Rippling has raised $500M in a round led by Greenoaks. The round values the company at $11.25 billion, the same as the company’s Series D financing in May 2022.
This was an unusual round, raised in record time and for a purpose that ultimately resolved on its own.
It all started on Friday, March 10th at 5:30 a.m. PST.
Rippling’s primary banking partner, Silicon Valley Bank (SVB), collapsed with dizzying speed on Thursday, March 9, and entered FDIC receivership on Friday, March 10.
That same Friday was payday for many Rippling clients. Everything was teed up as usual: Funds from clients had arrived into the transient account at SVB, and instructions for paying out to employees had already been submitted to the bank. All of this had been set in motion earlier in the week, long before news of SVB’s troubles had broken.
But trouble did break. I was woken up by a call at 5:30 a.m. telling me that some of our clients’ employees hadn’t seen their payments arrive yet. I immediately jumped into our “war room” on Zoom.
At first, we thought this was an operational issue: SVB’s systems indicated that payments had already been successfully processed. On top of that, SVB’s payments team told us the funds were merely delayed because of heavy volume, and that they’d still be issued that day.
Then, at 9:00 a.m., we got the news: The FDIC had closed SVB and frozen their assets. These included our customers’ payroll funds, which were already in flight and on their way to employees.
We understood the gravity of the situation: Over 50,000 employees were in Friday’s pay run. Although it was “Silicon Valley” Bank that failed, the prospective victims here were not rich venture capitalists. They were everyday Americans from across the country, making an average of roughly $55,000 per year. 80% worked outside of California and 65% worked outside of tech. We knew that some of them would be living paycheck to paycheck.
So we didn’t think long before extending nearly $130 million of our own capital to fund our customers’ payments to their employees. Our hope was that we would eventually recover most of this from the FDIC, but it wasn’t clear how much, or when.
This still left the problem of how to issue the payments. Until Friday, we had used the software infrastructure of SVB to reliably issue billions of dollars in payments each month. Our systems were built around SVB. Now, all of a sudden, SVB was gone.
Fortunately, we had previously set up accounts with JPMorgan Chase (JPMC) as a redundant payments infrastructure to avoid a single point of failure. But our plan to migrate always assumed we’d have a week or two to make the switch.
The reality? JPMC’s cutoff for same-day payments was 12:30 p.m., that day.
Now we had three and a half hours.
Immediately, 15 of the top engineers at Rippling set to work generating a payment file we could submit to JPMC by their cutoff. It’s hard to rush something this important: It has to be perfect. As the 12:30 deadline neared, our CFO even negotiated extra time with JPMorgan. In the end, the files were processed, and employees saw payments start arriving immediately. Most employees were paid on time on Friday, and the rest were paid first thing Monday morning.
But our sense of relief was short-lived. No number of engineers could solve the biggest problem we now faced: $545 million of our customers’ money was still locked up at SVB. And all of it was due to employees over the next three business days. We expected that the FDIC would release some amount of capital to depositors on Monday, but we couldn’t count on it.
We had a number of sources of capital, but raising a funding round was our best option. If only we could get a deal done by Monday morning…
So I called Neil Mehta from Greenoaks. Greenoaks has been an investor in almost every one of Rippling’s rounds, and Neil is a longtime supporter of the company. We went from a conversation with Neil at 9:30 a.m. to a signed term sheet 12 hours later. The round closed shortly thereafter on Monday morning, less than three days from start to finish — thanks in no small part to a team of lawyers from Goodwin Procter (representing Rippling) and Gunderson (representing Greenoaks) who pulled two consecutive all-nighters to make it happen.
On Sunday afternoon, the FDIC announced that it would guarantee deposits. The immediate need for capital to protect our customers was gone. But there was never a question about moving forward with the financing. First, I believe strongly in handshake deals, and didn’t want to break my commitment from Friday. Second, the round is at a good price that we believe reflects our performance, especially given the change in the fundraising backdrop over the last year. It lets us focus on our customers and build great products no matter what happens with the economy.
This extraordinary financing would not have been possible but for the fact that Rippling’s business is strong and growing at triple-digit rates. We have a base of investors who are staunch supporters of the company and always looking for opportunities to increase their ownership.
Now, we’ve recovered all funds from SVB and our balance sheet holds just shy of $1 billion in cash. On top of all of this, we’ve moved our banking operations to JPMorgan Chase, and payroll is running smoothly.
It’s simply remarkable to think that our banking partner collapsed on the day we had to pay over 50,000 people, and we still got everyone paid within 24 business hours. Thank you to the Rippling team that got it done, to the partners who supported us, and to Greenoaks for the bet they’ve placed on our continued success.