TBPN - BREAKING: Rippling v Deel, Tech Feud, Corporate Espionage Drama

Episode Date: March 17, 2025

TBPN.com is made possible by:Ramp - https://ramp.comEight Sleep - https://eightsleep.com/tbpnWander - https://wander.com/tbpnPublic - https://public.comAdQuick - https://adquick.comBezel - https://getbezel.comPolymarket - https://polymarket.comFollow TBPN: https://TBPN.comhttps://x.com/tbpnhttps://open.spotify.com/show/2L6WMqY3GUPCGBD0dX6p00?si=674252d53acf4231https://podcasts.apple.com/us/podcast/technology-brothers/id1772360235https://youtube.com/@technologybrotherspod?si=lpk53xTE9WBEcIjV(00:00) - Where are the Brothers? (02:01) - Rippling v Deel (38:24) - NYT Article (42:46) - The Timeline (57:49) - The Information (01:06:20) - The History of Corporate Espionage

You're watching TBPN live. We are not live from the Temple of Technology today. We are broadcasting from the Temple of Technology because I am traveling. I'm in the nation's capital, Washington, D.C. It is a balmy 60 degrees outside. It's not cold at all. Jordy, where are you right now? And how are you doing? I'm home in Malibu, the home of magnitude 4.0 earthquakes. There's an earthquake? There's an earthquake last. Last night, it was like a 4-0 just as we were sort of going to bed. And the fascinating thing is that there's been a ton of earthquakes literally right on my neighborhood. Like if you look at the map, there was an LA Times article last week, I think it was Monday, about how this area of Malibu has just had a bunch of earthquakes.

So we basically had two 4.0 earthquakes in the last week. last week in the exact same spot and a bunch of others. So we're moving and shaken over here, John. Love it. And yeah. So the funny thing, it doesn't seem like seismologists, right? Like people that study. It doesn't seem, they describe their own craft as trying to read the tea leaves. Really? They can't, they actually aren't like, they aren't able to, make really accurate predictions other than we think a big one's coming. But they have no sense, like, you know, there's been this massive uptick in activity over the last like six months. They're not able to make any type of more accurate projections other than at some point,

there's going to be a big one. But anyways, we have some news shaking the timeline today. There is a post I wanted to pull up from a guy named Anon. He says, about the story that we're going to cover. This is an incredible tale of espionage and intrigue until you remember it's HR SAS. But it's real espionage and intrigue for our world. And do you think it's an accident that they did this on St. Patty's Day?

Well, just to set the tone, if people haven't been following, today, Parker Conrad, the founder of Rippling, announced that they're suing deal for embedding a spy in rippling, which is crazy. In the Irish office. In the Irish office. And yes, it is St. Patrick's Day. And so, you know, we got to put on the tinfoil hat and wonder what's really going on here. Is this some hibernian conspiracy going on?

Are the Irish lads up to something? Yeah. But it feels like it's potentially Irish on Irish crime. And we hate to see that, especially on a day as important to me as an Irishman as St. Patty's Day. Not wearing any green, John. I'm, yeah, you're wearing green. I had the decency to throw on a green.

Where's my green? I even thought about leveling it up and going double green with the bezel. But I'm going to, I'm going to leave it off for now. Well, let's set the table. There's actually a new article that just dropped in blue. that I think we should actually kind of pivot over to by because it's by Matt Levine over at at Bloomberg spies in the sales slack I'll send this I'll send this over to the I'm pulling it up yeah is this one nothing like there's nothing like breaking news

nothing like breaking news yeah and and Matt Levine is is a fantastic writer and I think he'll break it down pretty well so we'll read through this we'll take you through some of the actual complaint, the PDF that's been shared. It's a 50-page document. I have some ideas of what, where the interesting stuff is, where the interesting anecdotes are. And then we'll go through a list of other corporate espionage just to give some history because it's a fascinating topic. We'll do too many deep dives there, but there's some, there's some fascinating ones in this list I put together. Somebody tried to steal a Coca-Cola formula at one point. The Chinese were stealing Google self-driving car stuff. There's been fascinating stories throughout the business history.

Is the Coca-Cola formula? I don't know if you know offhand. Is it still actually? Trade secret. Secret? I think so. They've found a way to maintain that secret over a century plus. I think so.

I think they divide it up in such a way that no one can get a full look at everything. And so they've never been able to, because it would be off patent by now. And so someone would have copied it. But yeah, highly guarded trade. secrets, including a new product sample and sell them to arch rival PepsiCo. Someone tried to steal it and sell it in 2006 this happened. Anyway, we'll go into that at the end of the show. We got to cover the breaking news first.

So let's read about Matt Levine. He says spies in the sales slack deal. I wonder how much corporate espionage there is. If you work in a high touch, high dollar sales business, enterprise software, investment banking, et cetera, much of your time will be spent pitching new customers who are choosing between you and your competitors, or pitching customers who currently work with your competitors, or trying to retain customers, who are thinking about switching to your competitors. If you knew what your competitors were up to, that would help.

If you knew a competitor was coming to your customer's office next week to try and steal them away from you, if you saw your competitor's pitch deck, you could take some actions. You could get to the customer first and offer a discount. You could see the arguments in the pitch deck and try to counter them. You could see what your competitor says about the features of its own product and try to build those features into your product. It's not a magic cheat code. You still need a competitive product and pricing and good salespeople and all that, but it surely helps. So, you know, find a salesperson at a competitor and recruiter.

Not to quit your competitor and come work for you, but to stay at your competitor and spy for you. You give her quarterly bags of cash. She looks at your competitor's pipeline and keeps you up to date on who it is pitching and what it is saying. Obviously, this is not legal advice. It seems problematic in all sorts of ways, but surely people try it from time to time. The downside is that apparently if you get caught doing this, you will get a hilarious lawsuit. And there's a big quote here from kind of summarizing what's going on. Workplace Software Company People Center Inc.

I didn't know this is the real name of Rippling. That's their, I guess Rippling's just their DBA. People Center Inc. It's suing its chief competitor over. alleged corporate espionage. Both companies were valued in excess of 10 billion. Rippling in its complaint says deal cultivated a spy to systematically steal its competitors' most sensitive business information and trade secrets in a deliberate attack that lasted for more than four months. The alleged spy at Rippling, its Ireland-based global payroll compliance manager was identified

after he was observed accessing Slack channels and documents with no legitimate reason to do so. The complaint says. crazy. I know. I just want to go out and say that this 100% is happening at other companies. Yep. And those people right now are shaking. Oh yeah. And they deserve to be. This is deeply wrong. And, you know, you get into this situation because deal and Rippling were able to grow extremely quickly. Yep. Initially doing very different things, right? Oh, yeah. Rippling was distinctly focused on the U.S. market.

They allowed you to pay people internationally, but it wasn't a core focus, deal focused on helping U.S. corporates move internationally. And then both these businesses have been converging over the last, call it, two years. And given the scale that they're at now, yes, there are companies running on legacy systems and other competitors and things like that. But for the big logo clients, you can imagine. that they're almost always competing, you know, nobody is saying, hey, I'm going to go sign up for, I want a new payroll provider and then not getting

bids from deal and rippling, right? That would be like bad practice from the HR or finance team at any company, right? You should be getting competitive bids. So it's not at all surprising that like these companies have basically been in a blood feud. What is surprising is that they would go far enough. to allegedly, you know, plant a spy. And I'm excited to get into the honeypot opponent because there's so much here. Rippling was really playing some 40 chess. I love it. Yeah. I mean, I made a

whole documentary about Rippling. I used Parker's previous HR company in 2012, 2013 Zenefits. worked great. Interesting hack there where they'd give you the product for free and then act as your your health insurance broker. And so they would take the brokerage fee. And that was when you sign a health care contract as a company, the health care broker gets a commission. And those commissions can be really, really high because you're sending, like you're committing to spending a lot over a long time and they're very low churn. And so it was a very interesting. And so it was a very interesting, it was a very interesting, like, go-to-market hack. They grew extremely quickly. They were the fastest company to hit a billion dollars in sales in Silicon Valley or ARR, like ever. They're

multi-billion dollar company. Then, of course, there's all the drama with Parker and Sacks, and that's been litigated and relitigated a million times. But when I talked to Parker, I was asking him, like, okay, so like, you're basically building the same company twice. Like, how did you think about it and it seemed like much more focus on HRIS early on. They wanted to do this vertical, this, he called it the compound startup model. So they do multiple things. He really looks like what Microsoft does where they have Excel and PowerPoint. They're not this pure play vertical SaaS company. They're horizontal. And on day one, he wanted, you know, payroll, benefits, and IT. And so Ripplings go to market was, hey, you have all these employees.

some of them are working from home. You buy them laptops. What happens when they quit or they get laid off? Well, they got to send their laptops back. It's a hassle. You're probably not like refurbishing them properly and putting them back in the cycle. We will just handle all that for you. It was a unique go-to-market, grew a ton.

And then I asked him like, hey, like, what's going on with international? This seems like it hasn't been that much of a focus for you. And, you know, the subtext of the discussion was kind of like what's going on with deal. And he wasn't really mincing words. he obviously sees them as like a very serious competitor, but also just, I think there was a little bit of acknowledgement that COVID caught him off guard and COVID really, really accelerated what deal was doing because deal was built for international and super crazy remote work. And the fundamental, and anybody that's an entrepreneur or investor should go back and read

the deals, or sorry, not deal, Rippling Series A memo, like on the compound startup. Parker basically lays out the master plan. He even published the memo himself. Deal didn't have to steal that one. But he puts out this master plan of like if you basically own the employee graph, you can launch every meaningful piece of workplace software. Yep. On top of that.

And something to be, you know, I think we covered this last week. It's something like 70 plus percent of all like public companies. are based in the U.S. Yep. And what that means is that Rippling should own the global, should dominate, you know, if they're going to come in the U.S. and sort of dominate the American market here and then, you know, eventually expand into global payroll, then of course they're going to eventually get to upselling.

And so for Deal to move into traditional payroll and HRIS, that's also something that's sort of critical for their long-term, uh, viability. They're not going to basically dominate the global payroll market without also having a significant sort of foothold in the traditional HR tech market here in the U.S. Yeah, yeah. It's, yeah, I mean, the compound startup thing's fascinating. It's funny because we're actually working on setting up payroll right now. And so we, you know, our decision is being informed by the war on the timeline. Whoever we just. Yeah, we should just condense this down and set up a Zoom link between a deal rep, a rippling rep,

Augusta rep, a warp, a warp, and just get them all on the same call and say, hey, guys, let's build in public here, let's keep it transparent. Yeah, come on the show and pitch us and whoever pitches is the best. It'll be good content and we'll get a good payroll provider. It is fascinating that, obviously, like, there's this almost like holy trinity of unicorn Silicon Valley companies and they're all funded by Founders Fund and Andreessen

and Sequoia and stuff and like all the serious VCs have piled into these like unicorn, decacorn payroll companies, gusto, rippling and deal. But if you look in the public markets, there's another three companies that are all in like the

tens of billions and they all have basically the exact same name. It's like paycom, paylossity and there's another one with pay. And then above that, there's the higher end ones that are worth even more. So it's just a massive market. When you're taking a cut of just payroll, it's just so easy to justify, oh yeah, 50K a year, 50K a month. Yeah, you can look at, you can look at historically, I think the payroll market has always been, you know, the narrative has been, this is not a winner take all market.

Deal and rippling and gusto can all be worth tens of billions of dollars just by eating 80 people. right ADP today. Yeah, ADP is the big one. ADP is at $120 billion. Yep. Today, there's no new companies signing up for ADP that I know of. Totally, totally. It's just not happening.

I never interacted with a startup in coming up like 10 years in startups that was on ADP. I'm sure they reach out to companies, but they're just not winning any companies. So it's almost like a cable style business where it's just running back. Or like the Oracle. It's like, you know, it's like a huge business, but like for older school companies and bigger companies. And ADP, I'm sure is great if you're Disney. I think, I think when I was at Disney, they were on ADP. And it was like, yeah, they have like the most insane enterprise compliance needs.

And ADP fills that probably pretty well. But it's probably so cumbersome if your startup and you're like, actually, I have no need for 25 of these features. Yeah. Anyway, let's continue with the Matt Levine article. So a deal spokesperson said Rippling was attempting to deflect negative attention from itself. Weeks after Rippling is accused of violating sanctions law in Russia, which we'll get into in the information article, it's seeding falsehoods about deal. Rippling is trying to shift the narrative with these sensationalized claims, the spokesperson said. We deny all legal wrongdoing and look forward to asserting our counterclaims.

Sorry, but yes, that absolutely works. If you are ever accused of violating sanction laws, please do bring a sensational spying lawsuit against your competitor. That will certainly distract me anyway. So to be clear here, this is a good line from Deals's PR team. The thing that's sort of hurting them on this is that the alleged spy hit in the bathroom and then pled the scene. You read the complaint and you're like, oh, this is like, I hate bad. So this is the right line from Deal, but it's, I don't know.

I think Matt's seeing through it a little bit. Yeah, so he says this is not legal or public relations advice. It's just an expression of my own interest. Anyway, here is Ripling's complaint, which refers to the alleged spy as DS for Deal spy. The guy allegedly lurked in a bunch of Slack channels devoted to Ripling's sales process so he could channel information back to Deal. Guided by Deal as his primary search term, DS surreptitiously accessed Ripling Slack channels replete with its sales and marketing trade secrets and proprietary and confidential information. The channels accessed by DS, contain highly sensitive and confidential information about customers, prospective customers, including details such as customer name, contact information, revenue at issue, and current issues and problems the customer is facing, and details of sales and relationships,

conversations between Rippling and its customers or prospective customers. All of these are details that a competitor, such as deal, could exploit to convince such customers to purchase their products rather than Rippling products. It is not clear how much this actually helped deal, but there is at least one suggestive case here. DS navigated to a mention of deal in a channel focused on a particular perspective customer who is considering both Rippling and Deal.

This is known as Prospect B. DS previewed the channel, which included details for a call scheduled with Prospect B the next day, and communications in which Prospect B relayed to Rippling specific concerns with the products and services offered by deal. The channel also contained Rippling sales teams internal parts. pitch strategy discussion, including confidential details about how Rippling planned to highlight certain advantages of its products to address the prospect's pain points with deals offering. On February 20th, 2025, this is like just weeks ago.

Super recent. Yeah. The day of the scheduled call between Rippling and Pris, D.S. previewed the B-related channel 66 times. Later that day, Prospect B abruptly canceled the scheduled call with Rippling in which Rippling was going to deliver its proposal and explain that they were doing so because they had decided to select a deal for the product they were interested in, even though Rippling believes that customer would have been better served by Rippling. And it's fascinating here. My takeaway is like we are in a very new age of, especially with like the gong IOs and the sales recordings and stuff.

like if you're in an organization and you have access to the Slack, like there's more information than ever because you don't have to walk by filing cabinet and grab their notes off their desk. Like it's possible that like every single interaction with a customer is recorded verbatim and then also summarized. And then you see all the Slack channels that they're in. And some of them are like it's literally just a ticker of like this company is about to sign for this much money. This company is worth this much. this company wants us to build this feature. And it's just like, yeah, well, valuable data. To me, this is just surfacing the reality of business, which is that it's,

it's everybody in Silicon Valley has had this narrow generalized, you know, competitive CEOs will talk to each other, their friends. It's sort of like, hey, positive some we're eating, you know, we're eating these sort of legacy businesses. Like there's enough market cap for us to go around. Yep. And so this. This type of story is basically surfacing what has been, I'm sure, happening in the background in a bunch of different ways. I was joking earlier that, you know, imagine a world where somebody bugged all the Waymos in SF because there's no driver in them.

You could just like hire a Jason Bourne type to just like, you know, bug them. Keep calling Waymo's dropping like an air tag off with a microphone. Yeah. And you would just get this constant stream of private conversations. And this is why the ski lips are so important. I mean, people are talking about bugging the ski lifts because that's where the capital allocators really exchanged the proper alpha. Yeah, yeah, that too. But anyways, you know, I think this is going to be a big wake-up call for the industry that, again, it's not all positive.

We are competing for the same customers. And, you know, we certainly, we have our own counterintelligence operations. lead against other podcasts, right? Yes, yes. We know that competing, you know, podcasts have tried to get moles into the system. But yeah, we're just embracing that head-on, right? And I think every SaaS needs to have a counterintelligence operations lead, you know, yesterday. Definitely, definitely.

Yeah, but like, let's be clear here. if Rippling is coming for damages and they have this, you know, this example here where it's very clear that deal had insight into the sales process, you know, this is all, you know, it's up to deal to like, you know, prove whether this is real, real or not. But in this situation that Rippling is highlighting, deal had direct insight into the sales process, down to the dates, down to the individual selling points and they were able to leverage that information to get the prospect to drop out of the process completely with Rippling. And if this was happening at scale, there's totally a world where there was tens of millions of ARR that was on the line, especially if you look at

collectively and Rippling's able to say, look, our average customer stays with us for seven years, you guys, you know, you know, had a sort of, you know, leverage these sort of trade secrets and this sort of corporate espionage. This could be, the settlement here could be well into the tens of millions of dollars or, you know, even, who knows, it's not, this is going to be, you know, deal is going to be fine. Ripling's going to be fine. But this is, you know, not going to be an expensive blunder. Yeah. Yeah, it gets to like the nature of this particular business, which, you know, you talk to like the nuclear founders. You know, they were just literally all in that Jason Carman documentary together. And they have a very positive sum mindset because for anyone

in this like far out R&D heavy energy business, like they'll even let their their lead VC invest in another nuclear company often because they're just like, look. look like, A, if we both succeed, it's really good for the industry, and we're all just selling energy onto the grid. Like, we're competitive with oil and gas more. Sure, we are competitive with each other, but it's much less zero sum at this point. Whereas with these HR and B2B SaaS products, they're much more directly comparable. And then the other thing is that, I mean, this is a very high margin business where the

the pricing is super opaque and what the price that you're throwing at a customer is basically just like an idea of how much value they're going to get from this maybe. And if you have the ability to come in and quote just a little bit under, you're going to win those deals again and again. Because it's just it like you just have to throw out a number and you kind of get an idea from you can take the temperature of people. Well, what are you paying for ADP? Maybe they'll tell you. No. And think about how many people at Rippling it seems like there's enough proof that like out there already that if the alleged spy is hiding and all the stuff and you know it seems like there's enough proof to know that like some

information with past a deal somehow yeah think about how angry if you're the rippling exec team if you are that that one's obvious Parker being livid is is obvious the uh the team the sales team, right, where they're losing deals because people are, you know, basically just have, you know, this sort of information advantage. If you're the engineering team who's like in the product team that's trying to compete on features and you're spending all this time to build the best possible product, but then you're losing out on revenue and, you know, growth because again, this sort of unfair advantage, I can see why they took it this route. versus just, you know, this is sort of beyond just putting up an X thread and being sort of

being angry, right? Yeah. Let's continue with this Matt Levine article. If you had your competitor's whole pitch deck for a potential customer you both wanted, that wouldn't guarantee you a win, but it would help. Anyway, most of the fun in the lawsuit is the trade craft. Rippling apparently discovered the alleged spy not because he was snooping on their sales information, but because an investigative reporter at the information,

at the information contacted Rippling about a forthcoming article concerning deals Russia-related sanctions activity and asked Rippling about its dealings with Russia. The reporter included internal Rippling slack method.