In the 1970s, the tech industry was several orders of magnitude smaller than it is today. But each company had far larger product ambition. And each engineer had an outsized scope.
Apple released its iconic Apple II computer in 1977 with just 25 employees. One engineer built the file system, one engineer built the input/output, and one engineer built the graphics. Microsoft, too, shipped its first operating system with just 100 employees. Even in the late 1990s, Google was launched with just 4 employees.
Each company had to chart its own path for product strategy, go-to-market, business model, and hiring.
As Silicon Valley matured, market sizes for tech companies grew 10x bigger than anticipated. Thousands of startups arose to chase these opportunities, fueled by internet adoption and cheap capital.
Then came an insatiable demand for talent. Consultants, analysts, and bankers flocked to high tech salaries. Career ambition replaced technological ambition as the driving force of startups. Employee count scaled faster than company productivity. Accelerating growth in teams and revenue masked declining productivity per employee.
Eventually, startups became so similar that playbooks emerged – and generally, they worked. Today, any startup can access an instruction manual for every aspect of marketing, sales, engineering, and even product strategy. For each playbook you follow, you’re outsourcing your strategy in return for jumpstarting the respective function.
But cheap cash, big teams, and playbook dependence come at a cost: incrementalism.
Tech’s growth in spite of declining productivity means that incrementalism can still yield success. Founders and execs can tackle increasingly narrow problems and still make millions.
Incrementalism is squandering Silicon Valley’s potential. Many of the nation’s most talented people are iterating on a tiny product surface area. First principles thinking is being replaced by shortcuts like NPS optimization and bookings-to-burn ratios.
Rippling is one of the few beacons of ambition in an increasingly incremental world. To understand the magnitude of its vision, we first need to understand the magnitude of the problem it is trying to solve: the administrative crisis.
The administrative crisis
The world sees the United States as a model for corporate prowess and agility.
But I worry the opposite is true: most companies sink far too many resources into menial tasks instead of company building.
The post-covid world is even more burdensome. Managing employees across geographical borders brings a new set of HR, tax, compliance, and IT security challenges.
For fast-growing startups, this overhead requires sacrificing precious time and elevating burn rates. For non-tech companies, maintaining a web of HR, IT, and compliance obligations is a constant burden, prohibiting them from investing in growth, building a strong culture, and solving big problems.
Hundreds of point solutions across dozens of Gartner quadrants solve subsets of these problems, but these narrowly-focused products cannot solve administrative challenges across systems. It’s not surprising that total factor productivity has stagnated, despite an explosion of productivity software tools promising the opposite. Not only do point solutions fail to accelerate productivity, their sprawl is actually slowing things down:
Source: BetterCloud
Consider the lifecycle of a remote employee. First, you must register them with the correct state tax agencies. Then you need to ship them a laptop, ensure it has the right security settings, and provision their accounts to systems like Zoom or Slack. Once they’re onboard, you must manage their benefits, comply with a web of local regulations, and enforce IT security settings without being on the same network. And when they leave, you need to somehow retrieve their device and comply with employment law.
Disconnected employee data and workflows are a massive tax on productivity.
Given employee data lives across dozens of systems, point solutions cannot solve remote employment holistically – they solve symptoms, not root causes. Companies must either pay the administrative tax to support a remote team, or miss out on top global talent.
The administrative crisis is a fundamental bottleneck to company growth.
Rippling: ambition makes a comeback
Rippling is the ambitious solution to the nation’s sprawling administrative crisis.
Its strategy starts with the employee record, contextualizing each employee within the company. As the source of truth for employee data, Rippling can solve the administrative crisis holistically across software systems.
Questions like "what software systems can this person access?", "what tax regimes must we comply with?", and “how should we compensate this person?" all require the employee record that Rippling owns.
Employee data encompasses more than a username and password: start dates, compensation, role, function, group within the company, and even third-party app credentials all give context on the employee. In the same way that Salesforce deeply understands external customer relationship data, Rippling understands internal employee data.
At first glance, it is easy to confuse Rippling for a payroll system like Gusto. That is a category error – Rippling checks the HR system boxes, but the overall platform cannot be described by a single software category: it is a series of applications and workflows powered by employee data.
For example, employers can onboard employees remotely, provision their devices and apps, and manage their taxes in one place. With deep integrations into the business software stack, Rippling controls all administrative logic.
Many software companies are started opportunistically, so their product roadmaps are evolutionary. But the CEO and co-founder Parker Conrad built Rippling through intelligent design. Each product has a whitepaper, each funding round has a written memo. Releasing these memos publicly means Rippling is unafraid of competition: if you give your product roadmap to your competitors, you best be able to outpace them on building.
Rippling’s ambition permeates every aspect of the company, from engineering and distribution, to culture and terminal value. The engineering velocity is much faster than most startups. The product covers far more surface area. A broader platform means more potential buyers.
Rejecting incrementalism has downsides. Ignoring SaaS playbooks makes the business harder for investors to evaluate using traditional methods. Running the culture at a fast pace could make employee retention challenging. Avoiding HRIS categorization could make it harder to position the product. Building a massively complex platform requires years of engineering work and a big balance sheet.
But if Rippling succeeds, it unblocks company scaling, freeing smart people to work on hard problems. Everyone assumes SaaS companies are fundamentally unambitious, while Rippling is hiding in plain sight.
Product: breadth and depth
The relative ease of building point solution SaaS products drove hordes of new startups to saturate every niche of business system software, optimizing for depth over breadth.
But Rippling was not looking to build a software company. It was looking to solve the employee management problem, requiring coordination across employee data silos. Parker started with the employee data asset: by building on top of the employee record, Rippling could develop a compound product quickly. The product’s ambitious surface area enabled Rippling to quickly scale to tens of millions in ARR.
Rippling also realized that choosing between breadth or depth is a false dichotomy.
There is a set of common infrastructure needed for many business applications. A typical Series C software roadmap is largely predictable middleware: permissioning, reporting, approvals, compliance. Every point solution company has to build these capabilities from scratch.
Rippling abstracted this common infrastructure into Unity: a set of middleware capabilities on top of its employee graph. Rippling only needs to build middleware once, and then can amortize the investment across all its modules, freeing engineers to work on new product functionality. As Unity gets stronger, the entire product suite becomes deeper. Breadth and depth don’t have to be zero-sum.
A common middleware layer on top of employee data empowers not only internal product teams, but also customers to build complex workflows on top of their employee data that go well beyond traditional HR use cases.
These workflows are otherwise nearly impossible to execute: for example, Rippling customers can configure custom workflows that allow salespeople to give customer pricing discounts based on their level within the org. Or ingest Zendesk tickets to see payroll costs per support ticket resolved. Or run reports across silos of business data.
The breadth of use cases requires a large engineering team. SaaS playbooks focus on efficiency metrics like maintaining a 1:1 ratio of NNARR to burn – this inadvertently discourages ambition, trading off long-term upside for a narrow definition of efficiency. Rippling, on the other hand, has R&D spend that is off the charts compared to other companies of its size.
Building a unified middleware layer reflects the scope of Rippling’s ambition. But it is a capital intensive endeavor, requiring an unusually large engineering team. This is a challenge for the company: it must simultaneously fund a massive engineering endeavor and translate the investment into operational leverage. And because Rippling touches so many systems, it has higher risk impact: if its infrastructure breaks or underperforms, customers suffer more deeply.
Distribution: the rebundling era
Accumulating advantages are rare in software. You can increase brand and product depth, but things get harder as startups scale: as your customer acquisition engine saturates the core market, incremental customers become more expensive to acquire and likelier to churn.
CAC increases, retention declines, and product development slows.
Bundling is Rippling’s accumulating advantage that offsets classical diseconomies of scale. This means that, unlike most growth-stage companies, Rippling’s core metrics improve over time. CAC paybacks decrease. Growth accelerates. Retention improves. Cross-sell rates increase.
It is common knowledge that companies build product bundles over time. But this is mostly out of convenience – it is easy to add new SKUs to sell into a captive audience. Rippling’s bundle is core to its strategy from day one, so the effects ripple across the entire business.
Of course, an expansive product increases contract sizes, and thus LTV. But a bundled product also drives sales and marketing efficiencies. Entirely new cross-functional use cases emerge to market the overall suite – for example, onboarding new hires touches SSO, payroll, and benefits products. And more product functionality increases the likelihood of resonating with different buyer personas. These efficiencies lower CAC.
Bundling is a tailwind to sales conversations. Why pay $30 per employee per month for five different products ($150) if you can get a comparable offering in a single bundle for $50? And companies with smaller budgets can buy additional products that were out of reach as point solutions. This is one of the few true accumulating advantages in software – amortizing S&M across several products means you can charge less while making more.
Having many SKUs also fuels net dollar retention well above the industry average. A multi-product suite enables piecemeal expansion: companies can start with one or two products, then buy more over time.
Once customers know you’re a multi-trick pony, they’ll start looking to you for new product offerings. Today, Rippling’s product launches are nearly guaranteed to succeed given its existing distribution and customer trust. New offerings have revenue and engagement metrics within months that most startups would be excited to reach in years. The extreme version of this is Microsoft Azure: cross-sell was how it built the fastest growing b2b business of all time.
The proliferation of software products over the past five years suggests that there will be thousands of multi-$B software companies in a decade, but the gravity of bundling will pull software towards consolidation. An expansive product portfolio should lead to higher terminal margins, as Microsoft has demonstrated, suggesting the end-game of software companies will have a stark power law distribution.
Bundling comes with risks. Because Rippling is bigger than a single software market, it doesn’t neatly fit into each of its product’s Gartner categories, making it harder to find customers. The product takes time for users to understand, so those looking for a quick evaluation may get lost. And vertical software players may be able to cater to customers in their respective vertical more acutely than a horizontal player like Rippling.
Culture: pushing the limits of the possible
In the war for tech talent, many companies are competing aggressively on employee benefits, and even the number of work days in the week. Rippling’s ambition demands excellence over balance, which is not for everyone. The company’s core value is to “push the limits of the possible”, a refreshing contrast to the muted values of modern-day startups.
Rippling’s ambitious culture starts with its founder Parker Conrad, whose idiosyncrasies reflect a relentless focus on product.
His job title on LinkedIn is "Customer Support" – he still personally responds to support tickets as a way to get closer to the customer and improve the product. His desk is squarely in the middle of product and engineering.
Parker also runs Rippling’s Rippling instance. He manages payroll, approves every hire, and makes administrative changes in the system. He has personally hired more than a thousand employees through the system. The product roadmap writes itself when it is solving your own problems.
Unconventional for a company of Rippling’s size, Parker has no executive assistant. This means you can’t simply slide onto his calendar. The result is that he spends far less of his time in meetings, and far more on product, than the average founder. A compound product requires undivided attention.
Parker’s distaste for menial tasks led to expensive lessons at Zenefits, his first HRIS startup. But the positive externality of Zenefits is that Parker learned from his mistakes and earned a chip on his shoulder. He hired a general counsel at Rippling within a year of launch to ensure they’re running a tight ship, reducing cultural risk.
It would have been hard to devise the employee data strategy without a deep understanding of employee management. With the learnings from Zenefits, Parker crafted Rippling with higher intentionality and caution.
Rippling’s expansive product strategy requires a unique modular org structure. Each product has a relatively autonomous GM and engineering team. Given each sub-product has massive scope, they’re like startups within a bigger startup. In fact, Rippling has over 50 former founders within the company, many of whom are running various product divisions.
Each micro-startup gets to leverage the technical infrastructure, distribution engine, and existing customer base of a large company. But the GM model requires complex coordination of resources across the company – new product leaders need to push the marketing team to highlight their capabilities, train the sales team on selling their product, and work with the infra team to ensure the backend supports their needs. This can get complicated with several GMs.
Of course, it should be no surprise that Rippling is ambitious in its marketing, too. It turned a cease and desist letter from Gusto into a viral campaign by writing its legal response in poem form. Rippling even flipped a customer support latency problem on its head via radical transparency, turning it into a marketing benefit:
Rippling’s accountability billboard
The scope of Rippling’s ambition translates into a workplace that runs at a faster pace than most startups today. When employees ask Parker for meetings, he is known to show up at their desk to confront the issues in real-time.
Many tech employees would be surprised by that intensity – it could drive higher attrition. With high demand for tech employees, Rippling will need to fight to retain its talent.
TAM: more than HRIS or payroll
If you let others define your product category and follow accepted playbooks, you’re playing the game on others’ terms, including their market size.
Building a platform around employee data enables Rippling to transcend the traditional point solution market analysis. Because Rippling is not a singular product, its market size cannot be easily retrieved from an industry report.
Most narrowly, in HRIS, Rippling could steal market share from incumbents including ADP, Paychex, and Workday, representing over $40b in combined revenue. There is a chance this overestimates Rippling’s addressable market: industry precedent suggests it is challenging to serve customers across company sizes: upmarket HRIS is a complex product lift. Though it has already started to prove it can: several 1000+ employee companies use Rippling today (including Rippling itself). Other startups like Gusto churned off their own products years ago.
But I’d argue that traditional TAM math underestimates the Rippling opportunity. Singular TAM analysis does not do justice to multi-product companies. Salesforce’s CRM, for example, is now less than half its revenue. Its customer service software and marketing cloud far outweigh the original customer management business – the CRM TAM is too constraining for them. Similarly, Rippling’s adjacencies like SSO, international payroll, software provisioning, and workflow automation massively expand their market size beyond HRIS.
Rippling also controls software distribution as the provisioner of end-user licenses, giving it leverage over the business software ecosystem. It is hard to quantify the value capture from being the software distribution layer, but it certainly has been valuable for players in other arenas like Apple and Google.
If Rippling becomes the system of record for employee data, it will rewire the entire business software landscape. With a breadth of software integrations, Rippling can become the connective tissue across traditionally siloed applications.
Conclusion
SaaS wisdom teaches us narrow lessons: start by conquering a narrow market and expand from there, add at least as much in ARR as you burn each year, and build your product either horizontally or vertically.
Rippling rejects these norms entirely. It ignores the mimetic warfare of the Gartner quadrant. Its wedge was a data asset, not a narrow product. It doesn’t let SaaS metrics dictate its strategy.
Reminiscent of the foundational computing companies, Rippling shows what ambition in modern business software looks like. In the age of software incrementalism, Rippling is an anachronism.
With ambition comes volatility, simultaneously enabling outsized success and idiosyncratic risk.
An ambitious product strategy means an expansionary surface area, like the Roman Empire. It can become vast, but is expensive to build, there is far more territory to defend against competition, and you can burn employees out along the way.
But if Rippling works, it shrinks the administrative drag on American business.
Administration drives process and conformity. Less time on overhead, more time on creation.
Disclaimer: Founders Fund invested in Rippling in 2020 and has a board seat. I’m writing this piece not as an investment note, but as a case study for founders.
Thank you to Napoleon Ta, Everett Randle, Melisa Tokmak, Lisa Wehden, Axel Ericsson, Philip Clark, Sam Wolfe, and Pranav Singhvi for their thoughts and feedback on this article.