This post was originally published on Startupon on May 4th, 2023, my newsletter Q&A series that features some of the most influential builders in the game. It’s no secret that taking the leap to found a company and figuring out how to scale a startup in the early-days is hard, but this part of the journey is relatively unspoken about. I’m aiming to demystify the founding journey by interviewing founders, operators, and executives about their experiences scaling their companies. Subscribe here and never miss an issue!
Merge is a Unified API that transforms how B2B companies implement customer-facing integrations. The company offers one API to integrate with all human resources, payroll, recruiting, accounting, and other platforms, saving developer effort and speeding up product roadmaps.
Shensi and I have been friends since freshman year of college and we were really fortunate to be on this path together from the beginning. While we had this dream to one day start a company together, it wasn't something that we were going to force. Five years after college, we would regularly meet up for dinners, talk through ideas, and propose things, but nothing felt like it was going to be the next big unicorn. For us, it wasn't worth pursuing a small acquisition target.
We ultimately landed on building a Unified API platform because we both ran into this problem at our previous companies. I was Head of Engineering Untapped, a diversity recruiting platform, and was focused on building integrations with applicant tracking systems. Building the integrations wasn’t that complicated, but managing, maintaining, and onboarding new integrations for customers was a total pain. Shensi was Chief of Staff at Expanse, a cybersecurity platform, and had the same problem building ticketing integrations. Even though we were in such different industries, we fundamentally had the same problem.
B2B companies need to build integrations with all the enabling tools and competitors in a space, and that’s what we decided to tackle.
With Merge, we had the unique insights, and the big question for us was not which elephant do we need to take down, but was there enough demand for something like this? We used a lean launchpad, talked to 100 companies, didn’t ask any leading questions, and the feedback was powerful — they said they had a significant number of engineers working on this and they would pay for this type of solution. It became clear that this was different from other things we’ve tried to build before.
Merge’s goal has always been to build unified APIs for B2B companies across all business verticals. Our initial wedge was HR and Payroll, as well as Applicant Tracking Software (ATS) and the entire recruiting stack.
Each of the sub-verticals brought a unique perspective that helped us build the fundamental tooling that we use to launch new integrations. ATS’ have massive amounts of data and store information on every candidate that users have ever interacted with, which helped us build for scale, whereas HR has very strong data accuracy requirements, which helped us build a strong normalization engine as well as instill the proper checks and balances needed to make sure that we're not pushing out bugs.
Integrations are core to a lot of our customer’s products. It has a huge market size and clear targets to sell into. Luckily, today, a vast number of our customers are interested in more than one category. When you’re just a point solution, TAM is limited by vertical. That doesn't give you the ability to build out rich, detailed, deep API integrations that are also bought across a variety of systems, and that that really for us. Our multi-category approach allowed us to sell and upsell across categories.
The best modern API companies let users sign up and see product value right away. Given we sell directly to engineers, who notoriously hate sales calls, we wanted to make sure they were able to unlock and understand what they can get out of Merge immediately without any gating.
Another piece is that PLG forced us to build a great product. If you don't have a PLG motion, then you can be a little lazy and let the implementation team handle a lot of the customer complexities, and questions after the fact. Stripe would not have gotten where it is today if they hadn't made the product super easy to get started and then evangelize within your company.
PLG really forced our hand at building a great product.
I like to describe our GTM as the logo ladder.
We climbed the ladder by starting with SMBs. We knew we needed SOC2 before starting to sell into the enterprise. We are a core part of a customer’s infrastructure, processing PII and other extremely sensitive data, and we knew that without that as a bare minimum, enterprise customers wouldn’t trust us without a SOC2. These SMBs had successful motions and as champions moved between companies and word spread, we eventually sold upmarket to bigger and bigger fish. Then, we started pursuing other things. We were working with Gong, and Gong rightfully doesn't trust SOC2 flat out — SOC2 isn’t a certification, it’s an attestation. It doesn't really cover a lot, and Gong made us go through a formal security review process with us and pushed us to get ISO certified as well.
If you look at something like Plaid, the quality of each integration actually doesn't matter that much. If someone fails to link to Robinhood or E*Trade, it's annoying, but they can rerun the integration.
If a connection breaks in Merge, you’re screwed. Take Payroll for example: If you fail to run a payroll API to pay your employees, it could violate the law. A lot of things can happen, so quality has to be incredibly high. The way you build quality with integrations is by onboarding more and more end users. It's what we call crowdsourced building. We have a vast customer-set that spans verticals and a ton of company data that's wildly different. It’s forced us to build systems that are highly flexible. We’ve been intentional about building Merge to be quality integrations, and it’s something we've invested heavily in.
But then the other pieces, there is a world where integrations become completely commoditized. The most important piece here is that we have never felt that building the integrations themselves is the key to winning here. This is not a consumer space, not a fault-tolerant space. This is something where we’re selling really large enterprise contracts with customers that need you to support their whole integration function within their business as opposed to just helping them build a few integrations.
The first was realizing that this was a real problem. Before we started building we realized that we were in such different verticals of technology and while nothing should be in common, we actually had the exact same integration problems. We noticed that across industries, different data sources needed to integrate with different connectors. Different industries had the same issues plaguing their entire organizations.
Secondly, one of our marquee customers started putting real volume on Merge complimenting us and sending us messages like, ‘this is incredible, it saves us so much time, it's worth every penny’, all despite the high contract.
Lastly, nowadays it's easy to just look back and be like we haven't made it yet. But we have a lot of really strong logos that we respected long before Merge existed that we dreamed of one day becoming customers. It’s so exciting to work with them and have their CTOs share how much they’re loving the product.
We're a very intentional non micromanage-y company. We're very big on letting people lead their own initiatives.
We hire for ownership, which means we try to understand someone's motives for joining the company beyond being a skills and qualifications match for the role. We like to bet on up and comers. We've bet on people who are in it because they want to learn to build a company. They want to experience what it's like to do something from the ground up. That's the sort of thing we're looking for as opposed to the classic, “I want to come in and get a senior title and grow my title inflation”.
Integrations are going to continue to be more and more important. A lot of what drove the recent rise of integrations were these massive cloud platforms like Workday and SAP, where everything was stored in one database with all technologies connecting to that. Now, with the unbundling of systems of record, you're seeing more of these companies pop up and they all need to share data between many applications.
Today, we’re seeing more platforms launch more integrations, but for a while, these platforms would expect their customers to build them. Previous iterations would require users to leverage something like Workato to build an integration. Fast forward to today and customers are not okay with that. They don't want to buy platforms where they need to build their own integration to every other piece of software they use. They demand pre-built modular integrations.
The Collison brothers are really impressive. They really modernized the API space. They're able to take things that we're incredibly complex and make them very simple, and that’s our goal. Our product is immensely complex, and if we presented all the complexity to our customers right off the bat, customers would never sign up. They've built an evolving journey of their product, and that's what we're really going for too.
If you’re an early-stage founder building in this space, I’d love to hear from you! Email me here.
