Y Combinator Startup Podcast - Building A $2 Billion SaaS Company: Lessons From A Two Time Founder

Episode Date: January 8, 2025

Two-time founder Rujul Zaparde knows a thing or two about resilience and learning from failure. After dropping out of college to build FlightCar, he worked as a PM at Airbnb, and later as a visiting partner at YC. In 2020, he co-founded Zip, a procurement software company that has since raised $370 million and reached a $2.2 billion valuation. In this conversation with YC's Dalton Caldwell, Rujul demystifies the world of enterprise sales, shares his hard-earned lessons about scaling a business from zero, and explains how founders can use first-principles thinking to better approach the challenges of building a startup.

It was a first-time founder, right? I dropped out of school. Like, I cared a lot about what others thought, what my team thought, the leaders thought, right? Like, oh, well, people quit because this person, the story executive comes in and then leaves. I cared what our investors really thought, right? Like, oh, like, how is the board meeting gonna go?

Like, how do we, like, paint a positive picture about the business and press and all this other stuff? You care about a lot of these things. And then the second time, you really are like, you know what, it's my time. I just want to build something that people want that like really works. I'm here with my friend Rijuel, the founder of Zip. And we're going to talk today about what he's learned as a two-time founder, as well as

employee of Airbnb, as well as visiting partner at Y Combinator. So to get us started, what is Zip? What do you guys do? What's your two-line description? Tell us about it. Yeah, so Zip is a procurement software company. And so we provide one front door for any employee in an organization to request to purchase. and we route it for approval across budget and legal and IT and security and all the different teams

before connecting into the ERP or financial system. You guys have done really well. You were just, you're in the summer 20 batch and now you're a pretty legit company. I mean, I don't know what the public numbers you can disclose are around valuation or money raised or revenue or employees. Whatever you can share, I'd love to hear. Yeah, so the company is about 350-ish people. We've raised about $370 million now and the most recent round was our series of. at 2.2 billion post last month.

I love to hear the story of flight car. Let's set the stage. You were very young. And you started a startup. So take it away. How did flight car get started? Yeah, so this was back in late 2012, early 13. I dropped out of college.

And I remember, so this was technically still in high school, really. So my co-founder... You dropped out of freshman year? I dropped out of just before freshman year, actually. year, actually. So, and, you know, I remember I called up Kevin, my co-founder, and was like, hey, maybe we should, like, let's do a company together. And, you know, he was like, okay, like, I'm free this weekend. And, like, let's chat through ideas. And he was like, I've got to go somewhere, but let's meet up at, you know, I grew up in New Jersey. The local hangout spot,

of course, was Panera Bread, right in Princeton, right near where I grew up. And so we agreed on a Sunday to meet up at Panera Bread for an hour before Kevin had to go run somewhere. And we were like, let's just think about the best idea. Let's try to come up with the best idea we can in the hour. And then like, let's just do it. And he's like, hey, you know, have you heard of this thing? It's called Airbnb. And I was like, no, I've never heard of that. And he's like, well, people are sharing their homes with other people. And it's like, no way. Like, really? And, and, and we kind of just started talking. We're like, well, people are, you know, what's the most expensive thing you own, your home. And if people are sharing that, well, the second most expensive

thing people own is generally their car. When are they not using their car when they're traveling? And this is, you have to remember, like, pre-Uber and Lyft, like really, you know, I mean, they must have been early stage companies at best. And so we were like, yeah, car, you know, we would potentially do car sharing, but at the airport, when people are not using their cars, they're traveling and other people are coming in and, you know, they can rent the car. And so that's how flight car was born. Free airport parking by renting out your car, fully insured. That was the one-liner.

That one hour led to five years of doing that company. And so the second time around, I took a very different approach, but I would really encourage that, like, you know, if you're thinking about doing a company, like you really put the right level of thought into the idea. More than an hour at least. Yeah, at least more than an hour. And so you have all these funny anecdotes.

You guys did such a great job of doing things that don't scale. You just share some of the anecdotes for how you got your first customers and how you got it off the ground. We actually had a bunch of crazy stories. So I remember we were in the winner 2013 YC batch, and we hadn't launched yet. And so this is like, I remember doing office hours distinctly with PG like two weeks into the batch. And PG is like, oh, so like, how many customers do you have? And I remember we were like, well, we haven't launched, so we have no customers.

And he was like, well, why don't you, why haven't you launched? And we're like, well, we don't have a parking lot to park people's cars. And he's like, well, that doesn't, like, that sounds like a thing you guys can figure out. Like, you need to launch, like, tomorrow. And we really took it to heart. We were like, we need to launch. And looking back, like, that was the right advice, you know, for us, because that's how you get feedback. And so we were like, okay, well, where would we park the cars?

And we were like, well, there's a bar, which is the local Bay Area, like, transit system. there's like a huge like basically subway parking lot at Bart, which is like five minutes from the SFO airport. We can just park there. And so we literally launched like within a couple of days and we basically would meet our customer at Bart, get in the car, drop them off at the airport, and then come back and then we told them we would park the car, but we would just park it at Bart and I remember it was two bucks a day, so it was pretty cheap. And what happened was that then turned into like 200 cars parked at Bart over the course of like three years. weeks and it got like we had increased so much parking there that it got reported to the

BART police which they have their own police force it so turns out and we basically like the cops called us they were like you need to get these cars out and we had nowhere to put these hundreds of cars so we then switched to an undercover operation where we would not wear flight card uniform or anything else and meet people like you know get their cars and park it and then eventually you know we got another parking lot but like that was like an example of like just you know, we had to be so scrappy. I mean, there's so many other, I mean, I remember early on, we were like, you know, in a marketplace, right, you need supply and you need demand. And so you have to solve for the supply. You have to fake it initially. And so we, one compounding challenge was

that we were three co-founders, one of whom, not me, but one of whom did not have a license. We couldn't drive. And then you guys were old enough to rent a car, were you? And yeah, we were all, I think, 18. And so, you know, like a lot of car rental agencies do not rent to like 18 year old kids for good reason. And so we found this company called like super cheap car rental in San Jose or something. And this dude was like, yeah, I'll rent you guys like 30, 40, you know, crappy base model corollas. And so we're like great. And so we actually just me and my one of my co-founders, we literally took the Cal train down to San Jose and drove up a car one at a time like 15 times each, which was terrible, and then parked it at the same Bart lot. And

That's what we initially started renting out. That's how we got supply. And so you realize doing such an operationally intensive business like flight car, when you have to do something scrappy, it's like almost at a comical extreme, compared to like running a B2B SaaS company today. You spent an hour thinking about the idea. You spent five years working on it.

And as I recall, you got some real scale. You guys raised a fair amount of money. What was the summary or the post-mortem on what happened with flight car? At our peak, we had 17. different airport locations. It was a very, we didn't take, like we took a very sort of asset heavy sort of approach, right? We had like leases for that 17 different airport facilities. We had shuttle services to and from the airport. I mean, we were washing and gassing up like hundreds

of cars every day. Like it was a very, very operationally intensive business. And, and I sort of equate it to like, if you think about like making money in a business is like kind of like, you know, if you have a lemon, it's like squeezing the. juice out of the lemon and like what's left is like the money you make. Flight car was the type of business where you know it's the last drop out of the lemon, that's the money you keep. And so if you screw up squeezing the lemon earlier, you don't need to squeeze the rest of it to understand that you are not making any money, right? And it was a very, very very sort of poor gross margin business because you have all this fixed expenditure.

And so one very key thing is start a business that is a higher margin business, right? And that's why the idea matters. It's almost like instead of going to college, you went to like the hardest boot camp I can ever imagine, which is here's a really low margin asset heavy business. Good luck at the airport. And you spent five years on that. That was your early 20s. You learned so much about what to not do, I feel, you know, in an experience like that. The problem with margins by there, because it's like, oh, well, why are low margins bad? Well, if it weren't obvious, they're bad because of a couple of things. One, it means your multiple as a company is lower.

You're less likely to be able to raise money because you have a lower margin business, so it's harder. You have a lower multiple. Yet, and this is key, you need the money more desperately because you have a low margin business. And so you have this really negative feedback loop. And I mean, Flight Car, I mean, we almost ran out of money so many times. I mean, I even remember our Series A, I pitched, I got to know a lot of people because I pitched like 80 different firms, nearly all of whom except for one said no. And I remember at a point where we had like two weeks of cash left and we were like, you know, payroll cycles every two weeks. So we had just

done executed the cycle. We're like, we can't even make the next one. You know, when do you tell the team that you don't have enough money to run the payroll, right? Like that was, I remember distinctly having that conversation and we got lucky and we had somebody lead the A, but we went through a lot of moments like that. And, and so one, one, thing was just, yeah, you want to set yourself up with a positive feedback loop, not a negative. So you ended up, I think, selling the company, and I think you ended up joining Airbnb as an employee. Can you just kind of set up the context there? And then I'd love to hear what it was like working at Airbnb during that time period. So what happened was, you know, I knew after Flight

Car that I wanted to do another company. I knew I was going to do another startup. But I felt like in reflecting, I had never worked anywhere. Like, I'd never worked at a real company. And so what you miss when you don't work at a real company is like I think a lot of the basic stuff like how do companies like even generally work at scale and like what is like the best in class like what do great engineers and designers and you know like what do those people look like like how do they work right and and actually I remember one of the reasons I reflected and realized I needed to learn this was we had hired a marketing leader at flight car and I remember like she starts And then one week into the job, in my one-on-one with her, she's like, you know, Rizuel, like,

it kind of feels like you went to a bus stop and just picked up everybody from the bus stop, and, like, that's who works at your company. And it's like, wow, like, that's tough feedback. Well, like, looking back, like, you know, there was some truth to that, if I'm being honest. And so I was like, you know what, this is not acceptable. Like, I need to, you know, I need to learn this. And so, of course, you know, a company that I always had. a tremendous amount of sort of affinity for was Airbnb.

Yeah, it makes sense. And so, you know, I ended up joining as a product manager at Airbnb and certainly learned not just a lot about like what, you know, how like sort of best in class products are built. So I worked early on on the Experiences team, which is where I met my co-founder, Lou. And we actually, a lot of our early team actually comes from that experiences team at Airbnb. But it was great to see Brian Chesky that the CEO be so involved in all the details. of the experiences product. And I mean, just at such a critical level of quality that, like, I definitely learned

a lot from sort of seeing that. And so that was one of the things that I'd set up for. But I also, I think, learned at Airbnb at the time, the company had grown a lot. I think I was the, if I remember, I was like the 30th or something product manager. And then when I left, almost three years later, two and a half years later, there were like 100-something product managers. So, I mean, and that's just product managers, you know, and then you look at engineers. I mean, it's thousands and thousands of people, hundreds and hundreds of designers.

And you sort of realize, like, it's so important to have the right incentives for your team members because you don't want to create situations where you have a lot of people that were hired because maybe some people wanted to, you know, build up their functions or teams, and there wasn't maybe the best justification for them. And then, of course, you can't blame a certain, you know, designer for wanting to build something because they were literally hired, and so they have to produce something. You don't want as a company to have that much self-inflicted pain. Like, you already get enough pain from external sources, right?

Like, how do you make sure that, like, most of the pain you're experiencing as a company is externally inflicted, not self-inflicted? You were at the retreat we had where the founder mode, it was not called that at the time, it was just Brian Chesky talking. PG turned, he coined the phrase founder mode. But you were there, and again, you worked at Airbnb in the years where they were growing so fast. Do you have any thoughts on the whole thing? It absolutely resonated with me.

And I also at the same time, I love Airbnb. Like, I could not be more happy that, you know, that, like, there's so much change that was executed and delivered within the, you know, within the company. But certainly I can totally see how, you know, there was, like, there was a need for change, right? And, like, a need for, like, creating conflict within the company to actually ask the hard questions and say, hey, do we need these folks? or are we actually doing this project because somebody actually needs to execute this project so that they can get promoted versus like this is the right thing for the company?

You've had a unique experience as a founder where you've actually worked at Y Combinator as a visiting partner. That was after you left Airbnb. I remember we recruited you and you and I worked directly together working on a batch. And so we set in interviews together, we set in office hours, we set in group office hours.

And so you've seen it from the other side at YC. So I just wanted to like reflect on that. what do you remember from that batch? It was winter 20 that you and I worked directly together. What are your big memories from that? Yeah, I mean, I remember that was, well, first, that was the, like, half-remote unplanned batch because it was right at the beginning.

It was like the lockdowns happened chaotically, and we had to make some stuff up. That was correct. It was like two or three weeks before Demodian. Right at the tail end, exactly. Just reflecting, we've had some great companies just from our group that batch. Yeah, like, I think we had, yeah, like 50 or 60 companies,

And I think the success rate is astronomical. What Not is a multi-billion dollar company. Airbyte is a unicorn. There's a number of other well-known companies that were in our group. Post-Hog, BuildBuddy, 99 Minutes, Yasser Stark Bank in Brazil, Pali. So it was phenomenal talent that was in our group.

At least my reflection from this was that, like, how formidable the founder really is, and like how much they really want to make something work? Maybe not that specific thing. maybe something else, but like make something work in the world, like is such a critical thing. That was just a really special group of people. And they were all doing very different ideas,

very different verticals, very different types of founders. There wasn't a lot of overlap, I would argue, between who we had in that group. So yeah, we set in office hours together, we set in group office hours together, we saw all these companies at the most nascent stages. And then, you know, I guess you're a bit of a masochist. And you, I remember you saying, oh, you know what?

I'm just, I got another company and be, I'm gonna go, I'm gonna do a do-over. Maybe, yeah, what was your thinking on deciding to do another startup? Yeah, no, I mean, it wasn't a decision I feel like I had to make. You know, I knew I was after flight car, I knew I was going to do it again. And, you know, but this time, we'll get to that, but I was, you know, we were going to be much more thoughtful about it. And I had spent a lot of time working with Lou and getting to know Lou when my co-founder, when we were at Airbnb, he was my engineering counterpart at the company.

And so, you know, we were working on, like we had been noodling on ideas and stuff. for like pretty much two years, really, until we ended up starting ZIP. So just kind of on the side. And we both committed to both quitting basically and kind of going full-time, literally March 31st, 2020. So that was right after our batch. Isn't that funny timing?

Yeah, it's like a week. A few weeks after the lockdowns. After the lockdown. And for Lou, it was quite a change, because I think Airbnb revenue dropped like 95% the week he left, which was quite a change for the company. Indeed. Yeah.

Yeah. And so, but we were forced to, you know, be, we were alone and kind of in lockdown and just trying to figure out what we wanted to do. It is such a humbling experience, right? Because you literally working at YC as a visiting partner, you know, you're meeting all these founders and, you know, helping people think through pivots. And yet you realize, like, you don't know yourself what your idea is and what you're going to do. And candidly, Zip for us was a mid-YC batch pituit. We actually were working on a series of different ideas. and I remember, you know, we had a really, really helpful, come to Jesus office hours with you, Dalton, where you were like, guys, what are you doing? And, you know, your advice was like,

you guys know you want to start something with execution risk, but you don't so much want to take on market risk as a second-time founder. So why don't you find, you know, an old software company that exists in the world that, you know, hasn't, like, hasn't changed much in a long time and sort of figure out like what what's changed in that space in the world and like and trying to solve a new problem. And so we did that and that led us to procurement. But I have to say like, you know, it was just like that changed. I mean, that changed

the trajectory of my wife and created the company. And that was as a second time YC founder after working at YC. Right. And like it's just so helpful. I would love if you could help demystify enterprise sales. There's a lot of founders that have a lot of questions about enterprise sales that haven't done it before and you're someone that is really good at enterprise sales that has immense scale doing it and you went zero to one on it. It's certainly been a learning experience for me and still is right because we literally had never worked at a company before before Zip that had a sales team in it. But one, to your point actually about like your time is the most valuable thing.

You want to prove to yourself really that this is the right thing to even be investing your time into, we had decided, Lou and I had decided that the first 10 customers that we closed, we were going to try to sell them completely cold, like through cold LinkedIn outreach or whatever, but not referrals, not friends, not anyone we know, because if you can get 10 different people and 10 different companies in the world to, you know, take out their proverbial credit cards and buy your thing, when they don't owe you anything in the world, that means like you're more likely to have market fit. And that's what we wanted to prove or disprove. And so that's how we, like, we started out and we built the muscle for outbound, which even today,

we're a significant majority outbound for a business today, not inbound. And so we literally reached out. We would max out our LinkedIn connections diligently every morning, and we would message people that add us back because it doesn't cost you in mails, so it's free. And we would just reach out. And we would ask truthfully, initially, for advice because we wanted to learn more about the space and what their problems were. And that was helpful.

I mean, in two or three weeks, we have a document that has 107 pages of notes in it from all these conversations. And that helped us sort of cement the idea that we were going to work on, which is exactly what Zip still does today. But it helped us then convert that into sales because we learned from these folks. We took all these notes and then we were like, oh, we should do this. And we'd go back and say, hey, remember that conversation we had? Your feedback was so helpful to us that we, in fact, we built it. Can we show it to you? And then they were like, wow, that's really cool.

Like, no one ever does that, you know, for me. And so, and that's how we ended up getting people excited and closing our first set of customers. But we wanted to, we wanted to do it totally cold and step by step. And how did you price for these first customers? That's a really common question they get. Well, one, it is important to charge because I've also seen founders that, like, want to do a design partner thing or, you know, it's free for some reason because they're just, as a founder right, you're like, I have no customer. or like a few customers, I don't have confidence in my product, like how could I possibly charge money for it?

And the truth is, like, if there's enough of a pain and promise of a solution, like people should and will pay for it, and it's a test. And you want the people to pay because you want feedback that actually helps your product. You don't want feedback from people who would never have otherwise bought it, potentially. And so it's really important to charge. I don't think you need to think too much about how much you charge.

You charge maybe 10 grand or 20 grand a year or whatever. year or whatever, something rational that like there's no company out there that's a reasonably sized company that can't afford like a $10,000, $20,000 year purchase. What if someone's thinking, wait, but I can never charge that much, my product is bad or I haven't built much? Like, how do you overcome that? What I would say is you'd be surprised how much enterprise software is bad. And it's not, they're not charging 20K, they're charging like, you know, millions first. And second of all, like, in the big picture, like 20K a year, like just doesn't matter.

to a company that's, you know, that has 100, 200 employees in it. Like, it really doesn't matter. And if they're not willing to pay that, that is telling you something that you should be realizing, which is, you know, maybe you should work on something else or you need to tweak what you're building. That's the honest answer. And over time, you can, you know, as you get more confident, you can, you have more referenceable customers, you have happy customers, you can charge more over time. But initially, just charge enough to know that, like, it's something rational, there's pain, they're willing to pay, and then just prove that you have something. My big theme that I feel like I've learned working with you and that I understand in your whole

story is that you're a founder that kind of got to do a do-over where you had a startup. You did the full thing. You learned a lot. You made incredible progress. Then you had time to go be an employee to be a PM. Then you had time to work at YC and see what it's like to be a YC visiting partner and then you got from first principles to do a startup again and you got to be very intentional in every decision you made about what things you wanted to keep from your experiences and what things you wanted to do differently. And so to me that's the big theme here. So I love your thoughts on, you know, this overall decision-making framework and sort of what are the things that you chose to take from your first startup that you brought to your second one? And what are the things you're like,

nope, don't want to do that again. Absolutely. I think if I had to really distill it in my personal reflections. It's like, you know, the first time, as a, I was a first time founder, right, I dropped out of school, like I cared a lot about what others thought. Like, I cared what my, to the point I was just making, like what my team thought, the leaders thought, right? Like, oh, well, people quit because this person, the story executive comes in and then leaves. I cared what our investors really thought, right? Like, oh, like, how is the board meeting going to go? Like, how do we, like, paint a positive picture about the business and press and all this other stuff? Not that I cared about press, but, like, you know, you care about, like, you don't want negative press, right?

And so you care about a lot of these things. And then the second time you really are like, you know what, it's my time. I just want to build something that people want that, like, really works. And so actually, now what I'm going to do is, like, try to disprove things. Like, the first set of customers is, like, yeah, I want them to buy a cold. Like, I don't just want revenue. Like, I don't care. I want to know that this thing is real, you know?

And like, yeah, like if we have a board meeting, which obviously we have board meetings, like, I'd rather we just focus on what's broken in the business. Because ultimately, that's how we get better. Like, I don't want us to spend a lot of time talking about what's going well because that's not going to help us. And like, it's just such a liberating way to think about things to just seek truth, right? Whether it's your team, your investors. Ultimately, it has to come from you. That's awesome.

Well, thank you so much for joining us today. I really appreciate it. Thanks for having me, Don't.