Last week, TechCrunch broke the news that workforce management software company Ripling was closing on a new $200 million funding round led by Coatue at a hefty $13.4 billion valuation. The round also includes another $670 million secondary element aimed at giving some of Rippling's investors a greater stake in the company, while Rippling The company also reported that its employees, some of whom joined the company when it was founded in 2016, have liquidated some of their stock into cash. .
Rippling declined to comment at the time, but founder Parker Conrad confirmed our information in an interview Friday afternoon, saying the subelement was actually a $590 million bid, of which 200 million $390 million is available to employees and $390 million to seed investors and other investors, it added.
This round, Rippling's Series F, is also almost entirely an inside round. Coatue is an early investor in Ripling, along with other backers of the round who have been investing throughout, including Founders Fund and his Greenoaks. The only new addition to the cap table is Dragoneer, a San Francisco growth-stage investment firm.
Of course, we were interested in more than Rippling's new funding, so we discussed sales figures during our call with Conrad. We discussed the company's new office lease in San Francisco (currently his second largest lease signed in San Francisco this year). Conrad also talked about why Rippling is relatively “free” of his AI. You can listen to the full conversation in podcast format later this week. For now, excerpts of the conversation, edited for length, follow below.
So why raise this money?
To be honest, at first it was just an employee's bid. We wanted to find a way to have liquidity for our early employees, so we went into the market looking at actually offering about $200 million for employees who wanted to sell their stock. . [But] There was a lot of investor interest, so we initially expanded to include a small amount of primaries. [capital] – Primarily as a way for investors looking to buy more to gain more ownership – and beyond that, we ended up expanding to seed investors as well.
What does this secondary sale say about your plans to eventually go public? Is an IPO a little off?
I'm sure it's a bit far, but it's not something to delay. [anything]. In fact, it might be better if there were people who wanted to buy a house or people who wanted to buy a house. [want more cash] Because things happen in life. It would be great to relieve some of that pressure before going public so there aren't a ton of people selling as quickly as possible on the public market.
Is this the first time employees have been able to sell stock?
it's not. We did something for him in 2021. But it was a small company, a small company, and a long time ago.
Are you worried about your employees leaving your company after cashing out?
One of the things we talked about internally when we launched this was, “The first rule of employee bidding is that we don't talk about it internally or publicly.” We don't want to see someone spike a football or anything like that. And his second rule for employee bidding is “See first rule.”This is a very private and personal thing, but I'm so happy for you all [participating]; If this changes anything [their] Life is a wonderful thing. But it's not the destination. The game isn't over yet.
What do you think about sales more generally? Some people don't like to see it. Other managers think it's best. Elon Musk seems to be a fan of Tesla, considering the company's management turnover rate.
Rippling's management team has been surprisingly stable over time. Many of the members of the team are people I originally hired for the role. Some of them have long working histories before joining this company. And certainly, I always like to keep people. This means that Rippling's early employees sometimes leave the company. I think it's always emotionally very sad when that happens, even if the company is doing well and they want to do something else. Sometimes, it's just hanging out. On a personal level, that's always been very difficult for me.
You leased a new 123,000 square foot property in San Francisco for your local employees, and now your employees are back three days a week. How did you decide on that policy, and are you concerned about retention or hiring?
We believe there is tremendous value in having people in the office together. Our company has never been a company that promotes remote work. When we temporarily went remote during the pandemic, we said, “This is him for three weeks, and then he'll be back in the office.” Of course, unfortunately it took much longer than that, but we got back to the office as soon as possible. I think full remote is possible depending on the company, but it's like playing a game in hard mode. I think it would be a lot easier if people could come together in person. You can do a lot of things.
Meanwhile, employee management software is extremely crowded. You'll be up against Zenefit, a company you famously co-founded and ran. Paycor, Workday, and Gusto to name a few. . .
The strange thing is that Ripple is actually [human capital management] A company in Ho Chi Minh City. Everyone who builds business software believes that the way to build the best business software is to build these very narrow, focused, and deep products. And I think that's completely wrong. I think the way to build the best business software is to build a very broad suite of products that are deeply integrated and seamlessly interoperable. Yes, we have a very strong HR and payroll suite, but we also have an IT and security suite. We have a spend management suite that handles corporate cards, bill payments, expense reimbursements, and more. In fact, we are using the primary capital raised in this round to fund R&D activities for our new fourth cloud, which we plan to launch in a completely different field.
A classic example of a company that builds software this way is Microsoft. Microsoft is like his OG in the complex software business.
Speaking of Microsoft, what is its “AI strategy”?
We are currently a company that is relatively new to AI products. There are a few things we are working on. But I'm always very skeptical of what's popular in Silicon Valley.so what can i tell you [our AI strategy] Not. I'm very skeptical of these chatbots. I don't think anyone wants to chat with HR software.
I would like to ask you about your tweets related to our story about the new round.i saw [Benchmark general partner] Bill Gurley said:Antifocus isn't cheap” I didn't know if that was a compliment or a dig. do you know?
I think it's a bargain considering it's from Bill. And he's not wrong that taking the opposite approach is expensive, especially in terms of research and development. When you look at Rippling from a financial perspective, one thing that stands out is how it spends on research and development. You talked about a crowded HCM space when you compare us to other HCM competitors, and they spend an average of 10% of their revenue on research and development. Next year, Rippling plans to spend the same amount on research and development. [three rival companies] Combined, our revenue footprint is much lower than the three companies. It's definitely true that there's a huge upfront investment phase to building what we're building, and it should definitely diminish as a percentage of revenue over time. So he's not wrong, but it's a very clear part of our strategy. What Bill may not fully understand are the benefits of building software this way.Initial research and development costs are much higher [later result in] Significantly improve sales and marketing efficiency.
Has Bill ever done business with you?
No, I've never met Bill. He's always been like a low-level antagonist, but I've never actually met him.
I know he doesn't get along very well with Marc Andreessen.
Also, Bill and I have something in common. Maybe we should meet up and have a beer about that particular thing.