Technology's daily show (formerly the Technology Brothers Podcast). Streaming live on X and YouTube from 12 - 3 PM PST Monday - Friday. Available on X, Apple, Spotify, and YouTube.
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 DC. It is a balmy 60 degrees outside.
Speaker 1:It's not cold at all. Jordy, where are you right now, and, how are you doing?
Speaker 2:I'm home in Malibu, the home of magnitude four point o earthquakes. There's an earthquake? There's an earthquake last night. It was, like, a four o just as we're sort of going to bed. And the fascinating thing is that there's been a ton of earthquakes literally right on my neighborhood.
Speaker 2:Like, if you look at the map Send me your message. 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. Yeah. So we basically had two four point o earthquakes in the last week in the exact same spot and a bunch of others. So we're moving and shaking over here, John.
Speaker 1:Love it.
Speaker 2:And yeah. Alright. So the the the funny thing, it doesn't seem like size it's seismologists. Right? Like, people that that study it doesn't seem they they describe their own craft as trying to read the tea leaves because they 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.
Speaker 2:Yeah. 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 gonna be a big one. But but, anyways, we have some news shaking the timeline today.
Speaker 2:There is a post I wanted to pull up, from a guy named Anand. He says, about the story that we're gonna cover. This is an incredible tale of espionage and intrigue until you remember it's HR SaaS, but it's real it's real espionage and intrigue for our world. And It is. Do it's do you think it's an accident that they that they did this on Saint Saint Patty's Day?
Speaker 1:Well, just to set the 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.
Speaker 2:In in the, in the Irish office.
Speaker 1:In the Irish office. And, yes, it is Saint Patrick's Day. And so, you know, we gotta put on the tinfoil hat and wonder what's really going on here. Is this some Hibernian conspiracy going on? Are the are the Irish lads, up to something?
Speaker 1:Yeah. But but it feels like it's potentially Irish on Irish crime. And True. Know, we hate to see that especially on a day as important to me as an Irishman Yeah. As Saint Patty's Day.
Speaker 2:Not wearing any green, John.
Speaker 1:No. I'm yeah. You're wearing green.
Speaker 2:Decency to throw on a green.
Speaker 1:Where's my green?
Speaker 2:I even thought about leveling it up and going purple green with Bezul, but I'm gonna I'm gonna leave it off for now.
Speaker 1:Well, let's set the let's set the table. There's actually a new article that just dropped, in Bloomberg that I think we should actually kinda 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 crew.
Speaker 2:I'm pulling it up.
Speaker 1:Yeah. Because this one
Speaker 2:nothing like there's nothing like breaking news.
Speaker 1:Nothing like breaking news. Yeah. And 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.
Speaker 1: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 just to give some history because it's a fascinating topic. Won't 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.
Speaker 1:The Chinese were stealing Google self driving car stuff. There's been there's been fascinating stories, throughout the business history. So
Speaker 2:Is the Coca Cola formula I don't know if you know offhand. Is it still actually
Speaker 1:Trade secret. Secret? I think so.
Speaker 2:They've they've found a way to to maintain that secret over a century plus?
Speaker 1:I think so. I think they I think they divide it up in in such a way that no one can get a full look at everything, and so they've never been able to because I 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 archrival PepsiCo. Someone tried to steal it and sell it in 02/2006 this time. Anyway, we'll go into that at the end of the show.
Speaker 1:We we we gotta cover the breaking news So let's read about Matt Levine. He says spies in the sales Slack deal. I wonder how much corporate espionage there is. Like, if you work in a high touch, high dollar sales business, enterprise software, investment banking, etcetera, 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.
Speaker 1: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.
Speaker 1: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.
Speaker 1: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 and there's a big quote here from kinda summarizing what's going on. Workplay workplace software company, PeopleCentre Inc. I didn't know this is the real name of Rippling.
Speaker 1:That's their I guess Rippling's just their BBA. People Centered Bank is suing its chief competitor over alleged corporate espionage. Both companies were valued in excess of 10,000,000,000. Rippling in its complaint says Diehl 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 global pay, payroll compliance manager, was identified after he was observed accessing Slack channels and documents with no legitimate reason to do so.
Speaker 1:The complaint says
Speaker 2:Crazy. I know. Just wanna go I just wanna go out and say that this 100% is happening at other companies.
Speaker 1:Yep.
Speaker 2:And those people right now are shaking.
Speaker 1:Oh, yeah.
Speaker 2:And and they deserve to be. This is Yeah. Deeply wrong. And Yeah. You know, you get into this situation because deal and rippling were able to go grow extremely quickly.
Speaker 2:Yep. Initially, doing very different things. Right? Oh, yeah. Rippling was distinctly focused on The US market.
Speaker 2:They they allowed you to pay people internationally, but it wasn't a core focus. Deal focused on helping US corporates move internationally, and then both these businesses are sort of 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.
Speaker 2:I'm gonna go sign up for, I want a new payroll provider and then not getting bids from Deal and Rippling. Right? That would just sort of be, like, bad practice from, the the HR or finance team, at any company. Right? You should be getting competitive bids.
Speaker 2:So Yep. Not at all 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 Yeah. Plant a spy. And I'm excited to get into the honeypot component because
Speaker 1:There's so much here.
Speaker 2:Rippling was really playing some some four d chess.
Speaker 1:I love four d chess. Yeah. I mean, I I made a whole documentary about I I used Parker's previous HR company in 2012, '20 '13, Zenefits. Worked great. Interesting hack there where they'd give you the product for free and then act as your your health insurance broker.
Speaker 1:And so they would take the broker the brokerage fee, and that was when 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
Speaker 2:Yeah.
Speaker 1:You're you're sending you're, like, you're you're committing to spending a lot over a long time, and they're very low churn. 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 in sales in Silicon Valley or ARR, like, ever. They're multibillion dollar company.
Speaker 1:Then, of course, there's all the drama with Parker and Sachs, and they've been that's been litigated and relitigated a million times. But when I talked to Parker, I was I was asking him, like, okay. So, like, you're basically building the same company twice. Like, what how did you think about it? And it seemed like much more focused on HRIS early on.
Speaker 1: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.
Speaker 1:And on day one, he wanted, you know, payroll, benefits, and IT. And so Rippling's go to market was, hey. You have all these employees. Some of them are working from home. You buy them laptops.
Speaker 1:What happens when they quit or they get laid off? Well, they gotta 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.
Speaker 1: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.
Speaker 1: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. It it you know, he's obviously sees them as, like, a very serious competitor, but also just I think there was a little bit of acknowledgment that
Speaker 2:Yeah.
Speaker 1: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.
Speaker 2:And the and the Yeah. Fundamental and 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. Yep. Parker basically lays out the master plan.
Speaker 2:He even published the memo himself. Yep. Deal didn't have to, you know, steal that
Speaker 1:one. Yeah.
Speaker 2:But but but it 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 and something to be you know, we I think we covered this last week. It's something like 70 plus percent of all, like, pry public companies are based in The US. Yep.
Speaker 2:And, what that means is that Rippling should own the globe should dominate you know, if they're gonna come in The US sort of dominate the American, market here and then, you know, eventually expand into global payroll, then, of course, they're gonna 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, viability. Like, they're not gonna basically dominate the global payroll market without also having a significant sort of foothold in the traditional HR tech market here in The US.
Speaker 1:Yeah. Yeah. It's the yeah. I mean, the compound startup thing is fascinating. It it it's funny because we we we're actually working on setting up payroll right now, and so we we we you know, our decision is being informed by the board on the timeline.
Speaker 2:Whoever wins Yeah. We should just condense this down and and set up a Zoom link between a deal rep, a rippling rep, a gusto rep rep. A work rep. Yeah. And just get them all on the same call and say, hey, guys.
Speaker 2:Like, let's build in public here.
Speaker 1:Let's get Yeah. Yeah. Come on the show and pitch us, and then Yeah. Whoever pitches the best, it'll be good content, and we'll and we'll get a good we'll get a good payroll provider. It is fascinating that, you know, obviously, like, there's this almost, like, holy trinity of unicorn Silicon Valley companies, and they're all they're all funded by Founders Fund and andreeson and Sequoia and stuff and, like, all those serious VCs have piled into these, like, unicorn, decacorn, payroll companies, Gusto, Rippling, and, and deal.
Speaker 1: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, Paylocity, and Yep. There's another one with pay. And then above that Yeah. There's higher end ones that are worth even more.
Speaker 1: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. 50 k a year or 50 k a month.
Speaker 2:Yeah. You can you can look at, you can look at, historically, I think the payroll market has always been you know, the the the narrative has been this is not a winner take all market. Yep. Deal and rippling and gusto can all be worth tens of billions of dollars just by eating ADP. Right?
Speaker 2:ADP today
Speaker 1:ADP is the big one.
Speaker 2:ADP is at a hundred and 20,000,000,000. Yep. Today, there's no new companies signing up for ADP that I know of.
Speaker 1:Totally. Totally.
Speaker 2:It it's just not happening. I I I've never interacted with a startup in coming up Yeah.
Speaker 1:I agree.
Speaker 2:Ten years in in in startups that was on ADP. I'm sure they reach out to companies, but they're just not winning any companies. So so it's almost like a cable style business where it's just Yeah.
Speaker 1:Running Or, like, the Oracle. It's, like, you know, it's, like, a huge business, but, like, for older school companies and bigger companies. Yeah. And ADP, I'm sure, is great if you're Disney. I think I think when I was at Disney, they
Speaker 2:were on ADP. And it
Speaker 1: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 at 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.
Speaker 1: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.
Speaker 1:If you are ever accused of violating sanction laws, please do bring a sensational spying lawsuit against your competitor.
Speaker 2:That will certainly distract me anyway. So to be clear here, this is a this is a good line from from Deal's PR team. The Oh, yeah. Thing that's sort of hurting them on this is that the alleged spy hid in the bathroom and then Yep. Led the scene.
Speaker 2:You read
Speaker 1:the complaint, and you're like, this looks really bad.
Speaker 2:So this is the right line from from Deal, but it's I don't know. I think Matt's seeing through it a little bit.
Speaker 1:Yeah. So he says this is not legal or public relations advice. It's just an expression of my own interest. Anyway, here is Rippling'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 Rippling's sales process so he could channel information back to Diehl.
Speaker 1:Guided by Diehl as his primary search term, DS surreptitiously accessed Rippling's 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 Diehl could exploit to convince such customers to purchase their products rather than Rippling products. It is not clear how much this actually helped Diehl, but there is at least one suggestive case here. DS navigated to a mention of deal in a channel focused on a particular protect on a particular prospective customer who is considering both both Rippling and deal.
Speaker 1: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 team's internal pitch strategy discussion, including confidential details about how Rippling planned to highlight certain advantages of its products to address the prospects' pain points with deals offering. On 02/20/2025, this is, like, just weeks
Speaker 2:recent. Yeah.
Speaker 1:The the day of the scheduled call between rippling and d s previewed the b related channel 66 times. Later that d later that day, prospect b abruptly canceled the scheduled call with Rippling in which Rippling was going to deliver its proposal and explained that they were go 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 that, like, my my 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 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 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.
Speaker 1:And then you 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
Speaker 2: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 is sort of like, hey. Positive sum.
Speaker 2:We're we're eating, you know, we're we're eating these sort of legacy businesses. Like, there's enough market cap for us to go around. Yep. And so this type of story is basically surfacing what has been, I'm sure, happening in the background in a bunch of different ways. Right?
Speaker 2:I was joking earlier that, you know, imagine a world where somebody bugged all the Waymo's 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
Speaker 1:and then dropping, like, an AirTag Oh, yeah. With a microphone.
Speaker 2:Yeah. And you would just get this constant stream of of private conversations.
Speaker 1:Right? And this is why the ski lifts are so important. I mean, people are talking about bugging the ski lifts because that's where the capital allocators really exchange the proper alpha.
Speaker 2:Yeah. Yeah. That too. But, anyways, you know, I think this is gonna be a big wake up call for the industry that, again, it's not all positives. We are competing for the same customers, and, you know, we certainly we have our own counter counterintelligence operations lead against other podcasts.
Speaker 2:Right? Yes. Yes. We we know that that competing, you know, podcasts have have tried to get moles into the system. But Yep.
Speaker 2:But, yeah, we're just embracing that head on. Right? And I think every SaaS needs needs to have a counter counterintelligence operations lead Yes. You know, yesterday.
Speaker 1:Definitely. Definitely. Anyways
Speaker 2:yeah. But but, like, let's be clear here. If 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 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 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.
Speaker 2:Our average customer stays with us for seven years. You guys, you know, you know, were had a sort of, you know, leverage these sort of trade secrets and sort of corporate espionage. This could be the settlement here could be well into the tens of millions of dollars or or, you know, even who knows? It's it's not, this is gonna be you know, deal is gonna be fine. Rippling's gonna be fine, but this is, you know, not gonna be an inexpensive blunder.
Speaker 1:Yeah. Yeah. It it gets to, like, the nature of this particular business, which you know, you talk to, like, the nuclear founders, the you you know, they were just literally all in that Jason Carmen documentary together. And they have a very positive sum mindset because for anyone in this, like, far out r and 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. Like, a, if we both succeed, it's really good for the industry, and we're all just selling energy onto the grid.
Speaker 1: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 with these HR and and b to b SaaS products, they're much more directly comparable. And then the 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 gonna get from this maybe.
Speaker 1:And if you have the ability to come in and quote just a little bit under, you're gonna win those deals again and again. Like 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.
Speaker 2:No. And and think about how many people at Rippling. It seems like there's enough proof to that like, out there already that if the alleged spy is hiding and and all this stuff and, you know, it seems like there's enough proof to know that, like, some information would pass the deal somehow. Yep. Think about how angry if you're the rippling exec team.
Speaker 2:If you are that that one's obvious. Parker being livid is is obvious. The the team the sales team, right, where they're 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 and being sort of
Speaker 1:Totally.
Speaker 2:Being angry. Right?
Speaker 1:Yeah. Let 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 tradecraft. Rippling apparently discovered the alleged spy not because he was snooping on their sales information, but because an investigative reporter 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 Slack messages in his email, and Rippling investigated who might have accessed those messages and quickly identified the alleged spot.
Speaker 1:Crazy. Right?
Speaker 2:Wait. I didn't even I I didn't even see anything about this yet.
Speaker 1:Yeah. And so we can go we can go over to that information article, but the the possible lesson here is that tech companies are are much more sensitive about leaks to journalists than they are about sharing sharing sales information with competitors. So if you're doing corporate espionage, don't blow up your spot by trying to plant negative stories, not any sort of advice. Having identified the spy, Rippling then tried to prove that he was working for deal. The smoking this is a quote from the from the from the complaint.
Speaker 1:The smoking gun came earlier this month when Rippling set forth a test of or what is known by security professionals as a honeypot to have confirmed Deal's involvement. Rippling's general counsel sent a legal letter to Deal's senior leadership identifying a recently established Slack channel called d dash defectors, in which the letter implied rippling employees were discussing information that Deal would find embarrassing if made public. It's such a weird, like, thing to send. Just be like, hey. Yeah.
Speaker 1:We're we're we're we're talking trash about you in our Slack.
Speaker 2:You know? I know. But it's just too
Speaker 1:And it's like, I I don't know why you would share that with your competitor. But
Speaker 2:Well, it just apparently, it didn't matter. Yeah.
Speaker 1:I guess it just didn't matter because they fell for it.
Speaker 2:Well well and and here's the thing. So we're not picking we're not picking sides here. Yeah. If anything, I've been incredibly impressed with Rippling's growth and
Speaker 1:Yeah.
Speaker 2:Deals growth. They're both tremendous examples of, you know, you know, what what's possible in Silicon Valley. Many many people many people almost couldn't believe how quickly deal was growing. The deal hasn't been without its own sort of crises because anytime you're these companies are moving huge amounts of money around the world all the time. Right?
Speaker 2:And anytime you're in that business, you're it's somewhat crisis prone because let's say, let's say, some sort of, like, account manager doesn't catch that, oh, this entity, you know, set up a deal account, and they're using our product to pay out Oh, yeah. People that are doing prop trading. Right? So they have this sort of crisis around prop trading. I think it was probably a year and a half ago.
Speaker 2:I can't quite remember. And then on the other hand, you have Rippling who's, hey. You didn't notice this, but, you know, you've been paying out a a sanctioned entity in Europe. Right? Yep.
Speaker 2:You know, I'm just I'm I'm just making up an example. I've I've no knowledge of this specific instance. But but, yeah, you can imagine this is a war at the feature level. It's a war at the sales level. It's a war at the capital markets level.
Speaker 2:It's a it's a war at the sort of, like, you know, narrative Yeah. PR level. So
Speaker 1:It is so funny to compare it to, like, war, because when I made the rippling video, I I wanted to make it, like, as dramatic as possible, basically. And I was like, what is the like, what what is, like, the hardest moment in your career here? Like, what what's been the hard moment to talk about? And they gave me a pretty interesting anecdote about, like, early on, something happened with, like one one of their customers had a weird character in the name of the company, and it completely messed up the entire payroll file. So payroll just didn't run.
Speaker 1:And they were on the phone with some of their clients who like, a lot of the tech companies are like, oh, okay. Like, the payroll's gonna go out on Monday instead of Friday. Like, all of our employees will be fine with that. Like, we'll just deal with that. But, one of the companies was, like, running, like, trucking, and he was calling the team being like, guys are gonna, like, lose their mortgage over this.
Speaker 1:Like, this is this is, like, bad. Like, you need to help that. And so the entire Rippling team had to go to ATMs, get cash, go to Western Union, and, like, wire individual amounts to people. And they just, like and it was, like, super dramatic, but it's so funny because it's, like it is dramatic, but at the same time, like, we're talking payroll software here. Like, it's not really life or death, but it is actually very important.
Speaker 1:And and the stakes are high with, like, sanctioned entities and even, I mean, the abuse that can happen. Just moving money, at any system that moves money, whether it's Venmo or PayPal or Stripe, like, it can be abused. It can be hacked. And by definition, there's a lot of money at stake. And so, it is it is serious business even though, you know, we we we like to joke.
Speaker 1:Like, oh, it's b two b SaaS. Like, it's it's so easy. It's so, like, you know, not it's not as, like, world historically important as everything else, but, like, there there is stuff here that's pretty that's pretty important. Let let's move on. So about this d defectors channel.
Speaker 1:In reality, the channel was not used by rippling employees and contained no discussions at all. It had never been searched for or accessed by the spy. Would not have come up in any of the spy's previous searches, and the spy had no legitimate reason to access the channel. Crucially crucially, this legal letter was only sent to three recipients, all associated with Deal, Deal's chairman, the chief financial officer, and the general counsel, Deal's head of USC Which
Speaker 2:is the founder's dad.
Speaker 1:Oh, is that is that who that is? I I know Boise's. It's like, it's gotta be someone related to him. And Deal's outside counsel. Neither the letter nor the d defectors channel was known to anyone outside of Ripley's investigative team and the deal recipients.
Speaker 1:Yet just hours after Ripling sent the letter to Deal's executives and counsel, Deal's spy searched for and accessed the d defectors channel, proving beyond any doubt that Deal's top leadership or someone acting on their behalf had fed the information on the d defector's channel to Deal's spy inside Rippling. And then now it says pretty good.
Speaker 2:Yeah. So pretty good. Good enough to get an Irish court order to seize the alleged spy's phone, at which point he also did tradecraft. But here's the thing. This is in the days leading up to Saint Patrick's Day.
Speaker 2:Can you imagine what can you imagine the evidence that you need to get something like this to happen
Speaker 1:Oh, yeah.
Speaker 2:Coming up on on Saint Patty's Day?
Speaker 1:I I assume Ireland shuts down for the entire month of March.
Speaker 2:Yeah. It's it's what what's the the the Chinese New Year, you know, in in China, they sort of shut down a lot of factory operations.
Speaker 1:Us Irishmen are known for for liking a bottle, and and and Saint Patty's Day is as good as good as an excuse of any. So you know? I certainly wouldn't be going to work if I was in Ireland in the high school.
Speaker 2:This is the natural you you know you know how in twenty twenty, twenty twenty one, there was this sort of, like you could go on Reddit, there's people that have two jobs. You know? Like, a software engineer, like, Meta and Google, you know, or or sort of Meta, like, some unknown. This is the natural evolution of that, and and you just work for work for all the expense management companies, work for all
Speaker 1:Just pass all the info back. I mean, that that is my real question here is, like so this spy was clearly w two ed at Rippling. Might even had might even have had stock options, which is kind of hilarious to think about. But how was how was the spy getting comped by deal? Like, was it literally, like, cash in a duffel bag?
Speaker 1:Or
Speaker 2:Well, so basically the Deal makes a really good product for paying people globally.
Speaker 1:Oh, okay. I see where you're going
Speaker 2:with this. And so so it's it's very possible that he was dogfooding the product.
Speaker 1:Yeah. Maybe maybe the long term here is, like, okay. Rippling has, like, the normal, like, business, mid market, startup market, enterprise market, and deal pivots to being, like, tradecraft payroll. So, like, when the CIA like, Palantir for payroll, that would be a good, like, rebrand. Be like, hey.
Speaker 1:There's a massive network of spies all over the world. We're not gonna use the traditional payment rails anymore. But if you need a duffel bag of cash dropped to an ex KGB member at the Kremlin, like, we can get it done for you.
Speaker 2:Crazy. Crazy.
Speaker 1:I think that's a good that that that's potentially a good, like, growth story out of this drama. It completely repositions the company. Palantir for payroll.
Speaker 2:Crazy. Alright.
Speaker 1:We gotta go through the actual, like, the bathroom scene. Do you already read those?
Speaker 2:Yeah. Yeah. Yeah.
Speaker 1:Of know this is your favorite part. So DealSpy initially told the independent solicitor that his cell phone was in a bag on another floor. The solicitor offered to have an associate retrieve the bag, but DealSpy insisted that he retrieve it himself. The solicitor informed DS that if he was lying, he would be breaching the court order. The solicitor accompanied DS downstairs and took possession of the bag, but in fact, DS had lied.
Speaker 1:The bag only contained a notebook. It held no mobile device. On information and belief, DS's cell phone was on his person the entire time. After misdirecting the independent solicitor, DS then went to a bathroom, locking the door behind him and refusing to come out despite the independent solicitor's repeated warnings that these actions were in violation of the court order. Rather than comply, DS was heard doing something on his phone by the independent solicitor.
Speaker 2:You can just do things.
Speaker 1:Doing something. He's just playing candy probably. The haptics are going crazy. He's just addicted to TikTok maybe. It's just ice cream so good in the bathroom just watching a livestream.
Speaker 1:Good. Suggesting that that DS may have attempted to flush his phone down the toilet rather than provide it for inspection. Later that day, Rippling had the plumbing of its Dublin offices inspected but did not locate any mobile devices. While in the bathroom and continuing after leaving the bathroom, Diaz was again told repeatedly that he was required to provide the device, and he would be in violation of a court order. After Diaz left the bathroom, he was informed that taking another step forward rather than handing over the phone immediately would be an additional breach of the order.
Speaker 1:Diaz then replied, I'm willing to take that risk. Diaz then stormed out of the office and fled the scene.
Speaker 2:I mean, the Netflix doc is gonna go crazy, except I don't think it'll actually happen because it's it's at the end of the day, it's enterprise SaaS.
Speaker 1:Yeah. Me or Jason Carmen are the only hopes for making
Speaker 2:this Well, no. To to be honest to be honest, the right form factor with this is a South Park style cartoon
Speaker 1:I agree.
Speaker 2:That that releases basically this week, and it just sort of breaks it down because it's too it's too silly to to actually be made into a documentary also.
Speaker 1:It's so funny. But, yeah, I mean, this is like this the people keep saying, like, oh, like, know, we need Silicon Valley back. We need HBO Silicon Valley back. Things are getting too crazy. You know?
Speaker 1:The VCs are in the White House now. Like, it's truly, like, next level. Well, let's finish his what Matt has to
Speaker 2:The the thing I don't understand is is the spy not intelligent enough to understand that all of this stuff can be what what what's the word for it? Subpoenaed from, like, Apple or or Google or sort of Oh, yeah. I mean, Slack is was using I'm I'm sure Slack not end to encrypted. Like that.
Speaker 1:Yes. I mean, Slack's not end to end encrypted. And then also, like, Salesforce owns Slack. They're happy to hand this over. And then also, like, when you run Slack at the enterprise level like Rippling does, like, they own all of the data.
Speaker 1:I'm sure they have, like, their own copy. Yeah. They don't even need to go to Salesforce and say, hey. Hand it over.
Speaker 2:I think what's what's totally possible is that he was communicating over an encrypted service To the deal people. To the deal team. And then, you know, he who knows? Maybe he had a handwritten note with, like, basically, like, the login information, which is like, okay. I'm gonna flush this down the toilet.
Speaker 2:And, like, that's that's basically it. Right? Yep. I don't know how much that's gonna help him. But, but, yeah, you know, innocent until proven guilty.
Speaker 2:Right? So
Speaker 1:Yeah. So Matt closes out by saying when they come to raid your office, locking yourself in the bathroom until they go away probably won't work, not legal advice, but it will make you something of a legend. Also, imagine dredging the toilets for the possible spy phone. Oh, hilarious. Hilarious.
Speaker 1:Wild, wild stuff. Should we go to the New York Times article? Just give some extra context, because, Rippling did comment on this and gave some extra information around this.
Speaker 2:Yeah. I don't know how much of the the New York Times we need to really cover. But
Speaker 1:Mostly, it's just that, you know, you you can see, obviously, Parker posted about this. But, Vanessa Wu, who I actually interviewed for that documentary, she's Rippling's general counsel. She said in a statement, we're all for healthy competition, but we won't tolerate when a competitor breaks the law. Weeks after Rippling is accused of violating sanctions law, and then, yeah, Deal also fired back with that. It's a brazen act of corporate espionage.
Speaker 1:Logan Bartlett on the timeline.
Speaker 2:Wait. Real quick. Somewhere it says Rippling Rippling told the New York Times that it also discovered correspondence between BS and Alex, deal CEO and cofounder. I didn't see that anywhere else.
Speaker 1:I didn't see that either.
Speaker 2:But maybe it just didn't make it into the initial complaint.
Speaker 1:Maybe. I don't know. Is is that yeah. Rippling said it had also discovered correspondence between DS and Alex Bozzese, DL CEO and cofounder. Earlier this month, they sent a letter, which we heard about to the father of the of the founder.
Speaker 1:Within hours, DS started searching the channel and the company asserts.
Speaker 2:Horrible stuff.
Speaker 1:Rippling's bringing in the heavy hitters. They the lead lawyer is Alex Spiro of Quinn, Emmanuel, Urquhart, and Sullivan. Pasadena law firm, by the
Speaker 2:way. Nice.
Speaker 1:Shout out John Quinn, named partner, lives in my neighborhood. Great great dude. He's known for representing Elon Musk, Jay z, mayor Eric Adams of New York City. Some heavy hitters on this. Also, I think he represented Evan Spiegel at Snapchat.
Speaker 1:And mister Beast was also a Quinn Emanuel client, giving you a little bit a little bit of world tour of what Quinn Emanuel's up to.
Speaker 2:Shout out
Speaker 1:to Quinn Emanuel for
Speaker 2:coming. Things. Yeah. They're doing things.
Speaker 1:Yeah. I went to
Speaker 2:went to high
Speaker 1:school with all the kids that were affiliated with this law firm.
Speaker 2:I honestly wonder so I I really wonder how how this sort of plays out. Right? So you have DealSpy who's an employee of Rippling, not an official employee of Deal, I would hope. Yeah.
Speaker 1:He's just w two
Speaker 2:ed. Then and then
Speaker 1:Deal buying, and they pay me $20 an hour. It's great.
Speaker 2:And then and then the issue is then you have Deal who's represent you know, Deal's counsel and any outside counsel that they would hire is representing Deal. Yep. But then they also have some interest in, like, making sure that Deal Spy has good representation. But at the same time, if they represent if they represent, they can't, like, fund his lawsuit because then it looks like you
Speaker 1:know? Jordy, I think you need to read more spy novels because this is what's called being out in the cold. Like, the spy is burnt. They're out in the cold, and they gotta go they gotta go figure it out. Gotta get a new identity.
Speaker 1:Go Jason Bourne mode.
Speaker 2:Yeah. And it's a challenge because Deal has billions of you know, potentially a billion dollars on their balance sheet. And Yep. The spy probably made you know, what's that quote? It's like, I'm you know, I you know, you should be embarrassed at how you know, not that you sold out, but, like, how little it it actually took.
Speaker 2:Right? Like, this deal's high. Like, I could imagine him making $200,000 and then
Speaker 1:Imagine he just got 10% of the company. Deal spy. If you got if if you got less than 5%, you got host. You got
Speaker 2:host. Yeah.
Speaker 1:If you're if you're gonna do it for less than 5%, you're you should be a cofounder for this.
Speaker 2:You should
Speaker 1:have cofounder stake. Board seat for sure. Board seat. Board seat. Apparently, you can you can tweet from prison, and you can do podcasts from prison.
Speaker 1:So come on the show, but also join the board. Smart. Why not? Call in. Be the remote board member.
Speaker 2:Yeah. Great great call.
Speaker 1:If they're really gonna pivot to Palantir for payroll, you know, and and run spying operations across the world, he's he'd be an expert. Anyway, wild, wild times in the timeline. Should we go to Logan Bartlett? He says today is like the not like us drop for people who know what t three t two d three is, which is triple triple double double double, which is how you grow a really high growth b to b SaaS business, of course. Is not not like us is the is the Kendrick song.
Speaker 1:Right?
Speaker 2:Yes. Yeah.
Speaker 1:That is the the
Speaker 2:I'd like to see I would love to have had a little little birdie, you know, flying around following Parker Conrad because I wonder if he did a face to face, you know, with with his employee who was spying on him. You know? Like like, the king, you know, the king. You know? There's a spy within the castle walls and the king, like, you know, the
Speaker 1:Yeah. Yeah. I mean, you gotta hand it to Parker. Like like, enterprise SaaS is normally so boring, and his his entire life has been fascinating. Yeah.
Speaker 1:Somehow, it's just always filled with
Speaker 2:Well, also the you gotta like, one thing the the two reasons to be really bullish on on rippling after this, you know, and again, we're we're the news, so we're not we're not taking sides here. But but just sort of objectively, like, incredible execution execution on both the law like, the the the law here, the the execution of the honeypot, you know, how quickly they moved on this. You know, less than a month ago, they were still sort of uncovering a lot of this. And then, you know, it it's not super you know, companies that are that are winning and, you know, crushing markets don't typically feel the need to hire spies. That being said, the best ones probably do it and don't get caught.
Speaker 1:You know? Yeah. Yeah. We yeah. If you're an enterprise SaaS thought leader now, you need to parody Josh Steinman's how many foreign sabotage teams are operating on US soil.
Speaker 1:You can just post that every day. How many enterprise SaaS sabotage teams are operating in Silicon Valley right now? Just ask the question every day.
Speaker 2:There you go.
Speaker 1:Good morning. We're gonna win, and how many enterprise
Speaker 2:How many corporate espionage teams are operating within, you know, American SaaS company?
Speaker 1:American unicorns. Yeah. Well, you you had a good post about this. It's a it's a photo of a soldier doing a house clearing. Coyptus SaaS Bellum asked enterprise SaaS is war.
Speaker 1:There was some debate in our group chat about whether or not that
Speaker 2:The the translation.
Speaker 1:But I think the message got across, and you got a couple hundred likes already it's a lot of fun. And Pavel Asperuhov says, the East into the East India company had a private army. Why shouldn't the corporate expense management platforms militarize back to basics?
Speaker 2:I also said that
Speaker 1:says, imagine you're in Valhalla explaining to king Leonidas about the great battle of banking products.
Speaker 2:Amazing. I also said Richard Nixon would have loved b to b SaaS.
Speaker 1:For
Speaker 2:sure. If he were around today, I'm sure he would have been angel investing into into one of these, you know, companies.
Speaker 1:I'm in DC. I almost stayed at the Watergate. I'm a big fan of that hotel. They have fun with it. When you when you pick up the the phone at the Watergate, it says, like, welcome to Watergate Hotel.
Speaker 1:You don't have to break in. Like and everything is, like, branded around, like, the break in, and they've really leaned into that as their, like, shtick. It's pretty fun.
Speaker 2:Very fun.
Speaker 1:I like it. Adam Rankin, I think who's over at Warp, says, the world of payroll moves fast, but join Warp ships faster. Announcing our latest product launch SaaS. Sue your competitors as a service. Try it out now.
Speaker 1:He's having a lot of fun with it.
Speaker 2:Yeah. Warp is just happy to not be in the be at the the forefront of another, dramatic payroll incident. Yep. I was work work portfolio company. They've they've just been they had a little hiccup last year related to some marketing stuff, but they just have stayed laser focused.
Speaker 2:And now if you look over at Luke Metro, he's posting I will share this in the in the in the YouTube chat. Luke Metro has the emoji where the two people are fighting and then, like, the guys in the background, you know, like, smoke.
Speaker 1:Yeah. Yeah. Yeah. Yeah. That's Warp.
Speaker 1:Yeah. That's Warp. Chilling in the back. He's not paying attention. I mean, honestly, like, it it I wonder what's going on at Gusto today.
Speaker 1:Like, they gotta be so happy that they're just out of it.
Speaker 2:Yeah. The only thing is, like, I I I legitimately believe that Gusto isn't actually competitive with these companies. From from everything that I know, they don't they really say if you have more than 20 employees, like, just go elsewhere. Like, it's really meant to be for sort of the SMB category.
Speaker 1:So That's cool.
Speaker 2:I have to imagine that they're just sort of like, cool. We're glad that you guys are, you know, duking it out. But
Speaker 1:Yeah. I've been a Gusto imp customer for almost a decade, like, years.
Speaker 2:Always a
Speaker 1:good experience. And, yeah, I mean, it was interesting because Gusto launched as ZenPayroll, and then Parker went through y they were it's a YC company. Parker goes through YC with Zenefits and gets so big, so fast, and, like, completely sucks the oxygen out of the air and then quickly is, like, compound startup mode, take over the world mode. I'm gonna do payroll. I'm gonna do everything.
Speaker 1:And so ZenPayroll rebranded because they didn't wanna be confused. Even though they were the they were their first mover, they were like, we're just gonna, like, not deal with this chaos stuff that's going on. You can have the Zen name. And then Zenefits, of course, like, sold and got shut down and, like, rebranded. And so they could've stuck with ZenPayroll the whole time, but I I mean, Gus does a good name too.
Speaker 1:I I I think it all worked out. And and, also, it feels easier to rebrand a a b to b SaaS product than it does a consumer product just because there's like like, the goodwill doesn't build up the same. Like, you have your install base.
Speaker 2:Yeah. Most of most of your sales motion is coming from, you know, word-of-mouth, you know, direct sales. Like, it it is much easier. Yeah. I don't know if there's any other
Speaker 1:Yeah. Yeah. I mean, there's interesting stuff. I mean, honestly, people should go read the entire complaint because it is written in, like, plain English. And, also, I just think it's an fascinating tour of of, like, how enterprise SaaS works.
Speaker 1:Like, it's not like they're leaking alpha here, but if you're running a b to b SaaS company, like, you should read this just to just to understand how Rippling works because Yeah. They're explaining the whole process. Like like, from leads to most valuable pro prospects, they have, like, this five stage funnel, research, customer development, a demo, then refinement, then a contract stage. Each stage of the sales pipeline requires significant effort, and it kinda goes through like, it's kind of a playbook for building enterprise SaaS. And I thought I thought it was interesting because, like, you you often, like, these playbooks are repurposed by the like, oh, you hear Sam Blonde who worked with Parker on a podcast on, like, the set Jason Lemkin, like Saster.
Speaker 1:Right? You could learn some of the stuff there, but this is laid out in, like, with legal precision. And so it feels like there's actually
Speaker 2:And I
Speaker 1:maybe very implementable here.
Speaker 2:I actually have some breaking news. So this this story has apparently reached LinkedIn Oh. A lot faster than I thought because my buddy who's a who's a big LinkedIn user, he doesn't use x. He just sent me the story. And I wanna reply back.
Speaker 2:I'm not gonna reply right now, but I wanted to reply back, buddy. Six hours too late. Six hours. No. The the my the first text that I got this morning were, like, check X.
Speaker 1:Same thing.
Speaker 2:People are tagging, you know, people are tagging TBPN in this Yep. Yep. Story. They're calling it the Watergate of SaaS.
Speaker 1:The Watergate of SaaS.
Speaker 2:Great.
Speaker 1:Let me see.
Speaker 2:Do we wanna go do we wanna go through some of those examples of other big corporate Yes.
Speaker 1:We do. I I I I I do wanna highlight this one image from the complaint. It's it's, like, page sixteen, seventeen, and and I think this is what people are gonna be pointing to on, like, the was something actually nefarious going on, or was this guy just acting weird? Rippling Slack logs show that the deal spy began searching and accessing and accessing Rippling Slack channels at an unprecedented rate beginning or around November 2024. Notably, DS searched the term deal approximately 23 times a day.
Speaker 1:And so it seems like it seems like this person, was maybe at Rippling and then started spying, and it kind of goes from, like, a before and after. It's not like they were planted there beforehand. The below illustrative example demonstrates why a search for deal is powerful and alarming. Namely, this example shows that deal is mentioned in discussions concerning Rippling sales leads as well as discussion related to a potential customer for Rippling's PEO product.
Speaker 2:Yeah. So the challenge the challenge here and what I think Deal is gonna run into because Deal's own internal Slack messages in regards to their entire like, it's it's not like the the sort of deal spy at Rippling could just pass information to one person at Rippling on signal, and then that's, like, the end of the information. It's the information gets passed, and where the evidence will be really damning is if there's sort of this top down, hey. Focus on Shopify. We know rip like, we're risk of and then there's sort of this, record of, the sort of information coming in from unknown source and then using that, you know, that that information being used to change the change the outcome of this sort of sales process.
Speaker 1:I wonder if the spy knew that there are records of channel previews because that's some because wait. Just for some clarity, when you're when you're in when you're in an organization, there are private channels, which you can't even access or search for. There are public channels, which you can join. When you join them, it sends a little message like, hey. Jordy joined the TBPN guest planning chat or whatever.
Speaker 1:But you can also just preview them, which means you're just, like, looking and scrolling through, but no
Speaker 2:one funny because this
Speaker 1:in the organization knows, but the IT guys know.
Speaker 2:This is basically one of the the sort of things that Rippling pitches, which is, like, you should have one sort of sort of database for all your employees, and then it should connect to every application that you use so that there's sort of this, like, graph of activity. So
Speaker 1:Oh, there's a graph, baby, and the graph is looking like this. Like,
Speaker 2:flat flat
Speaker 1:flat flat and then just massive growth.
Speaker 2:Oh, no.
Speaker 1:Clearly. And it's like Oh, no. Yeah. What's going on there? Something changed.
Speaker 1:All of
Speaker 2:this It's funny. It's it's interesting to think about how that relationship would have popped up because it's possible that Deal was you know, I'm totally speculating here. It's possible that Deal was wanting to recruit this person, and then person was like, oh, actually, I really like deal, or I like rippling and the culture here. And, like, I've got, like, a pretty great, like, stock option plan, but I'm down to moonlight.
Speaker 1:Yeah. Give me give me the give me the cash bags. So the the the the the interesting thing here from the complaint is they really lay out how they actually found the spy, and, the title of this is tiny bird. I love these, like, little spy terms. On 02/27/2025, when the information published the article for which its reporters saw comment from Rippling, Rippling learned two important things for the first time, that Tinybird, a startup discussed in the article, is Deal's customer, and two, that Tinybird reportedly made payments to sanctioned rushing banks using the Deal platform.
Speaker 1:Specifically, quote, tiny bird followed instructions currently hosted on the website of a sanctioned Russian bank that guide companies on how to skirt sanction rules by using deal. Prior to the publication of this article, no one at Rippling, including Deal Spy, had any other work re work related reason to know about any connection between Tinybird and Deal, let alone search that name through Rippling's Slack archives. Nevertheless, Rippling's investigation revealed that DS had searched for tiny bird twenty times between February 19 and February 20, so before the article broke and before the information had been passed back. Over a week
Speaker 2:You gotta give the you gotta give, DS credit for just being incredibly locked in on the task. Hard to imagine him getting any other work done other than just, like, spamming these different search terms. And
Speaker 1:Yeah. You know, we talk about, like, 10 x engineers, and we talk about a players. And it just seems like Corporate athletes. Let's just call balls and strikes. In terms of spying, potentially a 10 x spy.
Speaker 1:Potentially an a player here. Although, though, did get caught. And the whole spy thing lasted, like, two months. Rough. And and also the handling of the phone afterwards was pretty bad.
Speaker 1:But clearly on the grind for a while. What? Gotta give credit where credit's due.
Speaker 2:What did DS flush? That's the big you know, it's like, what did Ilya know?
Speaker 1:What did Ilya see? Yeah.
Speaker 2:What did Ilya see? What did
Speaker 1:What did DS flush flush? You gotta impose that. On information and belief, DS most likely knew to search for Tinybird because he was instructed to search for that term by deal, presumably after the reporter indicated to deals communications team led by VP of communications Elizabeth Diana that Tinybird was a focus of his reporting or of of the reporting. Upon learning of the Tinybird searches, Rippling strongly suspected that Deal was directing DS's actions, but to ensure Rippling conceived a test, a honeypot, and this is where we go into the the dash defectors tab, which is fascinating. Anyway, so we we we should read we should quickly read through that information article that actually kicked all this off.
Speaker 1:It's in the information, it was an exclusive that dropped on 02/27/2025, less than a month ago. It's called the bitter fintech feud that stretches from Silicon Valley to Moscow. Diehl and Ripley have stirred up a hornet's nest in the staid world of HR and payment software. The seemingly mundane world of human resources management startups is not the place you'd expect to see cutthroat corporate blood sport, battles linked to global geopolitics, and questions about whether companies took on the wrong customers to boost growth. But Diehl and Rippling are hardly ordinary startups.
Speaker 1:Their feud spilled open spilled spilled into open view earlier this year in a Florida courtroom. A court appointed receiver to a fraudulent investment scheme accused Deal in a complaint of becoming a magnet for people moving money into Russia and making it easy for bad actors to do business with our nation's enemies in violation of national sanctions. The takeaway here, Deal and Rippling are trading jabs over payments in Russia. Rival fintechs are both under pressure from partners over sanction risks. Feud spills out into the open.
Speaker 1:Deal immediately pointed the finger at Rippling, calling the accusation a coordinated effort by Rippling to damage the reputation of its main competitor. Deal applied to dismiss the case. Deal's evidence was that the receiver's attorney was an investor in Rippling and represented it in licensing and regulatory matters, including helping set up its insurance brokerage. So, yeah, there there's been this, like, go back and forth on, like, Parker and the Rippling team clearly go pretty hard at deal. He's taken shots.
Speaker 1:Like, I I think there's been interviews where people have kind of asked, like, hey. What's going on in the international market? And he'll just be like, deal is not a good product. And he, like, is very aggressive about that where most most founders would not, like, cross that line because it can it's just like it's just a high downside risk. It can be seen as gauche or, you know, improper or impolite.
Speaker 1:Everyone in Silicon Valley is usually like, hey. We that might be a future acquirer or someone we acquire. We might have similar investors, similar employees. Like, let's just keep it cordial and say, yeah. We love what we're doing, but, fundamentally, we have very different visions and, you know, different cultures, and you pick whatever you want.
Speaker 2:What is that? So so one data point that's interesting, Rippling had barred former employees who went to deal from participating in a in tender offers. So he's basically saying, sure. You're still a shareholder in Rippling, but you're not gonna get access to liquidity Interesting. The way you would if you went and worked at, you know, someone like Ram.
Speaker 1:Yeah. Yeah. I mean, just very aggressive stuff across the board. And then do you remember the the snake oil fiasco, this whole thing? No.
Speaker 1:So the so there was something where where, I think it was I think I I'm gonna get this I'm gonna get this close, but I think it was, like, Rippling was calling deal snake oil, and they created a snake game that you could play, like, you know, a browser based Oh, yeah. Yeah. To kinda, like, take a shot at them. And a lot of people on on X were kind of like, just like like like, this is, like, too much. Like, just focus on building.
Speaker 1:Like, play a clean game. This is rough in the passer. This is getting a little aggressive. And Yep. We did the, like, the trash talking.
Speaker 1:Like, you know, maybe maybe this is maybe tech
Speaker 2:should Yeah. They said
Speaker 1:like the NFL, not like
Speaker 2:just launched they said deal just launched the page comparing themselves to Rippling. Good news. They know who's beating them. Bad news, they're selling snake oil, and then that was you can you can play the game.
Speaker 1:Yeah. Yeah. It was it was their response to deals competitor page, which are very standard. Like, almost every startup will have, like, the side by side of, like, oh, and it turns out, like, we check all the boxes, and our competitors check none. Like, you know, it's like Yeah.
Speaker 1:Everyone just does that. It's seen as just kind of normal normal stuff. Normally, you don't use a use a phrase like snake oil, which is aligned with, like, almost like illegality. Right? Because you you like, snake oil is a is a fraudulent medical claim usually.
Speaker 1:Although Brian Johnson famously, you know, just sells Sells oil that's called snake oil, and he's leaning into it and kind of re repurposing the term. But in general, snake oil is a is it's a little bit harder harder phrase. It's it's a harder edge than just saying, look. Like, you know, we think we're better than deal in boom boom boom boom six different ways, and, like, that's why our product is better. And I'm sure Rippling has that landing page as well, and deal does too.
Speaker 1:But, but people were like, oh, okay. This is really, really heating up. But now we see, like, okay. Well, things like maybe that was all justified. Like, maybe there there's really a reason for there to be a blood feud here, And and maybe there's a reason why they were doing that snake oil jab at deal and not at Gusto or Paylocity or ADP, even though they might be competitors with any one of those companies.
Speaker 1:Yeah. Anyway, we should we should move on to some of the the greatest corporate espionage things in history. Oh, we we should give some context on just where these companies are sitting. There's a good there's a good data table in the in the information comparing global payroll platforms deal and rippling valuation deals at 20 12,600,000,000.0. Rippling's at 13,500,000,000.0 on revenue.
Speaker 1:Deal allegedly is at 800,000,000. Rippling's at 580,000,000. And so a lot of people
Speaker 2:Which is
Speaker 1:I think huge.
Speaker 2:Crazy. I mean
Speaker 1:It's such crazy.
Speaker 2:If if you just had to estimate their revenues, it its deals growth has been almost unbelievable.
Speaker 1:It's insane.
Speaker 2:And so when articles pop up, you know, they they had an article, and this is also in the information back in September of twenty twenty three. It said how Deal became the payout provider for prop trading firms, including a site frozen by the CFTC. So this stuff, this is potentially one way that they're able to put up you know, I I don't know. Deal, I think, came out in this article and said this represents, like, you know, very minuscule amount of our revenue, but but clearly deal is a real threat to Rippling. Right?
Speaker 2:Yep. It's not a it's not this isn't Rippling, like, sort of beating up on some in any way. You know? They almost have doubled it. Yeah.
Speaker 1:Yeah. And so Rippling's raised 1,400,000,000. Deals raised 685,000,000. Deal has 5,000 employees, and Rippling has about 3,000 employees. Rippling's available in more countries, 85 countries compared to a 60 for Deal.
Speaker 1:So that just gives you some some some context around the size of these companies. But they're pretty close, and it makes sense that they're rivals. And it does feel like increasingly they're going after the exact same customers, Whereas maybe the ADPs and the Gusto's have found, like, different segments that are less hotly contested, at least for now. But it'll be interesting to see where it happen what what happens with it and and whether, like, one of these companies breaks out or or if we're just doomed to a an oligopoly in payroll forever, which which is certainly what's happened at, like, kind of the the the public market decacorn territory, but we'll see.
Speaker 2:Yeah.
Speaker 1:Anyway, should we move on to other corporate espionage cases involving US companies?
Speaker 2:Yeah. Should we start with IBM versus Hitachi?
Speaker 1:Let's do it. Do you wanna read this one?
Speaker 2:Or Do you wanna explain what these companies are, John, since this was kinda more your era?
Speaker 1:Brutal. Yeah. Back in '82, I almost interned at IBM, but decided to go over to Hitachi. You know? Yeah.
Speaker 1:But it was '21 at
Speaker 2:the time. Hitachi try to get you to go back and work at IBM and then come back? They said, you know, go go do a summer internship with IBM, then come back next summer. We got you on a, you know, a maxed out 6 figure 4 year deal.
Speaker 1:Yep. Yep. Yep. Yeah. Have you have you seen War Dogs where Jonah Hill is like it's like IBM.
Speaker 1:No one knows what IBM stands for. And then the the actors, the the one guy's like international business machines. Yeah. Yeah. And and he's like, get out of here.
Speaker 1:You're fired. It's the greatest clip. I love it. I actually filled an ad with that actor. He was like, oh, yeah.
Speaker 1:Was a great, great experience. He has, like, one line in the movie. He was really stoked about it. Nice guy. Nice.
Speaker 1:Anyway, in 1982, IBM became the victim of a major industrial and espionage scheme when agents of Japanese firms Hitachi and Mitsubishi sought to illicitly obtain IBM's confidential mainframe computer designs. The FBI set up a sting operation to catch the conspirators in the act. You love it. An FBI undercover operation uncovered that 12 Hitachi and five Mitsubishi employees were conspiring to purchase or steal IBM's proprietary technical manuals and software tapes for
Speaker 2:Wait. So were they Yeah. Is this one of those things that's like a what's it called? A Goretzu where you
Speaker 1:have to put Yeah. So I mean, yeah, I wouldn't be surprised if the Japanese government owns part of Hitachi and Mitsubishi, or they own pieces of each other.
Speaker 2:This is their company. Why are two companies coordinating on something that's so obviously illegal? Totally.
Speaker 1:Just open up American care We should this like, Dino, Rippling, Gusto Parker. Let's get you all together. You all get 20% of each other's companies, and then we can all work together to destroy Japan. Japan doesn't stand a chance in play in payroll. Once we've got the American b two b SaaS k Ratsu, let's get everyone in there.
Speaker 1:It's great. The scheme was halted with multiple arrests, and the case was described at the time as possibly the largest industrial espionage case in history.
Speaker 2:Right. So this is crazy. Hitachi pleaded guilty along in in '83 with two executives, and they paid fines of $10,000. 10 thousand dollars. Oof.
Speaker 1:They're never how would they ever recover?
Speaker 2:Yeah.
Speaker 1:They also issued an apology to IBM and entered a legitimate technology licensing agreement. The the case, the early case raised awareness of overseas competition targeting US technology and led companies, to tighten their security on sensitive r and d. Yeah. Wild. It's funny.
Speaker 1:Should we go into the hair care product espionage of 02/2001?
Speaker 2:Of course. I mean
Speaker 1:People have been asking about our hair care routines again. You know? Yeah. The answer is we is is we conduct a large espionage on on the Yeah.
Speaker 2:We have moles we have moles inside of Unilever and Procter and Gamble.
Speaker 1:Yes. And
Speaker 2:they're they're just giving us, you know, sort of, you know, chemicals out the back door that won't hit the market for another decade.
Speaker 1:So that's really
Speaker 2:that's really bad.
Speaker 1:Yep. So in 02/2001, consumer products giant Procter and Gamble was caught spying on its rival Unilever to gather intel on Unilever's hair care business. P and G's tactics cross the line from normal competitive intelligence.
Speaker 2:I just have to say something really quick. So when governments do this or hard tech, you know, defense, they do it. It it's like, oh, this is, like This is serious. Really bad. And then when when when hair care companies and HR