How Zapier grew to $35 million in ARR

Posted on November 6, 2018

What we cover in Episode 16

 

Zapier is a remarkable success story.

They’ve grown to $35 million in ARR after only taking $1.2 million in funding.

They’ve scaled to 170 employees who are all remote. They’ve got a platform that now boasts 1300 apps with each of those apps making the Zapier platform more powerful for both partners and users. That’s real network effects, building a real moat around their company.

So, how did they do it? Well, listen to the episode because we ask Wade, the co-founder of Zapier.

 

      

 

Wade shared so much great advice and information in the podcast, here are some of the highlights.

If you like what you read, make sure you give the entire podcast a listen 🙂

1. Focus on what matters

 

In business, like life 🙂 focus is often the key to success.

As a company, Zapier is not world class at everything they do. They’re ok with that because focusing on what matters right now, and excelling at those things is what makes them successful:

“There is a lot of survivorship bias in companies, where you reach a certain success, and it’s very easy to look back and say, all the things that we did made us successful.

But I think very rarely in companies is it all the things we did that made us a success, it’s typically, one or two of the things we did that resulted in our success, and then all the other stuff, we probably just did really poorly because we were tiny, we didn’t have enough resources, we couldn’t do well enough, but it was just not bad enough that we failed.”

They’re content with setting those things aside for a period and then revisiting them to improve at another time that makes sense.

“We’ve had some amount of success with these things, but they can get better at them. We are willing to admit that and find a way to make them better or be content with the current state of them, set them aside and come back to make them better eventually.”

What are the things you need to get better at right now that are critical to your growth? And what are the things you can set aside and revisit at a later date?

Growing companies pick their battles to double down on the things that matter so they can see step change improvements vs. incremental improvements across a broader range of things.

“We identify which parts of the business are most critical for us to try and get better at first. “

 

2. You need to make the tough decisions

 

In fast-growth companies often the challenges faced by a CEO evolve as the company grows.

When a company is in its infancy one of the CEO’s challenge is to hire talent for their start-up, often those people have many options to choose from.

“One big challenge is you have to build a great team. You have to build a great team around you and people that are good and talented, have many options,”

The CEO’s role is to share their mission with people who get it and want to join to help make that vision a reality.

Once a company has grown and added a talented management layer, the role of the CEO is to make the hard decisions that are pivotal to the companies growth.

“You start to build a management layer, you have a good management layer, and you’re fortunate to hire a great executive layer. These layers are full of really talented and smart people.

So what ends up happening is, every problem that your organization has now gone through a layer of smart people before it comes to you.

And so the things that kind of come to me end up almost being comically hard”.

That’s a difficult job, you’re faced with a set of problems that have already been scrutinized by a group of intelligent people, experts in their fields, and they’re looking at you to make a choice.

No matter how smart a group of people are, at times they need someone to make a decision and can make everyone feel comfortable with the consequences of that decision.

“And so, as a CEO, you get comfortable with this fact that like, I’m gonna make a choice. I’m gonna make a decision, and we’re gonna live with that, and you will hope that for a certain set of decisions, the decision is the correct one.”

 

3. Creating a platform with real network effects is an actual growth lever

 

Today the Zapier platform has 1300 apps. All of those apps can quickly work with each other via zaps.

But, back in 2012, that the number of apps stood at 25, all of them added by the Zapier co-founders.

The Zapier founders had a choice to make, do they keep trying to scale the business by adding the apps themselves, or do they try to build a platform where developers would spend time adding their software to Zapier.

“We thought, we’re not going to be able to scale the company by building a lot of different apps. We probably need a platform where developers can build against Zapier.” But the thing we didn’t know at the time was, would anyone even care to build against Zapier? Like, we were building these on our own, but why in the world would a large company say, “You know what, I’m gonna devote engineering resources to build to this tiny three-person startup.”

Luckily they got a crucial data point that helped them make the right decision.

I remember we got an email from Aaron Levie co-founder of Box at like 2:00 AM on a Saturday night. He was like, “Why is Box not on Zapier?” And that was kind of like the one data point that we had, well, if Aaron cares enough to send an email in the middle of the night about Box being on Zapier, then maybe, just maybe, he would be willing to take some of his engineers and devote cycles to building a Zapier integration.”

That decision has helped Zapier build network effects into their business that make it very difficult for them to be disrupted.

“That has helped us go from that 25 we had that summer to 1,300 now. It builds a network effect around Zapier that’s hard for any other company to compete with. “

 

4. Choosing the right business model for your product is critical

 

There is no one size fits all when it comes to business models. For example, there is a lot written about the advantages of freemium, but for many businesses, it’s not a good fit.

“Most companies, most B2B SaaS companies would do well to get rid of their free product. It would make more money if they didn’t put their free product out there.”

For Zapier free made a lot of sense for two reasons:

– There are not a lot of companies who offer a similar service to Zapier. People needed to get into the product and play around with it to see how it could benefit them.

“So it’s not something that people can wrap their head around immediately, they’re like, Oh, I know it’s providing integrations, but how does it work? What does this thing do? And so there’s a certain amount of like, I wanna play with this, and I wanna see what it can do,”

– Free was also an excellent option for Zapier for their partnership model. Partners could integrate with Zapier for free. But, users could even start using the apps partners added for free, making it more appealing for those partners to add their integration. All software apps would like more users using their products.

“And so, one, to build an integration on Zapier is free, but also it’s really powerful to say to partners, your users can use Zapier for free. They can get started with Zapier for free,”

 

5. What makes an excellent remote worker?

 

More and more of the world is moving to remote work. We talk a lot about why this is a good thing in a previous episode.

Everyone can adapt to remote work, but there are to be more successful when remote.

– The first is being a self-starter

“We want folks who are self-starters, they default to action, and are self-motivated, they get things done. You have to ask a lot of questions to uncover that.

For example, you can ask about the last problem you’ve identified at work and what did they do about it.

If they say, I identified a problem, and then I told my boss about it,” and well, okay, that’s the minimum effort you could’ve done.

But if they say, I identified this problem, I told my boss about it, and then I built this thing that I think could help address that, all right. That’s pretty good.

If it’s, I told my boss, I built this thing, and then I collaborated with these other functions outside of my group to spread this across the entire org, it’s like, wow, this is somebody who not only can get things done, but they can work well with others, they can work across the org chart”

– The second is having strong written communication

“Are they the type of person that can articulate their thoughts clearly? Can they write them down? Can they talk to different types of people well?

That is super important.

Being remote you can’t always be jumping on a call. AT a remote company you need to be able to write.”

The podcast provides a more in-depth look at these topics, so if you enjoyed reading the above, please do give it a listen.

And until next time,

Happy Growing!

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