Is the Suite Strategy Right for Your SaaS Startup?
Tomasz TunguzVenture Capitalist If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here. Is the Suite Strategy Right for Your SaaS Startup?
Most massive software companies structure themselves with an office of the CEO, which allocates capital to different business units. Within each business unit, a general manager operates one or more products. There are three paths I’ve seen to achieve this scale:
In a recent podcast, Parker Conrad champions the suite strategy, also called a compound company. Parker founded Rippling, a six-year old company with about 1800 employees. Rippling sells about 13 products for information technology teams, finance teams, & human resources teams like mobile device management, payroll, & talent management. A compound company must excel at new product development & launch. At Rippling, new products must leverage the 4 strengths of a compound company:
When the office of the CEO approves budget for a new product, the company hires a general manager for the product. The GM hires the first 4-5 people on their own - without Rippling’s talent team. This test reveals the GM’s ability to sell others on the team’s mission & prospects. Then the team of 10 people or so launches the product into the customer channel, rapidly iterating until the product has achieved its goals. Why might it be the right time to start a compound company? In the first two decades of cloud, Parker argues startups built superior point solutions to compete against the distribution might of on-prem incumbents. Cost-cutting CFOs prefer consolidating spend on suites. Suite strategies trade depth for breadth at least in the short term & require a different mentality for building a company. Today, new startups have to compete with a cloud-native incumbency. These different competitive dynamics raise the question : is the better approach is point solution or suite? |
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