The Zapier Playbook

5 reasons why a company with no headquarters is the go-to for software process automation

In our previous post, I jumped right into an example of workflow automation with Zapier. Zapier is so important to the future of software process automation that I decided to write a brief memo diving into the company and why they’ve been so successful.

This is going to be a playbook in the style of Acquired. In fact, since a significant portion of this playbook is based on their interview with Zapier CEO Wade Foster, it will be cross-posted there! Click over to that link to catch a free preview of the interview; the full recording is available as part of Acquired’s Limited Partner program.

Now let’s get into it.

Share

  • Founded: October 2011

  • Launched: June 2012

  • Headcount: ~400

  • HQ location: None! 100% remote from the beginning.

  • Outside money raised: $2.7M (per Crunchbase)

  • Users: 3M+

  • Paying customers: 100k+

  • Annual recurring revenue: $50M (as of January 2019; they have likely surpassed $100M by now and are generating real profits)

  • Integrations: 2,000+

Getting to $50M in revenue while raising a mere $2.7M of venture capital is virtually unheard of in modern tech startups. Some founders will raise more than that in a pre-seed round. But, coming from Columbia, Missouri, the founders avoided Silicon Valley conventional wisdom that lionized fundraising, prioritized growth over everything, and couldn’t imagine how a 100% remote company would achieve massive success.

So how did they do it?

  1. They nailed the timing. In 2012, the first generation of SaaS companies (e.g. Salesforce, DocuSign) were building externally-facing APIs and the first generation of API-first companies (e.g. Twilio, Sendgrid, Stripe) were getting off the ground.

    • With the explosion in APIs, there was exponential growth in the number of endpoints developers could tap into: Metcalfe’s Law in action. This meant massive (and increasing) complexity for any company that wanted to plug in manually or via their own tools. Thus, there was a corresponding opportunity for someone to step into the middle and reduce the growth formula for new connections from a multiplicative function to an additive function.

  2. They reduced complexity so much that non-engineers were able to start doing engineering work. When the company was founded, Wade was wrestling with the Marketo API and, in his words, “I was a bad engineer… I write code because I have no choice.” In other words, he set out to build Zapier’s core value proposition: “The easiest way to automate your work.”

    • So many companies have run (and still do run) on simple spreadsheets with basic logic and little automation. Zapier alone can make these processes more durable and reliable, which gets companies thinking about automation earlier in their lives. With automation, a spreadsheet can scale (though even a spreadsheet has limits).

    • Zapier also benefited from the rise of complementary companies. Wade notes the rise of a new AWZ stack: Airtable + Webflow + Zapier. Put another way, these three companies represent a user-friendly backend, a user-friendly frontend, and the connective tissue that ensures data moves between the two (and between any other resources a business might need).

  3. They took key steps to lock in their network effect. A standard SaaS approach may have directed development resources towards building new integrations in-house, refusing to leave this core element up to chance. Zapier recognized the impossibility of this task and took a different path.

    • The team built 35 key integrations that launched with the product in 2012. They were willing to build in-house to bootstrap their network of integrations.

    • They built the developer platform earlier than anyone expected. By offloading further integration to the other product teams, they were able to speed ahead of the pack and achieve what is still one of their core value propositions: “More integrations than anyone.”

    • This network effect benefits all parties: customers, app developers, and Zapier itself. App developers consider Zapier a more important integration than they do its competitors because every other integration is a potential connection and every connection is a value-add for customers. By the same token, every new integration adds more value to Zapier than it would to a competing network. And customers have greater choice in which apps they can connect and less risk that an app they want to connect will not be on their preferred automation platform.

  4. They aligned their business and pricing model with customer expectations -- and they didn’t overthink it. The apps Zapier connected early on were primarily purchased via self-service, not through dedicated sales teams. The team knew that their target customers were used to purchasing software this way and so they never invested in a dedicated sales team.

    • According to Wade, the team was still arguing about pricing strategies the night before the product launched until someone said “screw it, none of us know anything” and decided to base the pricing tiers on the Fibonacci sequence and give each tier a whimsical name.

    • Per Wade, if your growth is led by your product, the specific pricing numbers at launch barely matter at all as long as you aren’t off by orders of magnitude.

  5. They didn’t leave their distributed work culture to chance. They started building the remote muscle from the beginning when the company was a side project. After they graduated from Y Combinator, the founders wanted to live in different places and the first few hires were already able to work remotely. According to Wade, the keys for Zapier’s remote culture are a disciplined workforce and excellent written communication. These are important elements at much larger companies that come to the fore much earlier in the lifecycle of a company with a distributed workforce.

    • To support the dissemination of important written communication, the team built an internal tool called Async, which Wade describes as “a blog meets Reddit.” Async isn’t nearly as fast-paced as Slack, but it also isn’t meant to be a permanent knowledge base like a Wiki. The team treats it like a replacement for internal memos.

    • Every week Wade writes a multi-paragraph email to the team to lay out what's on his mind. This is a key process for building alignment throughout the company: Because everyone can see it, it doesn’t have to filter down through layers of management. And if it’s posted on Async, it can attract feedback.

    • According to Wade, the biggest drawback of a distributed workforce is that there are no physical interactions to celebrate what Wade refers to as “epic moments.”

Leave a comment