 was like the culture of the sales organization was broken. And bullet 0.3 was the sales organization reported to Parker, not to me. Um, and the implication, the inference, um, I would even say the, the lie in that slide was that, uh, all of the compliance issues were on the sales team.
Um, and actually like something like 70% of the licensing violations were actually on the account management team that reported directly to David and happened while he was running it. Um, and that, that never came out. Um. David managed to never have that show up anywhere in the media. Like, look, I own, you know, I'm just equally responsible for the account management team as anything else.
But it really kind of, it always sort of really grinded my gears that, you know, David was out there attacking me for the li these licensing violations, most of which happened on his team, on his watch while he was there, um, as COO.
Logan: So, so you're holed up at
Parker: And by the way, I mean, those aren't the only, there was also, I mean, we could, we could talk for hours about, but there, there's also also this, this macro thing and then this supposed party culture, um, which I can say was like largely just not true at Santa Fe.
It's like, there are,
Logan: actually took the, uh, the staircase up here just to, you know, see if, see if rippling had the same party culture.
Parker: that's right.
Logan: a funny, it's a funny story.
Parker: it's, I mean, yeah, look, I mean, you know, what happened is the landlord emailed our office manager and said, Hey, we heard that someone. Uh, you know, we found a used condom in the stairwell, and at the time we were in this building at 3 0 3 Second Street, there are like 30 other companies in that building.
Um, it's not even clear that it was someone from Zenefits, but we were the company that sent an all employee email saying that this behavior is unacceptable, which then got picked up in the media and sort of written and rewritten and rewritten to like, you know, sort of orgies at like high flying tech startup and, um, you know, but, but largely that story was just not true.
TLBS Parker Conrad Rerun (final edit yt): Hey guys, this is Rashad. I work with Logan on the show, and I wanted to take a quick break to tell you about
Logan: the narrative thing,
TLBS Parker Conrad Rerun (final edit yt): unsupervised Learning. Unsupervised Learning is our AI podcasts
Logan: whole media. I mean, Andreessen has future. Now. Here I
TLBS Parker Conrad Rerun (final edit yt): ai, Adobe, and many others about the topical things that are happening in the very, very rapidly developing
Logan: are your thoughts about just like
TLBS Parker Conrad Rerun (final edit yt): So
Logan: startups and how it can be
TLBS Parker Conrad Rerun (final edit yt): uh, check out the link in this description for our YouTube channel, but also wherever you get your
Logan: know, companies or VC's,
TLBS Parker Conrad Rerun (final edit yt): to the show.
Logan: something about journalists wanting author or like some authoritative figure, uh, in the past that they can look to and sort of talk about the definitive way
Parker: Well, one, one thing that kind of sucks about this is that, you know, the, the media tends to have like two stories about startups, and those two stories are like, you know, superhero and villain and, and that's it. And, and like the truth is like, neither of those two extremes. And like, um, you know, I have for the most part, like not, I sort of took a vow not to read any of the news coverage about me or Rippling, um, starting about five or six years ago and have mostly stuck to it.
Um, and, uh. The reason is, is like even when stories were, were, were positive, they just made me cringe. And like when stories were negative, they made me cringe even more. Um, because like, you know, I'm not a saint, um, but I'm also not like the devil either. Um, and, but that was like, there was sort, there's never sort of any room for nuance on this stuff.
Um, and so I think that drives like a lot of the media narrative around Start-ups, and a lot of the fascination around founders comes from that. Um, um, from a VC perspective, I think it, it's slightly different. I think that, you know, for investors, um, I am, I'm like a, a, a pretty deep skeptic about the idea of investor value-add.
I think that most investors are value destroying and the more involved they are in companies, the more value that they destroy. And that was true, you know, for me. Even, even with some like objectively really smart people involved in my last company, like we would've been better off at Zenefits just doing like the exact opposite of whatever Andres and Horowitz told us to do.
Um, and like it's not because they're bad or dumb, it's because like they learned all the wrong lessons from all of their past experiences that didn't apply to like our specific situation. And there's nothing more dangerous than a really sharp VC that really knows a lot about the industry and the market and how startups work that spends two hours once a quarter thinking about your company.
You know, it's just a very explosive combination, um, or very combustible, um, sort of setup. Um, but like one of the things that is very real about investor value add is brand, um, that investors. Bring this sort of brand in premature to the companies that they back. And I remember there was this thread on Twitter a little while ago where I think people were, were talking about like, what do founders want from VCs?
And Keith Raboi had this theory that like what founders want is they want investors that increase their odds of success. And I remember thinking to myself like, no, that's, and I've enormous amount of respect for Keith, but I think he's dead wrong about that. I don't, I don't think that's what founders are looking for from their VCs.
I think that's what VCs want founders to be looking for from them and what they want to convince LPs they bring to the table. I think what founders actually want more than anything else is validation. Um, because you get like no validation in this job and for a long time, like early on in a company's lifecycle, you've like told.
All of your friends and family, you know that you are gonna go start this thing and it's gonna be really successful. And then you go back and you like see them all like over Thanksgiving or over Christmas and you're like, fuck, it's still not successful yet. And maybe not only is it not successful, but you're like super fucked and like things are not working at all.
And that's like not what happens some of the time. That's what happens like almost all the time. Like even for companies that go on to be successful. Um, and you're sitting there and you're trying to beg people to join the company and you're trying, you're pleading with early customers to try and get them to sign up and it, and, and like it, there's zero validation that you get for a long, long time.
And I think that the thing that, that, that investors bring to the table is brand. Um, and that brand, um, helps you. Um, it on, on like a personal level, it, it helps people because they, they can go tell their parents that like, you know, oh, like such and such firm, you know, um, just invested in my company. Like, I, I, you know, I, it is, it is working.
Like it wasn't a mistake for me to do this. Um, it, it changes the, it it means that prospective employees are more likely to respond to your emails. It means that customers are less likely, or prospective customers are less likely to ask you, well, how long are you guys gonna be around? And like, you know, like, I need you to fill out this like fifty-seven page security questionnaire.
Um, because like, they just believe that, you know, if this firm, this big-name firm invested in you, it must mean that things are kind of like boxes are checked behind the scenes.
Logan: a shortcut. It's a
Parker: That's right.
Logan: for, it's like Harvard, right?
Parker: Exactly. It's, it's the same thing. It's.
Logan: does that, does that fit in with what Keith said though about increasing probability of success because people are more likely to join, customers are more likely to validate, or is it pure psychological?
Parker: so I mean, I think, um, yeah, I think it, I, I think it is absolutely real and it does improve your, it does increase the chances that you'll succeed it 100%. It is, in my view, the, like, the true real value add that I don't like it because I don't, I don't think that that ought to come from investors. And I'm like resentful of the fact that it does, but it is real and it, and it, and it does come from that.
Um, but that, you know, I think, you know, credit to a 16 Z, I think they were the first firm to like really figure that out and understand that that credibility came from the media. And so, um, it, you know, Andreessen, Horowitz, like all of everything that they've been able to do as a firm, I believe is like bestowed on them by the media. By their incredibly aggressive media and PR strategy, right from day one. And like my, like my view on this is the way to think about them is that they're really a PR firm with a monetization strategy of investing in companies. And like, that's the way to sort of think about it. And I, I'm convinced that like all of their decisions are through the lens of like, you know, how this is going to play, you know, from a brand perspective in the media.
And there are advantages and disadvantages to do to that as a founder. The advantages to it are that some of this sort of, you know, um, this sort of magic brand pixie dust is going to like, make its way onto you. The disadvantages of it are, um, you know, there are these cases when their interests and yours might not be aligned.
And for 98, 90 8% of the time, that's not gonna be the case. But I generally think. That, you know, most, uh, I, most founders, I really think that their priority is the success of their company. I think it's just, you can't, you can't like start this thing and, and not care about it in a very real way. And there, there are obviously always going to be some exceptions, but I think, um, for, for a lot of VC, the present company
Logan: Yeah. Yeah.
Parker: you know, it's really the, the order of priorities is like first their personal brand and, and second the brand of their firm.
And third, the returns of their firm. And fourth, the success of your company. And in almost all cases you are like perfectly aligned with them. And then there are these like very, very rare cases where that sort of falls out of sync. Um, and, and then it gets, it can be very, very dangerous for you. Um, um, in, in situations like that.
Logan: Yeah, that's, I mean, you obviously lived, lived that exact situation. Um, it's a fascinating, I mean, obviously I, I, I've sort of fallen into doing this type of thing and I, I did ever thought it would be something I got bored during the pandemic and started tweeting and now I. Because you know, when you, they actually, if you get to a certain number of Twitter followers, you have to have a podcast as the rule, actually.
And so, uh, but it is, I mean, obviously there's, uh, I've spent a lot of time thinking about all this stuff, right? And for me it was the pandemic was going on and capital was, you know, abundant. It was totally plentiful. And it was like, how do I cut through the noise to try to future-proof? I mean, I, I didn't wake up one day and say, all right, I'm gonna fuck around on Twitter and that's gonna lead to a following.
And then I'm gonna uplevel into having a podcast and get to sit with people like yourself. But it is. There's definitely, uh, a lot of truth to the, to the perception and the brand and the willingness. I think one of the things that hopefully I can do is at least help tell some stories in a different, more interesting way than I think other people can.
But it's obviously, you know, I'm doing this for some to some end. Right.
Parker: Yeah, no, of course.
Logan: And so it's a, it's an interesting, I mean, Andreessen has done it in a very systematic way, right? From the founding, uh, obviously they've, they've had people on staff from the very beginning, but they've been pretty structured in how they're thinking about it.
And if you look at, I mean, Sequoia, you know, they were founded in what, seventy-two Andreessen was founded in oh nine. And both of 'em are held in, you know, if you look at Twitter followers, they're the top two Twitter followers.
Parker: no, of course
Logan: Andreessen found a shortcut
Parker: it worked. Yeah, a hundred percent.
Logan: Yeah. So, uh, well thanks for going through all that.
I guess shifting gears, let's talk about Ripley. So you decided you learned, uh, a lot of stuff there, but one of which was the automation side of things and actually doing it in a software way. So maybe talk a little bit about your existing company, which I think is super interesting.
Parker: So Rippling really has one underlying insight, and that insight is that employee data is present in a lot of different business systems, well outside of the HR department and HR business systems. And as a result of that, I think. Employee data is really actually an underlying primitive for a lot of business software.
Um, you know, well beyond sort of the traditional sort of HR verticals where we think of employee data playing a role. Um, and that creates both a problem for businesses that we can solve and an opportunity sort of related sort of corollary opportunity for us. And the problem that it creates is that for companies, um, they have to update and maintain this distributed employee record across all these different business systems.
Um, and you see this, you know, whenever you hire someone, there are all these places where they need to be set up, and most companies will have some checklist of all the things they need to do when an employee joins a company, most of which are about, you know, distributing this employee data out to these various different systems.
And then every time something changes, some subset or maybe even all of these systems are implicated and need to be adjusted manually, um, by some administrative person. The way that this should all work is there should be one underlying system that handles the propagation out to everything else, and that's effectively what Rippling is and what we do.
Um, but the corollary opportunity is that most companies that make business software understand this dynamic. They know that the more information about employees that they ask for, um, of their client, um, the harder their software's gonna be to use, the more work it's gonna be to implement the more ongoing administrative, uh, administrative hassle it's gonna create for their customer.
And so as a result of that, most business software vendors. Actually, you know, ask for as little information about employees as they possibly can, which means that most of them know much less about your employees and your company than they ought to know and
Logan: they don't want the onboarding process to be more cumbersome
Parker: Exactly.
Logan: the bar
Parker: And, and the ongoing administrative hassle and all that sort of stuff.
And so that cre, that creates a whole bunch of downstream product problems and implications, um, in a lot of these different, and sort of really a surprisingly wide array of software verticals. Um, it means that most of these systems are under missed. Because you don't have good concepts of role-based permissions because you don't understand what someone's role is.
Um, it uh, means that things like workflows and approvals and alerts are not as good as they could be because like, you don't understand like, concepts of routing. Like you don't know who someone's, who the VP of someone's department is. Maybe you know who their manager is, but you don't know like who the finance associate that's aligned with their team is who their HR business partner is.
You know, that sort of thing. Um, it means that the reporting and the analytics in these systems are inferior because you can't cut and slice the date, slice and dice the data based on concepts like department and team and level and work location and employment type and what have you. Or maybe you can do it on like one of those dimensions, but not all of them.
Um, and so there's this related opportunity for Rippling to kind of rebuild software in a bunch of different verticals. With this deeply embedded understanding of role, um, which is another way of saying this deeply embedded understanding of your company. Um, and I think that unlocks an enormous amount of product capability across a surprisingly wide array of software verticals.
Logan: And so, so to, to say this back to you, but if, if you have all of the employee information and hierarchy and, uh, you know, teams and departments and titles and pay and all that. There's a lot of things that can hang off of that from a software standpoint that gives you the right to go into a bunch of different directions.
Be that something like, you know, a single sign-on Active directory, be it a bunch of different workflows and permissioning tying all this stuff together with the Core Atomic unit being the employee information record hierarchy.
Parker: Yeah.
Logan: And so how does that manifest? So H-R-R-I-E-S is the core, I mean, employee information.
Right. So that's, was that the original start? Uh, or was the original start, Hey, we're gonna do, like how many products did you start with originally?
Parker: We, we started with, uh, payroll and hr, um, I, uh, single sign on and, and identity and device management like managing, you know, managing employee laptops and things like that. And so it was always like from day one, this, this idea of sort of like, you know, an an employee system that was not an HR system or it was not merely an HR system that extended sort of like outside of the HR department into the rest of the company.
Logan: So you almost started from the business problem, uh, rather than, Hey, People soft was a thing back in the day, and so let's continue to build new versions of people soft in the cloud, or, you know, mid-market, people soft or whatever. It's like, Hey, this is an, if we have this data, we can, onboarding should be easy.
Offboarding should be easy. Permissioning to different applications should be easy. All of that.
Parker: Yeah, I mean it was, so what we, what we sort of decided was most, most businesses take like a buyer centric view of the world. So they have an HR buyer and they, they build software for an HR or HR buyer, and they have an IT buyer and they build software for an IT
Logan: Which makes sense. It gives you someone a call, it gives you, the sales team can galvanize behind it, throw events, all that.
Parker: it makes a lot of sense.
Um, but we sort of thought like, look, there's this problem that sort of exists across all of the entire organization and across all of these different buyers, which is this understanding of who your employees are and their job and role and function. Um, and that, you know, different companies are selling the same basic thing to different buyers within the company, and the product is, is inferior because they, because they don't, the products are inferior because they don't tie together.
And so you, you look at something like it where they have this concept of identity, um, you know, whether, whether you call it, you know, single sign on or like, you know, directories or federated identity or what, whatever it is, it is effectively, you know, who are your employees. Um, and, and, and, and like that boils down to, in, in my view, uh, like the HR data in a company.
And those two things are actually like deceptively, like very, like, like much more similar than, than, than people think of them as being, uh. And, and that if, if those identity systems, if they actually understood all of the, the sort of what we call the employee graph, like all of the data about an employee, both from the HR system and from like all of the other systems that, that, that employees use around the business, you could build much better policies.
You could build much better workflow, much better automations. Um, there's a lot of stuff that you could, you could do with that.
Logan: And this is kind of, I mean, if you look what Microsoft has done with teams and now what they're doing with their video product to Zoom, it's a similar insight taken a slightly different way of, Hey, if you have all this desktop applications, you can stitch together a suite of products that work better together, right, than anyone.
And you're obviously taking an employee centric view of that, but.
Parker: So I think there, there has been a, a, this conventional wisdom in, in for software. That for like the last like 10 or 15 years that I think is like largely wrong or at least like no longer correct. Um, which is that companies should focus very narrowly on one product. Um, and, uh, when you look at some of the most successful large-scale business software companies, um, they don't do that.
You know, like Microsoft is a, an example of what I would call like a compound company that's that's building multiple, you know, multiple products in parallel that interoperate seamlessly, seamlessly. The same thing would be true for SAP, for Oracle, for, for, um, I think Salesforce and the, the advantages of like focusing are like extremely well understood.
Um, uh, and so I, I won't spend a lot of time like going down that path, but there are four distinct advantages that I see to building products in this like compound fashion. Um, and one of them is much deeper integration. Um. In Rippling's case with Rippling itself, and also with like this underlying employee record.
Um, and that unlocks an enormous amount of product capability across a lot of different software verticals. Um, and I think you see the same thing with Microsoft where, you know, some of the ways that like, you know, teams is like integrated with like other Microsoft products makes it better at from product perspective, even though there are many things about Slack that are like, you know, superior, like on, on its own.
Um, the second thing is that I'm convinced that when you look at, at business, so a lot of business software is like, you know, workflows, alerts, uh, role-based permissions, reports, analytics, like all the way down and like everything converges at scale and becomes some version of the same set of like modular components.
And so when you're building a lot of different products in parallel, you can abstract out those specific pieces and build them once, but also build them like a hundred times deeper than what any of your point SaaS competitors can afford to build. Um, and so you have much better analytics and much better workflow automations and much better role-based permissions.
Um, and, uh, and so on those specific areas, a company that's building in this like compound way can, can beat point SaaS competitors from a product perspective. The third thing is that for buyers, you get this common UX. So you, if someone has taken the time to learn how to, you know, build a report in Rippling, if, if they know how to set up workflow automation, if they've learned our internal scripting language called, god forbid, called RQL.
They have superpowers for any product that they buy through us that do not apply if they buy a third-party points ask solution. And the fourth one is, and this one is sort of like very obvious with Microsoft, is that you have these pricing and contracting advantages when you can afford to basically amortize your sales and marketing and your R&D costs across multiple different SKUs instead of having to like make it all back on like one single SKU.
Um, and that allows you to run circles around competitors from a pricing perspective. And so, you know, teams is like free in the Microsoft bundle and it's like, how do you compete with that if you're slack? And, uh, and so those are the four things that I think, um, create this really big opportunity for what I call like a compound company.
Um, and there are a number of different areas where I think it could work. I think Salesforce is one example of, uh, uh, of a company that's done this extremely successfully, um, since the move from like on-prem to the cloud, obviously. And I think that Rippling is going to be another, and I, I think of Rippling as this like bizarro world version of Salesforce, where you have a very similar set of tooling to what you'd find in Salesforce.
It's just that all of it is built on a different underlying primitive, it's built
Logan: versus
Parker: employee versus customer. And there's a, you know, there's a whole bunch of externally facing business process and workflow. That it makes sense to operate on Salesforce because of this understanding of customers and relationships between leads and accounts and contacts and things like that.
But there's this sort of other side of the coin, which is all of this internal business process, which, which needs all of that. But it instead needs an understanding of who your employees are and their role and job and function and their relationships to one another. And that drives, you know, everything about that system, you know, from role-based permissions to approvals and workflow and analytics and what have you.
Logan: Super interesting. And so you sell it modularly, right? You don't need to buy, uh, all the suite of stuff. You can, you can sell components at a
Parker: That's right. You can buy, um, you can buy one, one thing or all of them. Um, and so the both, one of our big advantages and disadvantages is that we have multiple buyers within a company. Um, and, um. The, the advantage, the disadvantages of that are, are clear, you know, it can introduce some complexity in the sales process, but the advantages are that it actually allows us to target, like all we need is one in, you know, all we need is like, it can be the IT person, it can be the HR person, it can be the controller, um, you know, anyone who responds like, Hey, I'm actually kind of interested in that.
Um, if, if they get on the phone and they're like, this is fascinating, they'll then connect us with all of the other people within the org. And so it gives us like three times as many leads, um, that we can go after.
Logan: up by functional role? How does that work?
Parker: Um, we have, so we have A's that, that sell, that are sort of the, the, the frontline contact across the board. But then we have solutions consultants in the background that we have, like, um, you know, HR specific solutions consultants and IT specific solutions, consultants and some for sort of other products as well.
Um, that will come in and go like really deep with. Um, sort of a, a, a prospective customer that has like, you know, wants to go really deep on that specific item.
Logan: How do you execute with the velocity across? I mean, this is pro, it's, it's a lot of product sprawl, right? I think you've, you've hired in, uh, a lot of founders as well to help lead these different business units. How do you think about like breaking up the product management problem? I.
Parker: Well, I think, I think, so first you need to think of it as a business unit, um, which immediately implies something about the organizational structure for these products. Um, and I think you need to work to isolate all of these individual business units and teams and find, um, isolate them from like the broader, you know, process and complexity of the company.
And then find all the ways that they sort of interfere with each other, and compete with, with each other and, and like break up, you know, each of everywhere that that happens, like break that up into a service and that can happen. At the level like of like, uh, you know, of infrastructure level, it can be like, you know, they compete with each other for CPU cycles and you know, database rights and things like, you need to break that up into sort of services or it can happen at the level of like recruiting or executive attention or you go to market or anything like that.
And you need to constantly sort of disentangle that so that people are not the product to sort of isolate these business units as much as possible. And I think you need, it's important that each of them be like run by a single and singular individual, um, often, which is often for us, someone who was a former founder.
Um, uh, and we have just an enormous concentration of people like that. I think. I think it's like, you know, over 50 former founders that, that work at Rippling in one capacity or another. Um, and, but it doesn't, they don't have to be founders, but they have to be people that, you know, have that sort of temperament.
That could, you could see doing that, um, whether they've done it yet or not, although always helpful if they have gone out and sort of, you know, being their head against a brick wall for a long period of time and sort of like given up on that, but like understand the reality of what it's like.
Logan: And you also have said you, you like hiring people that, uh, have chips on their shoulders and also sense of humor. Is that like, how does that manifest itself in, in the company culture? And why are those traits that you found to be successful hires? Those
Parker: Well I think the humor thing is just that like people who have a chip on their shoulder and don't have a sense of humor can some, it's sometimes just a little bit, little bit and suffer. Yeah. Or just a little bit insufferable. So it's more fun if, if people, if people have a sense of humor. Um, but, um, so one of, um, two of our company values are, uh, we run hard and push the limits of possible, um, and.
I've sometimes thought that actually maybe like a better articulation of like both of those, um, would, would be that I think people are capable of so much more than they believe themselves to be capable of. Um, and that, um, you look at you, you look at different companies in different circles, in different situations or, or just different institutions in different situations and, and the amount that they're able to come to accomplish with the same amount of time, the same amount of resources is just like sometimes radically, radically different.
And like, if you were to think about this from first principles, you might think, well, you know, I don't know, maybe if you like, just like really work hard, maybe you can get 20% more done, but you look at what actually happens and like, it's often like an one or two orders of magnitude or even more than that.
The difference between what, you know, sort of similar groups of individuals are able to accomplish, um, in somewhat similar circumstances. Um. And, um, like Patrick, Collison has like a, a, a, a thing on this that he does where he's like, you know, he collects these lists, these lists of this list of examples of like, uh, people accomplishing like in incredible things, like very quickly, like, you know, building rockets to go to the moon in some very short period of time.
And then, you know, contrast that with like the van ness, like bus line, like, you know, like seventy-five years or whatever it is. And, um, I think that part of the, the most important job that you have as the CEO of a company is to set, um, the, the pace and, uh, the, the sort of this tenor and the sort of pace of execution for the business, um, and, and how much that your, your company's gonna get done in a certain period of time is often like way more within your control as the leader of the business than than you might think.
Um, and your job is really to, um. You know, to sort of, to sort of try and, and pull that out of people, um, you know, like what, that they can do more than, than they think they can. And, um, the thing that I think is really cool about, you know, people that, you know, have a little bit of a chip on their shoulder is those are people who like already sort of believe that about themselves.
That you know, that they've maybe been discounted in some way or that they're capable of more than sort of what's reflected in, you know, their past or sort of, you know, what sort of what they, what they've done historically in their careers. And so those, those people often like, sort of really rally to that banner and that idea.
Logan: How do you, how do you interview for that? Or how do you, do you, do you ask like, is there any way to Sess out if someone has a chip on their shoulder?
Parker: Oh. Um, well sometimes it's like really clear. I mean, like, some people like show up in an interview and it's like very obvious that. That, um, that they believe that, um, it's, it's like, again, it's, it's one of the things that um, I love about hiring former founders because people have had that experience, like often have sort of unfinished business of some kind.
Logan: It's interesting. I remember every, uh, VC that turned me down for a job when I, uh, when I interviewed. Most of 'em aren't in the industry anymore,
Parker: you go. Yeah, no. So like, uh, you should come work here.
Logan: yeah. I, uh,
Parker: Great sense of humor, chip on your shoulder. You would really fit in.
Logan: hold petty slights, uh, as, as my friends like to remind me. Uh, well, um, so I guess I, one other thing, and we were supposed to do this last week, uh, but you guys announced a big round.
Parker: We did. Yeah. Thank you.
Logan: did you, how did you think about raising, obviously the, the market's been a little upside down. You guys are killing it from what I've. Been told from what I can tell. How did you think about like raising now? Uh, I, I saw Jeff Lewis, who's I, I consider myself a, a kindred vibe capitalist to him, but they, uh, they posted their, their memo of how all that played out.
What about on your side? How'd you think through like, if it made sense to raise now?
Parker: So in, in terms of like why I think it made sense for us to raise, um, one of the sort of interesting things about Ripley is if you look, if you look at companies, I haven't, we haven't talked, you know, about exactly what our revenue is. But if you look at companies between a hundred million and 200 million in ARR, um, IVP did this sort of like study on this, um, I think it was like a year or two ago where they, they looked at like, you know, a whole bunch of different SaaS companies and.
At various different sort of ARR thresholds, how much they spent on, you know, G&A sales and marketing, or in ARR and then R&D as a percentage of their revenue. Um, and if you look at SaaS companies between a hundred and 200 million in ARR, the sort of, you know, 50th percentile, the median is that they spend, uh, twenty-five percent of their revenue on r and d.
Um, and, uh, you know, the, the twenty-fifth and the seventy-fifth percentiles are, you know, plus or minus five percentage points. So at 20 and at 30% of their revenue, which implies a standard deviation of like, you know, um, about seven to 10 percentage points, um, rippling spends, um, an anomalous amount of money on R&D, which is probably about three standard deviations away from, from the mean.
Um, there are a lot of reasons why we do that. I think it is like part of the sort of compound approach that we have to the market. Um, but a big part of the reason why we raised the round. Um, so Rippling at the end of the financing has now, uh, a a little bit over $600 million in cash on hand. Um, and so we have.
All of the last round that we raised and like, you know, most of the round before that, sorry, the last round, like before this one. So, um, uh, and so like the reason that we raised it is I think of that 600 million, I think, I think of it as like 200 million of it is so that we can continue this anomalous investment in r and d over the next two or three years, no matter sort of what happens in, in the financing markets.
And having been sort of, you know, having been in this situation where I had to raise money in 2009 when I couldn't raise any money, that was sort of a big consideration for me. The other 400 million is for me to sleep at night while spending the first 200 million. And so like, that's sort of the way I think about, about sort of the, the financing for the company.
Logan: Yeah. Got it. Um, well congratulations on, uh, on getting it done. And uh, that was, when was the last round before that? That was last year.
Parker: Yeah, it was in, uh, in like, uh, August or September I think.
Logan: It's impressive. It seems like you guys are executing at a really high level with all this stuff, so
Parker: Well, I hope so. Knock on wood. We'll see.
Logan: Obviously a big, big number. How'd you think through the, the valuation and, uh, it was roughly, it wasn't quite two x the last round, right?
Parker: yeah, a little less.
Logan: H how did you, how did you come up with that number? How did you think about valuation in this world of public markets falling down and what made sense of, I mean, at some point I've seen the power dynamic over the last two years, and companies like yourself often have, are in the fortunate position that they have ball control over what price they want to raise at and how, how it made sense.
So how, how'd you think about it?
Parker: So first, like I, um, I, I studiously like try not to have opinions about valuation. Um, and, uh, I think I'm, I'm like a, I, I don't know how companies should be priced. Um, I see like, you know, well, I mean this time a little more than that, but usually like one round every two years or so. And, and so like, I don't, I don't have the best sense of it myself.
And so
Logan: to be fair, I think over the last two years, VCs haven't known
Parker: they haven't done either. Yeah, yeah. Yeah.
Logan: now it's even more
Parker: Yeah. Now, now no one knows. Right. Um, but the, so the way that, I mean, so look, I mean, the round, we, we signed a tour sheet in mid-April. Um, so, um, you know, this wasn't, um, I mean, this wasn't a round that like, you know, came together like in December or January or something like that.
Um,
Logan: was a fair amount of carnage in by the mid-April
Parker: yeah. But by mid April, yeah, it was a little more after mid-April. But, um,
Logan: dunno, 80% of it, probably 70%, I dunno.
Parker: Um, and so, um, you know, and there are some, some really good investors who I think do know how to, how to think about this. You know, like in addition to Jeff, there was, you know, KP, co-led the round. Sequoia did like a really big, you know, much more than their Prorata investment in the round.
And so some of it is like, well, okay, you know, they, they, they seem to believe this, um, you know, the, the company's metrics are really strong. I think. And that, that helps. Um, one thing I think, um, you know, that was sort of common for, for investors that decided to invest in the round, one thing that I think they was sort of common across all of them is I think most of them looked at Rip Lane not as a SaaS company, um, but as a machine that produces SaaS businesses, each of which have abnormal growth characteristics.
And so it's like very connected to the, the sort of idea of Rip Lane being a compound company. And the idea that if you look at some of the businesses within Rip Lane that have launched more recently there, the growth trajectory for like these individual businesses is on par with like where Rip Lane was, you know, uh, in the early days when we were at, you know, one or 2 million in a RR.
Um, and so one of the neat things about the company. I think as if you're thinking about it from a valuation perspective, is this idea that you get, not not just the growth in the core business, but then you can sort of stack on the growth of, of these other businesses as, as they come out. Um, and that, that was something that I think was, was really exciting to investors as they thought about, like, what would the right valuation or for, for a business like that be?
And it might be sort of somewhat different than, you know, a, a single SKU, SaaS business.
Logan: Yeah. That's interesting. Um, I guess last one, uh, San Francisco, you're from New York. How long have you been out here?
Parker: Uh, I mean, I think of myself as not like living permanently in San Francisco, but I've been here since 2006. So
Logan: to get to the point that
Parker: it's, it's getting the point where I'm not just visiting anymore.
Logan: I, there's a lot of talk about the, uh, the demise of San Francisco has been, um, a narrative over the last little bit. What's your perspective on the city itself? Do you live in San Francisco
Parker: I do. Yeah. I live in the mission.
Logan: and, uh, I, I get the feeling you, you're passionate about anti-resetivism type stuff, but, uh, one of the big narratives right now at least, has been Chesa, the district, the only district attorney I know the name of in the entire country.
What, what's your perspective on the state of San Francisco right now as a tech city? As a city itself? Like what's going on from a homelessness, crime, all that stuff?
Parker: I mean, look, I, I am frustrated with all those things, like just as much as, as everyone else is. I mean, have been three shootings in front of my house in the mission, like literally, you know, within sort of 50 feet of my front door in the last year. Uh, and not like someone shot a gun, but like someone shot a person.
Um. And I think one was just yesterday. Um, and, and so, um, look, I, I get it. I mean, I think that stuff is super frustrating too. Um, I I just think that, um, I don't think that like putting more human beings in cages for longer periods of time is gonna solve it. Um, and like historically, like it doesn't seem to solve it.
Um, you look at, um, you know, states that are incredibly aggressive about, um, locking people in cages and throwing away the key, like Louisiana, and they have some of the highest crime rates as well. You know, it doesn't, there, there's no, doesn't appear to be any real correlation between sort of doing that and like reducing crime.
Um, but it is like, I think among the least admirable human characteristics that we have, that obviously it's very natural that that human beings want to do that. Um. And, um, but doing that is like how you get yourself into the situation that we're in now, where we have, you know, the highest incarceration rates in the world.
Um, and so, uh, you can't, you can't fix the incarceration problem if you're not willing to reduce sentences, reduce the frequency with which people go to prison, you know, even, even in cases of violent crime. Um, because like, look, you can't, you can't clear out the prisons just by getting rid of people or get, getting, like releasing people who have not done anything violent.
Um, in, in order to like really adjust the prison population to something that is like even remotely normal. You're, we're gonna have to face the fact that sometimes even violent criminals who have been in prison for a long time, we've gotta find a way to sort of get them out. Um, and um, I've always thought like prosecutors are.
The li the sort of key to the solution to the incarceration rates in this country because the prosecutors have all of the power and make all of the decisions about who goes to prison and for how long. And people believe mistakenly that it's not the prosecutors that it's the juries. Um, but that's not true.
Um, if you look at the way the criminal justice system works, you know, ninety-eight percent of these cases plead out, um, because prosecutors come to people and they give them a choice that is no choice at all. Um, where they say, look, if you plead guilty, then you'll get, you know, a sentence that's five to 10 years and you have a chance of seeing your kid someday again, um, before you die.
And if you don't do that, uh, we're gonna, we're gonna go to trial, we're gonna win, you know, ninety-five percent of the time. You're gonna go to prison for life and you're never gonna see the outside of that jail cell. And like, you know, faced with that choice, it's no wonder that like people plead guilty and of course they plead guilty even when they're innocent.
Um, so my view of this is like, look, prosecutors are actually, it's interesting, they're the only person in this whole sort of criminal process that is explicitly charged with looking out for the interests of all participants. Um, like in the sort of legal code of ethics in most states, um, that everyone agrees to when, you know, they, they pass the bar or whatever, become a lawyer, they line up that, that prosecutors are actually explicitly supposed to look out for the interests of the defendants as well as for, you know, the victims in the state.
That's of course not the way it works. Like no prosecutors work that way. Um, but it, it ought to work that way. Um, and there are like so few progressive prosecutors like that in the country, um, that. You know, I, uh, like I, I want to, you know, support the ones that sort of have that approach.
Logan: Interesting. I it's. Contrarian, at least from what I can tell on where it's pulling. But, um, it'll be
Parker: Yeah. I mean, I don't know. I have no idea. I mean, I have no idea if, if he'll survive. Um, I, I, I hope he will. Um, but you know, we'll see.
Logan: Yeah. Well, good. Anything we didn't hit?
Parker: I think that covers it.
Logan: Thanks for doing this.
Parker: Yeah, of course. Thanks for having me.
Logan: we're able to make this work.
Parker: Yeah.