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Parker Conrad Built Rippling by Ignoring the Most Sacred Rule in Startups

By Parker Conrad · Strategy · 2 min read

The classic startup advice is do one thing and do it extremely well. Rippling does payroll, benefits, identity, laptops — all working together. There's something almost heretical about it.

Key Points

The 'do one thing well' advice created a generation of point solutions that are now commoditized
There's an island of product-market fit over the horizon — harder to reach, but much more powerful
Compound software businesses may be the wave of the future — and there will be three of them

There's this island of product-market fit over the edge of the horizon. Harder to get to. But it's a much more powerful type of product-market fit that's much harder to displace.

The Compound Startup

Interviewer: The classic startup advice is do one thing and do it extremely well. You came up with the compound startup — it's not just one thing. Not just identity. Not just payroll or benefits. It's all of these things working together. There's something almost heretical about it.

Conrad: I think it actually resembles a lot of software companies that were built more than 20 years ago. SAP, Oracle, Microsoft, Salesforce to a certain extent. They look like compound software businesses.

It's not just payroll. Not just identity. It's all of these things working together. Almost heretical.

Point SaaS Hit a Wall

Conrad: There was this moment in time where it was possible to do one narrow thing — everything shifted from on-prem to the cloud. You could go out, do a really narrow thing, and turn it into a SaaS company. Almost all of them ended up being worth low single-digit billions. It was really easy to find a niche.

Then all of these markets got crowded with companies doing this one narrow thing. Point SaaS, we call it. And the types of problems you can solve are much more limited when you're constrained to one narrow domain.

Almost all point solutions ended up worth low single-digit billions. It was easy. Then every niche got crowded.

The Hidden Island

Conrad: The theory of the compound software business is that there's this island of product-market fit that's over the edge of the horizon line. Harder to get to. But if you can build multiple parallel applications at once, you can get there. And it ends up being a much more powerful type of product-market fit that's much harder to displace.

Rippling spends an absolute fortune on R&D — analytics, permissions, workflow automations — things that cut across any one category. Most of our competitors just can't go as deep on that stuff.

There's an island of product-market fit over the horizon. Harder to reach. Much more powerful. Much harder to displace.

There Will Be Three of Them

Conrad: I'm not sure it's good advice for everyone. A lot of companies reach out wanting to build a compound startup. It's actually a deeply cynical view of software markets. It's possible compound software businesses are the wave of the future — and also there will be three of them.

It's an argument for many fewer businesses but much larger and more successful ones. Sales and marketing has gotten harder — public companies are spending 50% more on sales and marketing but adding 10% less in new ARR. The business model for a lot of software is just broken.

Compound software businesses may be the wave of the future. And there will be three of them.