The Generalist - WorkOS: Enterprise’s Great Equalizer

Hey friends,

I’ve been a WorkOS fan for some time. The company’s mission to make startups “enterprise ready” through a suite of elegant APIs has always seemed like a massive opportunity. That’s why in October of 2020, I chose WorkOS as my response to a question tweeted out by Patrick O’Shaughnessy:

As it turns out, WorkOS had raised a Series A by then. Within a year, CEO Michael Grinich was being preempted with Series B term sheets. And in 2022, WorkOS announced it had raised $80 million, led by Greenoaks.

Twenty months after that tweet, I’m more bullish about WorkOS than ever. The company is growing rapidly, accumulating major customers like Webflow and Vercel, and saving innumerable hours of developer time. And yet, its ambitions span far beyond its current impact. If WorkOS succeeds, the way software is developed may be fundamentally different.

This piece was written as part of The Generalist's partner program. You can read about the ethical guidelines I adhere to in the link above. I always note partnerships transparently, only share my genuine opinion, and commit to working with organizations I consider exceptional. WorkOS is one of them.

WORKOS: ENTERPRISE'S GREAT EQUALIZER

Actionable insights

If you only have a few minutes to spare, here's what investors, operators, and founders should know about WorkOS.

• Bridging the enterprise chasm. Startups often struggle to sell to large companies because of their technological demands. That includes things like SSO, SCIM, and audit logging. WorkOS exists to bridge the chasm between startups and big businesses.
• An API that increases your TAM. With elegant APIs, WorkOS makes it possible for startups to serve large enterprise customers. This can be revolutionary for companies, massively increasing their addressable market. As a result, CEO Michael Grinich refers to his business as “an API that increases your TAM.”
• Founder-business fit. Few understand the problem WorkOS is solving better than Grinich. The CEO’s first company sunset its core product after it became clear that it lacked the features necessary to sell to enterprise customers.
• A sense of taste. WorkOS is solving an acute pain point. It doesn’t need to be beautiful to be successful. And yet, Grinich’s team has built an exceptionally elegant product that shows a love for the craft. The result is a platform that developers love.
• Building a new interface. In the fullness of time, WorkOS might look less like an API business and more like an interface. Grinich is constructing a layer that helps companies navigate and adopt new technology. It may also change how software is developed.

***

Paul Graham has been credited with saying that startups die by suicide rather than homicide. Though founders fret over the momentum and machinations of competitors, survival typically rests in the hands of the executives themselves.

Perhaps the one place where this does not apply – or applies least – is in the world of enterprise software. Promising startups have repeatedly seen their trajectories snuffed out by the industry’s apex predators.

The canonical example is Slack. Stew Butterfield’s messaging business embarked on a remarkable tear before success attracted the attention of Redmond’s exterminator. Microsoft rolled out Teams to its legion of Office 365 customers and, in doing so, choked off Slack’s future potential customer base.

This story is well known. But explanations of how Microsoft managed this maneuver almost always miss a vital element. It is not that Microsoft has more money, though that helps. It is not even that it has an expansive, installed userbase. (Though again, it’s nice to have.) It’s that Microsoft is fully and completely enterprise ready. Over decades of effort, the firm has developed the features and infrastructure needed to serve big customers. Equipping the Fortune 500 with Teams requires Microsoft to build only the product, not a software stack spanning SSO, SAML, OAuth, directory syncs, audit logs, and beyond.

It’s hard to overstate the importance of this edge. The insurgent’s primary advantages relative to the incumbent are speed and focus – both disappear when it comes to serving enterprise. In Slack’s case, once Microsoft forced it to begin competing for large enterprises head-on, Butterfield’s business had to redirect attention and talent to building that stack. At precisely the time that speed and focus were needed most, Slack had to relinquish it.

Because of these dynamics, fearing annihilation in enterprise software is not paranoia but pragmatism. As Neil Shah, founder and General Partner of Greenoaks, an investor in WorkOS, noted:

Shah added that insurgents need to focus on building “only differential” features but cannot do so given demands levied by enterprise customers.

Enter WorkOS.

Founded in 2019 by second-time entrepreneur Michael Grinich, WorkOS is not just a provider of SSO and other services, it is enterprise software’s great equalizer. Instead of spending years building and maintaining in-house infrastructure, insurgent software companies can rely on WorkOS to achieve enterprise readiness in a fraction of the time. By doing so, insurgents maintain and intensify their natural advantages, unlocking the ability to serve larger customers without losing speed or focus. Grinich describes his company as “an API that expands your TAM.” WorkOS’s demonstrable value, ease of use, and focus on developer experience have prompted investors like Lachy Groom to refer to the company as “the next Stripe.” Coming from Stripe’s former Head of Issuing, that’s a meaningful comparison.

As you might expect, that proposition has resonated with customers and venture capitalists. WorkOS counts Webflow, Vercel, Hopin, Loom, Airbase, and many others in a clientele that stretches into the hundreds. Last month, the company announced it had raised an $80 million Series B, led by Shah’s Greenoaks. Investors noted that it was an especially competitive fundraise.

In today’s piece, we’ll explore what WorkOS is, why it matters, and the radical opportunity it is chasing. In the process, we’ll discuss:

• Hard lessons. Before starting WorkOS, Michael Grinich founded email client Nylas. Its initial failure demonstrated the need for enterprise readiness as a service.
• A tenth of the time. WorkOS reduces the time it takes to set up enterprise SSO by as much as 90%. It has a similar impact with other features like Directory Sync.
• Saying yes. IT administrators want to adopt new products but can’t do so unless specific requirements are met. By helping address these needs, WorkOS helps IT administrators experiment with cutting-edge tools.
• Impressive talent. Grinich has succeeded in recruiting tenured talent. That seems to come down to his leadership, along with the size of the WorkOS opportunity.
• Going top-down. WorkOS has scaled by leveraging a classic bottom-up motion. That works well for small-to-medium-sized businesses (and startups). WorkOS may need to add a different approach to capture the top end of the market.

Let’s get to it.

As a note, we’ll be taking a brief break at The Generalist to re-charge and gear up for the second half of the year. We’ll be back in action on July 10.

Until then,

Mario