Aug
04
2020
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Rippling nabs $145M at a $1.35B valuation to build out its all-in-one platform for employee data

Big news today the world of IT startups targeting businesses. Rippling, the startup founded by Parker Conrad to take on the ambitious challenge of building a platform to manage all aspects of employee data, from payroll and benefits through to device management, has closed $145 million in funding — a monster Series B that catapults the company to a valuation of $1.35 billion.

Parker Conrad, the CEO who co-founded the company with Prasanna Sankar (the CTO), said in an interview that the plan will be to use the money to continue its own in-house product development (that is, bringing more tools into the Rippling mix organically, not by way of acquisition) but also to have it just in case, given everything else going on at the moment.

“We will double down on R&D but to be honest we’re trying not to change the formula too much,” Conrad said. “We want to have that discipline. This fundraising was opportunistic amid the larger macroeconomic risk at the moment. I was working at startups in 2008-2009 and the funding markets are strong right now, all things considered, and so we wanted to make sure we had the stockpile we needed in case things went bad.”

This latest round included Greenoaks Capital, Coatue Management and Bedrock Capital, as well as existing investors including Kleiner Perkins, Initialized Capital and Y Combinator. Founders Fund partner Napoleon Ta will join Rippling’s board of directors. Founders Fund had also backed Zenefits when Parker was at the helm, and from what we understand, this round was oversubscribed — also a big feat in the current market, working against a lot of factors, including a wobbling economy.

It is a big leap for the company: it was just a little over a year ago that it raised a Series A of $45 million at a valuation of $270 million.

This latest round is notable for a few reasons.

First is the business itself. HR and employee management software are two major areas of IT that have faced a lot of fragmentation over the years, with many businesses opting for a cocktail of services covering disparate areas like employee onboarding, payroll, benefits, device management, app provisioning and permissions and more. That’s been even more the case among smaller organizations in the 2-1,000 employee range that Rippling targets.

Rippling is approaching that bigger challenge as one that can be tackled by a single platform — the theory being that managing HR employee data is essentially part and parcel of good management of IT data permissions and device provision. This funding is a signal of how both investors and customers are buying into Rippling and its approach, even if right now the majority of customers don’t onboard with the full suite of services. (Some 75% are usually signing up with HR products, Conrad noted.)

“We like to think of ourselves as a Salesforce for employee data,” Conrad said, “and by that, we think that employee data is more than just HR. We want to manage access to all of your third-party business apps, your computer and other devices. It’s when you combine all that that you can manage employees well.”

The company is gradually adding more tools. Most recently, it’s been launching new tools to help with job costing, helping companies track where employees are spending time when working on different projects, a tool critical for IT, accounting and other companies where employees work across a number of clients. Other new tools include SMS communications for “desk-less” workers and more accounting integrations.

Second is the founder. You might recall that Conrad was ousted from his previous company, Zenefits (taking on a related, but smaller, challenge in payroll and benefits), over a controversy linked to compliance issues and also misleading investors. But if Zenefits was finished with Conrad, Conrad was not finished with Zenefits — or at least the problem it was tackling. This funding is a testament to how investors are putting a big bet on Conrad himself, who says that a lot of what he has been building at Rippling was what he would have done at Zenefits if he’d stayed there.

“Once you’re lucky, twice you’re good,” said Mamoon Hamid, a partner at Kleiner Perkins, in a separate statement. “Parker is a true product visionary, and he and his team are solving an enormous pain point for businesses everywhere. We’re thrilled to continue partnering with Rippling as demand for their platform dramatically increases in this era of remote work.”

“Rippling is not just a superior payroll company, but something much broader: they’ve built the system of record for all employee data, creating an entirely new software category. Rippling’s massive market opportunity is to streamline the employee life cycle, from software to payroll to benefits, and fundamentally improve the way businesses hire and manage their employees,” said Ta in a statement.

Third is the context in which this round is coming. We’re in the midst of an economic downturn caused in part by a global health pandemic, and that’s leading to a lot of companies curtailing budgets, reducing headcount and potentially shutting down altogether. Ironically, that force is also propelling companies like Rippling full steam ahead.

Its SaaS model — priced at a flat $8 per person per month — not only fits with how many businesses are being run at the moment (primarily remotely), but Rippling’s purpose is specifically geared to helping businesses both onboard and offboard employees more efficiently, the kind of software that companies need to have in place to fit how they are working right now.

Updated with commentary from an interview with Conrad.

Feb
17
2020
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Rippling starts billboard battle with Gusto

Remember when Zenefits imploded, and kicked out CEO Parker Conrad. Well, Conrad launched a new employee onboarding startup called Rippling, and now he’s going after another HR company called Gusto with a new billboard, “Outgrowing Gusto? Presto change-o.”

The problem is, Gusto got it taken down by issuing a cease & desist order to Rippling and the billboard operator Clear Channel Outdoor. That’s despite the law typically allowing comparative advertising as long as it’s accurate. Gusto sells HR, benefits and payroll software, while Rippling does the same but adds in IT management to tie together an employee identity platform.

Rippling tells me that outgrowing Gusto is the top reasons customers say they’re switching to Rippling. Gusto’s customer stories page lists no customers larger than 61 customers, and Enlyft research says the company is most often used by 10 to 50-person staffs. “We were one of Gusto’s largest customers when we left the platform last year. They were very open about the fact that the product didn’t work for businesses of our size. We moved to Rippling last fall and have been extremely happy with it,” says Compass Coffee co-founder Michael Haft.

That all suggests the Rippling ad’s claim is reasonable. But the C&D claims that “Gusto counts as customers multiple companies with 100 or more employees and does not state the businesses will ‘outgrow’ their platfrom at a certain size.”

In an email to staff provided to TechCrunch, Rippling CMO Matt Epstein wrote, “We take legal claims seriously, but this one doesn’t pass the laugh test. As Gusto says all over their website, they focus on small businesses.”

So rather than taking Gusto to court or trying to change Clear Channel’s mind, Conrad and Rippling did something cheeky. They responded to the cease & desist order in Shakespeare-style iambic pentameter.

Our billboard struck a nerve, it seems. And so you phoned your legal teams,
who started shouting, “Cease!” “Desist!” and other threats too long to list.

Your brand is known for being chill. So this just seems like overkill.
But since you think we’ve been unfair, we’d really like to clear the air.

Rippling’s general counsel Vanessa Wu wrote the letter, which goes on to claim that “When Gusto tried to scale itself, we saw what you took off the shelf. Your software fell a little short. You needed Workday for support,” asserting that Gusto’s own HR tool couldn’t handle its 1,000-plus employees and needed to turn to a bigger enterprise vendor. The letter concludes with the implication that Gusto should drop the cease-and-desist, and instead compete on merit:

So Gusto, do not fear our sign. Our mission and our goals align.
Let’s keep this conflict dignified—and let the customers decide.

Rippling CMO Matt Epstein tells me that “While the folks across the street may find competition upsetting, customers win when companies push each other to do better. We hope our lighthearted poem gets this debate back down to earth, and we look forward to competing in the marketplace.”

Rippling might think this whole thing was slick or funny, but it comes off a bit lame and try-hard. These are far from 8 Mile-worthy battle rhymes. If it really wanted to let customers decide, it could have just accepted the C&D and moved on…or not run the billboard at all. It still has four others that don’t slam competitors running. That said, Gusto does look petty trying to block the billboard and hide that it’s unequipped to support massive teams.

We reached out to Gusto over the weekend and again today asking for comment, whether it will drop the C&D, if it’s trying to get Rippling’s bus ads dropped too and if it does in fact use Workday internally.

[Update 2pm Pacific: Gusto’s PR representative Paul Loeffler claims that “This is common business practice in maintaining a brand”, says that for Gusto “A core, but not exclusive focus, are small businesses”, and admits that “as Gusto itself has grown to become a large-scale company, we have different needs than many of our customers and transitioned to Workday.”

Finally, he declares that “We’re excited to see more companies create new solutions that make it easier for businesses to take care of and support their teams” despite theatening to sue one that was. If Gusto itself grew out of Gusto, an ad asking if its customers are too seems wholly accurate.]

Given Gusto has raised $516 million10X what Rippling has — you’d think it could just outspend Rippling on advertising or invest in building the enterprise HR tools so customers really couldn’t outgrow it. They’re both Y Combinator companies with Kleiner Perkins as a major investor (conflict of interest?), so perhaps they can still bury the hatchet.

At least they found a way to make the HR industry interesting for an afternoon.

Apr
03
2019
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Rippling raises $45M at $270M to be the biz app identity layer

Parker Conrad’s last startup, Zenefits, drowned in busy work. Now with Rippling, he wants to boil that ocean. Instead of trying to nail one thing then expand, “very counter to conventional wisdom, we took on something that’s a lot broader and more ambitious.” That meant spending two years with 40 engineers working in stealth to build integrations with nearly every popular business tool to combine HR, IT and single-sign on services. The result is that when you hire an employee, Rippling onboards them to all those services in a single click. Goodbye, busy work. Hello, gateway to the enterprise app ecosystem.

The past few years have seen a Cambrian explosion of startups building specialty software for office productivity and collaboration. But that’s left customers struggling to get their teams set up on all these fragmented tools. As such, Rippling had a very good first year on the market with rapidly growing revenue. So when Rippling went out to raise money, Conrad was signing term sheets in just over a week.

Forty-five million dollars. “I know that rounds are bigger these days, but still, for a Series A, that’s pretty substantial,” Conrad tells me with a wide grin over coffee at San Francisco’s Four Barrel. “We want to keep doubling down on the engineering, investing and putting more money into R&D, so we have real product advantages and technology advantages over other players in our space, even though a lot of them have been around a lot longer than we have.” The Information‘s Zoe Bernard had reported Rippling was raising at least $30 million.

Rippling’s round was led by Kleiner Perkins and its enterprise guru Mamoon Hamid. As Conrad tells me, “Many of the metrics you use to evaluate SaaS companies were invented by Mamoon. He really knows his stuff. He’s also just a really great person.” Kleiner was his dream partner for Rippling. “I remember when I was in high school, Kleiner Perkins was the only VC firm I’d ever heard of. When I was a little kid, I thought ‘Oh that’d be cool some day.’ ” The round was joined by Initialized Capital, Threshold Ventures (formerly DFJ) and Y Combinator.

A source confirms the round was a stunning $270 million valuation. Hamid was also skeptical about Rippling trying to integrate with everyone before launch. But, he says, “What was a concern a few years ago is now something we like about the company.” After getting pitched so many piecemeal enterprise solutions, it suddenly clicked for Hamid why customers would want “one stop for everything. You need an independent party to be that glue layer.” 

Typically, enterprise software is an unglued mess. Apps don’t talk to each other, so when you hire a new employee, you have to manually add them, their role, their team, their manager, their permissions and more to every single tool your team uses. There are HR systems that control payroll and benefits, IT systems that determine what equipment you’re issued, productivity and collaboration apps like Slack and Dropbox and department-specific tools like Salesforce or GitHub. Conrad believes manually updating these with each hire, fire or promotion is the source of almost all administrative work at a company.

The willingness to slog through office chores rather than strategically nullify them is why Zenefits grew so fast, then suddenly hit a wall. What can be begrudgingly brute-forced at 50 employees becomes impossible to manage at 500 employees. That’s why, he says, “We don’t want to have anything that’s not software end to end in the product.” If it requires a client to call Rippling’s operations team for help, it could be built better. That maniacal focus actually allowed Conrad to temporarily hold Rippling’s only role responding to user complaints, which he also credits with propelling rapid iteration. The CEO wants to remain in that mindset, so he still lists his job title on LinkedIn as “Customer Support.”

Conrad seems to have convinced investors that though he was pushed out of his $4.5 billion-valuation HR startup Zenefits, he was more responsible for its rise than its fall. Conrad had built a script that allowed Zenefits staffers to stay logged in to the study portion of their insurance exam. Conrad insists it played no part in helping them study for or pass the certification test. Still, regulators got involved, leading to his departure and a combined $1 million SEC fine for him and Zenefits. The desire to speed things up was another symptom of busy work draining the company’s time.

There were also culture issues, with Zenefits once having to tell employees not to have sex in the office stairwells. A more measured pace and a deeper commitment to diversity are a few other ways Rippling hopes to avoid the culture troubles of Conrad’s last venture.

Rippling only truly began hiring more than engineers when it came out of stealth a year ago. Now the startup has established two lucrative business models. First, it earns reseller fees from other enterprise tool makers when people buy them through the Rippling gateway. Any developer with a well-established brand becomes an integrated Rippling partner. It’s not going to try to out-build Zoom or Mailchimp. “As Rippling is successful, what I think it can do is bring a lot of customers to these other businesses. If you can bring down the marginal cost of adding an N+1 business system, there’s a lot less hesitation about adding products.” Customers want more utility, just without the headache.

Meanwhile, Rippling develops its own in-house versions of undifferentiated parts of the HR and IT stacks, like PTO management or commuter benefits. Customers aren’t loyal to a brand in these areas yet, so it’s easy for Rippling to swoop in. And it can charge a similar rate, but beat competitors on convenience because its homegrown systems integrate directly with Rippling’s source of truth on employee details. Upstarts in the single-sign on space like Okta and LastPass claim to be identity layers, but are really just password managers. And their early growth has spurred SaaS companies to build API endpoints on which Rippling’s version RPass can piggyback.

For a while I thought Slack would emerge as the enterprise identity provider because chat is such a ubiquitous need that it could be the start of a cross-app profile. But HR and IT are an even more foundational layer, and Slack doesn’t feel like a natural place to gather employee details like Rippling is. “For slack, communication and collaboration in general are a big enough opportunity to not let identity get in the way of the core business there,” says Hamid.

Now with Rippling’s business revving up and plenty of cash to fuel the engine, Conrad tells me his biggest concern is hiring the right people. “The really challenging thing in a company is when the headcount grows too quickly. I’m making sure we don’t do things like more than double headcount in a 12-month period,” he tells me. While Zenefits was a mad blitz for scale, Conrad has tried to bias Rippling toward action without being so impulsive that the company makes mistakes. “It’s never easy, but we’re not yet at the scale where things become really scary. We have a little bit more time to hit milestones. We’re growing at a healthy clip, but nothing that’s straining things in any way and we see that because we track our NPS very closely,” he says of trying to run a business at a more livable pace while being an active dad, too.

Luckily, Zenefits taught him how to avoid many of the pitfalls of entrepreneurship. Conrad concludes that he’s happy to have gone from “playing video games on impossible mode versus medium mode.”

Oct
10
2018
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Zenefits’ Parker Conrad returns with Rippling to kill HR & IT busywork

Parker Conrad likes to save time, even though it’s gotten him in trouble. The former CEO of Zenefits was pushed out of the $4.5 billion human resources startup because he built a hack that let him and employees get faster insurance certifications. But 2.5 years later, he’s back to take the busy work out of staff onboarding as well as clumsy IT services like single sign-on to enterprise apps. Today his startup Rippling launches its combined employee management system, which Conrad calls a much larger endeavor than the minimum viable product it announced while in Y Combinator’s accelerator 18 months ago.

“It’s not an HR system. It’s a level below that,” Conrad tells me. “It’s this unholy, crazy mashup of three different things.” First, it handles payroll, benefits, taxes and PTO across all 50 states. “Except Syria and North Korea, you can pay anyone in the world with Rippling,” Conrad claims. That makes it a competitor with Gusto… and Zenefits.

Second, it’s a replacement for Okta, Duo and other enterprise single-sign on security apps that authenticate staffers across partnered apps. Rippling bookmarklets make it easy to auth into over 250 workplace apps, like Gmail, Slack, Dropbox, Asana, Trello, AWS, Salesforce, GitHub and more. When an employee is hired or changes teams, a single modification to their role in Rippling automatically changes all the permissions of what they can access.

And third, it handles computer endpoint security like Jamf. When an employee is hired, Rippling can instantly ship them a computer with all the right software installed and the hard drive encrypted, or have staffers add the Rippling agent that enforces the company’s security standards. The system is designed so there’s no need for an expert IT department to manage it.

“Distributed, fragmented systems of record for employee data are secretly the cause of almost all the annoying administrative work of running a company,” Conrad explains. “If you could build this system that ties all of it together, you could eliminate all this crap work.” That’s Rippling. It’s opening up to all potential clients today, charging them a combined subscription or à la carte fees for any of the three wings of the product.

Conrad refused to say how much Rippling has raised total, citing the enhanced scrutiny Zenefits’ raises drew. But he says a Wall Street Journal report that Rippling had raised $7 million was inaccurate. “We haven’t raised any priced VC rounds. Just a bunch of seed money. We raised from Initialized Capital, almost all the early seed investors at Zenefits and a lot of individuals.” He cited Y Combinator, YC Growth Fund, YC’s founder Jessica Livingston and president Sam Altman, other YC partners, as well as DFJ and SV Angel.

“Because we were able to raise a bunch of money and court great engineers . . . we were able to spend a lot of time building this fundamental technology,” Conrad tells me. Rippling has about 50 team members now, with about 40 of them being engineers, highlighting just how thoroughly Conrad wants to eradicate manual work about work, starting with his own startup.

The CEO refused to discuss details of exactly what went down at Zenefits and whether he thought his ejection was fair. He was accused of allowing Zenefits’ insurance brokers to sell in states where they weren’t licensed, and giving some employees a macro that let them more quickly pass the online insurance certification exam. Conrad ended up paying about $534,000 in SEC fines. Zenefits laid off 430 employees, or 45 percent of its staff, and moved to selling software to small-to-medium sized businesses through a network of insurance brokers.

But when asked what he’d learned from Zenefits, Conrad looked past those troubles and instead recalled that “one of the mistakes that we made was that we did a lot stuff manually behind the scenes. When you scale up, there are these manual processes, and it’s really hard to come back later when it’s a big hard complicated thing and replace it with technology. You get upside down on margins. If you start at the beginning and never let the manual processes creep in . . . it sort of works.”

Perhaps it was trying to cut corners that got Conrad into the Zenefits mess, but now that same intention has inspired Rippling’s goal of eliminating HR and IT drudgery with an all-in-one tool.

“I think I’m someone who feels the pain of that kind of stuff particularly strongly. So that’s always been a real irritant to me, and I saw this problem. The conventional wisdom is ‘don’t build something like this, start with something much smaller,’ ” Conrad concludes. “But I knew if I didn’t do this, that no one else was gong to do it and I really wanted this system to exist. This is a company that’s all about annoying stuff and making that fucking annoying stuff go away.”

Mar
14
2017
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Zenefits founder Parker Conrad takes another crack at HR onboarding

 Parker Conrad’s last venture at Zenefits didn’t end so well with his departure as CEO and the company having to re-orient itself. But he’s once again starting a company that will figure out how to build an employee system of record and management, starting off with smoothing out the process of on-boarding employees and focusing on other major life events for those… Read More

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