What's the right way to build a software business? Many startup advisers say B2B software should start by solving one problem, get customers, and then add features as the company grows. Serial founder Parker Conrad, founder and CEO of Rippling, an HR software startup that was valued at $13.5 billion in April, thinks that's the wrong way to go.
Speaking on a recent episode of TechCrunch's podcast “Found,” Conrad said he believes the advice given to software founders over the last 20 years was wrong.
“I think the traditional way of thinking about how to build business software is to have a very narrow focus, build one very narrow thing, and dive very deep,” he says. “As a result of this traditional thinking, I think we've been building business software the wrong way for the last 20 years. The side effect of building these very narrow applications is that companies end up having to manage 100 different, separate pieces of software to run their business, and there's a lot of inefficiency there.”
Naturally, Conrad is talking about his book here. Rippling aims to be a comprehensive solution that covers everything from payroll to expense management, corporate cards to IT solutions. When asked how he feels about competition, Conrad said it depends on what potential customers are looking for. Conrad said Rippling competes with Brex and Navan on the financial side, and potentially Gusto for payroll solutions.
“The secret to building better business software is to build a system that allows you to build multiple concurrent business software applications that are all built natively into the same system,” Conrad said.
Building software this way allows companies to build multiple applications off of one data set, creating a standardized user experience, he said. It also gives companies more options for product pricing, he added.
While there are certainly areas, like cybersecurity, where companies need to focus and dig deep, Konrad has a point: platforms will outperform feature-based companies, especially in times of economic downturn when companies don't have as much money to spend on software.
TechCrunch reported last year that market turmoil in 2020 and 2021 has led to a slew of single-function startups launching and raising funding, meaning many SaaS startups are likely to struggle or be forced to consolidate.
Lauren Straub, general partner at Bowery Capital, said something similar at the time. Straub told TechCrunch in January 2023 that no one wants to back a startup that's building a product with one function because it doesn't have a moat or a differentiating factor from potential competitors. He said companies generally don't like to spend money on single-function technology, especially when budgets are tight.
Mark Goldberg, a venture capitalist who was then a partner at Index Ventures and has since started his own fund, echoed the sentiment in an interview with TechCrunch last year, saying large companies are more likely to use a less-than-perfect service under their existing contracts before signing a new one with a staid startup.
“Before Slack was sold to Salesforce, one of the scary things was that Microsoft released Teams,” Goldberg said at the time. “All of us in Silicon Valley thought Teams was a great product and better than Slack, but a lot of people just didn't care. Why do we need another vendor? This is an area where even the best-in-class product might not cut it.”
Conrad hopes the horizontal approach he's taken with Ripple will help it both attract and retain customers as the market fluctuates. So far, it's worked.
“Right now, every software industry has about a dozen competitors, so it's very crowded,” Conrad said, adding that customers would prefer an approach where software companies “build a system that reintegrates all of this and give customers one system that combines a lot of functionality and wins.”