From 0 to 11.25 Billion at Breakneck Speed with Matt MacInnis at Rippling

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I o n Think about the Olympic gold medal women's gymnastics team from the last decade. If they had someone on their team who wasn't very good, what did they do? They cut them. There was no hesitation. There wasn't. What about their feelings? It doesn't mean you have to be inhumane. It doesn't mean it has to be like a grinding meat market all the time. Those teams have room for fun too. But when you contemplate what it means to win Olympic gold, when you contemplate what it means to win the top title in whatever sport you play, there is just zero chance that anybody is ever comfortable. There is zero chance that any of those winning teams ever tolerate non performers. Ever. And so if you want to build a winning company, it should never be easy. You should be relentless in pursuit of excellence all, all the time. The big winners are going to be the ones that never stop. I need some traction. You need some traction. Let's get some traction.

Hey, what's up innovators, entrepreneurs, visionaries and disruptors. This is your Traction podcast host, Lloyd Lobo. We're a community of over 100,000 people just like yourself on a mission to help you get the methods, the money and the madness to explode your business growth. Featuring stories and tactical advice straight from those who've done it before, like Shopify, Twilio, Asana and many more. Super excited for today's session. Our guests is Matt McInnes, COO of HR tech behemoth Rippling. In less than seven months after reaching a 6.5 billion valuation, the company has now been valued at 11.25 billion. Matt joined the company when it was just 70 employees and has been a key player in its exponential growth. From 2009 to 2018, Matt was the co founder and CEO of Inkling, a mobile learning platform that provided on job training for companies like McDonald's and Whole Foods. It was named one of the fastest, most innovative companies and raised over 100 million in funding before being acquired in 2018. Matt, you've had a very successful journey as an entrepreneur.

I can debate. I can debate that assertion, but keep going.

100 million acquired. Now you're at Rippling for me, my definition, success is you made enough money where the money doesn't dictate your decisions anymore.

I don't know. Money matters to me. I'm not they. You know the phrase, right? F you rich. And I'm like, I've made a few bucks. But the journey on paper, on paper.

It looks like F you rich.

Yeah, fine.

I.

For sure. Fair enough. I think the way that I think about my own journey is I'm super happy to be where I am and doing the work that I'm doing, because every chapter that came before it was a necessary ingredient to get me where I am. And Rippling is way more successful than anything I've done before. Before. And maybe my success o meter is a little bit skewed as a result of that.

So let's dive in there for a second because I've had a similar journey. Not built a unicorn, bootstrapped a company to eight figures plus in revenue, then sold majority to a growth equity firm. But 2009 to 2018, nearly 10 years, you ran Inkling. You raised over a hundred million. You sold it, you could have done another company. What prompted you to join Rippling?

When I left Inkling, there were three things that I thought I might do. One was to go and invest full time and join the dark side. And I explored that. Super glad I didn't do it. The second, and I can talk about why the second thing was to go start another company and have another at bat. But I will say, like, with the benefit of hindsight, it's like the odds are so against you when you go and start something from zero. And I was way more acutely aware of that at the age of 39 than I was at the age of 29. And then the third option was to go and work for somebody else. Which, to be honest, coming out of inkling was really not something I thought I would want to do. But there's something really special about being in a company that is winning, like, wildly. It's just such a different. It's such a different experience. And Parker and I have known each other since we were both 18 years old. The other element here for me was like, man, I can join a proverbial rocket ship and also do it with somebody I love, be do it with a friend. That is not an opportunity that's going to come around a second time for me. And so it became super clear that that was the best option. One of most, like, useful pieces of advice that was given to me in deciding what you want to do. Is not to compare categories of work. Don't think, oh, do I want to invest? Do I want to start a company? Do I want to be in business working for someone else? Don't think about categories. Think about the specific available instances in each category. So I can start this specific insurtech company, I can go work for this specific investing firm. I can join Parker and work at Rippling. And when you stop thinking about it as categories or abstractions and you really think about the specific opportunity, like the best opportunity under each umbrella, the decision making process gets way easier. And so once I get out of that initial mindset, like it became clear what the right answer was at the.

Time you joined, though, the VC market was all on the up and up. Everything was hot. What made you disqualify that as an option? Because you could have made a lot of money invested in a bunch of companies there too.

Right? Man. So the sport that I play is business and like venture capital is finance. And it's great, like turning money into more money sounds good. Like there's lots of upside there because money gets you things. But I love the sport of company building specifically. I love the human interactions, I love the management, the decision making, the impact of my decisions, the day to day pace, the anxiety is addictive. And so as I got to know investing from the inside a little tiny bit, it just, it became clear to me that it didn't fit with who I am. And that's cool. Coming to that realization was really rewarding because it gave me conviction around what I really wanted to spend my time on. And I love this. Like, I love it.

You're actually playing the sport versus playing it on a, I guess Nintendo or Xbox.

Yeah. Or it's like you could play the sport or you can be perpetually in the bleachers, say for like halftime. And I think I'd rather be on the court.

I love that analogy. That's fantastic. Parker being your friend, this was a rocket ship. But you joined when there were 70 people. Were there like one or two things that told you that this thing is going to be huge? Because there were other players also in the space. There was still Zenefits around. There's a bunch of other players in there.

Yeah. Look, I think people even still don't understand the scope and ambition of what we're trying to accomplish at Rippling. And that's cool. I don't think people need to understand it. But your question about why, like, how did I know from the outside or what did I think from the outside that convinced me that Rippling was going to be the thing. I have personally invested now, I think, in about 60 companies, somewhere between 50 and 60, and have watched many entrepreneurs, many very smart entrepreneurs go through the journey from beginning to end, and many of them obviously not yet at the end stage. And for the very small number of companies that I've invested in that have done exceptionally well, you can begin to pattern match a little bit. Not necessarily. You can certainly pattern match the things that are failure modes, and you can try to eliminate those from your investing activity. But you can also see, like, the things that make companies outsize success. And what stands out to me is some shift in a market. Something happens to a technology in a market, whatever, that creates a structural advantage for a startup. Structural meaning that, like, the technology that they have is going to naturally fit with the market in a way that the incumbents can't fit with the market. I can give you a really concrete example of how this is playing out to Rippling's advantage today. But if I zoom back out to four years ago, when I was making the decision to join, it became clear to me that the underlying system of record for employee data had really never been aggregated in a way that Parker was trying to aggregate it. And if you play that out, if you just think like from first principles, what happens if somebody actually pulls this off? You're like, oh, shit. Your brain immediately goes, they're going to own this and they're going to own this and they're going to own this. And you have this long list of applications that people spend money on today. We're like, wow, Rippling pulled that off. They could really dominate in, like, these 20 software categories. And there were really like, three reasons I joined Rippling. The first was idiosyncratic to me, which was that what Parker needed for a chief operating officer at this specific company at this specific moment played really well to my strengths. As somebody who loves process, who loves culture, who loves to think about optimizing a business, great hand in glove fit. The second thing that drew me to it was that I was going to get to work with one of my best friends. And you just can't not put that on the list of considerations operations. And then the third reason I joined, and the biggest reason was like, this company has a structural advantage in how people define that market today. And the reason I choose the world, like, how people define that market today is that from the outset, I believe that if Rippling is successful, we will not be boxed into the category of the incumbents. Any more than Apple was boxed into the category of cellular telephone when they came in with the iPhone. It's upset how people thought about that market too. So I think like the story about Rippling is like about 20% written so far. And in the rearview mirror people are going to be like, wow, like those people, whoever they were that were running that company saw around the corner.

Now one thing was very interesting when I studied Rippling. Contrary to some of the many other successful businesses, they pick one ideal customer profile, they would pick one product, get it to product market fit and then they started layering on and Rippling had many products at once. And I thought that was really interesting and maybe that was a necessary thing to attack that market is you go with a bunch of products.

Yeah, the product conversation about rippling. So people talk about compound startup. This was a term that Parker himself came up with. And customers see these things as individual products. I'm going to have a payroll product. I'm going to have an HR information system as a product. I'm going to have my mobile device management for my laptops. I'm going to have apps and identity for managing apps access in my business. And we're very happy to play it out that way. We think about them as discrete products also we sell them as individual SKUs. The reality of course is that each of these products share a common heritage. They share an underlying set of frameworks across all of them. That starts to blur the line about whether our spend management product, our device management product and our payroll product are in fact like each discrete products or are they all manifestations of some like really powerful underlying capability just applied to different. Those are use cases in your business. And yeah, we're a compound startup. We started with multiple products but really what we started with was the underlying data store for employees and then applying that really rich understanding of the employee data to all of these different problems in your business. And we just charge you for a different set of workflows to do payroll than we would charge you to do those around device management. It was always a natural component of how we approach things. And for a lot of entrepreneurs who hear the compound startup thing, they think, okay, that that really means is they've got multiple products. But like you gotta have a right to have multiple products. There's gotta be something true about your software and true about your market that makes it totally natural to have these discrete products all under one roof. And I actually think there's very few companies that have the right to do that. Like if you Say you're going to be a compound startup and you're going to have multiple products from the beginning. The tail is wagging the dog. Unless you have really fricking good reason that your customer wants to buy multiple products all on a common platform from you. It's a relatively rare thing.

What are the keys to success in making that happen as a compound startup?

You man, you can't will it into existence. Like, I look at a company like Dropbox that started out with the thumb drive in the sky and solved for a very discrete problem, right, which was like, it was hard to move data from point A to point B, and there was no really simple interface to the cloud to move that data. And so they built that product, they scaled it up, and, and then they've tried over and over again to launch the second, like Dropbox Paper for document editing. Which for the record, like Dropbox Paper was like an awesome or is an awesome product. It's clean, it's easy to use, it's very attractive. But like structural. People were gravitating more toward email and documents living together. Which is why Google Workspace is so popular. And Office Microsoft 365 is very hard to break into that because there's a structural dynamic in the market that causes people to want to use products that aren't associated with the thumb drive in the sky. And the ingredients to success, as you asked, it really are about how the company is born and the market dynamics the company is in and not something that like the founder can conjure or will into existence. One analogy I like to use is you have to shift your mindset as an entrepreneur away from thinking about building your company and trying to make it successful as like to a large degree a function of your effort. Like, it's not actually a function of your effort as much as it's a function of what is true in the market. So if you think about every startup as an experiment and what you're trying to do is find out the result of that experiment, let's say it's like drug discovery. Every startup is like a candidate drug and the market either has binding receptors for that drug or the market doesn't have binding receptors for that drug. I'll tell you one thing absolutely true about Amgen or Abbvie or any of these companies that develop drugs. They don't try and market to the disease to convince it to die in response to their drug. That's absurd, right? What they do is they accept the data. They accept the science of running an experiment for A candidate drug to see if like the binding receptors or whatever are there. And startups are a lot like that. You start a company, you create a product, you put it out into the market and you will find out really quickly whether the binding receptors for your product exist. If they don't, it's super, super unlikely that you're going to be able to market your way around that problem like you're not going to. And so your question about the compound startup, either you are in a market where your product has the right to be a compound product or you're not, you're not going to willpower your way into having a product that has three or four different SKUs. And like suddenly you're a compound startup because you said you want it to be, the market's going to give you the right to do that or it's not.

It's also not a term that's used very much popularized by Parker and Rippling and some probably a few pitch decks here and there. Now, now see that? But this right to be that is a key thing. And so you guys started with owning, making sense and making intelligence from that employee data. Basically you're the system of record for employee data. What is the big vision for rippling? What is the long term vision for Rippling?

We want to be the system or the software platform that sits underneath every mid market enterprise in the world. We don't think a lot about the needs of companies like Citibank or Ford at that scale, but we definitely think about two people in a garage all the way through many thousands of employees. And what is true about all of those businesses is that anytime they're spending their money, their energy, their time, all of which eventually reduces to money on the administrative bullshit of running the company, of enabling and disabling accounts or managing policies around spend or like even just down in the nitty gritty of trying to figure out an expense report and where it shows up in a pay run. Like people spending time on that kind of stuff, the work is super important, but it's a really negative return from a company's perspective. And so we think that if we can build the system the way that we've envisioned it, we can mostly eliminate the administrative burden of running a company. And if you're doing that for hundreds of thousands of multi thousand person companies, like you've made a massive dent in the economy and in the way that the world runs. We want to do that across every single software category that depends on employee data. And man, sir, you give me a workflow that somebody in your company does. And I'll give you a workflow that is dependent on employee data. And it's so much more valuable a position to be in than workflows that are centered on the customer. For example, like customer data is super important. Salesforce is a massive business doing precisely that. Salesforce, if you get a workflow that centers on the customer data, it's probably a product that you can buy from Salesforce, but It's probably only 20 or 30% of what you do in your business. The rest of it's really centered on the employee. And so we want to be the system that sits under everything you do to run your company. You can imagine now that we have our spend product, so we're issuing your corporate cards, we're doing bill pay in the near future. We help you obviously do the things we're known for, like our HR information system, running payroll, managing your laptops, we'll even warehouse your laptops for you, ship them in, ship them back out automatically when you hire a new employee. But we can see out over the horizon to a lot of other really interesting software categories that are not totally, obviously to the onlooker, dependent on the employee record. But in reality they are. And we're going to keep launching products, we're going to launch a new product probably every quarter for the next two or three years and just keep entering categories, pulling all of this stuff under one roof. So the vision is big and broad and I'd say just the ambition of the company is one of the reasons I'm still here fighting it every day certainly now.

You guys recently launched Spend management. Tell us more about that and what does it mean for the trajectory? Because initially rippling was everything hr, like payroll benefits, super simple app management. In one year I added a hundred people. So I know we had to hire two IT guys and our rippling should have existed. But what does that spend management mean for the future of this trajectory?

We're talking about like when you think about any product, it starts always with a set of design assumptions that almost presuppose the outcome of the exercise. And I'll just give you a very simple example. It's if you're going to design a car from scratch today, whether you decide to make that a gasoline powered car or a battery powered car is going to dictate a whole bunch of stuff that you're going to be able to do with that vehicle. And if you've ever been in a Tesla, you realize like the backseat doesn't have a hump in the middle. And that's because there's no transmission from the motor in the front to the wheels in the back. There's no engine. And so you've got a trunk in the front. Tesla Model S has rear facing seats for kids in the back. And there's all kinds of things that they do with a Tesla that like BMW is still futzing around trying to figure out how to manufacture batteries. They're like 10 years behind Tesla in what is clearly the future future of cars. The design assumptions that they had going into Tesla were wildly different than the design assumptions that BMW had when they were making their latest three Series or whatever. And so for us, when we enter a segment, I promise you, we start with a different set of design assumptions at Rippling than any of our competitors in any point Solution category starts with. So I'll give you a very concrete example in spend management, since you brought that up. There are other really great companies, some of whom are partners of ours. Like Brex is a good partner of ours and they integrate beautifully with Rippling. But when any or expensify, like when you start designing one of those software solutions, you start with how can I make it so that the customer has to enter as little data as possible into my system to get bootstrapped and get going with my product? Totally sounds reasonable to me. Let's lower the bar for what it takes to get off the ground. And so you're going to get them to enter in like employee data, like their name and like what department they're in, maybe a little bit more information about their start date or what level they are. But like you're starting to get out into shit. You got to rekey this data into our system or suck it down through a straw via an API every time something changes. So we're going to minimize our dependence on that data and try to build the system as best we can under that design assumption. But with Rippling, we started with the design assumption that we were going to have access to every single piece of data and metadata about every employee ever in this company, that we were going to understand at an atomic level who things like their division vice president or who their peers are in a team or what department or team or group they're a member of and what happens when they switch in and out of that group. We assumed from the beginning in the design of the spend management product that we would have all that data and guess what? We do. And therefore our policy engine and the ability to set super fine Grained rules about what somebody can do with a credit card or with an expense report is extraordinarily rich and super automated. So you can just say no, you can't buy software from Adobe or if you can't spend money on Amazon unless you're on the infrastructure team and you've been here at least six months and you're in your job level seven or above, then you've got a hundred thousand dollar spending limit on aws, otherwise the corporate card won't support your expenditure. Like that's trivial for us to accomplish. In rippling, every single other spend management solution started from the beginning under the design assumption that they would never have access to that level of data. And so the products just don't do what our product can do. And that's true across the board. For everything at rippling, it's a reason that customers end up choosing us is that we the Venn diagram between what we can do and what a point solution can do. There's a pretty decent overlap, but there's this massive piece of stuff that like we alone can do because we started with a different set of design assumptions than any of our competitors.

Fantastic, huge opportunities like you outlined. Now I want to shift focus to being a CEO. You went from being a CEO to a coo. A lot of startups and founders, me included, are confused, what is the role of a CEO? When do you bring on a CEO? Like what is it in different companies? I've seen them do different things like marketing and sales reports to CEO. Everything reports to a CEO. Yeah. So what is that role of a CEO? When is the right time to bring on a CEO?

So first of all, the line that was always given to me by my Sequoia board partner back at Inkling was the CEO is for CEOs who don't want to do their job anymore. Which I don't totally buy that. But I thought it was a clever way to shoot down the idea. The CEO is this amorphous compliment to the CEO. And this is the most important thing that I think people don't understand about COOs is that the job is purposefully amorphous. Or maybe a better way to put it is like the CO job is idiosyncratic to any company and in particular to any CEO. And the CEO should be the Yang to the CEOs Yin. So you know, if you've got a really strong sales and marketing CEO, the COO is probably not the sales and marketing coo. If you've got a very strong operational CEO, then The CEO is probably not the operational COO at rippling the idiosyncrasy is that Parker, he's very good at across the board at thinking critically through all the functions. But what he's particularly gifted at is product. He's very close to the product and thinks very deeply about the interface between the product and the market. And so what he spends less time thinking about is like the internal mechanics of running the company. How do we think about finance, how do we think about hr, how do we think about business development and the partnership ecosystem? How do we think about post sales services and all of the things we do for customers after they've bought and use the product? And even down at the level of thinking about how do we shape the management team and to sort of meet the challenges of the business. I partner with Parker in those areas not because that's what a CEO does, but because that's between Matt and Parker. Like that's the complimentary arrangement between the two of us. And so like Parker is the one and only CEO for sure, but we split the job in certain ways that like allows him to go and focus on the things that he's really awesome at and then I take on the things that I happen to be awesome at. It's a really awesome partnership in that sense. But there's no correct answer to the question of what a COO does other than that the COO has to be highly complimentary to what the CEO is extraordinarily good at in terms of timing. That too is just so idiosyncratic to the business, I can tell you. Failure modes if you like. If a board wants to throw a COO in because the CEO sucks train wreck. If the board wants to throw a COO in because the CEO doesn't realize that he or she has a bunch of blind spots unless CEO is going to go in and fix those fucking train wreck, you know, like guaranteed failure modes is where the CEO doesn't have the maturity and self awareness to understand where they might be complimented or boards trying to force this stuff in to try and fix the CEO. It's like auto fail and I've seen that movie play out a bunch of times, frankly, even its benefits were like I think the board and Parker and we're not seeing eye to eye and they brought in David Sacks and David probably single handedly took that company straight into the side of a mountain. It was just a complete disaster.

That is great advice. Great advice indeed. So take us behind the scenes. When you walked into the company 70 people or so in 2019, then you guys go into a pandemic like, how did you manage all of this as a CEO? What did the first three, six, nine months look like?

To be successful in work, you got to go do shit. I don't care if you're like an individual contributor at the age of 22, straight out of college, or whether you're a 50 year old, experienced, seasoned executive. Like, one of the most important criteria for success in work, in life, is that you go and do shit. You don't wait for permission, you don't pull your punches. You have to be right a lot. If you're not right very often and you go and do things like you're going to crater your business. And so there's, there are some caveats here, but being right a lot, being willing to change your mind and making decisions quickly and acting, Those are three of the leadership principles at Rippling that we talk about. And so like when I joined and there were 70 people, probably because of the prior nine years of my life where it was just all action orientation all the time, I just started doing stuff. I remember the first thing I asked Parker is like, okay, where's the P and L? He's like, what do you mean? I'm like, where's the income statement? Like, where's the cash flow statement? Where's the balance sheet? And he laughed. He thought that was the funniest question. He's like, I don't have one of those. What are you talking about? And I was like, okay, all right. Job number one is going to be like, I got to get the basics of the financials in order. And so off I went, tried to figure out what the finance infrastructure should look like. Then we got into product design. I was like, okay, who's doing the product design? Oh, we have an outsourced agency that kind of builds mockups for us and then the engineers go and build it. I'm like, okay, we're ultimately going to want to have a design team, right? Yeah, absolutely. I'm like, cool, I'm going to go hire somebody for design. So I went and recruited John Francis, who runs design for the company, into the business. And like, the most important work that I did was picking people. Like picking people to build out the functions that didn't exist yet. And it wasn't because Parker said, hey, here's your list of to dos. Not at all. I showed up and Parker was like, hey, what do you think we should do? And I was like, I think we should probably fill in These gaps. It sounds good to me. Have at it. And I went and did it. Weed whacked to the best of my ability. In hindsight, holy smokes man. I am actually quite surprised at how quickly we were able to build out a bunch of things from 0 to 1 in the company. But one critical point I think every entrepreneur needs to understand is like we already had a business. Like Parker made some very. Parker and the team. Parker and the founding team, like made some very prudent decisions about just focusing on product and sales. Product and sales don't need all the other shit. You don't need hr, you don't need your customer support team, you don't need a chief of fucking staff. You don't need any of those trappings. What you need is a product and you need to sell the product. And until you can prove that you know how to sell your product, don't hire anything else. And I think Parker did like a remarkable job of holding the line on just the basics of like sales, marketing and product until there was really clear traction and then like you could let go of the elastic band and start going for it. And that made it easier for me when I showed up because better to come from behind than to get ahead of the machine.

Who are the first few people you hired? What tactics did you have to put in place to accomplish this? Rippling has always been a very fast moving company. But you come in as CEO, you come up with, hey, this is the plan. Now you got to bring on some people, right? Yes, I know you can roll your sleeves, but that means different in a 70 plus person company.

What's the question? Like who I hired first or yeah.

Who did you hire? What are some things you tackled? How did you do it?

Basically I would say that there's. I have to be careful not to color my memory with the knowledge I have today. At the time I actually made a few mishires. The one mistake that I made was like I hired some people at sort of the VP level first as opposed to last. I've since learned that you really should build functions bottom up and outside in. And what I mean by that is like hire smart, execution oriented individual contributors at any seniority level, but make sure that they are mentally prepared to be individual contributors as you get a function off the ground. And what I mean by outside in is build the like the interfaces inside the company to that function first and then the supporting cast behind those interfaces can come later and the people who are interfaces to the rest of the business can fake it. Till they make it. And I'll give you a concrete example. Like when you're going to hire hr, you don't hire up the compensation person or you don't hire up the employee experience person. You hire the HR business partner. Like you hire the person who's the interface to R and D, the interface to sales, the interface to marketing and then the person who's in the HR business partner role. If they don't have a policy behind them or they don't have a comp person behind them initially, they just do that work themselves. But they're like always going to be at the interface between the HR function and like the leader of sales. And so that's the outside in part and the individual contribution is the bottom up part. Like what most people do. The the big failure is to hire the VP of HR or hire the chro and then tell that person that they should go and hire the individual contributors. And everything is fucking upside down at that point. Like it's just going to take so long to have a functioning function. It's going to be so unlikely that executive who's been there for all of a month is going to know the kinds of people who are going to succeed at the company because they themselves haven't been there long enough. So like higher, bottom up, higher, outside in as you build out a function. And I repeated that playbook across customer success and HR and design and so forth.

I love this example and I love it for a variety of reasons. So I went through this myself. We were a bootstrap, 20 person company, raise some money in a year. We went from 20 to 140 in less than a year, like maybe 10 months. And the first natural inkling of everyone, including your advisors, VC's is go and hire execs and they're going to hire these people. The problem is those execs, especially the bigger the company they come from, they're not used to rolling up their sleeves. They want to hire people who want to hire people and that grossly slows down the function and never really get that function going. I like this because you're almost like hiring a jack of all outside in and bottom up.

I love that.

Give me an example. Actually I just want. I liked it so much. The HR may not be as relevant for our audience or to wrap their heads around, but how does this work in customer success? A lot of our audience are customer success marketing founders.

Look, customer support. When I joined we had our engineers doing customer support. So when a support ticket came in, we Were using email for support. We were using front as the software application to track the email. So like, we didn't have Zendesk or anything like that. And one of the most important things you can do early in a company's life cycle is shorten the learning loop. Like, anything you do to cut people out of the learning loop of the organization is positive to the evolution of the product. And so what better way to expose the product teams to the reality of the customer experience than to force the engineers to solve the customer tickets. And obviously you can't do that forever. But like, for us, we got as far as 50 engineers, or maybe even more than that, where they were the ones solving the customer pain. And like, the beauty is an engineer who sees customer pain, takes it personally. Like, a good engineer is like, shit, my software caused this person to not get insurance and went to the hospital and didn't have coverage. Or my software caused this person to not get paid on time. That is like catnip for that engineer. They have to go fix it and they learn from it. There's like really high customer empathy. So it was a really smart move on the team's part to have the engineers doing this. And then of course, we had to introduce the support function. But the way that we did it outside in and bottom up was like, I went out and I hired a guy who had been in support functions for some time, but whose attitude was like, just put me in, coach. Like, his attitude was, I will do it. I will answer the tickets, I will help us set up the infrastructure with my left hand while I answer tickets with my right hand. And by the way, like, I want to sit shoulder to shoulder with the engineers. And so he had that attitude. It was great. We threw him into the pit. He tried to figure things out. He did it and like, he didn't have any specialists behind him and he didn't hire a bunch of managers above him. He just hired in a few more really intrepid support agents. And eventually we earned the right to build a support infrastructure around those people. But it wasn't until the first few hires had been in the trenches with the engineers that we started to do that. So that's like a bottom up, outside in approach to support. That really worked for us.

And that was another fantastic example. Now I want to dive into. I read your user manual for Matt McInnes and I really loved it. Most leaders don't have it. They go and you got to figure out how to work with them. I really found it very interesting and the things you look for. There's pros and cons, maybe, but what prompted you to do that, and how has it been working out for you?

All of my ideas come from other people. In this case, like the user manual piece, I think at least the next proximal node in the idea is Claire Hughes Johnson at Stripe. She had this concept of a user manual. But I also have to attribute it to Elad Gill, whose book had the essay from Claire in it about the user manual. So, like, between Elad and Claire, it's. That's where the credit goes. My version of this. Think about a human interaction in the workplace. And one of the things that I'm really attuned to as an executive is that, like, I have an executive lens. Everything I see around me, I'm, of course, viewing it through the lens of my own personal history. No human can escape that. We all see the world through our lenses, our cultural lenses. I'm a gay man. I've got color. In terms of having grown up in a tiny town in the middle of nowhere and what that did to the way I see myself in the world, we all have these, like, really intrinsic lenses, and you can't take them out. It's not like a pair of glasses you can take off. It's your eyeball. So, Lloyd, where did you grow up? I'm pretty sure it wasn't San Francisco.

I grew up in Kuwait. I was a refugee of the Gulf War.

Yeah, so like, Kuwait refugee of the Gulf War. That experience is going to color the way that you see the world. You know, you're an entrepreneur. You've started companies. And so if you, like, randomly bump into somebody at a coffee shop and talk to them about starting a company, like, you're going to interpret the things they say and judge the things they say on the basis of the full history of you. And so when I, as an executive, I'm really attuned to the fact that, man, 15 years of my life, I've been the boss. And that, like, disadvantages me in some really important ways. Like, I don't totally get to see the world from the perspective of an individual contributor in the company. And I try really hard to be humble in interpreting the signals I get from folks when I have to make decisions about the business. So the user manual, when you think about somebody saying no to you in person, or you. Somebody, like, denies a request or an executive tells you, like, no, you're doing it wrong, is there's a threat that, like, the person's gonna feel like they just got put down. Or the person was disrespected. Or maybe the people with, like, maybe Matt doesn't like me. And like, that's. Be that as it may, the reality is if I have a user manual and I'm able to point you to the user manual, you're gonna know immediately that this is not about you. This method of getting in touch with McGinnis, this method of scheduling something or what he wants from you before we get together for his office hours on Friday. It's not about you. You're not in the penalty box. It's just a way that you know that McGinnis does business. And so one of the weird side effects of having a user manual is that people feel more respected. Like, people are willing to play by the playbook because they know that you have more demands in your time than perhaps they have on theirs. And this is a way for me to systematically communicate things that would optimize the way I interact with folks that I maybe don't talk to every day without making them feel disrespected or uncomfortable. And so, like, the ostensible reason to have a user manual where you describe your foibles, your expectations, ways that you prioritize communication, is to make things more efficient. And it definitely does that because you can just point people at it. But it also has this really nice side effect of eliminating the risk that if you're direct with people about your idiosyncrasies, they won't think it's about them.

That's said, indeed. Now I want to dive into the growth side of things a little bit. What are the key things you need to ensure as a company that goes from maybe 0 to 10 million to 100 million in revenue? Maybe one or two things from a COO's perspective.

Yeah. So you're growing a business from 1 to 10 to 100 million. In ARR. Those are obviously all very different. There's like, very different stages from 0 to 1, 1 to 10, and 10 to 100. But what's your job? Your job is to keep stuff on the rails. Like in this, like, communication complexity, as there are more people in the business, there is more risk. You certainly have to be more risk aver in certain areas of your business. And so maybe one way to think about this is like, in any given function or in any different area of a business, you have a certain tolerance for variance. And so like in software, at the outset, you're exploring things. You're like just checking code in left and right to See if something can be built that the customer will want to buy. But when you get to our scale payroll, you do not want to mess around with payroll and your tolerance for variance in the performance of the payroll product drops precipitously. And so to mitigate that risk, you introduce process. Process reduces variance. Therefore process is a super useful tool. And so like we now have pretty strict code check in requirements, we have pretty strict compliance review requirements in like different parts of our business. But there are parts of your business where like variance is actually really freaking important when it comes to any sort of like innovation in the business and trying new things. Like you do not want to put people in a super tight process. And so one of the most important pieces of wisdom I think for an executive in a scaling company is to know when to apply process and when to allow chaos. And like, in the wisdom to know which model applies, there's like middle ground. Like one thing you want to try to protect as a company scales is the culture. And like, culture is a wildly overused and misunderstood term. And so I'll give you a specific definition which is that culture is the set of behaviors that you encourage or discourage in a group of people. And there's how you celebrate Thanksgiving, you know, how you celebrate Ramadan, how you celebrate what you do in your city, do you drive in the bike lane, do you smoke cigarettes outside at like a little pot, like they do in Japan? There's all of these different things that define culture across different slices of your communities. And so like how do you do that at a company? Like it's just one more community of which all of the employees are a member. And the way that we do it at Rippling is we think about establishing leadership principles. And like leadership principles are guiding high level tenets that inform how an employee should behave in the business. Like one of the ones that we have is like Rippling leaders. Go and see, they go and see what that means is like at Rippling we expect leaders. And I don't care if you're an individual contributor or a manager or whatever, if you're going to be a leader in the business, we expect you to go and look at the data, not manage things through spreadsheets. Don't get a Mode dashboard or a tableau dashboard, Go fucking read the closed notes on the deal, Go read the support ticket of the pissed off customer. Go talk to the people in the front lines of the business who are like experiencing whatever the issue is and come back to the table with a perspective that's informed by going and seeing. And so we have nine leadership principles at Rippling, of which Go and See is one. And that codifies a set of behaviors that we think spell success at this company specifically. So like scaling from 1 to 10, you got to be okay at this. But scaling from 10 to 100 million, where you're talking about hundreds or thousands in our case of employees, you've got to put a scaffolding in place. And it's a form of process. It's a form of process that like reduces the variance in the behaviors that you see from people at the company and rewards the behaviors that you want. And I don't think any company in recent memory has scaled to an awesome outcome without having a very deliberate code for things like this in their business. So like, that to me is one of the most important things that I think we're getting right and have to continue to invest in to get right.

Culture is the leading indicator of growth. I liked how you broke it down. It's the set of behaviors. Now in terms of hiring, the one thing I heard, and I've seen, and I think I've seen Parker tweet that as well, Rippling likes to hire a lot of former founders. What's their strategy behind that and what roles do you hire these people?

Okay, so like when you hire a founder, you're applying a heuristic. There's a set of really concrete behaviors that you want from everyone in the business. You can't interview people for seven weeks, put them all on some sort of like multi month probation period to examine their behavior before you hire them. And so you're reduced to looking for shortcuts to predict how someone is going to behave in a business. Like that is what the hiring process is. It's how you pick candidates. There are many different heuristics. You can give people coding challenges and see how they perform and observe how if you challenge them with telling them something is incorrect, how do they react? Are they open minded or are they combative? Are they defensive or are they vulnerable? Like you can really start to get to know somebody quickly. One of the shortest hand heuristics for like the collection of behaviors we think makes somebody successful at Rippling is that they've started a company before because man, they are going to have a go and see attitude. They are going to be able to make decisions quickly. They are going to be willing to change their minds. They are probably going to have a capacity to be right a lot. They're probably going to do what is right for the customer every time. Because what you're really doing, by the way, I'm just rattling off the leadership principles at Rippling. Like these are the characteristics of successful entrepreneurs. When I say successful, by the way, I don't mean they built a billion dollar company. Like successful entrepreneurs are the ones that follow a good process regardless of the outcome. Like that's still a successful entrepreneur. If every awesome entrepreneur had a billion dollar outcome, there'd be like a hundred times as many huge outcomes. But the market doesn't bear that. And so there's all of these extraordinarily talented entrepreneurs who just didn't get lucky. And so when you bring them into Rippling, they still come with this awesome can do. Embrace the ambiguity attitude. I love it. And so like you asked as a second part of your question, like, where do we put them? We don't care. Like often what happens is that they end up running a business. So like our spend management product was built from scratch by a guy named Rashab who started a company that I had invested in. The company didn't work out, but he was a killer entrepreneur and he's done a great job. Our time and attendance solution was built by a guy named Sachith. Again like somebody in whose business I had invested. Amazing entrepreneur, didn't get lucky in the market, came to the table and built the time and attendance solution and has proven to be an awesome technical leader. Like entrepreneurs can be put into kind of any situation and if they bring that mindset to bear on the problem, they're going to be successful. And so we have an all you can eat appetite for people with that mindset joining our company. And we will carve out space and make room for any successful entrepreneur. Successful meaning like they ran a good process regardless of the outcome.

I love how you talked about it. I think in the beginning we said I define success as you made some money. It doesn't have to be a billion dollar company, but it came to an outcome. But this is even better. You learned something, you ran a successful process.

You ran the experiment in the universe and you got an answer. And so many people claim to have started companies but never got off their fucking sofas. And that's, that's, that ain't it. That ain't it. Yeah.

What is your sort of benchmark of a successful process though?

Well, yeah. Did they build something or did they ship it? Did it go? Did they get something in market? Did they get customer feedback? Were they able to like raise money as a proxy for this? Again, whether they raised money is a heuristic for whether they were running a good process. It's not like directly inspecting the process, but you have to assume that like a decent venture capitalist is going to have a decent read on it. And so you can use that as a heuristic. Did people want to come and work for them? Did they ever recruit like a team of good people to work for them? If so, okay, now we know that they're willing to get off their asses. We know that they're willing to go out and hustle to try and get people to join their company because man, hiring the first and second employees fricking hard. We know that they were able to assemble a team to actually get something out the door like you can. The symptoms of good process are readily observable regardless of what ultimately happens economically to the company.

Definitely. And these are good ways to think about it. I wanted to ask you a couple other questions, but I think this very much answered that. I was going to say as you grow, as you add more and more people, more and more customers, more and more revenue, especially in the B2B SaaS world, it's hard not to grow fast without growing old. It's hard not to lose that startup velocity. And so I was going to ask how do you maintain that? And I think this is the way you guys probably maintain that. This culture of hiring founders and doers who can deal with ambiguity. Your culture is all about that.

Yeah, there's. But there's another part to this that is is perhaps not super actionable or satisfying but you gotta be relentless like you have to never lose your energy. There's a company that I won't name whose founders recently did a blog post about a major change in the way they were running their business. Like a big strategy change. And they had written the co founders were like back in the saddle and re energized by the new challenge. And I was like where the fuck were you guys for the last two years? Who would say that? Why would you say I'm re energized about my startup? Where did you get de energized? What a horrible thing to say. What I will tell you about the leadership team at Rippling is like we have a nuclear power source that like it is just non stop go energy and if we see something that's wrong, we fix it. If we see something we don't like, we do something about it. And it's super easy after you get a bit of to take a step back and maybe lose your conviction and maybe Be gaslit by some really touchy feely people that like, it's not good to keep the pressure on, but you have to keep the pressure on. It has to be hard. It has to be difficult at every step. If you're going to build like an absolutely generational company, how could it possibly ever be easy? That's ludicrous. And the analogy I go back to on the sports front is think about the golden state warriors, like 2017, 2016, like when they really got into this like rhythm of winning. Or think about the Olympic gold medal women's gymnastics team from the last decade. If they had someone on their team who wasn't very good, what did they do? They cut them. There was no hesitation. There wasn't. What about their feelings? There wasn't. Let's take it slow. Maybe they'll get better. No effing way. The Golden State warriors, man, they cut people from that team like a toenail. They don't care. Because it's about winning. It doesn't mean you have to be inhumane. It doesn't mean it has to be like a grinding meat market all the time. Those teams have room for fun too. But when you contemplate what it means to win Olympic gold, when you contemplate what it means to win the top title in whatever sport you play, there is just zero chance that anybody is ever comfortable. Zero chance. There is zero chance that any of those winning teams ever tolerate non performers. Ever. And so if you want to build a winning company, it should never be easy. You should be relentless in pursuit of excellence all the time. It should be freaking exhausting. And you should think about it the same way that the Golden State warriors think about winning the title. There's nothing short of that's ever going to win a market as fiercely competitive as yours or mine or any other market you're in. The biggest winners are going to be the ones that never stop. And that's to me the most important ingredient for us. High pace, relentless energy, pursuit of excellence. No tolerance for non performers. And then like tonight at 5:30, I'm going to do rippling wine club. And like we're going to have 50 or 60 people like in the cafeteria tasting wines and high fiving, getting a little loose. Like we love each other, just like the Golden State warriors love each other. Just like the women's gymnastics team loved each other and just built, built this awesome connection with these other human beings in the course of being winners. And that's like my great hope for anybody who works at rippling Is like it's grinding and hard and you make some great friendships. That's what this is actually all about in the end is like the journey.

It is.

And you know what?

Anything worth doing is not easy. Pain is the precondition for growth. The one thing's been consistent through this conversation, your energy, man. You got this energy.

Energy.

You talk to people. And there's very few people I talk to that have that energy. Twilio CEO is one of them. Jeff Lawson is having to own the space. That's your energy. Your energy is, I have a company but I want to come work for you. That's the energy you're giving out, man. I can just sense what it's like.

I'll take that, I'll take that as a compliment because look, we're all going to die and on the way to death, we're going to choose the sport or the game that we're going to play on the way there. So choose the sport you want to play. And if it's going to be business, play to win, don't play to lose, don't play to kill the time. Play to win. And if you don't feel like winning, then maybe you've chosen the wrong sport. There's nothing wrong with that. But find the one that makes it just natural for you to want to be the best. That's the path to happiness in my view.

Definitely. Now a big part of this is also creating a solid product focused culture throughout the organization. Not something that just sits with the PMs or you guys are very product first company. How do guys manage to do that? Hiring entrepreneurial people, relentless focus, go high energy. That product mindset is hard to bring sync throughout the company, right?

Yeah, it is actually really hard. And I'll give you a couple of reasons why it's hard in general and then how we do it. Like one of the great traps of the natural growth of a company is that you subspecialize all of the functions. So initially it's just a founder sitting on their sofa and then it's a founder and a co founder and then it's a founder, co founder and they're engineers and everybody has really rich, rich shared context. And so it's super easy to optimize the whole engine and not to inadvertently optimize a subsystem like just optimizing sales or just optimizing marketing or just optimizing engineering. You wouldn't do that because there's five people. And so everybody's got the same context. But like, when you get to be 500 people, a thousand people, whatever, not even that many, like 100 people, you start to subspecialize. And what happens is, like, you have a very convincing head of sales, which tends to happen like. Like they're viewing the world inside their box. They're thinking about how they optimize the sales engine and thinking about how they can do things that would help them make their number or whatever. But if the solution to the problem that the salesperson has. Let's say the salesperson's having a really hard time selling the product to this segment or this customer, the solution to the problem is the product, the salesperson's not very well equipped to, like, even see that possibility. Right. They're gonna work on optimizing what's happening inside of their own little world. And so what works for Rippling? Parker does a great job of starting from the product as the place that all problems begin and probably all solutions begin. And he's right. Like most of the things you think about in the product, I'm going to give you a concrete example of this. Like, HR teams in companies, we happen to be an HR software company, and if you think about not being able to get a report out of your HRIs that you really want, okay, so I want to know the job levels of, like, people in the marketing department over the last 12 months, and I want to see, like, a histogram so I can tell what the trend is toward more senior or more junior in that function. If the product doesn't support that at most companies, what the HR team will do is they'll download the data from the HRIS and use Excel to massage it. And I guarantee you what's happening as a result of that is that the product team that built that reporting engine in that HRIS has no knowledge that this is a problem for that customer. There's no feedback loop. There's no back pressure. Like, they just solve the problem inside their box. In hr, thinking about how they would get to the answer they need to get to. So at Rippling, we don't do that. We don't let the HR team download the data and massage it in a spreadsheet. It's a huge pain in the ass for them. They don't like it. But what they are forced to do is give feedback to the product team. So if they want to do something they can't do in Rippling, the product team has to implement a fix not for us, but for all of our customers. And then they're able to run the report. And by creating this setup where like the product is the source of all problems and the product is the source of all solutions, you are able to make a product that works better for customers. And we dog food the shit out of our software. We dog food it all day, every day. Don't allow people to make workarounds on their own terms, inside their own scope of responsibility, because they're not seeing the bigger picture of what could be done. And that's like a, that's a hallmark of the way that we run the company and the way that we make our product better.

Fantastic. How many people do you guys have today?

We're like 1700.

That's a crazy task to achieve at 1700 people, let alone 17. So kudos to you guys. And it's a fairly global workforce, right? Where are the majority of the people?

Yeah, our major populations are in San Francisco, New York, Seattle and the us and then Bangalore has a big office that's like the nicest office of all of our offices.

And then one of your co founders are there.

Yeah, yeah. Persona, who was Parker's co founder, just had a good network there. And so we were able to get like an A team off the ground from the very beginning.

Cool, cool, cool. So key learnings from building this global, diverse workforce. Distributed workforce.

Man Global. So this is one of the most important things that has happened in the positive column for Rippling, which was, I hate to say it that way, but like the pandemic has created a lot of new economic opportunity. Right. Notwithstanding the negatives, if you are a company that is lucky enough to be strong in a market, just as it go, undergoes some like major secular shift, you have this huge advantage over incumbents. Let me explain that a company for us, like ADP or paylocity or paycom or Paycor or all of these incumbent like providers of payment solutions were all built pre pandemic. And their model of the world is like really calcified in their product. And so the market never really used to demand that you would take one system and use it globally because you didn't have that many employees globally. And like most of your employees were in an office in Pick youk Place. And like the people who were stragglers, you were willing to buy another system in that country and just pay someone to operate it. And you didn't really think about it. Covid completely upended expectations about where people are going to live and work. And this old patchwork approach to managing employee data and paying employees globally fell apart. It doesn't work. It's absolutely bonkers what you have to do with ADP and Ceridian in Canada and some other system in Europe to pay employees if they don't. The systems don't talk to one another. We have built a global payroll system and a global employer of record system, an EOR system that allows you from a single interface, from a single system to administer payments to employees around the globe in one single integrated system. Like the fact that the market shifted under our feet when we were still and still are a young company allowed us to really quickly pivot the approach push of the product to match that new market dynamic. Like ADP is. They're like the Ford or the BMW to the Tesla. Oh man, it's going to take them so long to think about how to re architect their entire freaking system and rethink all the assumptions in the design of that system to be able to adapt to the new post Covid reality. Whereas we were able to jump on that opportunity instantly. And so we are literally and this is like not marketing hyperbole, it's not unwarranted self aggrandization. We are the only company that has ever built a truly integrated single global payroll platform that just moves the money. Like we debit your US account, we deposit to employee accounts in the uk, we take care of the money movement, we show you the currency conversion rates right in the interface. And this is just one of a number of different things that we do to make it easy for a company to run itself globally. This is huge for us and I think in hindsight it will have been been the single most important ingredient to our financial success as a company. And it happened to us. If Covid hadn't happened, and I wish it hadn't, but it wouldn't have offered us quite the same rich amazing opportunity that the company has today to go and capture that market.

I think I was reading that there was a survey that said what was the biggest cause for digital transformation in your company. These were big company CIOs were joking about it and they talked about many factors and then they put COVID 19 as the number.

Yeah, it's like you can talk about COVID 19 as a thing, but really what's interesting is where you contemplate for a moment all the knock on effects of what Covid did. Like the behavioral changes in consumers where we work from, all that kind of stuff. It's pretty fascinating.

Matt, this has been a fantastic conversation. I feel I can go on and on. Your brains are just gold but as you look back on your journey, what was the toughest, low, lowest point? How did you navigate it? What can we learn from that?

You want rippling or do you want like the whole thing?

The whole thing. Because you know what? Sometimes yes, rippling is a big task, but it might not be the lowest point and sometimes pretty straightforward answer is.

For me which is like Inkling was nine years of my life and but it feels like it was like 30. I started that company when I was 29 years old. Solo founder. Solo founder. But not really because very quickly a couple people joined me as co founders and like they were good friends. It was me alone on the sofa for like, like let me put it this way, like the co founder of Inkling wasn't a co founder. Like the main, like the engineering co founder wasn't a co founder until I had already quit my job and started the company because he didn't believe me that I was going to fucking do it. And I called his bluff. He's like, if you actually go and do it, I'll join. I'm like, okay, I'm going to hold you that I quit. I started the company. And then he's like, shit. And so he had no choice. He had to keep his word. I wasn't solo for long. That company was started primarily in hindsight, out of a sense of existential crisis on my part Start that I had not yet started a company. Yeah, I knew the market pretty well and I knew some insights about the iPad before it came out. And there were reasons why I was probably a good person to start that company. But really sadly it was more about me wanting to start a company than it was about some burning need to solve a problem in the universe. And we pursued that business doggedly for nine years. But in the end, look, it wasn't a great financial outcome. We sold it to a private equity firm for less money than we had raised. I got a check through the very goodwill of some of the investors providing a carve out. They're like, I didn't get rich. And over the course of that I had my ego just ground down into a fine powder. Like I was not the shit I thought. I had not become the person that my 18 year old self had expected me to become. And I judged myself very harshly for that and I am so thankful for it. It was like when we finally, when I really realized that like the gig was up and we were going to sell the company and it wasn't going to be a great outcome, like took us a year to do it from that point part, that point forward. And that was a really tough year. It was a really, really shitty year. And you know, in hindsight, I have a completely different worldview. I talk about business as a sport. I don't talk about it as who I am. I think about winning because I want to win. I don't talk about winning because it's something I need to do to value my own being. And that sort of enlightenment, if I can use that word, is like making me a better leader. But dude, like when you are convinced that you need to get something done to be worth something and then you don't achieve it, you have some serious demons to face. And I meet many founders and many entrepreneurs, I think, who also have that disease that like success in entrepreneurship is the very definition of their success as a human being. And it's something I'm very glad I've.

Grown out of, definitely. And one thing I took away from this conversation, a lot of founders, when they start small, bootstrap or whatever, 20, 30 people, you get really close, you start throwing the word family a lot. And I heard the word word team a lot. Ice of championships a lot. And I think that is the right approach because you can't treat your company like your family.

Super dangerous to ever use the word family at work. Super dangerous. It's not your family. You can't fire your sister. You gotta be able to fire your colleague. You have to. It's a team. And the team is there to win. I love family. I'm glad I have one. They can't fire me, man. God knows they probably should have fired me like 10 times. Times.

But when you try to though with family comes a lot of drama. You don't want drama in the company.

Yeah, I mean, like, this is. Family is an important part of life and work and teams are an important part of life, but they're definitely not the same thing.

Fantastic. This has been a great conversation. Where can we find you on Social Active, anyone?

Yeah, I'm like, I'm a major lurker on Twitter @stanine S T A N I N E and that's probably about it. Otherwise I'm at work doing my thing and I keep a low profile and I love it. Thanks for getting me out of my little shoebox for this day.

Thank you for listening and we hope you enjoyed this week's episode of the Traction podcast. If you enjoyed the show, please leave us a five star review and you can find all the information mentioned in today's episode @TurtraCoff IO that's T R.

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