Many startup advisers suggest starting a B2B software business by solving one key pain point, attracting customers, and adding features as the company grows
Parker Conrad, the current CEO and founder of Rippling, an HR software startup valued at $13.5 billion in April, is a serial entrepreneur who believes this is an incorrect approach.
In a recent episode of TechCrunch’s Found podcast, Conrad expressed his belief that the guidance provided to software founders over the past two decades has been misguided.
He stated, “I believe the prevailing opinion regarding business software development is that one should concentrate on a single, specific aspect and delve deeply into it.” “I believe that the incorrect development of business software has characterized the last two decades due to this conventional wisdom.”
The consequence of developing these extremely niche applications is that businesses are now required to oversee the operation of 100 distinct software applications, creating significant inefficiency.
Conrad naturally discusses his book in this context. Rippling aims to provide a comprehensive solution encompassing various services, including payroll, expense management, corporate cards, and IT solutions. Conrad’s response to inquiries regarding his feelings toward competition was contingent upon the specific requirements of a prospective client.
Conrad stated that Rippling competes with Brex and Navan in the finance sector, while it may compete with Gusto in the payroll solutions sector.
“The key to developing superior business software is to establish a system that enables the development of multiple parallel business software applications that are all natively integrated into the same system,” stated Conrad.
He stated that the development of software in this manner enables organizations to construct numerous applications on top of a single dataset, thereby achieving a standardized user experience. He also stated that it provides companies with additional pricing options.
While there are certainly instances in which it is advantageous to establish a company’s focus and invest in a specific area, such as cybersecurity, Conrad’s assertion that platforms outperform function-specific companies has some validity, particularly during economic downturns when enterprises have fewer financial resources to allocate to software.
Last year, TechCrunch reported that numerous SaaS startups were likely to encounter difficulties or be forced to consolidate due to the market frenzy of 2020 and 2021, which saw the launch and funding of numerous one-feature startups.
Loren Straub, a general partner at Bowery Capital, expressed a similar sentiment at the time. In January 2023, Straub stated to TechCrunch that no one would invest in a startup developing a product limited to a single feature, as these startups lack a moat or an element that distinguishes them from potential competitors. She stated that companies hesitate to allocate funds to single-feature technology, particularly during severe budget constraints.
VC Mark Goldberg, a partner at Index Ventures at the time and who has since established his fund, expressed the same sentiment in an interview with TechCrunch last year. According to him, it is more probable that large corporations will utilize subpar offerings from their current contracts before executing a new agreement with a one-note startup.
“One of the frightening developments before Salesforce acquired Slack was the launch of Teams by Microsoft,” Goldberg stated. “We in Silicon Valley all believed that it was a fine product and superior to Slack; however, many individuals are uninterested.” What is the necessity of a distinct vendor? That is an instance where the best-in-class designation may not have been advantageous.
Conrad anticipates that his horizontal strategy with Rippling will attract and retain consumers as the market fluctuates. So far, it has been effective.
Conrad stated that the software industry is extremely competitive, with a dozen competitors in each vertical. He also mentioned that customers prefer an approach where a software company “builds the system that sort of recombines all of this and gives people one system that combines a lot of these capabilities and wins.”