The Exchanges

Q Listen, you, you always come to my show for an honest conversation. Talk to me about the screw up at the series B. I read this, and I kind of was wincing in pain, but also, you know, uh, empathetic to my dear friend Jeff, feeling sorry for you. Um, tell, tell me in this one, what happened, and what was the fuck up there, man?

A Oh man, look, I, If I had to sum it up, it would be analysis paralysis. I want to take you back to, I want to take you back to that moment in time, and I'd encourage folks to go to bedrockcap.com slash rippling. Where we write about this ad nauseam. But, you know, it was sort of February of, and we were convinced there was going to be this COVID shock, everything was going to grind to a halt, and then there would be a rebound at some point. So we project, we got the projection right. We were like, what do we have agency? What can we at Bedrock do to take advantage of this as investors? And we concluded we should invest in Rippling because they're not, we're not going to have 20 VC firms Competing to lead a preemptive series B at this moment in time. We called Parker up. He's like, yeah, I'll engage. We dropped everything for two weeks, literally while the world shut down. All we were doing was working on Rippling, myself, Spencer, Eric. All we were doing was working on Rippling, interviewing all the executives. Tons of diligence. We agreed on evaluation with Parker. He's like, send me the term sheet. I'm ready to sign. And we were like, wait, Like all of their business at the time was SMBs. Now, since then they've extended, expanded surface area phenomenally into mid-market. They're starting to crack very early innings, but upmarket. Back then it was like all SMBs. We're talkin…

AI assessment note: “If I had to sum it up, it would be analysis paralysis.”

Q the market environment that we spoke about there, the one question I did have applied to the company is, and actually speaking about kind of the upgrade rate that you spoke about earlier, given the macro, given the layoffs, given current kind of internal sentiment within companies today, are you concerned, like, how does the new market environment affect Rippling's customer base in your mind, and is that a concern?

A I think it's great for Rippling's, I think it's great for Rippling. I mean, it's going to be challenging for Rippling's customer base. The reason that it's good for Rippling, Is because they actually allow their clients to do more with less. They're able to show their clients tangible time and headcount savings. So it is a more for less story. Rippling customers don't need to hire dedicated payroll administrators until they're over a thousand employees. Rippling customers, you can onboard a new, onboard a new employee in less than five minutes. You can offboard a new employee in less than five minutes. Uh, you can convert a contract or a part-time employee into a full-time employee in five minutes or less. It removes so much administrative work. It is a cost savings tool, which is why we're seeing the upgrade, the magnitude of the upgrade volume that I'm at least anecdotally seeing through these emails of whatever Customer upgrades. It's unbelievable. So I think it's a plus for Rippling. If you save a company money when they're trying to save money by reducing administrative work, that benefits Rippling. Now, the jury ultimately is out. I mean, if, if we enter a true recession and companies are laying off hordes of workers, that's obviously not good for any enterprise SaaS company. It's not going to be great for Rippling. Um, but ultimately I believe that like, yeah, I, I don't…

AI assessment note: “The reason that it's good for Rippling, Is because they actually allow their clients”

Q Listen, you, you always come to my show for an honest conversation. Talk to me about the screw up at the series B. I read this, and I kind of was wincing in pain, but also, you know, uh, empathetic to my dear friend Jeff, feeling sorry for you. Um, tell, tell me in this one, what happened, and what was the fuck up there, man?

A Oh man, look, I, If I had to sum it up, it would be analysis paralysis. I want to take you back to, I want to take you back to that moment in time, and I'd encourage folks to go to bedrockcap.com slash rippling. Where we write about this ad nauseam. But, you know, it was sort of February of, and we were convinced there was going to be this COVID shock, everything was going to grind to a halt, and then there would be a rebound at some point. So we project, we got the projection right. We were like, what do we have agency? What can we at Bedrock do to take advantage of this as investors? And we concluded we should invest in Rippling because they're not, we're not going to have 20 VC firms Competing to lead a preemptive series B at this moment in time. We called Parker up. He's like, yeah, I'll engage. We dropped everything for two weeks, literally while the world shut down. All we were doing was working on Rippling, myself, Spencer, Eric. All we were doing was working on Rippling, interviewing all the executives. Tons of diligence. We agreed on evaluation with Parker. He's like, send me the term sheet. I'm ready to sign. And we were like, wait, Like all of their business at the time was SMBs. Now, since then they've extended, expanded surface area phenomenally into mid-market. They're starting to crack very early innings, but upmarket. Back then it was like all SMBs. We're talkin…

AI assessment note: “If I had to sum it up, it would be analysis paralysis.”

Q pay my therapist so much more than you do, so, uh, don't worry about it. Um, I want to move to the second narrative violation, though, with Rippling, which is, um, basically how they build the company itself. It's been described before as a compound startup. Um, I want to touch on this. How did you first see this compound startup build with Rippling, and what does that mean, really?

A Well, look, I think it basically means that they are trying to become truly the employer of record for not just SMBs, not just mid market, but upmarket as well. And in building an employer of record, that means like multiple, multiple products where you basically have pseudo decentralized teams internally, With leaders, building them, and then ideally there'll be, there's this flywheel effect over time. And the way that we've seen that really come to the fore over the past few quarters with Rippling is the upgrade rate is astronomical. So, I mean, whenever people renew, when customers renew, they're upgrading. One of the things that Rippling does that I think is super cool is we get an auto email, uh, the major investors, there's a few of us, ourselves, Sequoia, Kleiner Perkins, Founders fund. Get an auto email on, um, every time they close a deal, and just folks are upgrading like crazy because they've built this suite of so many different products. There are so many things for people to upgrade to, so much to cross sell, and the value proposition is uniquely suited, I think, to our times, which was part of why we decided to, you know, Quadruple into the company by co-leading that Series D round earlier this year. It basically allows businesses to flatten the G&A curve. It allows them to spend a lot less. They can accomplish a lot more faster without adding a head count. So I …

AI assessment note: “it basically means that they are trying to become truly the employer of record”

Q Not at all, but I want to start with a little bit of context. We always love a good storyteller on how the person made their way into the wonderful world of venture, as you said before. So how did you make your way into the world of venture, and what was that entry point for you, Jeff?

A Really started back in 2009 when I, uh, took a leap and left a hedge fund I wanted to start a startup, and that business ended up becoming this company called Topguest, which was an enterprise SaaS company. After we sold it, one of my investors, Founders Fund, sort of asked me if I wanted to try out being a venture capitalist, and I ended up joining Founders Fund as a principal in 2012, really thinking that I would stay for like a year and go on to start another company, because Topguest, while we'd made our investors some money, it certainly didn't change the world in any meaningful way. And I always thought I'd go back to building another startup, but just Fell in love with venture and joined at a moment in time in 2012. When there was so much opportunity, this wave that might be cresting now in venture was really just starting back then in 2012. So I just ended up getting to invest in some phenomenal companies and working with incredible entrepreneurs. And one of the folks that I'd known from my startup days, even predating my time at FF, I was Eric Stromberg. And in late 2017, early 20 18, we decided to start Bedrock together. And it's been a whirlwind since I can't believe four years have passed. We made that decision.

AI assessment note: “Founders Fund, sort of asked me if I wanted to try out being a venture capitalist”

Q They say, hey, hey, hey, no, no, no, take that off. I do want to ask you, Bedrock, you've built something very, very special in the short space of time, Jeff. What have been the most challenging elements of building the firm that is Bedrock? And you know, for me, in the preceding chapter, to you, what advice would you give me having built such a great foundation to Bedrock?

A I mean, the reality is, when you're building a venture firm, you're sort of rewriting the script, starting from scratch with every new fund. And so, it's not like building a company that's building a Product that you're sending into the world. You sort of have to rewrite the script with every new fund. The strategy needs to constantly be changing. And so I think in practice, what that means is having very clear principles from day one, but having few rules, lots of principles anchored in principled discipline thinking, but not that many rules. So for example, our guiding ethos, our principle at bedrock from day zero was we want to search for narrative violations. We want to search for companies that for whatever reason are being overlooked or underestimated by other investors where we can get in at a counter narrative moment in time. That is the guiding ethos of the firm. In order to do that, we really can't have many other rules. So for example, I used to have a rule that I would never do an uncapped note. This was a rule I had from my first day as a VC. It was drilled into my brain. You're nodding that you agree with that. Drilled into my brain by like some of the people who mentored me at Founders Fund. Never do an uncapped And I think one of our best investments at Bedrock was doing an uncapped note investment in Rippling, and so you sort of have to always know when you hav…

AI assessment note: “having very clear principles from day one, but having few rules”

Q Not at all, but I want to start with a little bit of context. We always love a good storyteller on how the person made their way into the wonderful world of venture, as you said before. So how did you make your way into the world of venture, and what was that entry point for you, Jeff?

A Really started back in 2009 when I, uh, took a leap and left a hedge fund I wanted to start a startup, and that business ended up becoming this company called Topguest, which was an enterprise SaaS company. After we sold it, one of my investors, Founders Fund, sort of asked me if I wanted to try out being a venture capitalist, and I ended up joining Founders Fund as a principal in 2012, really thinking that I would stay for like a year and go on to start another company, because Topguest, while we'd made our investors some money, it certainly didn't change the world in any meaningful way. And I always thought I'd go back to building another startup, but just Fell in love with venture and joined at a moment in time in 2012. When there was so much opportunity, this wave that might be cresting now in venture was really just starting back then in 2012. So I just ended up getting to invest in some phenomenal companies and working with incredible entrepreneurs. And one of the folks that I'd known from my startup days, even predating my time at FF, I was Eric Stromberg. And in late 2017, early 20 18, we decided to start Bedrock together. And it's been a whirlwind since I can't believe four years have passed. We made that decision.

AI assessment note: “one of my investors, Founders Fund, sort of asked me if I wanted to try”

Q They say, hey, hey, hey, no, no, no, take that off. I do want to ask you, Bedrock, you've built something very, very special in the short space of time, Jeff. What have been the most challenging elements of building the firm that is Bedrock? And you know, for me, in the preceding chapter, to you, what advice would you give me having built such a great foundation to Bedrock?

A I mean, the reality is, when you're building a venture firm, you're sort of rewriting the script, starting from scratch with every new fund. And so, it's not like building a company that's building a Product that you're sending into the world. You sort of have to rewrite the script with every new fund. The strategy needs to constantly be changing. And so I think in practice, what that means is having very clear principles from day one, but having few rules, lots of principles anchored in principled discipline thinking, but not that many rules. So for example, our guiding ethos, our principle at bedrock from day zero was we want to search for narrative violations. We want to search for companies that for whatever reason are being overlooked or underestimated by other investors where we can get in at a counter narrative moment in time. That is the guiding ethos of the firm. In order to do that, we really can't have many other rules. So for example, I used to have a rule that I would never do an uncapped note. This was a rule I had from my first day as a VC. It was drilled into my brain. You're nodding that you agree with that. Drilled into my brain by like some of the people who mentored me at Founders Fund. Never do an uncapped And I think one of our best investments at Bedrock was doing an uncapped note investment in Rippling, and so you sort of have to always know when you hav…

AI assessment note: “having very clear principles from day one, but having few rules”

Q If we flip over now to Jeff Lewis, founder and managing partner at Bedrock, Jeff, how do you think about and reflect on your own framework for price?

A And so my framework on price is, for point of entry, for one's initial investment, less price sensitivity, I think, is okay. I think if you're doing a smaller ticket, you're getting into a company, you can be a little bit less price sensitive. Where I think there's more potential to get tripped up is in this situation, when you're already high conviction, you already know the company, and you really want to double down. Getting that pricing right is actually really important, but I will say that you're already paying a hundred X AR multiples. The difference between a hundred X AR multiple and a 150 X AR multiple. The reality is those are both insane. And so you have to have extremely high conviction and to have done your diligence and really believe this set of entrepreneurs, this company is going to transcend. And if you feel that way, I would go for it at 300 versus 200. If you don't, I would do zero.

AI assessment note: “my framework on price is, for point of entry, for one's initial investment”

Q If we flip over now to Jeff Lewis, founder and managing partner at Bedrock, Jeff, how do you think about and reflect on your own framework for price?

A And so my framework on price is, for point of entry, for one's initial investment, less price sensitivity, I think, is okay. I think if you're doing a smaller ticket, you're getting into a company, you can be a little bit less price sensitive. Where I think there's more potential to get tripped up is in this situation, when you're already high conviction, you already know the company, and you really want to double down. Getting that pricing right is actually really important, but I will say that you're already paying a hundred X AR multiples. The difference between a hundred X AR multiple and a 150 X AR multiple. The reality is those are both insane. And so you have to have extremely high conviction and to have done your diligence and really believe this set of entrepreneurs, this company is going to transcend. And if you feel that way, I would go for it at 300 versus 200. If you don't, I would do zero.

AI assessment note: “my framework on price is, for point of entry, for one's initial investment”

Q I have this vengeance myself, because my grandparents lost everything when I was young, and you know, as a family, you see your grandparents and your family lose everything, and it really is destabilizing to your core. Um, do you have vengeance, Jeff?

A You know, I try to anchor myself to ancient things, um, ancient beliefs about the world, and they've helped me to really overcome feelings of vengeance that I had earlier on in my In my life, in my career. At this point, quite honestly, I feel very free. I don't really have vengeance at all, but because I've had it at junctures in the past, I know it when I see it, and I respect its power when I see it, and I want to back the truck up into entrepreneurs who have the goods, who have a huge life's work mission, Who clearly can execute, who clearly are A+, and have that extra motivator. Because I know how, I know, I know the degree to which it can push someone. So, like, it's so irrational to start something huge from scratch. Like, what we've done, Harry, starting these new venture capital firms, when you've got these Extraordinarily powerful incumbents that we're competing against and trying to collaborate with wherever we can. It's just completely insane to even try and start these things. You have to have something else beyond the life's work motivator. There has to be something a little bit off powering you to keep going. And Parker has that in spades more than any entrepreneur I've backed. He's got it.

AI assessment note: “I don't really have vengeance at all, but because I've had it”

Q Tell me, what, what was the unique view? Because as you said, the market was crashing. I think, you know, in the memo it says itself, the mid-market tech stocks were down 60%. It did not look rosy. What was the unique view that gave you the conviction to write such a large check and really double down at a worrying time?

A Well, look, the unique view was multifold. I'll start with our macro view, which I think was actually pretty unique. And then I'll talk about how it led us to rippling specifically. So we started to project out, we had a mental model we were building and say, November, December of 21, January, February of 22, there's going to be a huge crash. Things are insane. People are going to run away from growth. That's part one. So we felt like everyone's going to run away from growth. What's going to happen when everyone runs away from private growth? We felt like they were going to run to early stage and pricing at seed in series A, where we typically like to enter a company and we entered Rippling shortly after their series A. That's what we typically like to enter. And we did that with Rippling a little bit after their series A, so we didn't get it quite on the nose. But everyone's going to run there and prices will basically stay where they're at. But a lot of those companies will end up not being able to raise fall on financing because actually there's going to be a 12 to 24 month period of repricing in the private markets. And nobody, including us at Bedrock, nobody knows where the pricing is ultimately going to land. We still don't know, Harry. I don't freaking know what the pricing is going to be two years from now. Anyone who says they know is lying. Nobody knows where it's goi…

AI assessment note: “the unique view was multifold. I'll start with our macro view”

Q thing for the fund, especially when you deployed into Rippling. But in the short term, you miss out on making LPs happy and sending them back cash, which can help in terms of future fundraisers. I, I have this question now quite often where you, you know, you have the chance to distribute back versus redeploy. How did you think about that then? I'm just interested to learn from you.

A Well, we did it on fund one. So we returned a 10 plus X life to date multiple on our Bitcoin and Ethereum investments on fund one. To our LPs in cash. Nobody even emailed us to thank us. Didn't get a single thank you email from our Fund One LPs. Wow. This is a 20 18 vintage fund. You are a top five percent venture fund based on the Cambridge Associates data. And no one gave a shit that we returned that money so early on the fund's life. So I'm like, you know what, if they don't care, we're going to do what's best for maximizing the multiple of the fund because ultimately That's where our interests are aligned with our LPs. We all want to maximize the multiple over many, many years. We're recycling. So we're like, we're not making that mistake again. We're going to recycle these proceeds and we're trading out of a frenzied overvalued asset class that ultimately we think is going to bounce back over many years. Bitcoin and Ethereum will bounce back and we're going to put it into a back to basics compound startup company. And we're glad we did.

AI assessment note: “we're not making that mistake again. We're going to recycle these proceeds”

Q Do you agree that as a VC, you have to be inherently optimistic? Optimists like fundamentally make money in venture.

A Well, that's definitely been true historically. Uh, and then the question is, um, the question is, uh, is it going to be true in the future? Um, look, I think, yeah, you need, I think, I think you need to balance both, Harry, to be honest with you. I mean, I'm not like blindly optimistic. We at Bedrock certainly are not blindly optimistic. We have a healthy dose of pessimism on lots of things and brutally intensive debates internally, but ultimately I think you have to believe in the ability of select life's work entrepreneurs to transcend, to build extraordinary teams that build extraordinary companies, You have to be optimistic that people have agency and can do great things. You can be pessimistic about a lot of other things.

AI assessment note: “I think you need to balance both, Harry, to be honest with you.”

Q I have this vengeance myself, because my grandparents lost everything when I was young, and you know, as a family, you see your grandparents and your family lose everything, and it really is destabilizing to your core. Um, do you have vengeance, Jeff?

A You know, I try to anchor myself to ancient things, um, ancient beliefs about the world, and they've helped me to really overcome feelings of vengeance that I had earlier on in my In my life, in my career. At this point, quite honestly, I feel very free. I don't really have vengeance at all, but because I've had it at junctures in the past, I know it when I see it, and I respect its power when I see it, and I want to back the truck up into entrepreneurs who have the goods, who have a huge life's work mission, Who clearly can execute, who clearly are A+, and have that extra motivator. Because I know how, I know, I know the degree to which it can push someone. So, like, it's so irrational to start something huge from scratch. Like, what we've done, Harry, starting these new venture capital firms, when you've got these Extraordinarily powerful incumbents that we're competing against and trying to collaborate with wherever we can. It's just completely insane to even try and start these things. You have to have something else beyond the life's work motivator. There has to be something a little bit off powering you to keep going. And Parker has that in spades more than any entrepreneur I've backed. He's got it.

AI assessment note: “I don't really have vengeance at all, but because I've had it at junctures”

Q to admit, I did speak to a mutual friend of ours, Peter at SCS before the show, and he asked specifically, when you think about kind of upgrade rates and business model, for you in particular, what were you most excited by when it came to Rippling's business model? And then on the flip side, what areas did you think or do you think will be challenging and need improving?

A Well, look, I think payroll itself, the jury's out on how wildly profitable payroll itself can be. So obviously the core for Rippling originally was payroll. Now they've expanded way beyond that and very savvily have used that as a wedge to really become Workforce management to own the employee graph. That's the vision that's so compelling for me with Rippling. Now, obviously there are payroll companies like ADP that are extraordinarily valuable legacy companies that have never innovated, but I'm skeptical of payroll as a huge moneymaker. Now we have other bets, uh, or I hate to say bets. Let me take, I reneged the word bets. We have other investments that we're bullish on in payroll. That take a different approach where they're not actually monetizing sort of the payroll offering. They have sort of a different approach to monetizing, but I think that's part I'm skeptical of, but Rippling's already moved well beyond, beyond that. What I'm most excited about with Rippling, actually I didn't learn, we didn't learn at Bedrock until March of 2022. So basically we had been investors since before the Series B, right after the Series A we invested in 2019. In March of twenty-twenty-two, Parker and the company articulated a very specific and detailed product roadmap around how they can really become, through their employee graph, over time, I don't think he would phrase it this way, bu…

AI assessment note: “What I'm most excited about with Rippling... can really become... the AdWords for SaaS.”

Q Do you know what, my friend? I'm ready for the Amalfi Coast. Bring it on, but I want to start, um, with you and your relationship with Parker. I know that you met a long time before your founding of Bedrock, so take me back and paint that picture and story. How did you first meet Parker, and what was that scene of the meeting?

A Well, you know, it's a situation where I actually heard about Parker. I heard of him before I met him. Uh, one of my first pitches that I'd ever taken as a very young VC back in 2012, I was with a company called Sigfig. And this was actually the first company that Parker co-founded. But Parker had been fired from Sigfig right before I took the pitch. And so my pitch was with his co-founder. I believe his name was Michael. And I remember feeling like It was sort of this super smooth, super slick pitch, um, felt like, uh, Michael seemed like a really good manager, like a good leader, but was missing what I kind of articulate as this sort of power plant energy, ah, that I really look for in entrepreneurs. Like, who's going to just brute force this thing? Who's the entrepreneur who's going to brute force this by sheer force of will into a huge company? And I didn't quite feel that that was there. So we passed on SIGFID. Then a few months later, uh, one of my bosses at the firm I worked for, uh, referred a colleague and I, uh, an intro to Rippling. And I think they were like, The hottest company in their Y Combinator batch at the time. This was also in 2012. And so we met him at our office, and this was way before I founded Bedrock with, with Eric, many years before. And, uh, it was a great, I mean, Parker was like, whoa, this guy is a power plant. This guy is going to brute force a…

AI assessment note: “we met him at our office, and this was way before I founded Bedrock”

Q Final one for you. What do you think is the most underappreciated aspect of Rippling?

A Well, there's a company answer, which I spoke about earlier. I think owning the employee graph, the potential you have to become the way SaaS gets distributed is a huge, could be just a huge incremental lift for the business. I mean, that could be massive. It could be AdWords for SaaS, 1015 years from now. I think that's very underappreciated because it's not built yet fully, but we'll see. Very bullish on the prospects for that. I think back to what I said on Parker, This is a rare human who, to wholly self-actualize, has to build one of the largest companies on the planet, and he has the ability to do it. I don't think people know how to underwrite that.

AI assessment note: “owning the employee graph, the potential you have to become the way SaaS gets distributed”

Q pay my therapist so much more than you do, so, uh, don't worry about it. Um, I want to move to the second narrative violation, though, with Rippling, which is, um, basically how they build the company itself. It's been described before as a compound startup. Um, I want to touch on this. How did you first see this compound startup build with Rippling, and what does that mean, really?

A Well, look, I think it basically means that they are trying to become truly the employer of record for not just SMBs, not just mid market, but upmarket as well. And in building an employer of record, that means like multiple, multiple products where you basically have pseudo decentralized teams internally, With leaders, building them, and then ideally there'll be, there's this flywheel effect over time. And the way that we've seen that really come to the fore over the past few quarters with Rippling is the upgrade rate is astronomical. So, I mean, whenever people renew, when customers renew, they're upgrading. One of the things that Rippling does that I think is super cool is we get an auto email, uh, the major investors, there's a few of us, ourselves, Sequoia, Kleiner Perkins, Founders fund. Get an auto email on, um, every time they close a deal, and just folks are upgrading like crazy because they've built this suite of so many different products. There are so many things for people to upgrade to, so much to cross sell, and the value proposition is uniquely suited, I think, to our times, which was part of why we decided to, you know, Quadruple into the company by co-leading that Series D round earlier this year. It basically allows businesses to flatten the G&A curve. It allows them to spend a lot less. They can accomplish a lot more faster without adding a head count. So I …

AI assessment note: “folks are upgrading like crazy because they've built this suite of so many different products.”

Q Tell me, what, what was the unique view? Because as you said, the market was crashing. I think, you know, in the memo it says itself, the mid-market tech stocks were down 60%. It did not look rosy. What was the unique view that gave you the conviction to write such a large check and really double down at a worrying time?

A Well, look, the unique view was multifold. I'll start with our macro view, which I think was actually pretty unique. And then I'll talk about how it led us to rippling specifically. So we started to project out, we had a mental model we were building and say, November, December of 21, January, February of 22, there's going to be a huge crash. Things are insane. People are going to run away from growth. That's part one. So we felt like everyone's going to run away from growth. What's going to happen when everyone runs away from private growth? We felt like they were going to run to early stage and pricing at seed in series A, where we typically like to enter a company and we entered Rippling shortly after their series A. That's what we typically like to enter. And we did that with Rippling a little bit after their series A, so we didn't get it quite on the nose. But everyone's going to run there and prices will basically stay where they're at. But a lot of those companies will end up not being able to raise fall on financing because actually there's going to be a 12 to 24 month period of repricing in the private markets. And nobody, including us at Bedrock, nobody knows where the pricing is ultimately going to land. We still don't know, Harry. I don't freaking know what the pricing is going to be two years from now. Anyone who says they know is lying. Nobody knows where it's goi…

AI assessment note: “Well, look, the unique view was multifold. I'll start with our macro view”

Q to finish on Rippling's Tenex case. When we think about Rippling being a hundred billion dollar company, we're going to end on the positive because, uh, I'm going to pretend like I'm an optimist just for today. Um, but, uh, when we think about like that Tenex, what are the ones two biggest Barriers you think there will be to Rippling's 10 x outcome before we talk about the positives?

A I look, look, ultimately, every company is its own worst enemy. So when you're this, when you're this ambitious, um, and you're trying to do this much, ah, and you're scaling this quickly, there are lots of ways things can unravel internally. So that is the risk, especially given the compound startup approach and having the different teams internally. This is why I think the brilliance of Parker is Hiring his college friend, Matt McGinnis, who's a proven founder himself, who's phenomenal as COO, like Parker identified, he needed that. Looking at the rest of the executive team, the caliber of their CFO, the caliber of others on that executive team, Their new head of engineering. I mean, it is a truly world-class executive team for a early growth stage private company. I'll be, I'll be at a highly valued one. So I'm optimistic that we're going to be able to navigate the internal scaling challenges, but that is always the challenge with these things. I don't believe any other company. I'm sorry, but I'm just going to say it. There's no other companies can be able to out execute this founder in their market. It's just not, it's not possible.

AI assessment note: “there are lots of ways things can unravel internally. So that is the risk”

Q to admit, I did speak to a mutual friend of ours, Peter at SCS before the show, and he asked specifically, when you think about kind of upgrade rates and business model, for you in particular, what were you most excited by when it came to Rippling's business model? And then on the flip side, what areas did you think or do you think will be challenging and need improving?

A Well, look, I think payroll itself, the jury's out on how wildly profitable payroll itself can be. So obviously the core for Rippling originally was payroll. Now they've expanded way beyond that and very savvily have used that as a wedge to really become Workforce management to own the employee graph. That's the vision that's so compelling for me with Rippling. Now, obviously there are payroll companies like ADP that are extraordinarily valuable legacy companies that have never innovated, but I'm skeptical of payroll as a huge moneymaker. Now we have other bets, uh, or I hate to say bets. Let me take, I reneged the word bets. We have other investments that we're bullish on in payroll. That take a different approach where they're not actually monetizing sort of the payroll offering. They have sort of a different approach to monetizing, but I think that's part I'm skeptical of, but Rippling's already moved well beyond, beyond that. What I'm most excited about with Rippling, actually I didn't learn, we didn't learn at Bedrock until March of 2022. So basically we had been investors since before the Series B, right after the Series A we invested in 2019. In March of twenty-twenty-two, Parker and the company articulated a very specific and detailed product roadmap around how they can really become, through their employee graph, over time, I don't think he would phrase it this way, bu…

AI assessment note: “What I'm most excited about with Rippling, actually I didn't learn”

Q well, how big a company is that? Because you always underestimate the size of your winners. If I told you when you met Parker, For the first time in 2018 with rippling that it would be the sizes. Now you probably go, wow, I didn't expect it to be that big. Do you engage in outcome scenario planning, given the realization that you always underestimate the size of your winners?

A It's a great question. I'm going to answer it in a roundabout way by starting with, um, for us, the question always, With any investment, and then I'm going to talk about our different investments in rippling that we've made over the years. First question always, is there a 10 X from here? Can we gain conviction through a bust analysis that if things go right, there is a 10 X from here? So that's our work. We don't try to project beyond that, but we do always ask the question, is there a 10 X from here? And we do a lot of work and we did a lot of work on, you know, quite frankly, all of our investments in rippling on. The 10 X from here. So we believe in a 10 X from here. If they unlock global, um, You know, global, uh, employee of record. If they can do AdWords for SAS, you have this incredible flywheel with the core business that actually enables you to fund these things, which brings me to my second point, which I think is almost more important than outcome planning. How big of a preferred staff do you need to get to that outcome? And one of the questions, how much preferred equity do you have to sell to The evil venture capitalists in order to get to, in order to get to that massive 10 X outcome. One of the things I love about Rippling is that so many of these massive outcome companies. So if you think about the deep tech frontier tech stuff where the outcomes can be just a…

AI assessment note: “We don't try to project beyond that, but we do always ask the question”

Q founder can be the best in the world almost, but actually there are things societally, macro, politically, which can fuck a company beyond belief, beyond even the best founder's ability to keep the company alive. That was my lesson from losing money in this case. If you think back to a time when you lost money, it could have been the first time, um, what was your takeaway from that?

A Well, I haven't lost much, to be honest with you. I think I've only, we at Bedrock have only lost a few million dollars. You know, we've invested hundreds of millions of dollars over almost five years at this point. I think our loss ratio is less than 50 basis points, so we, we've lost almost no money. Um, you know, I've, Lost money by holding on to positions that IPO and when I should have sold them. So I lost money in some of those scenarios. But, uh, look, I mean, you can't control everything. We, we have a company in our portfolio now that They were hit extremely hard by the macro. They had some executional missteps. We have small dollars in. So we, because of our capital concentration approach, which rippling really epitomized, I mean, we sized up into rippling over several junctures over several years. This company I'm referring to that has trouble. Like we don't have much money in it. We only have a few million bucks in it. So if we lose that, it's fine. I think they're going to figure something out. I'm optimistic, but yeah, there are things you can't control, but what you can control is the micro and the underwriting of the micro opportunity and It's pretty hard to find an asset of this caliber on the planet.

AI assessment note: “there are things you can't control, but what you can control is the micro”

Q well, how big a company is that? Because you always underestimate the size of your winners. If I told you when you met Parker, For the first time in 2018 with rippling that it would be the sizes. Now you probably go, wow, I didn't expect it to be that big. Do you engage in outcome scenario planning, given the realization that you always underestimate the size of your winners?

A It's a great question. I'm going to answer it in a roundabout way by starting with, um, for us, the question always, With any investment, and then I'm going to talk about our different investments in rippling that we've made over the years. First question always, is there a 10 X from here? Can we gain conviction through a bust analysis that if things go right, there is a 10 X from here? So that's our work. We don't try to project beyond that, but we do always ask the question, is there a 10 X from here? And we do a lot of work and we did a lot of work on, you know, quite frankly, all of our investments in rippling on. The 10 X from here. So we believe in a 10 X from here. If they unlock global, um, You know, global, uh, employee of record. If they can do AdWords for SAS, you have this incredible flywheel with the core business that actually enables you to fund these things, which brings me to my second point, which I think is almost more important than outcome planning. How big of a preferred staff do you need to get to that outcome? And one of the questions, how much preferred equity do you have to sell to The evil venture capitalists in order to get to, in order to get to that massive 10 X outcome. One of the things I love about Rippling is that so many of these massive outcome companies. So if you think about the deep tech frontier tech stuff where the outcomes can be just a…

AI assessment note: “We don't try to project beyond that, but we do always ask the question”

Q So I want to start with Parker because obviously with bedrock, you focus a lot of your messing around narrative violations and in the memo you put Parker was narrative violation. Number one, when you look at, you know, his background and, uh, the prestige that he comes from serial co-founder, serial founder, uh, why is Parker a narrative violation in your mind?

A Well, Many reasons. I'd say the first reason is it's always, how does an entrepreneur view themselves? And one of the things Parker has consistently said to us is I am the ultimate narrative violation. So he self identifies and I think he would, he would say this, he said it to us, he self identifies as a narrative violation. So who am I to say he's not, if that's how he feels about himself, you know, I would sort of abstract it a little bit. And I always like to look back, uh, to business history. I'm a huge student of business history and the history of entrepreneurship. And if you think about sort of the greatest entrepreneurs, we can sort of go from everyone from like John D. Rockefeller, who of course founded Standard oil in the early 1900. You know, we could fast forward to the eighties and nineties, you know, Steve jobs was ousted from Apple. And then he was, you know, he returned to save the company. I think the greatest entrepreneurs in history, and this is a sort of declassé thing to say, it's not really a appropriate thing to say, but I'm going to say it anyways. I think the greatest entrepreneurs in history, it's this combination of a life's work surface area for the company, a life's work vision that they are truly going to dedicate their life to. With an extra motivator, and that extra motivator is vengeance. John D. Rockefeller was an extraordinarily vengeful per…

AI assessment note: “one of the things Parker has consistently said to us is I am the ultimate narrative violation”

Q founder can be the best in the world almost, but actually there are things societally, macro, politically, which can fuck a company beyond belief, beyond even the best founder's ability to keep the company alive. That was my lesson from losing money in this case. If you think back to a time when you lost money, it could have been the first time, um, what was your takeaway from that?

A Well, I haven't lost much, to be honest with you. I think I've only, we at Bedrock have only lost a few million dollars. You know, we've invested hundreds of millions of dollars over almost five years at this point. I think our loss ratio is less than 50 basis points, so we, we've lost almost no money. Um, you know, I've, Lost money by holding on to positions that IPO and when I should have sold them. So I lost money in some of those scenarios. But, uh, look, I mean, you can't control everything. We, we have a company in our portfolio now that They were hit extremely hard by the macro. They had some executional missteps. We have small dollars in. So we, because of our capital concentration approach, which rippling really epitomized, I mean, we sized up into rippling over several junctures over several years. This company I'm referring to that has trouble. Like we don't have much money in it. We only have a few million bucks in it. So if we lose that, it's fine. I think they're going to figure something out. I'm optimistic, but yeah, there are things you can't control, but what you can control is the micro and the underwriting of the micro opportunity and It's pretty hard to find an asset of this caliber on the planet.

AI assessment note: “our loss ratio is less than 50 basis points, so we, we've lost almost no money.”

Q So I want to start with Parker because obviously with bedrock, you focus a lot of your messing around narrative violations and in the memo you put Parker was narrative violation. Number one, when you look at, you know, his background and, uh, the prestige that he comes from serial co-founder, serial founder, uh, why is Parker a narrative violation in your mind?

A Well, Many reasons. I'd say the first reason is it's always, how does an entrepreneur view themselves? And one of the things Parker has consistently said to us is I am the ultimate narrative violation. So he self identifies and I think he would, he would say this, he said it to us, he self identifies as a narrative violation. So who am I to say he's not, if that's how he feels about himself, you know, I would sort of abstract it a little bit. And I always like to look back, uh, to business history. I'm a huge student of business history and the history of entrepreneurship. And if you think about sort of the greatest entrepreneurs, we can sort of go from everyone from like John D. Rockefeller, who of course founded Standard oil in the early 1900. You know, we could fast forward to the eighties and nineties, you know, Steve jobs was ousted from Apple. And then he was, you know, he returned to save the company. I think the greatest entrepreneurs in history, and this is a sort of declassé thing to say, it's not really a appropriate thing to say, but I'm going to say it anyways. I think the greatest entrepreneurs in history, it's this combination of a life's work surface area for the company, a life's work vision that they are truly going to dedicate their life to. With an extra motivator, and that extra motivator is vengeance. John D. Rockefeller was an extraordinarily vengeful per…

AI assessment note: “he self identifies as a narrative violation. So who am I to say he's not”