Transcript

Ted Blosser: So when you see me looking over here.

With my avatar, I'm actually looking at another application that's open, uh, which is my notes application where I'm keeping the agenda for today's discussion.

today's discussion is what we call the five biggest learnings from building a compound startup. We are a learning company, so one of our values is always be improving.

Welcome to the LEARN podcast, where we interview top leaders in tech and learn about how they're building the world's most innovative companies. I'm Ted Blosser, CEO and co founder of WorkRamp, the world's first learning cloud platform. Our mission is to help professionals reach their full potential through learning, and the LEARN podcast is where we can learn from the best leaders at the top of their game.

Please subscribe, leave us a rating, and we hope you enjoy the episode.

What's up, everybody? We're trying something new today. We did an unboxing of the Vision Pro, uh, right when it came out. And we gave our hypothesis on how the Vision Pro could disrupt. The future [00:01:00] of work. So we wanted to drink our own champagne and our research and actually try something brand new.

If you're watching the video version of this, we are recording it a hundred percent from the vision pro.

I also have our podcast software recording me on the side. You can actually see me in my office recording from the vision pro. But all the audio, the visual, the avatar will be coming from the vision pro and published directly to this podcast.

we'll see if we record more of these in the future, but definitely want to test it out and see, um, how it goes. So let's jump into today's podcast episode. I'll be talking directly to, the screen here, but also on my left hand side. I also have, my notes for the show.

So when you see me looking over here.

With my avatar, I'm actually looking at another application that's open, which is my notes application where I'm keeping the agenda for today's discussion.

But today's discussion is what we call the five biggest learnings from building a compound [00:02:00] startup. We are a learning company, so one of our values is always be improving.

And so we want to share the. Five big learnings we've, had when building a compound startup. So we're all start off with what a compound startup is. And then we'll go into where our current stage is as a company. And then we'll jump into the five learnings. If you haven't heard of what a compound startup is, a compound startup is a term coined by Parker Conrad from, Ripley.

He's the founder of Ripling, previous founder of Zenefits and in the late. 2010s, he coined this term because the conventional wisdom at the time was that most SAS companies should go narrow and deep and build specifically for, really single use cases. And he came around at that time and said, you know what, I'm actually going to go against the grain.

And I think the next biggest trend in SAS is that there should be fewer vendors who build many more products. And he's been putting his money where his mouth is. His company now rippling [00:03:00] has 20 plus products that they've built. I think I heard on a podcast recently, they're building about five to 10 new products a year.

And he thinks the value prop from a compound startup. It's much greater than going specialized. For example, in a compound startup, in the case of Rippling, you can actually have shared user data, shared permissions, shared settings. Basically, the user model is the value, not so much the applications.

And if you have a shared user model, all those applications become much more valuable to a business rather than going deep inside, a specific use case. Now, we are firm believers. In the compound startup philosophy as well. We believe this is going to be one of the biggest trends in SAS over the next three to five years, even bigger than AI.

We think AI will be a big trend, but it has, some huge growth potential five plus years. Out, but in the near more near midterm three to five years, we believe the compound startup trend is going to be critical. [00:04:00] What we're doing here at WorkRamp, if you're not familiar with WorkRamp, we are building what we call the learning cloud.

The learning cloud is a compound startup in and of itself. It is a, compound startup of about six products across two clouds. We call that the employee learning cloud. That's where all of your employees can grow to reach their full potential through learning. And then we have the customer learning cloud, which is how you turn your customers into your strongest advocates through learning each of those clouds have three products that share.

Content permissions, AI infrastructure, all the things you need from a learning perspective. We believe that CFOs, CLOs, VPs of sales, VPs of CS should be sharing one centralized learning infrastructure and actually take every learning use case and just have one trusted vendor that they can, build essentially learning centers of excellence around.

Inside their companies. And that's our mission as a company. And so what I'll do is share our [00:05:00] evolution and our learnings about building these six products over the last nine years or so, and hopefully you can take it back to leadership team, or if you're a founder and actually apply these lessons, when you're looking at building compound startup yourself, if that's what you want to do with your business.

With that said, let's jump into it. We'll go into my first point here. You'll see me looking and scrolling with my fingers here on vision pro through my notes. First big learning. This is called you need to do the research and you should do this research yourself. don't outsource the research when you're looking at the next big products to build for your compound startup.

One thing, that I've seen some other founders do is they might have a PM or analysts go research this, listen to their data. You need to get hands on with this research and really understand it visually. So, you know, and can, Market and can make the right and critical [00:06:00] decisions to decide on whether to enter the market or not.

I'll give two examples of doing the research. One where we didn't do the research and one where we did the research. and a great example back in WorkRamps history around 2017, 2018, we rolled out this brand new product called work room. This was essentially. A GitHub for learning. We were trying to open source the concept of training materials so people could put up their training materials and people can contribute to them.

So essentially, an open source version of training. And we thought such a novel idea. We released it and it was a huge flop. It had a cool launch because it's a cool concept got written up in things like Forbes, but like literally no traction. And we shut down the product very shortly after. And the reason being is we did absolutely no research.

We were so enamored with the idea, with the concept, and we did no market research heading into that. We just thought, Hey, we are, innovators. We are the next Steve jobs of the world. [00:07:00] Let's go release this to the world and see if they will love it. And we just didn't do the research upfront. If we had done the research, we probably would have never executed that product.

Now, fast forward. To

Late 2022, early 2023, we were looking at our next major products to build. And one of the categories we were looking at was the coaching category. There's some big providers in this category, like the better ups of the world. you have Torch and it is a really exciting category 'cause it's adjacent to our buyer.

, we like the coaching category, but this time we did. The research and we did this in multiple ways. One, we talked to founders of companies that were in the coaching category. We did our own market research. I personally did a ton of that myself. We also even hired in a coach into WorkRamp to coach about five of our employees to understand how to actually bring in an external coach, the dynamics around it, the pay around it, and really understand at a granular level how the whole model [00:08:00] worked.

Now we did that research for about a month and then we came away with that research and said, you know what? This is not the category for us. We looked at the category and there's a lot of things we just didn't think vibed well with how we did business. The gross margins weren't similar to what we were doing.

the whole coaching category where you have to manage contractors was something that we didn't have a strong, skill set for. it was a crowded category when we start to do our research with not that much differentiation either. And so there was really nothing where we said we had a competitive angle that made sense for us to add that as our next compound startup, idea.

And so we ended up scrapping that idea. Now we might, come back to it. We, who knows in the future, but for now we said, you know what? This is not the right time or the right fit for us. Let's not pursue that idea. And we ended up pursuing two other ideas. We ended up recently launching our CMS product, our sales CMS, and also our new communities product, which is part of our [00:09:00] customer learning cloud.

And we're so happy we did the research and studied those categories and those two products are doing really well. The recent launches, but we think they have a really strong market fit and we'll reference those as we go on. All right. That was point number one, needing to do the research. Point number two, you need to nail the timing.

Timing is key. And I'll give a specific example here for WorkRamp. And I'll actually give an external example. We all know that example. Webvan. Which is essentially Instacart and DoorDash about a decade and a half before Instagram and DoorDash. And Webvan was a dot com era company. It just got the timing wrong.

Burned through a ton of cash, went into bankruptcy. And again, 10 to 15 years later, when, essentially, the next gen smartphones came around like iPhone. The market was right for that disruption and those companies did really well it's not always the concept. It's the timing of those concepts that can make or break [00:10:00] companies in this world.

Timing is key for SAS products. We actually went and built our first version of our CMS. Back in 2017, we called this portals. We even released it to a few customers who liked it, but we just ultimately can never get traction on it because the category didn't really understand. Why we were building an LMS vendor was building a sales CMS.

Now, we ended up kind of sun setting that product over the years, but what happened in between 2019, 2020, 2021 is that the major CMS players, these are your companies like seismic high spot show pad. Big tin can, they all bought, or built their own LMS products to pair with their CMS. Now over those next three to four years, the market was then conditioned to say, Oh yeah, that makes a lot of sense for a CMS and LMS to be joined in one platform.

Now we saw that market develop and we went and built a new CMS product, like I mentioned earlier. In 2023, and we just recently announced that now this has seen a lot of success in its early days already, but that's because the market timing is correct. And so, what you want to do is make sure you really judge market timing.

Is the customer ready for it? Is the customer conditioned to buy in that way? And we've seen this success with our new CMS product that we're really excited about. So make sure you nail the timing. Timing is key. let's go to point. Number three, you need to set your internal teams up for success.

Don't set them up for failure. and what I mean by this is you need to structure your teams internally to make sure you have the ability to build and distribute the best products possible for the multiproduct or compound startup concept. I'll give you a story. I'll come back to Zenefits and also tell you a [00:12:00] story about WorkRamp as well too.

It was actually a rumor that I did verify, that Zenefits in its early days was seeing extreme competition from Gusto. Zenefits had an insurance, an innovative insurance product, but then Gusto, uh, essentially copycatted that, but they also had a payroll product. Said, Hey, I need to actually go build a payroll product really quickly.

And so what he did was he set his team up for success. He actually rented out a block of a hotel in San Francisco, brought in all his engineers, PMs. And they went and designed a payroll product in the matter of months, which in other scenarios could take years for companies to build. And so he basically fast tracked the build of this new product and saw a lot of success around that.

And that's why Zenefits hit that 4 billion plus dollar valuation at the time, because they were able to set their teams up for and not lose that part of the market to that [00:13:00] competitor, Augusto. And so we took a play from that playbook is we said, Hey, with our second product, this was our customer LMS product.

which was the foundation of our second, cloud, which is the customer learning cloud. We said, let's go set our team up for success. So we shipped our engineering team off to actually Carmel. We rented a home in Carmel. , for decent amount of this time. And so we went to Carmel.

And we, stayed there for a whole week and built the initial version of our customer LMS. Now we got this to production a couple months later, but that gave us a really strong foundation to build from. We collaborated, we knew the architecture that we want to build, and that was a very successful deployment.

And then we cleared all other distractions for this team to go build the best customer LMS. They could. And so we did that with our two new products, CMS and communities. We actually had dedicated pods, dedicated PMs where we essentially them from doing any other work. If you go try to put these compound startup [00:14:00] features onto existing product pods or with other work, you might be setting them up for failure.

So what you want to do is make sure you set up your teams for success. unblock them from any other work, make them as single threaded as possible so they could focus on that specific product at hand for the compound startup concept. So again, make sure you set the team up for success.

let's go to learning number four.

I'm going to use a semi quote unquote dirty word here, which is don't be afraid To micromanage, and it's a dirty word in the business context. Everyone hates that word micromanage, but I wanted to use it to get the point across. I was talking to a founder who will go unnamed. he was, a founder at a 75 million ARR company is a SAS company.

And they were building a new product that ultimately failed for about a year. And I asked him, I said, Hey, why did that product fail? What happened? And he said, you know what, Ted, I wasn't close [00:15:00] enough to the product. I essentially should have micromanaged the success of the product. I would come in and drop in a once every couple of months as the founder, see how they're doing, go to product reviews.

but ultimately I wasn't close enough to the day to day with this product. And it was a bet the company product that they were working on. And in hindsight, he said, Ted, you need to make sure for your biggest bets that you are essentially very, very close to them because those are the products that will make or break your company, especially when you're building a compound startup, you don't have that many at bats and you can't strike out too often.

These bets can take about a year for them, end to end. And so you need to make sure they're successful because a year of startup time, is an eternity. And so don't be afraid to micromanage. And so what I mean by that, I'll give a specific example when we were building that new communities product that we referenced earlier, is that when we started off with that product, I actually, did a lot of the research [00:16:00] myself on the market and I instilled my vision from the early days to set up the foundation.

And then I kind of handed it off to the team to really execute. And, the reason being is that community market was very fragmented. There were a ton of consumer solutions. There are a ton of old enterprise solutions. And I wanted our team to have a vision of essentially a hybrid of the two enterprise grade, but also consumer quality and consumer UX.

And so it was founder's job at that time to come in and say, Hey, this is the type of product we want to build because there's so many variations that you could build. I helped even write the initial product spec, down to the letter with the PM. But once we were in a good spot, I was able to phase out a little bit and move into a weekly cadence with the team.

And again, I'll use that word micromanage, but my main point is I was heavily involved in the initial build of the product. All the way through now, which is the product market fit stage. And so your job as a founder is to [00:17:00] help your company get to product market fit with these new products. And so product market fit is the name of the game of a compound startup.

Just because you released previously successful products doesn't mean that your new products are going to automatically have product market fit. And so again, you want to be closely involved as a founder. Until the product is ready for scale, it's your sole job to get to product market fit. And so that's going to be my fifth learning.

It's going to actually come into that same theme, which is your job as a founder is to get to product market fit before scaling.

What I've seen with other founders is that they prematurely scale before product market fit. What do I mean by this? When I say product market fit for me personally, that's getting to about 15 active customers.

Who really love your product and they say, Hey, this product solves a business pain. It is as advertised and I want [00:18:00] to, actually go share or even tell my other colleagues and friends about this product. And so roughly in my mind that comes to about that 15th customer. So. When you're ready to scale, I've seen other companies where right when you launch this, they go into the funnel, they go into close metrics, they go into distribution, they go into, how sales reps can pitch this thing.

Those are all fine and dandy, but the main thing is these all don't matter unless customers find value from that product. And so what you want to do is work very closely with those initial 15 customers or so you want to get their feedback, make sure. There's a tight loop between their feedback and the engineering team and the PMs.

You want to make an adjust course very quickly. Again, your whole job as a founder is to stay involved in those early days until the product is ready to scale. So you need to help them get to product market fit. But once it gets to product market fit, that's when you could take the step back and really trust your lieutenants or your team members to then take [00:19:00] it to the next level.

That's then where you can pour fuel in the fire. Move it through your common distribution channels. But again, until you get to that point, your sole job as a founder is to help these products get to product market fit. So those are the five big learnings of building a compound startup so far. We hope you enjoyed this.

Hopefully you like this new cutting edge way. We're recording this and vision pro again, could be the future of work, the future of learning. So we want to, again, drink our own champagne. Hope you enjoyed the podcast episode with some amazing guests coming on soon. And we'll catch you at the next one. Talk soon.