20VC: The Rippling Memo: Bedrock's Geoff Lewis on The Conviction Building Process to Write a $200M Check and Co-Lead Rippling's Series D | Why No Competitor Can Out Execute Rippling | Uncapped SAFE's Why You Should Never Do Them and Why Geoff Broke The Ru

Geoff Lewis is a Founder and Managing Partner of Bedrock, one of the breakout and new venture firms of the last decade, famously in search of narrative violations. He serves or has served on the Board of Directors for companies including Lyft (NASDAQ: LYFT), Nubank (NYSE: NU), Epirus, and Vercel. Additionally, he has led sizable early-stage venture capital investments in dozens of companies including Upstart (NASDAQ: UPST), Tilray (NASDAQ: TLRY), Leafly (NASDAQ: LFLY), Wish (NASDAQ: WISH), Workrise, and Rippling. Prior to founding Bedrock, Geoff served as a partner at Founders Fund for several years. In Today's Episode with Geoff Lewis: 1.) Meeting Parker Conrad: A Generational Defining Entrepreneur: How did Geoff first come to meet Parker Conrad, over a decade prior to making the first Rippling investment? What was it about Parker that compelled Geoff so much in the early days? How did Geoff analyze the chip on Parker's shoulder from Zenefits? How does he believe it has driven him with Rippling? 2.) Searching for Narrative Violations in Rippling: Why does Geoff believe Parker himself is a "narrative violation"? What does Geoff believe is the foundational narrative violation in the way Parker is building Rippling? Rippling has a large portion of its team as former founders, how does Geoff believe this impacts the culture of Rippling? What does Geoff believe are the single biggest barriers to Rippling being the "App Store for Business"? On the upside case, if Rippling goes right, how big could this be? 3.) Rippling: The Financing: What has been Geoff's biggest lesson on price and price sensitivity that he has learned through Rippling? Why does Geoff never do uncapped notes? Why did Geoff break that rule with Rippling? What gave Geoff the conviction to write Bedrock's largest ever check in Rippling's Series D? What was the massive mistake that both Geoff and Bedrock made in not financing their Series C? 4.) Geoff Lewis: The Investor What single trait does Geoff believe all generational defining founders share? How does he test for it? Does Geoff believe he has a chip on his shoulder today? How has his relationship to the chip on his shoulder changed over time? To what extent does Geoff engage in outcome scenario planning when making investments? What upside scenario plan does Geoff need to be able to see for him to make an investment? Has Geoff ever lost money in an investment? What were his takeaways from this experience?

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Welcome back to 20VC The Memo. This week, we are doing a deep dive on the incredible journey of Rippling. If you haven't heard Monday's episode with Parker Conrad, Rippling's founder, then that is a must. And today, we're joined by one of Rippling's largest investors, their Series D co-lead, and a close friend in the form of Jeff Lewis, founder and managing partner of Bedrock Capital, one of the breakout and new venture firms of the last decade. Famously, in search, I love this, of narrative violations, which we discuss in the show. Jeff serves, or has served, on the board of directors for companies including Lyft, New Bank and Vessel. Additionally, he's led sizable early-stage investments in dozens of companies, including Upstart, Wish, Work Horizon, Rippling. And prior to founding Bedrock, Jeff served as a partner at Founders Fund for many years.

• 0:42Harry Stebbings?

  But before we dive into the show today, we all hope we never need life insurance. But for me, nothing is more important than my family and knowing they will be protected and looked after. If you follow my Twitter, you know how close I am to my mother. And mortgage payments and other expenses, they don't disappear when you're gone. And life insurance just gets more expensive as you age, and so now is always the best time to buy. PolicyGenius was built to modernize the life insurance industry. Their technology makes it easy to compare life insurance quotes from top companies like AIG and Prudential in just a few clicks to find your lowest price. And with PolicyGenius, you can find life insurance policies that start at just $17 per month for $500,000 of coverage. And PolicyGenius has licensed agents who can help you find options

• 1:27Harry Stebbings?

  that offer coverage in as little as a week and avoid unnecessary medical exams. They're not incentivized to recommend one insurer over another, so you can really trust their guidance. Plus, there are no added fees. Head over to policygenius.com to get your free life insurance quotes and see how much you could save. That's policygenius.com. And speaking of game-changing tools like PolicyGenius there, Gamesite is the world's leading platform for helping companies of all sizes and industries drive durable growth through customer, product and community-led strategies. And did you know that Gamesite launched a new offering, Gamesite Essentials, in early March this year? Essentials makes it easier and more affordable for companies at any stage to reduce churn.

• 2:10Harry Stebbings?

  Drive more expansion and cross-sell dollars and improve usage and adoption. And best of all, Essential starts at just $20,000 per year and you can be live in as little as two weeks. In fact, Essentials has been leveraged by companies like Callan Lee, Chewy, DialPad, and nearly a hundred others since its launch in March. Now you can start and scale with Gainsight. Go to essentials.gainsight.com to learn more and mention 20VC for special pricing when you schedule a demo or sign up. Tell them I sent you and get that durable growth engine going. And finally, are you familiar with Kathy Wood and her firm, Arc Invest? They manage nearly $25 billion in their ETFs. For investors like us, think of the earliest investors in companies like Facebook, Spotify, or Uber.

• 2:53Harry Stebbings?

  They were investing in these companies long before they were public and made billions in returns on their investment. Now you can get in on the action too. You need to check out Kathy Wood's new Arc Venture Fund exclusively on the Titan Investing app. Led by the iconic Kathy Wood, Arc Venture is one of the first venture capital funds accessible to accredited and non-accredited investors. That means you can invest in Arc's big bets, both in the public and the private markets, with as little as $500. Previously, you needed substantial wealth and connections to be able to access these types of funds, but now everyday investors can access the Arc Venture Fund through Titan. So how do you get involved? Well, you sign up for the Titan app, deposit money, and purchase shares in the Arc Venture Fund. From there, Kathy Wood and her investment team at Arc Invest do the rest.

• 3:38Harry Stebbings?

  If you haven't heard of Titan yet, Titan is a place where you can have your money actively managed in diversified income generating asset classes like private credit and private real estate, and also where you can access exclusive investment opportunities like Arc Venture. So if you want your money actively managed by some of the world's most iconic investment managers, it's time to invest in the Arc Venture Fund exclusively on Titan. Head to titan.com/20vc and you'll get a free $25 investment into another one of Titan's portfolios. That's right, a free $25 investment into Titan's flagship portfolio. This is also a paid partnership, I have to say as a disclaimer, with Titan. And at the time of this reading, I'm not yet invested in Titan's strategies, but head over again to titan.com/20vc.

• 4:29Speaker 01

  You have now arrived at your destination.

• 4:32Harry Stebbings?

  Jeff, this is such a joy. I always love our chats. So any excuse for a chat with you. And I thought this would be the perfect one. Rippling is such an incredible company. Parker is amazing. But thank you so much for joining me today, Jeff.

• 4:43Speaker 03

  Delighted to join you, Harry. Looks like you're out ready for vacation in that cool hat.

• 4:48Harry Stebbings?

  Do you know what, my friend, I'm ready for the Amalfi Coast. Bring it on. But I want to start 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?

• 5:03Speaker 03

  Well, you know, it's a situation where I actually heard about Parker. I heard of him before I met him. 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. Michael seemed like a really good manager, like a good leader. But was missing, but I kind of articulated as this sort of power plant energy that I really look for in entrepreneurs, like who's going to just brute force this thing?

• 5:47Speaker 03

  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 Sigfig. Then a few months later, one of my bosses at the firm I worked for referred a colleague and I 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'd founded Bedrock with Eric, many years before. Parker was like, whoa, this guy is a power plant. This guy is going to brute force a company into something, one way or the other. But we felt, I think at the time, I don't fully remember why we passed. But I think we felt at the time that it was sort of because it was the hottest company in the batch.

• 6:31Speaker 03

  And because it was sort of being sent to every single VC in Silicon Valley. Worth that many back then, they're like a hundred X more now, but still a lot of competition. Did the seed round be too competitive? And the firm I worked for ultimately ended up investing in Zenefits later on. So I think I maybe misspoke. This was a Zenefits seed round back in 2012. But, you know, over the years, as Zenefits started to implode and the drama started to really kick in, I started reaching out to Parker and I was sort of in the midst of thinking about starting Bedrock. This was sort of 2017. We had a dialogue, we had a few emails, we had a few messages back and forth. And I was sort of just rooting for him because I'd been struck by his energy in that Zenefits seed pitch.

• 7:15Speaker 03

  I'd obviously been struck by the arc of Zenefits. And I'd been struck by my feeling that there was a missing element on that Sigfig founding team. And Parker felt like that missing piece to me. And so I wanted to build a rapport with him. So in 2018, we finally closed our first fund on Bedrock. Took us longer than I would have liked, but we got it done. We typically get things done and we say we're going to do them. Uh, our first email was like to Parker, like we've got, we've got to get involved in Replink. And he just closed his seed round, unfortunately, we missed it. Like Parker, we consider ourselves quite relentless. So yeah, dates back to 2012, it's been a decade of interactions.

• 7:54Harry Stebbings?

  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, Parker was narrative violation number one. When you look at his background, the prestige, he comes from zero founder. Why is Parker a narrative violation in your mind?

• 8:10Speaker 03

  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 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 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 could sort of go from everyone from like John D Rockefeller, who of course founded Standard Oil in the early 1900s. You know, we could fast forward to the eighties and nineties, you know, Steve Jobs was ousted from Apple.

• 8:54Speaker 03

  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 person. Jobs, when he returned to Apple, a lot of vengeance there. And I think if you look in business history, including the most valuable technology companies today,

• 9:39Speaker 03

  Google's maybe the exception, they don't seem very vengeful over there, but the most valuable companies today, there's a lot of vengeance if you dig in to that what happened under the hood along the way to those entrepreneurs. When you find a transcendent life's work entrepreneur with a company where there is a huge surface area they can capture, where they're not going to stop because they have this extra motivator, this extra ingredient of being wronged in some way by the world or by someone else, you auto invest. And to me, that's a narrative violation.

• 10:12Harry Stebbings?

  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 in it. It really is destabilizing to your core. Do you have vengeance?

• 10:23Speaker 03

  I try to anchor myself to ancient things, ancient beliefs about the world. They've helped me to really overcome feelings of vengeance that I had earlier on in my life and 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 plus, and have that extra motivator. I know the degree to which it can push someone. So like, it's so irrational to start something huge from scratch.

• 11:07Speaker 03

  Like what we've done, Harry, starting these new venture capital firms, where 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.

• 11:34Harry Stebbings?

  I couldn't agree more. And I love that in terms of vengeance being that kind of crucial actual source. I do want to touch on the second narrative.

• 11:41Speaker 03

  Ideally, you overcome it at a certain point. So like, I'm glad I've overcome it. Ideally, you sort of overcome it ultimately.

• 11:47Harry Stebbings?

  Do you not worry that with overcoming it, you become mediocre?

• 11:50Speaker 03

  I think you can find other motivators. And so I'd say in my case, what's, yeah, this should be about ripping a park or not a psycho, psycho analysis of you and I, Harry Stebbings, but.

• 12:01Harry Stebbings?

  I'm enjoying this.

• 12:02Speaker 03

  I think in my case, the thing that supplanted it as a motivator is sort of the journey of building. I'd never managed a team and built a team and mentored other people to be investors. And over the last few years with Bedrock, as we've really scaled things, and I've really grown a lot and feel motivated by the team, growing other people, helping them figure out their life's work and express their investing style in their own unique ways. That's become my North Star motivator. Early on, I wouldn't frame it as vengeance per se, but certainly a chip off my shoulder a hundred percent. Hopefully I don't lose my edge. I might. We'll see. I think you've got a lot more vengeance than me though. So you're going to be fine for the long term.

• 12:46Harry Stebbings?

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

• 13:07Speaker 03

  Well, look, I think it basically means that they are trying to become truly the employer of record, not just SMBs, not just mid-market, but up-market 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'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 and customers renew, they're upgrading. One of the things that Rippling does that I think is super cool is we get an auto email.

• 13:51Speaker 03

  The major investors, there's a few of us, ourselves, Sequoia, Kleiner Perkins, Founders Fund, get an auto email 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 quadruple into the company by co-leading that Series D round earlier this year. It basically allows businesses to flatten the G and A curve. It allows them to spend a lot less, they can accomplish a lot more faster without adding headcount. So I think that's the specific way in which compound startup for Rippling

• 14:36Speaker 03

  is both manifesting and why it's going to be extremely valuable to end customers over the years to come in a context where folks are trying to cut costs while also improving efficacy of administration and HR at large.

• 14:49Harry Stebbings?

  I have 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?

• 15:06Speaker 03

  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 savagely 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, or I hate to say bets, let me take, I reneg the word bets. We have other investments that were bullish on in payroll

• 15:49Speaker 03

  that take a different approach where they're not actually monetizing 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 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 2022, 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, but I'm going to, the adwords for SaaS.

• 16:33Speaker 03

  This can become the way that business software is sold because of all of the employee interactions that Rippling owns. So the more surface area they grab on the customer side, the more they actually become positioned to be the way that SaaS becomes distributed. That's part one. Part two, I actually think Rippling can displace some pretty big companies. I'd say when we first invested in 2019, thought, okay, Gusto seems like a really good company, but I don't really like that the people don't wear their shoes in their office. That sort of bothered me with Gusto. Maybe it's pronounced Gusto, I'm always bad at pronunciations, but I don't like companies where the people don't wear their shoes in the office. So I'm like, it can probably just place gusto.

• 17:16Speaker 03

  Then it's like, okay, wait, it can probably be like workday 2.0. That's like a, let's say, end state 35 to 55 billion dollar outcome. And now I'm like, wait, why does deal even need to exist? Like, why isn't Rippling just deal? Why does some of these European payroll and HR workforce management companies, not knocking on Europe, but why do you need a Rippling for Europe? There's no Airbnb for Europe. There's no Google for Europe. Why do you need a Rippling for Europe? Why do you need a Rippling for the rest of the world? Why can't that be Rippling?

• 17:46Harry Stebbings?

  I get you and I agree. The infrastructure, though, that you need to build out a Rippling for Europe on a per-country basis, given Europe's different regulatory provisions in each country.

• 17:55Speaker 03

  Hundred percent. Super hard and Personia's done an amazing job of that. Can be replicated, can be replicated.

• 18:02Harry Stebbings?

  The question is, narrow the focus, increase the quality, to Sutman's quote. And actually, there's so much more that Rippling can do in the US in terms of, you know, market dominance. It's an interesting strategic question of, you know, do you go for market dominance in the US or market entry and expansion in Europe?

• 18:18Speaker 03

  Yeah, you should ask Parker that question.

• 18:20Harry Stebbings?

  I will do and get a ton of hate from Europe. Yeah, totally. It's a wise, wise thought. When you said about the adwords for SaaS, Jeff, the honest thing that I thought was, how big a company is that? Is that a hundred billion dollar company? Is that a 50 billion dollar company? And I think a lot now about outcome scenario planning because I think it's so dangerous when you think, 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 size it is now, you'd 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?

• 18:53Speaker 03

  It's a great question. I'm going to answer it in a roundabout way by starting with, 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 of all, is there a 10x from here? Can we gain conviction through robust analysis that if things go right, there is a 10x 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 10x 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 10x from here. So we believe in a 10x from here. If they unlock. Global employee of record, if they can do adwords for SaaS,

• 19:35Speaker 03

  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 stack do you need to get to that outcome? One of the questions, how much preferred equity do you have to sell to the evil venture capitalists in order to get to that massive 10x outcome? One of the things I love about Rippling, so many of these massive outcome companies, so if you think about the deep tech frontier tech stuff or the outcomes can be just astronomical, or you think about a lot of things where you actually need to raise billions of dollars in preferred capital

• 20:19Speaker 03

  from venture capitalists to get to that big outcome, which means that actually there is a lot of risk of capital loss. Now, a common truism amongst venture capitalists that I disagree with is you can only lose 1x your money, so just focus on the upside. We don't like losing money at Bedrock, and we like to find companies where the preferred stack will grow linearly or sublinearly with revenue. And Rippling is that in spades. I've never found a company where I'm more convinced because of their quote unquote, "I don't love the buzzword compound startup. Parker likes it, so we can use it. He's the boss." But because of their approach to product building and go to market, I believe the preferred stack grows either linearly

• 21:04Speaker 03

  or sublinearly versus revenue over time versus hyperlinearly. Now, they're already at, you know, nine figures of ARR, growing extremely fast. They grew almost 3x over the past 12 months. We're gonna have to see if my thesis, our Bedrock thesis, has proven out. Today, the preferred stack is very small for the scale of the business and extremely small for the scale of the ambition. And so, when you can find an opportunity where you have very high conviction, you're not going to lose money, you can plow a lot of capital into it, and you also believe in a 10x story over many, many, many years, that's very rare in my experience.

• 21:43Harry Stebbings?

  You spoke about losing money there and it should never be easy or it should always hurt. I lost money for the first time recently and I learned one thing very importantly, which is that sometimes there are cases where the 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. What was your takeaway from that?

• 22:14Speaker 03

  Well, I haven't lost much. 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've lost almost no money. You know, I've lost money by holding on to positions that IPO and when I should have sold them. So I've lost money in some of those scenarios. Look, I mean, you can't control everything. 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. Because of our capital concentration approach, which Rippling really epitomized. I mean, we sized up into Rippling over several junctures over several years.

• 22:59Speaker 03

  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. It's pretty hard to find an asset of this caliber on the planet.

• 23:21Harry Stebbings?

  You mentioned sizing up over time into Rippling. You wrote the original check, well, your first check into it in an uncapped note. Now, I always have this rule of no uncapped notes. I think that you have in the past shared my perspective there, but you did it here. Help me out in terms of the internal discussions you had around committing to the uncapped note, why you decided to break the rule and why generally you hate uncapped notes.

• 23:44Speaker 03

  For sure. So look, we tried to lead the series A in 2019 and the postmortem from that. Was every round in Rippling is going to just be priced to absolute perfection. They were so good at managing that fundraising process. The memo was just absolutely flawless. Like, they circulated a memo that's better than any VC on the planet could write on like, why this is an obvious investment. A few hours later, they follow up. There was a clerical error in the memo and they follow up to correct the clerical error. I think that might have been on purpose. I think they might have put the clerical error in the memo so they could follow up a few hours later to show their attention to detail in the correction of the clerical error as a follow-up subsequent email.

• 24:29Speaker 03

  Like, I think these are masters. This team, Parker and his team at Rippling, are masters of raising capital. They have it down to an art form. And so, you know, look, we were outbid on the Series A by about 100 million. We were off by about 100 million on valuation. My postmortem and our bedrock postmortem from that was every round in normal markets will be priced to absolute perfection. Counterintuitively, the way to actually pay a lower price is to invest. And I use invest in air quotes, but is to deploy capital because uncapped notes aren't actually investing. That's why I hate them. Investing is you should know the price you're paying. That's what an investment is. It's not an investment if you don't know what the price you're paying is for the security.

• 25:14Speaker 03

  That's why we've never done them since Rippling. We've never done them before Rippling. We would never do them again unless a clone of this scenario surfaces some years down the road, which I doubt it will. But we, because they're so good at fundraising, we counterintuitively thought it would be cheaper to get in on an uncapped note than to compete to lead the next round because the business we felt was going to clearly work following the Series A. And we actually took a lesson away from this and we've extrapolated this to every investment. By the time a company is in a formal financing process, it's kind of dead to us. Like, we still love it, but once they've circulated a memo to 12 VC firms, we're not engaging. And both our Series B that we tried to do at Rippling and then were our own worst enemies

• 25:57Speaker 03

  and screwed up right when COVID hit and the Series D that we We collab with Kleiner Perkins. Those are rounds that we catalyze because that's how we operate now. We just, we catalyze rounds. We don't compete.

• 26:07Harry Stebbings?

  Listen, 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 empathetic to my dear friend Jeff, feeling sorry for you. Tell me in this one, what happened and what was the fuck up there, man?

• 26:22Speaker 03

  If I had to sum it up, it would be analysis paralysis. I want to take you back to that moment in time and I'd encourage folks to go to bedrockcap.com/rippling where we write about this ad nauseam. But February 2020, 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. 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? 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.

• 27:04Speaker 03

  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, all of their business at the time was SMBs. Now, since then, they've 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 talking like DJs, doctors' offices, barbers.

• 27:39Speaker 03

  And some startups were like, okay, like, wait a second, if everything's shut down and then the government announced like the lockdown, like, okay, if everything's shut down for like a year and they can't expand beyond SMB, we might be overpaying by like a factor of more than we thought. We knew we were overpaying, but we thought it might be overpaying by a factor more than we thought. And ultimately we concluded, and this is an internal, you know, inside baseball on VC firms, we had a lot of dry powder in that fund. That was many funds ago for us, several funds. That was better. Fund two, we were just starting to invest out of our second fund. We had lots of calls with our LPs. They were calling us being like, what's your take on the macro? Everyone was freaking out. So all the LPs are freaking out about the macro.

• 28:24Speaker 03

  We're like, actually, there's a risk, maybe it's some LPs would default if we call like 10% of the fund right when COVID hits. And so it was a combination of the SMB thing, LP fear and the market at that moment in time. We talked ourselves out of it, but we did try to do it at a lower price. So we concluded, okay, we should try to renegotiate with Parker. We offered X, let's try and get it at Y. He said, no, thanks. And we were rightly so, kicked to the curb. But we managed to maintain and build the relationship. And after that screw up, we opportunistically bought secondary, predominantly preferred secondary because part of our thesis is

• 29:04Speaker 03

  this is going to be a relatively small preferred stack for the scale of the company that they're building at several junctures. And that's what led us actually to like really dig in with Parker and the team and catalyze the series D with KP. Because we were buying up secondary over several years. And then when the market started to crash, we had a very unique view on why this was the deal to do. And we were determined not to get it wrong again.

• 29:30Harry Stebbings?

  Tell me, 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?

• 29:46Speaker 03

  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. We started to project out, we had a mental model we were building in, say, November, December of 21, January, February 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 and series A where we typically like to enter a company. And we ended rippling shortly after their series A, but everyone's gonna run there and prices will basically stay where they're at.

• 30:28Speaker 03

  But a lot of those companies will end up not being able to raise follow 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 going to land. So we felt like everyone's going to anchor earlier stage because of the perception of higher upside there. And in fact, the question that nobody was asking was where can you actually invest money where you're sure you're not going to lose it? In this world where the private market pricing is going to be all over the place. Beyond that, where can you be sure you're not going to lose it?

• 31:11Speaker 03

  Have solid conviction in a venture multiple with a path to a 10x. When you're talking about a mid-sized firm like Bedrock and we were thinking about deploying, we wanted to make one big investment. We're like, we need to do a growth stage investment. We want to table stakes and worst case scenario, we get our money back with ultra high conviction in a 10x story. So that led us to, and this was like February of 2022. What are the absolute best private growth stage assets on the planet? And we had Spencer, myself and Eric scouring literally the globe, trying to dig in to all the private growth stage assets. And we actually decided it was already in our portfolio. It was rippling for a bunch of the reasons I've already articulated. We're like, we think this is the single best private growth stage asset, full stop.

• 31:56Speaker 03

  We love the end market. The founder literally is not going to stop. In order for him to self-actualize, he needs to build one of the largest companies on the planet. They have the team, they have the momentum, they have the product suite, they have the go to market. And we decided that in an environment where things are going to be extraordinarily hard for entrepreneurs and where all of the energy was going to shift earlier stage, the extent VC is doing anything at all. We wanted to back our truck up into the most resilient founder we knew, running the best growth stage company we could find. And that was rippling. That was sort of the qualitative overlay of what got us there.

• 32:35Harry Stebbings?

  I have to ask, you know, you mentioned the uncertainty that we see at growth today in terms of the pricing and where it lands. I totally agree. No one has a fuck.

• 32:42Speaker 03

  And early stage, man. I think it's across the board. No one knows where these prices are going to land two years from now.

• 32:46Harry Stebbings?

  No, but like we, I mean, the, the kind of ridiculous thing that you see is people who say pricing at early stages changed. I don't think pricing has actually changed for the best companies at all at early stages. A migration of capital from late to early. And so it's kind of stabilized where it was. Nothing's changed. Growth has completely died. So my question to you is, how do you think about engaging in growth? How do you think about advising in investing in companies at growth today? Given the extreme volatility and uncertainty of where growth pricing will actually land? And actually, the range being much bigger, you know, 200 versus 500 is much bigger than 20 versus 15 at the early stage where it doesn't really matter.

• 33:20Speaker 03

  Hundred percent. Look, I mean, I think growth was dead. It seems to be coming back. I mean, Personia just raised 8.5 billion. I saw another company that just raised at a really high valuation. I think growth's starting to come back. But yeah, your point is well taken. Look, I mean, ultimately, this is something that we did once because we have a unique belief. A, it was capital concentration. So like, this was out of reserves from Fund One, Two and Three. Plus, we had a unique bedrock idiosyncratic thing. We owned a lot of Bitcoin and Ethereum in several of our funds. And we're like, what's the next thing to crash? So in like January, we're like, growth's gonna crash. Public markets have crashed. Growth's gonna crash. What's the next thing to crash? Like, it's gonna be crypto.

• 34:05Speaker 03

  We're like, we have to get out of Bitcoin and Ethereum. So we traded out of Bitcoin and Ethereum via our second fund before the crash. We're a great multiple and recycled those proceeds to fund our rippling investors. There's all these idiosyncratic firm-specific considerations that go into it. And then ultimately, we're like, what do we hang our hat on? We think the quantitative analysis, the analysis on the TAM, the product diligence, all of that's table stakes for making a growth investment. Like, we can do that. We're not better or worse than any other reasonably decent firm on the planet. What we hang our hat on is, can we underwrite a life's work entrepreneur who's not going to fucking stop no matter what happens in the world?

• 34:46Speaker 03

  Better than anyone? Yeah, I think we can underwrite that. Can we underwrite a survivor better than anyone? Yeah, I think we're the best on the planet at that. And that's who we wanted to back. So I don't think you're gonna find that because I think Rippling's the singular one.

• 35:00Harry Stebbings?

  I'm fascinated that you said about the reserves that you got back from the Bitcoin and Ethereum sales. You had a choice to distribute back to your LPs there. And actually, in a time when capital supply was crucial, you obviously chose reserves management, which in the long term is the best thing for the fund, especially when you deploy it 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 have this question now quite often where you have the chance to distribute back versus redeploy. How did you think about that then?

• 35:30Speaker 03

  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 2018 vintage fund. You are a top 5% 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

• 36:12Speaker 03

  that mistake again. We're going to recycle these proceeds and we're trading out of a frenzied, overvalued asset class that 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.

• 36:28Harry Stebbings?

  Wow, that is fascinating. In terms of the market environment that we spoke about there, the one question I did have applied to the company is, and actually, speaking about the upgrade rate that you spoke about earlier, given the macro, given the layoffs, given current internal sentiment within companies today, how does the new market environment affect Rippling's customer base? And is that a concern?

• 36:48Speaker 03

  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. It removes so much administrative work. It is a cost savings tool, which is why we're seeing the magnitude of the upgrade volume that I'm at least anecdotally seeing through these emails of whatever customer upgrades. 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. The jury ultimately is out.

• 37:33Speaker 03

  I mean, 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. But ultimately, I don't think you can be a venture capitalist and believe that it's like we're entering Great Depression 2.0 and companies aren't going to need workforce management. Like, that to me just seems insane, that we're going to live in a world where you don't need a workforce management tool. I don't believe that's the future.

• 37:57Harry Stebbings?

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

• 38:03Speaker 03

  Well, that's definitely been true historically. The question is, is it going to be true in the future? Look, I think, yeah, 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.

• 38:44Harry Stebbings?

  Do you know what, Jeff? The joy of kind of doing this for as long as I have and being old now is that I'm actually just brutally honest. And when it comes to Series D at Rippling, I mean this respectfully, is there much for you to do as an investor, given the quality of the management team and the stage of the company? And how does like your input change, given that insertion point?

• 39:04Speaker 03

  Very little for me to do. It's an absolute dream. And one of the things I love about Parker, he doesn't want help from VCs, full stop. I think he has a really special relationship, certainly with his lead for the Series A, who co-led the Series D with us, Mamoon from KP. You know, when someone takes a bet on you and believes in you and leads the Series A, that's a special relationship. So I'm sure that that's a great, super helpful relationship for Parker and Mamoon's phenomenal. I think he has a special relationship with Mike from Sequoia. They went to college together. He doesn't need my help. If he wants my help, I'll give it to him. I've given it to him on a few things in the past. I don't really bug him. It's a dream for a VC to be able to deploy this much capital in a company where you believe

• 39:48Speaker 03

  there's no way you're going to lose money and there's a half the 10x over 10 years. You strongly believe in as a firm and you don't have to really do very much. That is a dream equation.

• 39:58Harry Stebbings?

  You put 125 in. What percent of your fund is that? That's 15%?

• 40:02Speaker 03

  Well, we did it through three funds. We had then, actually four funds. We did it through Bedrock, our first three funds, Bedrock 1, 2 and 3. It's around 20% of those first three funds now, all in is Rippling across all of our investments. And then we syndicated a tiny like sliver, like not hardly any of the round, via an SPV to a few of our LPs who wanted exposure.

• 40:23Harry Stebbings?

  Brian Seaman, obviously your former colleague from Founders Fund, said the biggest enemy of venture returns is capital concentration limits. Do you agree with him?

• 40:30Speaker 03

  Well, we just did it. So we have 20% of Bedrock 1, 2 and 3 are in Rippling. We have a ton of Bedrock in Flock Safety. We have a ton of Bedrock in Versal. So we've concentrated capital in Rippling, Versal and Flock Safety to an extreme degree. So yes, we agree with him.

• 40:45Harry Stebbings?

  I want to finish on Rippling's 10x case. When we think about Rippling being a $100 billion company, we're going to end on the positive. When we think about like that 10x, what are the ones two biggest barriers you think there will be to Rippling's 10x outcome before we talk about the positives?

• 41:00Speaker 03

  Ultimately, every company is its own worst enemy. When you're this ambitious and you're trying to do this much 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,

• 41:39Speaker 03

  it is a truly world-class executive team for a early growth-stage private company, albeit a highly valued one. So I'm optimistic that they're gonna 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 gonna say it, there's no other company's gonna be able to out-execute this founder in their market. It's just not, it's not possible.

• 42:02Harry Stebbings?

  Can I ask you, I'm sorry, I am diving quickly, but they have more founders or former founders as team members within Rippling, I think than any other company. There was a great study I saw a couple of months ago, whenever it was, that said about the amount of former founders who are now team members at Rippling. What do you think that does in terms of execution, culture, morale, how a company is built? To have so many former founders, like Matt from, obviously, Inklings, what does that do to the company execution-wise, culture-wise?

• 42:28Speaker 03

  It makes it a culture of people that have a chip off their shoulder and need the business to be massive in order to self-actualize. And know things aren't easy. You know there's not always a comfortable ecosystem and matrix to take care of you and make your life easy and beautiful. They know that the world is cruel. They know that the world is hard and they still go for it anyways. That's the culture to abuse Rippling with, and that's the advantage Rippling has. That culture of being underestimated, of being faced with skeptics, saboteurs, doubters, detractors. Every great entrepreneur has that, and how to overcome that and channel it into winning over and over and over again.

• 43:13Speaker 03

  No other company is gonna have a culture like Rippling, and that's what makes it a compound startup in my mind. That culture is going to compound.

• 43:20Harry Stebbings?

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

• 43:24Speaker 03

  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 outwards for SaaS 10, 15 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.

• 43:59Harry Stebbings?

  Jeff, listen, I always love our chats. I cannot thank you enough for going off on a tangent on the psychology side in the beginning, for advising me in the middle. This has been so much fun as always and I can't thank you enough, my friend.

• 44:10Speaker 03

  Pleasure. Thank you.

• 44:14Harry Stebbings?

  I want to say again, a huge thank you to Jeff. He's been an incredible friend, advisor and supporter of me over the years and it really does mean a lot. That was so much fun to do. So huge thanks Jeff and such exciting times ahead with Rippling. If you'd like to see more from us behind the scenes, of course you can, on the twentyminutevc.com or twentyvc.com. But before we leave you today, we all hope we never need life insurance, but for me, nothing is more important than my family and knowing they will be protected and looked after. If you follow my Twitter, you know how close I am to my mother and mortgage payments and other expenses, they don't disappear when you're gone and life insurance just gets more expensive as you age and so now is always the best time to buy. PolicyGenius was built to modernize the life insurance industry. Their technology

• 44:55Harry Stebbings?

  makes it easy to compare life insurance quotes from top companies like AIG and Prudential in just a few clicks to find your lowest price. And with PolicyGenius, you can find life insurance policies that start at just seventeen dollars per month for five hundred thousand dollars of coverage. And PolicyGenius has licensed agents who can help you find options that offer coverage in as little as a week and avoid unnecessary medical exams. They're not incentivized to recommend one insurer over another, so you can really trust their guidance. Plus, there are no added fees. Head over to policygenius.com to get your free life insurance quotes and see how much you could save. That's policygenius.com. And speaking of game-changing tools like PolicyGenius there, Gainsight is the world's

• 45:39Harry Stebbings?

  leading platform for helping companies of all sizes and industries drive durable growth through customer, product and community-led strategies. And did you know that Gainsight launched a new offering, Gainsight Essentials in early March this year? Essentials makes it easier and more affordable for companies at any stage to reduce churn, drive more expansion and cross-sell dollars and improve usage and adoption. And best of all, Essentials starts at just $20,000 per year and you can be live in as little as two weeks. In fact, Essentials has been leveraged by companies like Callanly, Chewy, Dialpad and nearly 100 others since its launch in March. Now you can start and scale with Gainsight. Go to essentials.gainsight.com to learn more and mention 20VC for special pricing.

• 46:23Harry Stebbings?

  When you schedule a demo or sign up, tell them I sent you and get that durable growth engine going. And finally, are you familiar with Cathy Wood and her firm, Arc Invest? They manage nearly $25 billion in their ETFs. For investors like us, think of the earliest investors in companies like Facebook, Spotify or Uber. They were investing in these companies long before they were public and made billions in returns on their investment. Now you can get in on the action too. You need to check out Cathy Wood's new Arc Venture Fund exclusively on the Titan Investing App. Led by the iconic Cathy Wood, Arc Ventures is one of the first venture capital funds accessible to accredited and non-accredited investors. That means you can invest in Arc's big bets, both in the public and the private markets with as little as $500.

• 47:08Harry Stebbings?

  Previously, you needed substantial wealth and connections to be able to access these types of funds. But now everyday investors can access the Arc Venture Fund through Titan. So how do you get involved? Well, you sign up for the Titan app, deposit money and purchase shares in the Arc Venture Fund. From there Cathy Wood and her investment team at Arc Invest do the rest. If you haven't heard of Titan yet, Titan is a place where you can have your money actively managed in diversified income generating asset classes like private credit and private real estate. And also where you can access exclusive investment opportunities like Arc Venture. So if you want your money actively managed by some of the world's most iconic investment managers, it's time to invest in the Arc Venture Fund exclusively on Titan.

• 47:48Harry Stebbings?

  Head to titan.com/20vc and you'll get a free $25 investment into another one of Titan's portfolios. That's right, a free $25 investment into Titan's flagship portfolio. This is also a paid partnership, I have to say as a disclaimer, with Titan. And at the time of this reading, I'm not yet invested in Titan's strategies. But head over again to titan.com/20vc. As always, I so appreciate all your support and I cannot wait to bring you an incredible episode on Friday with the one and only Kevin Weil.