Founded by entrepreneur Parker Conrad in 2013, the HR company Zenefits was quickly anointed one of the fast-growing companies in Silicon Valley, with a valuation that soared to $4.5 billion within three years. Then it began to fall apart. The company was discovered to face compliance issues. Conrad was forced to resign. And Zenefits’s valuation was slashed in half, with more than 60% of the company’s employees laid off over numerous rounds afterward.
If Conrad wallowed in self-pity afterward, he didn’t do it long. Within months of leaving Zenefits in 2016, he formed Rippling, a company originally focused on the process of onboarding employees but that has since come to manage all aspects of employee data, from payroll and benefits, to the apps employees use, to a device management platform that enables Rippling’s customers to retrieve, wipe clean, and store employee computers when staffers part ways with a company.
In fact, there are now so many lines of revenue that Rippling just closed on $250 million in fresh funding led by Sequoia Capital Global Equities and Global Growth, with participation from earlier backers Greenoaks, Kleiner Perkins, Founders Fund, Initialized, YC, and Threshold Ventures.
The round brings Rippling’s total funding to $450 million. It also values Rippling at $6.5 billion, making it more valuable than Zenefits ever was before it sold a controlling interest earlier this year to a private equity firm.
Conrad thinks it could easily grow from here. Asked if Rippling has received interest from an acquirer like, say Microsoft, he says the “right analog” for Rippling is Microsoft. “Our view is that Rippling is not just going to double in the future, but maybe grow by some much, much larger multiple over time.”
Conrad largely credits Rippling’s “compound” model, wherein instead of focus narrowly on one smaller software sector, it has, from its outset, focused on growing numerous business lines simultaneously that share components and can be easily integrated.
It’s an approach that Rippling can execute by pulling founders into the fold, says Conrad, who offers that of Rippling’s now roughly 800 employees, 47 are former founders and many are in general manager type roles where they enjoy both financial security and the autonomy that they cherish.
(They build new business lines in-house; Rippling isn’t an acquisitive outfit, Conrad makes clear.)
That compound approach also enables Rippling to sell a bundled system of its offerings to customers on a mostly per-seat basis.
The way that Rippling is structured means more diversified revenue, too, which is something that investors, such as Sequoia, like to see.
It’s all beginning to add up, according to Conrad. He says that Rippling has more than doubled its number of customers over the last year and that it now enjoys 2.7 times the annual recurring revenue it saw a year ago, even while he declines to be more specific about how much revenue that equals.
Says Conrad: “I made that mistake the last time around [at Zenefits], and I predicted where our revenue was gonna go, and then we didn’t get there.”
As for how investors arrived at that $6.5 billion figure exactly, Conrad figuratively throws up his hands. “Man, you’re asking the wrong person. I see one deal every two years, which is the fundraising that we do as a company, [whereas] I know that investors are seeing multiple deals a week.
“What I want to do,” he says, “is just go out and put our best foot forward in a fundraising process. I studiously never have an opinion about what the price of the company should be and [instead] let investors tell me what they think is a fair price.”
We have more from our talk with Conrad coming; stay tuned.