The First Rule You Know About Building Software is Wrong: Rippling CEO Parker Conrad's Theory of the Compound Startup

2. Very Important VCs Agree
You Should Focus, Focus, Focus
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3. Startups fail when they lack focus, says Linkedin founder

4. The deepest business
problems span multiple
point-solution business
systems
What’s wrong with this approach?
Many ideas for point-
solution SaaS products
have been picked over
It’s rare for “focused”
companies to break out
and build that second,
or third, successful
product -- the focus is
in their DNA.
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The Compound startup
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6. Compound startup
ideas are (as of now)
contrarian, and
therefore, still
unexplored.
• Higher-order structures /
undiscovered islands of
product stability
Advantages of a
product portfolio:
• Integration
• Shared components
• Common UX patterns
• Bundled pricing
Bigger, more ambitious
company and outcome—
if you can survive it
• Solve the “whole problem” -
particularly business process
& coordination problems
• Much harder to execute, for
sure
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7. I Said “Compound” startup, not “Crappy” startup
Building multiple things badly
doesn’t work—but compound
startups have some inherent
advantages
● Integration → better products overall
● Re-use component functionality to build
better and faster
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8. Focus gone awry;
The current state of the UK payroll & HR market
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9. HRIS
OR
Payroll Banking
Time Tracking Absence Tracking
Pension
State-of-the-world UK payroll
Spreadsheet
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10. OR
Payroll Banking
Time Tracking Absence Tracking
Pension
Spreadsheet
Which leads to this…
NO HISTORICAL
DATA
NO PERMISSIONS
NO VISIBILITY
NO CHANGE MGMT
ADD/REMOVE
EMPLOYEES
SEND DEDUCTIONS TO
PAYROLL POC
ADD/REMOVE EMPLOYEES
SEND HOURS TO PAYROLL
POC
COMPARE LEAVE AGAINST
HOURS AND CALCULATE
HOURLY ACHIEVED RATE
SEND LEAVE TO PAYROLL
POC
PRORATE FIRST CHECK
MAKE COMPENSATION CHANGES (ex: PROMOTIONS)
ENTER & CALCULATE BENEFITS DEDUCTIONS, HOURS WORKED, PTO
PREP & TRANSMIT PAYROLL FILE TO BANK
UPLOAD PAYROLL FILE
TO BANK, THEN CROSS
YOUR FINGERS & HOPE
FILE DOESN’T FAIL!
RETRIEVE NET PAY FOR
PAYSLIPS
HRIS
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11. PAYROLL
PENSION
TIME TRACKING
ABSENCE TRACKING
BANK TRANSFERS
HRIS
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12. ○
○
○
What a compound startup looks like in practice
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Email Integrations
- Payroll
- Headcount Planning
- Expenses & Cards
- Employees
- Benefits
- Compensation
- Recruiting
- Development
- Performance
HR
- Apps (i.e. Slack, Zoom)
- Devices
- Security
IT
Finance
Sage Xero Concur Okta Active
Directory
PeopleHR Bamboo HR HiBob
Employee data takes this compound approach beyond HR
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Single source of truth for workforce data
- Payroll
- Headcount Planning
- Expenses
- Employees
- Benefits
- Compensation
- Recruiting
- Development
- Performance
Global HR
- Apps (i.e Slack, Zoom)
- Devices
- Security
Global IT
This is how every business in the world should operate,
but only compound startups can solve a problem like this…
Global Finance
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Following the thread of employee data pulls you into app
provisioning, Identity, IT device management & fulfillment
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And this problem is multiplied by country
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17. The integration is
the product
• Reduced systems
complexity for clients
• Common UX for clients
• Don’t repeat yourself—find
ways to build once, build
more deeply, re-use
everywhere
The compound startup playbook
Maximize the price
of the bundle—but
undercut the price of
each SKU
• Sales & Marketing and
(to an extent) R&D costs
are amortized across
multiple products
Organize the company
to parallelize execution
• Business unit vs functional
alignment
• Need product “owners” /
former founders / “barrels”
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