Case Study: Zapier

When Wade Foster, Bryan Helmig, and Mike Knoop attended the 2011 Missouri Startup Weekend, they hacked together a way to automate the transfer of data from one web application to another. For example, maybe every time a new lead was entered into a Google spreadsheet, you also wanted it automatically added to your Salesforce database. It was a cool piece of code, but it wasn’t yet clear that this could grow into an actual company. By the end of the weekend, they had, as co-founder Wade Foster said, “a barely functioning prototype and no clue what people wanted.”

They started trolling online forums in search of the integrations people were looking for. For example, they would find a post from someone hoping to import PayPal transaction data into the Highrise CMS, and they’d add that to their list of integrations they could build. One day, they saw that a guy named Andrew Warner was looking for a particular integration, and they contacted him directly. As Foster said later, “I hate being cold emailed with a sales pitch, so I intentionally try to avoid selling him on anything. I was just trying to find out if this is still a problem for him.” It was, so the Zapier co-founders wrote a custom integration and sent it to Warner. He loved it and asked how much he owed them. Thinking quickly, they responded, “It’s one hundred dollars to get into our beta program.” Andrew Warner was very happy with that and sent them the money, but they had no company bank account and no way to accept payments, so they took care of both quickly. 

The team continued to scour online forums for several months. If they saw several posts on Stack Overflow from users looking for a way to automatically transfer data between Stripe and a Google Spreadsheet, for example, they would write a script that would do that. They applied to Y Combinator, were rejected, but then tried again and were accepted into the next batch. Later that year, they raised a seed round of 1.3 million dollars from a total of six investors, including Y Combinator. 

Today, Zapier has more than five hundred employees, is very profitable, and supports over four thousand different integrations, allowing users to connect all sorts of web applications without needing to write a single line of code. The best part of this story? They never raised any capital other than that first seed round. Sequoia, the legendary Sand Hill Road venture capital firm, has tried desperately to invest and has repeatedly been rebuffed by the founders. Finally, in April of 2021, the founders agreed to sell a few of their own shares to Sequoia—at a company valuation of more than five billion dollars. 

Key takeaways:

I am a fan of Zapier. It’s a great product, I use it all the time, and I love some of the lessons that are embedded in their story of success. 

Founders need to be awesome salespeople. The fact that Foster trolled posts, reached out directly, and sold a deal was what got them rolling. Nothing is going to work if the founders can’t sell. 

You’re looking for a problem that people are willing to pay to have solved. Foster could have easily given that first integration away for free, but by naming a price—and having the customer eagerly accept—they knew they had something worth pursuing. 

Zapier could have easily raised wheelbarrows full of additional capital—they had the big-name VC firms begging to get in—but they preferred to grow the company organically, solving real problems for real customers and building one happy customer on top of the next. As a result, the founders are still majority shareholders of a profitable company with a valuation of five billion dollars.