In today's episode, Sudarsan Ravi, Founder & CEO of Talent Acquisition platform RippleHire, talks about how he stayed authentic in the face of early-day FOMO, what it takes to sell in a low-trust market like India and why you can’t put a deadline on building a great company.
2:25: RippleHire: ‘The’ word for employee referral
3:50: Ironic but true. Competition creates staying power
6:14: Getting funded does not prove ambition
8:12: Pole vaulting over FOMO
10:42: Selling at 40x pricing over competition in India
13:12: Buying SaaS in India - What’s new
16:05: Looking back on the Oh s**t! moments
17:18: What first-time founders can learn from my journey?
18:56: Why second-time founders put value over valuation
Rajan: Sudarsan, welcome to the Value SaaS Podcast where we talk about stories of entrepreneurs who have taken capital-efficient choices so that they can be in control of their businesses.
Sudarsan: Hi Rajan, thank you for having me here. My pleasure to talk to the SaaS community on this. The topic of Value SaaS is close to my heart.
Rajan: Absolutely. Sudarsan, just to give our audience a little bit of background about yourself, can you talk about what was the origin story for RippleHire? What was the inspiration? When did it get started?
Sudarsan: After working with a friend on a startup in the employee engagement space and realizing that we weren't going anywhere, I kind of put my feet up in August of 2012. I was really looking back at what were some problems that I have faced.
I realized that when building the PeopleSoft practice at Deloitte, we went from 35 to 150 people and a big way in which we hired was through employee referrals. We literally built our team out by getting people into a room and figuring out who's in their network.
I really thought about it and said, ‘Hey, why was it so unlike me to do that?’ If each employee referred one person a year, then how an enterprise hires talent could fundamentally change. And referrals is the best channel for hiring, whether it’s in terms of joining ratios, retention, the fact that you distribute wealth within. It's the highest form of marketing as well, it's employee advocacy. So the question of one person, one candidate, one year took me down the rabbit hole of this journey called RippleHire.
I am happy to share that today, like you have LinkedIn for social media and Naukri for job portals, RippleHire is the default for employee referrals in the country. So that's a little bit about our origin story. Of course, since then, we've evolved to build more products for talent acquisition, but that's a little bit about us.
Rajan: That's fantastic. So you're almost ‘the’ word for referral, just like LinkedIn is for recruitment
Sudarsan: Right. Absolutely.
Rajan: This idea is very sound. But you had a lot of competitors that started with you, but we don't know any of their names. But you've been around. Why is that the case?
Sudarsan: So actually, I'll tell you an interesting story.
The day I was ready to launch V.01, I came to the office all pumped. And the first thing I saw was that WhistleTalk (a competitor) had raised almost two crores in funding. That's when I discovered, ‘Hey, there is another company.’
Interestingly, that week, or a couple of weeks later, I ran into another investor who told me, ‘There are nine companies like yours, and I've not funded a single one of them. So I don't know what you're going to do differently.’
What happened as a result I was discouraged early thinking there may not be funding for this, and the fact that I had a funded competitor from day one to compete with, meant that we had to really focus on what we were good at, which is to provide a product that adds value to our customers. And that meant that all our focus, because we were a lean team, went in just trying to figure out the complexity of this problem. And it's an insanely hard problem to solve. Getting employees in a large enterprise to just give you an idea, less than 1% contribute today. And then to say that the right people within an enterprise need to contribute, to then process and get closures, meant that it was an insanely hard problem to solve, one that needed time
Sudarsan: The second reason we are still around is that for the first three years, everyone in the HR tech market looked at my product and said, ‘Wow, this is like an iPhone.’ But nobody would buy it, or few would try it. I realized this was because every year, 50-100 such companies come up and shut down after year two or three.
Large enterprises don't want to stake their stuff on something that may not exist a few years from now. The market is sensitive to whether a company will exist down the line, even if well funded. So the confidence that we were here to stay propelled our growth. That also gave us the patience to go figure out how to make this work on customer revenues more than anything else.
Rajan: In the past you said some of these companies had ambitions and a bit of FOMO which led them to have fast growth. Can you talk through that?
Sudarsan: I think a very common narrative in the startup ecosystem is that if you don't raise funding you're not ambitious, which I think is blatantly untrue. Ambition is a function of where you want to go and how high you want to aim.
Honestly, we think we are still getting started. There is no reason why we can't be a billion-dollar revenue organization in recruitment, simply because there are sufficient companies we compete with today, especially in the talent acquisition cloud space, that have billion dollars in revenue. Do we need funding to get there? Not necessarily. We may choose to. But we definitely know that our ambition has no connection with funding.
The other thing I find fascinating is that there are timelines published for what you should achieve and by when. We are trying to cram building a great company into seven or eight years. And I think there are ridiculously few examples of that.
Rajan: T2, D3, right? They expect you to triple, triple, double, double, double. And I literally cannot count the number of companies who've had that kind of growth. But that's the Excel model or the math.
Sudarsan: Well, I understand the reasons behind why that kind of model needs to be built out for showcasing fast growth. I mean, think about ecosystems like Value SaaS, it takes about 30 years to build. So if you want to build something that's totally life-changing, you have to have a long-term perspective, not a 5, 7, 10, but 20-30 years. Before that you can't even claim to have made a significant dent.
So I think when you look at it from a longer-term horizon, seven-year milestones seem like just a journey on the road.
RippleHire was a late bloomer but we've been doing fabulous in terms of growth numbers year on year. But it took us a long time to figure out where the hell we were going. And I must thank Upekkha for helping us out on the journey there.
Rajan: What are some of the earliest days of FOMO that you had?
Sudarsan: Existence. So I'll tell you, fear of missing out, startup conferences. I felt like if I didn't attend a startup conference, I would not be in the network or I would miss out on some learning till I realized a lot of it is the same and not contextually relevant.
The second aspect was on the media publications, where we get talked about. Honestly, we've not done an article on YourStory in 10 years. Not because your story isn't great, it's just we figured it's just not our audience. We don't cater to startups and SMBs; we just cater to large enterprises. The mediums that matter to us are the HR magazines.
Awards. In the HR world, I discovered much later when somebody pitched an award to me and charged me money, how murky the whole deal was. So the fear was taking a different path where everybody else claimed either a red herring award or a global HR award in India, and not be perceived as ambitious or successful. But somewhere it just didn't tie in with our authenticity. Authenticity is one of our core values here. And it was very difficult for us to say, ‘We will stay authentic. We will not pay money for any awards.’
In fact, even now, the only awards our customers compete on are data-backed, and run by Gartner-equivalent firms in the US; Gartner awards are the Oscars of HR.
FOMO on funding. When all the media narrative is about how it's cool to get funding, then to stick your neck out and say, ‘No, we are going to build and we are going to build this sequentially on customer revenue on long-term contracts.
Pricing. I feel like if you add value, you should charge. And because you take a responsibility to deliver value, and the customer doesn't care about the charge, they care about the value you deliver. And if you take that money, it's great. But I remember one of our competitors, unfortunately, shut down; we were like 40x their pricing.
And they didn't care about revenue. I would go off to their enterprises and say, ‘You are 50,000 people. If somebody's giving you something for peanuts, which forget a rounding error, won't even exist in your balance sheet and you don't even need approvals for it, then are you sure they will focus on delivering results for you?’ And true to the point, some of these things died.
Rajan: And you mentioned something interesting, Sudarsan; I wanted to double-click on it. You said when you provide value, you need to charge the price. I know that your large market base was Indian customers. I wanted to spend a little bit of time on that. In general, Indian customers are considered to be very, very price sensitive, right, if I were to put it nicely. You said quite the opposite.
Sudarsan: I think we are in a low-trust economy. India is inherently a low-trust market. And I credit Kunal Shah (Cred) for coining that term because it just made total sense for us. What happens in a low-trust space is there are people who come and promise the world and then don't deliver. But I've realized that when you go and you take ownership for a customer outcome and you choose and sit with a customer and say, ‘I'm going to make you successful and here's what I need to make you successful,’ customers are comfortable knowing that you're authentic, that you will deliver on what you do, and as a result, ROI is going to be far, far more for them.
The fact that we work in talent acquisition (TA) where it's all a numbers game, we are able to clearly articulate the value. Honestly, TA directly impacts top-line and bottom line. And the fact that we can go in and showcase that both in terms of top-line impact and bottom-line impact means that when we capture our percentage of that value, people are comfortable.
I think Indian customers are price sensitive, but they're far more value sensitive than price sensitive. And if you are willing to offer something for free but not value, it's not that they're just going to take it, especially enterprise.
Rajan: Oh I love that framing instead of thinking of them as price sensitive, we should think about them as value sensitive, if they're able to perceive the value. And in many cases, especially in software and when they're delivering something which is very intangible, that part gets missed out. But when you're able to correlate to top-line and bottom-line impact, then that value is something that is hard to overlook. And there they may be willing to attribute the value and then pay the price for the value that they're able to perceive.
Sudarsan: True. But you know, Rajan, it's not just what they perceive. When they signed a contract it's perception, but the fact that they deliver it.
There are enough players who charge but don't necessarily take ownership of delivery, and there are players who take ownership of delivery but don't charge you. I figured the best of both worlds works better.
Rajan: Got that. So, this is one question that I wanted to ask you because out of the many people I know you've spent the most amount of time in the Indian market; you go and meet folks and then that's how you close deals. I'm noticing this trend, compared to five years ago, how Indian customers are buying software seems to have gone through a big change. What is your take on it?
Sudarsan: Oh, significant difference.
Rajan: Ten years ago to now, or five years ago to now?
Sudarsan: Just two years ago to now.
Rajan: Oh wow. Okay.
Sudarsan: So, two things that have fundamentally altered is, one, people are comfortable building trust over online meetings. They still evaluate with the same rigor, but the medium of evaluation is no longer about in-person conversations. Of course, in-person conversations and workshops build trust. But, Rajan, we've sold some of our largest deals and then some of our largest transformations without ever meeting the customer during the entire COVID pandemic.
Sudarsan: And these are not just technology organizations, right? I'm talking about banks, I'm talking about steel companies, and some of the largest banks. So we are talking about some really large organizations that have traditionally always been, but you know the reality is that people are comfortable. And I think a lot of the mindset has changed about how technology can help as well as how technology should be bought.
I'm also seeing a significant focus on people relying on references and actually having detailed calls to be comfortable, versus just looking at a checklist, which would often happen when they felt comfortable in the relationship. So the way they evaluate has changed a little bit, but, yeah, I think even now post pandemic the number of meetings in the entire deal are probably one, at max two, in person; everything else is just online.
Rajan: So usually when I have a conversation about Indian customers there is always a story around price sensitivity, but it looks like you don't have a story like that, and many times those stories are crazy. What was the craziest story you had working with an Indian customer in the last many years?
Sudarsan: Well my most painful memory was when we literally needed a three lakh renewal so I could make payroll. And as a founder I didn't have the money to fly down to Bangalore to meet the customer. And I know that the outcome is I finally got the renewal. I really questioned at that point the number of attempts I had made and the requests I had made. I had to leave all my self-respect at the door. And I still remember how I felt that evening when I signed the renewal because I knew it was coming through and that I would get the money. I knew it would be okay for that month. But the feeling didn't leave me and I knew that I would never want to be in that state again.
The person after this whole thing got signed blocked me altogether. So I can't get through on the phone with them anymore. Like I traced them so much. And I don't think anybody else has blocked me yet in 10 years of existence. But yeah.
Rajan: So on this long journey, were there moments where it looked like, 'Oh, shit, this is looking really bad,' but in retrospect turned out to be a gift?
Sudarsan: Let me think about this. Yes, I'm sure. There have always been moments like that. I remember early on going after startups and shedding SMBs. When you shed SMBs at some point in your journey, you realize that you are letting go.
COVID hit and think about it, a lot of SMBs don't exist in that space and few startups took off, few did not. COVID itself was a great feeling, Rajan. April 1st on our hiring platform, the whole country had gone on a hiring freeze because most of them had no idea what's going to happen economically, so the first thing they did was cut jobs. And jobs on our platform went down to zero. But six months since then, the hiring market bounced back like crazy. COVID ended up being huge because joining ratios plummeted. People started getting multiple offers, and referrals was the best channel for hiring. The kind of rate at which people had to hire, they really needed core systems to be better. So I think COVID was the best example of us going to zero jobs to then growing 60% in that year and then growing north of 100% after that.
Rajan: If you were to reflect on it and say what are three things that you would do differently if you were to start all over again? Or, maybe three things that you'll tell a new SaaS founder to keep in mind, what would those three things be?
Sudarsan: Everybody says ‘talk to customers’. We talked to customers, we built based on what they said. So our product did not need much change but market fit took longer because the market did not tell us that they wouldn't trust us till we got to a certain number of years in size.
One thing I would absolutely look at is when you do your customer discovery, see if they're willing to put money on the table and go on a project with you. If they're willing to do that, then you'll know if your plans of 12 or 18 months are realistic or if it's going to take longer.
The second thing that I think I would do differently by far is focus on just one segment of customers. I'm glad, we survived COVID and we are thriving now because we serve the rich. When it comes to B2B SaaS, the rich are people with a lot of money and they're all large enterprises. So if you have to pick your segment, and you want to be recession-proof or want to solve the problem of churn, it's always better to focus on customers or the segment that has money.
Third is, I would absolutely, and this is something we did well, but it took us a while to get this right, is to really sit down and figure out how to make your customer successful. Because if you can do that, I think a lot of your subsequent engines would work much better. So customer success, I think, as your core DNA, is something I would do again for sure. Whereas I see a lot of people focus on sales and marketing DNA, and there's nothing wrong with it. But as success DNA definitely propels you far higher, right? You scale as you grow.
Rajan: So last question, Sudarsan: Is there anything that you think I should have asked you but I missed out in our discussion?
Sudarsan: That's such a Rajan question in a podcast. Yeah. Not really, Rajan, I really enjoyed this conversation. I feel like this is at the end of an interview where you ask a person, what question do you have for me?
So, I do have a question for you, and I'd love to hear your thoughts.
Rajan: Yeah, go ahead.
Sudarsan: You're known for wisdom. So what I'd love to understand is the whole Value SaaS movement. It's so commonsensical but it almost needs a movement. Why do you think that is there, or why do you think it's necessary? Isn't Value SaaS the only way to build the right business?
Rajan: I would say it's the same reason why there are bear markets and bull markets, right? I think I read this somewhere, maybe in a Morgan Housel post, that initially things are very scarce, things are not available, so what ends up happening is that you start making very prudent choices, very, very frugal choices, and then you use whatever you have and then try to make something more than what exists there.
But then as things start becoming prosperous, then we start becoming very, very lethargic and then we stop forgetting the fundamentals, and then we make these extraneous choices. So that leads to a lot of buildup, what in the financial world is called a bubble. And then the fundamentals get lost. And then a correction happens. Now, what has happened is that this type of boom and bust cycle on this type of bull and bear market, we've had a 13 year long bull market.
Rajan: In the last bear market you and I remember was in 2009 and that time everything looked very, very, uncertain. So it is a cycle. And where we are having this conversation depends on where we are in that particular cycle. If you and I had this conversation in 2009, the entire world would be like that's the only way to build. And in fact for us, in Indian culture, we've always only thought about this as a dhanda type of business (traditional business).
In the last 10 years, a lot of easy money has come in. And people are only focused on valuation. Then they don't know, this is unsustainable and then get a rude awakening. But people who have seen multiple cycles, and what I find fascinating, Sudarsan, is that second-time founders want to build Value SaaS more than first time founders, right?
Sudarsan: True, true.
Rajan: Right. Because they have gone through a cycle and they've been bitten by the ups and downs, and they're like, "No, I'm not going to do that ever." So, people who have raised Series A, Series B, they're like, "Second time, I'm not going to raise my Series A unless I'm sure that my business is going to be a rocketship business.
At that particular point in time, I don't want to play the valuation dance. I want to find a spot where I feel that, ‘okay, now these things are sustainable, then now I see like a crazy growth path. Let me kind of bring in the rocket fuel that is needed to take on that rocket ship trajectory. If that is not the case, then I will navigate the business in a different way.’
So it's a function of time when we are asking this question, and who is asking this question? Otherwise, I mean, in a long period of time, it'll always revert to the mean and revert back to the age-old wisdom.
So hundreds of years ago, this is how it was built. Hundreds of years later also, unless you are fundamentally sound, you cannot play the valuation dance for very long. But in between, we will see these things happen.
So as of today, if you ask me, everybody's saying Value SaaS or capital efficient business, Jason Lemkin is saying it, Battery Ventures is saying it, Bessemer Partners is saying it. Two years ago they were talking about a completely different tune. Yeah, I think the movement is needed when it is not popular. Today, Value SaaS is back to being popular.
Sudarsan: I know. I know, and I hope it stays because I think you're right, "once bitten twice shy" is the mantra that I think most second-time founders probably go through. I think also, a lot of FOMO results in people focusing on vanity, a lot of vanity is easy, right? When you're focused on valuation and where you get featured.
Rajan: I read this interesting Morgan Housel tweet where he said the number one quality for an investor is his ability to deal with FOMO. Now, whether it's a founder or investor, their ability to deal with FOMO or delayed gratification is a huge function of telling how successful they will become.
Sudarsan: Oh, absolutely. I think delayed gratification is the... I'm trying to study how we can teach that as a parenting framework for my kid, because I totally get that. If we can figure out delayed gratification, we can really do something far, far more significant with the time in our lives, right?
Rajan: Awesome. Thanks, Sudarsan. Thank you so much again for this lovely conversation.
Sudarsan: Yeah, pleasure, Rajan. Thank you for having me. And it's always thought-provoking when we engage with you.
Rajan: Awesome. Alright. See you.
Sudarsan: Take care. Bye.