Parker Conrad - Building a Compound Company

**Patrick O'Shaughnessy** (0:00)
This episode of Invest Like the Best is sponsored by Canalyst. Canalyst is the leading destination for public company data and analysis. Founded by a former buy side analyst who encountered friction sourcing, building and updating models, Canalyst is now used by over 400 institutions, including the largest money managers globally, and by a number of guests on the show.
With detailed company specific models and data on virtually every public company, Canalyst clients are able to ramp up faster, update models instantly, and incorporate the highest quality fundamental data into any workflow. If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalist.com/patrick. That's canalyst.com/patrick. Today's episode is sponsored by Brex, the integrated financial platform trusted by the world's most innovative entrepreneurs and fastest growing companies. With Brex, you can move money fast for instant impact with high limit corporate cards, payments, venture debt, and spend management software all in one place. Ready to accelerate your business? Learn more at brex.com/best. That's brex.com/best.
Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories and strategies that will help you better invest both your time and your money.
Invest Like the Best is part of the Colossus family of podcasts and you can access all our podcasts, including edited transcripts, show notes and other resources to keep learning at joincolossus.com.

**SPEAKER_2** (1:35)
Patrick O'Shaughnessy is the CEO and founding partner of PositiveSum and the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of PositiveSum or O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of PositiveSum or O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (2:04)
My guest today is Parker Conrad, co-founder and CEO of Rippling. I wanted to speak to Parker because he is building Rippling in a way that we don't come across often. Rather than focus narrowly on one product, he is building a suite of interrelated products simultaneously to carry out functions of HR, finance and IT for companies.
He calls it a compound company and we discussed the idea as well as some of his other non-traditional theories in detail. Please enjoy this conversation with Parker Conrad.
So Parker, one of the, I guess, sacred cows or if there's a 10 commandments of startups and business, this one would be on there, is that you're supposed to begin a business for a customer by focusing on one thing and get really, really good at that one thing and serve them well. And then you earn the right to transfer from product to platform. And this has become gossip in the world of building young technology companies especially. And I think you have a very, very different take on what might be possible in terms of how to build early on.
And I'd love you to lay the groundwork with your concept of a compound startup or a compound company right at the beginning, because I think it will inform just about all the other topics that we talk about.

**Parker Conrad** (3:18)
I generally agree with people who talk about the advantages of being focused as a company. I think that it's limiting and it misses something, because I think that there are a few underlying reasons. One is that a lot of really focused companies or the really focused company ideas have been picked over at this point. If you wanted to do a really narrow point SAS vertical company, the odds are at this point, there are five other people who are already doing it. It's not that I think it can't work, it's that there are these undiscovered islands of product market fit just beyond the horizon line that do this thing that people have largely been unwilling to do to date, which is to take on a constellation of interrelated products or features and build them in this way where they're seamlessly interoperable and build a company around that. There are a lot of opportunities there.
And I actually think that what I call a compound startup is not really something new, it's maybe something old come again, which is that if you look at the history of business software and you look at the really big outcomes from 20 or 30 years ago, most of them are what we would call compound companies. You look at businesses like SAP and Oracle and Microsoft, that's what they're all doing. They all have very broad product portfolios. And I actually think there's a misconception that the way to build product quality is to focus very narrowly. And that's the thing that I disagree with the most. I think that there are a whole host of ways where when you build in this compound way, you actually build much better products. And we can talk about what those are in a second.