If you want to start a successful business, it seems logical to begin by looking for a good idea—but Michael Grinich went in search of a bad one.
“I wanted to find an area that, to everyone else, looked like a bad idea, but based on personal experience, I knew some secret as to why it was actually a good idea,” he says. “That’s the only effective place to look for startup ideas because otherwise you just don't have any special insight.”
His counterintuitive approach was inspired by YC co-founder Paul Graham, who wrote, “The best startup ideas seem at first like bad ideas. … if a good idea were obviously good, someone else would already have done it.”
And that’s why Grinich was elated when his plan to build WorkOS, a platform for developers to easily add enterprise features to their apps, was initially met with a heavy dose of skepticism.
“A lot of people kind of disregarded it as not being an interesting problem or not that hard to solve,” he says, “but I had this firsthand experience from my previous startup, so I knew that there was an opportunity there.”
At Nylas (an email startup he co-founded), he and his team had struggled to make the app enterprise-ready, a problem Grinich calls “crossing the enterprise chasm.” Scaling and moving toward the much larger enterprise market (in search of six- or seven-figure deals), requires an entirely new set of features capable of handling the more rigid regulations and taxing resource demands of large corporations.
Building these features in-house, however, is costly, time-consuming and often seen as “boring” to developers who prefer working on shinier, customer-facing features — which is why Grinich built WorkOS. Founded in 2019, WorkOS provides developers with a set of building blocks that make it faster to ship enterprise features, like SSO and multi-factor authentication, and as a result, smooth the path to moving upmarket.
But before it was a powerhouse developer tool with $95 million in funding, WorkOS was just an idea scribbled onto the pages of a notebook full of possibilities.
And that brings us back to 2017 and the fascinating way Grinich chose to evaluate what to build for his next startup.
EXPLORING IDEAS
After leaving Nylas in the summer of 2017, Grinich took a year off to travel and contemplate his next move (“Sort of the entrepreneur version of Eat, Pray, Love,” he jokes).
During this exploratory period, he kept a notebook in which he scribbled down ideas for products or companies. It was the blank canvas upon which he could experiment with anything that sparked his curiosity, no matter how unfeasible or bizarre.
Some of the ideas that landed on its pages include building technology that could de-radicalize people ("I don't think that's a business, but probably a great dissertation to write,” he says in retrospect), or making a video using deepfake AI so that one person appeared as every character in the movie. The point of this exercise was not to decide on a winning product idea; the point was to practice thinking outside the box.
“I believe a lot of entrepreneurship is very creative,” Grinich says. “You have to find ways to get your creative juices flowing. In studying other types of people who do that for a living, like musicians or artists, it's always a mixture of finding ways to enrich their daily experiences so they have inspiration and then just working at it really hard.”
So, like an artist, he tinkered, toyed and devoted time and energy to honing his craft of generating ideas for the next venture. In an attempt to find fresh perspectives, Grinich went to museums, met new people and even attended a rocket launch. Sure, none of this was directly related to founding a SaaS company, but it served as creative cross-training, helping him build the muscles of innovation.
By the time he returned to New York, the pages of his notebook were brimming with half-baked ideas, and Grinich was getting restless. “I just sort of woke up one day and was like, ‘I'm ready to start working again,” he recalls. “It’s a very personal thing.”
Finally ready to start another company, Grinich pored over the contents of his notebook in search of an idea that met all of the following criteria:
- It was in a market undergoing a major transition. “I didn't want to work in a stagnant area.”
- It was something he already had experience and skills in. “I didn't want to go into a totally new discipline. I wanted to apply everything I knew quickly so I could pursue this opportunity faster.”
- It was in a huge market. “If the market is gargantuan, you have a lot of room to maneuver and pivot and land on something.” For example, Grinich says that if WorkOS’ original product hadn’t been successful, the team could’ve easily pivoted to build something like Rippling, a workforce management platform for HR, IT and finance.
- It was an idea that looked bad to some people but good to him. “If you have something that looks like a good idea to enough people, you risk getting into a situation where, within six months, there's a ton of companies just like yours.” You don't want to be in that situation. You want to be the only product in the category when you launch, and around six months ahead of the competition. So look for the solution that looks like a bad idea to enough people initially.”
- The timing was right. “Timing is the most important of all the criteria on this list. I didn’t want to wait for a market to emerge. I wanted it to be ready now. If the market’s not big, but it's growing really fast, you can capture it. If you don't have the skills, but you're in the right place at the right time, you can hire the right team to do it. But if you build something and you're three years too early, you're screwed.”
Just build in the biggest possible market because you can’t change it later. It's like building a house: location can't change. You can tear down the structure and rebuild it, but you can't change where it is.
As he mulled over the list, he reflected on his time at Nylas and realized he’d already been exposed to a problem space that met all five criteria: getting a SaaS product enterprise-ready.
“Though we didn’t achieve it at Nylas, I’d seen other companies, like Dropbox and Slack, successfully move upmarket to enterprise,” Grinich explains. “And by attempting that at Nylas, I’d learned a lot about the power of building products for developers and the business model around it. I also just love building developer tools.”
To top it all off, the market was huge—and ripe for transformation. “I looked at IT, and I was like, ‘I don't even know what IT means, but I know it's a multi-trillion-dollar industry globally,’” he says. “The market is so big, and there hasn't been a category-defining company here.”
VALIDATING THE IDEA
Creating a tool to help developers build enterprise-ready apps met all of Grinich’s criteria around market, experience and timing, but he was in no rush to ship. He was willing to spend the time ensuring that his new company had the highest chance of success — which ended up being about a year-and-a-half-long endeavor. That began with validating his idea by interviewing three key audiences:
- Founders of software companies currently trying to cross over to enterprise. This included CTOs of companies he thought would eventually need enterprise features. His goal with this audience was to see how they were thinking about their enterprise roadmap. He asked questions like: 1). How would you feel about using an external service for this? 2). Would you trust it? 3). What would it take for you to depend on us? 4). Where are you in your lifecycle, and when would you be ready to adopt a solution?
- People who had successfully done it at other companies. “These people essentially told me what the roadmap was because I hadn’t actually built enterprise stuff before.” He spoke to the enterprise product team at Dropbox (where he previously worked), Asana and Slack. Some of these people ended up becoming WorkOS' angel investors.For this group, he asked questions like: 1). How did you do it? 2). What was important? 3). What ended up not being important?
- IT admins. This audience was more challenging to get in front of, but Grinich discovered that many VCs have CIO networks, and that by simply reaching out to them and sharing that he was an entrepreneur building something for IT, they were willing to talk to him (as long as they didn’t feel like he was trying to sell them anything). “Very few people build cool software for IT people, so they're usually pretty excited to chat,” he says. This was a particularly important group because IT admins are the end user of WorkOS.Because he wasn’t familiar with this audience, Grinich’s goal was to build empathy by asking: 1). What are your concerns with enterprise software? 2). What do you care about with these products? 3). How do you think about security and compliance? 4). What's a showstopper feature versus just a nice-to-have?
From those early conversations, Grinich learned that software company founders were actually really turned off by the idea of enterprise. “Founders were like, ‘I don't want to do enterprise stuff. This sounds like it sucks. I want to stay away from this as much as possible.’”
But, he found that the problem he’d landed on was a real pain point for IT admins. “The people on the IT side were the most frustrated because they were the ones constantly having to say no to adopting new products and services that weren't enterprise-ready,” he says. “They're the ones that are the final gatekeeper.”
Additionally, the people who had successfully built enterprise solutions at other companies resonated with his idea immediately. One of WorkOS’ earliest angel investors, Paul Rosiani, a former Slack employee who had seen the immense effort of building enterprise features, was ready to wire money within a couple of minutes of the pitch.
“Nearly anyone who had ever seen or touched that process of getting enterprise ready immediately understood the value of WorkOS because they saw how complex it was to build from an engineering side, how hard it was to understand, how much of a distraction it was from the team actually investing in this and then leadership’s resistance to building it,” Grinich says.
With his idea validated by customer conversations and the first angel checks in hand, Grinich felt ready to start building.
“At this point, WorkOS was just a slide deck, essentially,” he says. “It didn't have any real customers. But I knew what we wanted to build for the first version, and I had a couple of engineers lined up that I wanted to hire.”
BUILDING A "MINIMUM AWESOME PRODUCT"
It was now January 2019. The first engineering hire would be onboarded the following month, but it would be more than one year before the first version of WorkOS made it to the hands of a real customer.
Why? Grinich was committed to taking the time to build a product that wowed its users at first sight. “I'm not a fan of the lean startup methodology concept of minimum viable products,” he explains.
At WorkOS, one of our operating principles is building a ‘minimum awesome product.’ That doesn't mean that you should just constantly be building forever, but you need to build something that’s beyond just okay — it needs to be excellent and impressive to people.
Putting principle to practice, Grinich and his team poured a tremendous amount of care into designing the first version of the WorkOS site, even though they had no users yet.
“We knew we wanted to stand out from a brand perspective from day one,” he says. “We knew API docs were really important, so we didn't just use some random open-source thing — we built our own engine for that. We tried to make sure every dimension that we were building was impressive from the start.”
In case you’re in doubt about just how indelible first impressions truly are: To this day, Grinich still has users who sign up and tell him they heard about WorkOS when it first launched on Hacker News back in March 2020.
Another reason for the longer timeframe between idea validation and product launch was the depth of the initial WorkOS features.
“We knew our story wasn't just going to be about authentication because enterprise IT admins needed more than that. The problem we were solving was: How do you make your app enterprise-ready?” Grinich explains. “From talking to people in IT, I had identified four different pillar features, and I knew WorkOS needed at least three of those features before we launched. It needed to be a full platform.”
Those four pillar features were:
- Single sign-on (SSO)
- Directory sync
- Audit logs
- Role-based access control
Grinich wanted to ship within roughly a year, so his team spent about one quarter building each of the four features, starting with SSO. Then, the first three months of 2020 were spent getting ready to launch.
LAUNCHING
Through the many months of development, Grinich had to have faith that what he learned in the validation stage held true, and even though no one was actually using the product yet, the time and resources he was pouring into it would pay off in the end.
“I think that there's no problem with putting all your eggs in one basket if it's a really good basket,” he says. “But about a year into coding, in January and February 2020, even I was getting antsy like, ‘Okay, we need to ship.'"
The plan all along had been to fly the whole team to San Francisco in March 2020 to launch at SaaStr, a major conference for SaaS and cloud enthusiasts — but then Covid hit and the event was canceled, and along with it, WorkOS’ launch plans.
But the team was undeterred. “The world was on fire, but we were like, ‘Hey, we're ready to go. Let's do it anyway.’”
So instead they launched WorkOS on Hacker News and Twitter with a tagline that immediately resonated with their audience: “Plaid for enterprise IT systems.” The response was overwhelmingly positive. “There were no snarky Hacker News comments — which is perhaps a silly metric, but I saw it as a badge of honor. Developers loved the idea of WorkOS and what we stood for,” he says. “Even though we didn't have the traditional signals around usage-based traction, I felt like we had strong product idea-market fit.”
Product-market fit is hard to describe. When you don't have it, it's pretty clear. You are struggling and every little thing is tough. But once you get it, it's like all the lights turn on. You feel it clear as day.
Post-launch, in a span of three weeks, he did demos and hand-onboarded 73 early- to late-stage companies across a huge swath of industries. “We had a super wide breadth of stages and sectors in our initial signups and demos, including developers who create apps for doctors, lawyers, accountants, teachers, engineers, scientists, and more. We had both small brand new startups and also huge companies signup. I remember doing a demo with the Dubai World Trade Center. This was not your typical dev tools launch,” says Grinich.
Despite the chaos of March and April 2020, WorkOS was able to cut through the noise. “The world was in crisis mode and shutting down. The fact that we got anyone to pay attention to a startup launch — not to mention an enterprise SAML developer platform — said a lot about how strongly our message resonated with developers. It was clear we had struck a nerve,” he says.
FUNDRAISING
Grinich’s hunch on the huge market size was proving to be spot-on — and gave him a necessary nudge to start fundraising.
“None of these customers were starting to use WorkOS immediately. They all had to develop the integration, and they had to put it on the roadmap — so it wasn't converting overnight. But it was this injection of confidence for me around the market size, so I decided to raise our Series A at that moment,” says Grinich.
And that moment was a turbulent one: The World Health Organization had just declared Covid a pandemic, the stock market was crashing and predictions of a long recession were looming.
“If I hadn't had to raise sometime in 2020, I would not have,” he says. “I raised at that point because I thought that the market was going to get objectively worse over the next few months, and we were going to enter this economic winter. So it was like, 'do it quick, do it now.'”
After initially trying to pitch to New York-based investors (and striking out), Grinich turned his attention to the Bay Area. The company still had no revenue to show and the first blue chip customer to truly use the platform, in terms of meaningful scale and growth, didn’t happen until October of that year. But there was heaps of potential.
“When I pitched WorkOS to VCs in Silicon Valley, they instantly got it — in many cases literally within seconds. These investors had seen firsthand how difficult it was for their portfolio companies to build for enterprise. The value prop was crystal clear,” recalls Grinich. “The only question they asked me was, ‘Why has nobody else built this?’ The pithy answer is ‘because it's really hard!’ but I think the other reason is that it hadn't been the right time. But now it was. And I had the right set of technical skills and experience to solve this problem.”
There was also a clear thread to one of tech’s biggest success stories.
“Our round was led by Lachy Groom, who was early at Stripe. He saw WorkOS and understood our approach and market. I remember he said, ‘This is like Stripe for enterprise features,’ which was also how we thought about it,” says Grinich. “Stripe had also picked a boring industry (payments) and essentially redefined the category by serving developers with great design and taste — I wanted to do the same for IT. Lachy deeply understood this vision, so he was the ideal partner.”
Grinich also notes that his second-time founder bona fides helped clear the path to a Series A. “I had a strong network with VCs, so even though we were meeting on Zoom for the first time, many of the firms I talked with had known me for years and already knew WorkOS,” he says.
PRICING
At the time of launching WorkOS, Grinich and his team still hadn’t nailed down pricing.
I consider pricing to be something you need to develop just like you develop the product itself. You iterate on the API design, and the same should be true of pricing.
For commercialization discovery, Grinich set up meetings and asked as many questions as he could, including:
- What do you do today to solve X?
- How happy are you with your solution? How could it be better?
- How long did/will it take you to build X? What could you build with those resources instead?
- If you could have this problem solved today, how valuable would that be to you?
- How do you balance the need to build enterprise features with other ideas for your product?
- How valuable are enterprise customers to you? How are you planning to grow upmarket?
- What else are enterprise customers asking you for? What's on your roadmap?
Then, he got to work on what he calls an “80% solution.” “There's a lot of benefit in coming to a pretty good solution relatively quickly and moving to the next phase, rather than just trying to achieve perfection.”
Initially, WorkOS charged based on the number of end users. So, if the customer was selling their software to five companies, and each company had 100 seats, WorkOS would charge the customer for 500 end users (the same pricing model Dropbox uses).
But this pricing model didn’t end up working for WorkOS. “It turns out that for companies that are just beginning their enterprise journey, which is when you need WorkOS, mapping pricing per user didn't make as much sense as mapping it per organization because they don’t yet have much confidence around how many seats they need.”
Today, based on user feedback, WorkOS charges per organization. So if the customer is selling their software to five companies, it doesn’t matter how many users sign in from each company — WorkOS charges for five units. As for initial WorkOS prices, Grinich landed on those because he wanted to charge less than a competitor, and he never wanted to lose an initial deal on price point alone.
“It’s an 80% solution,” he says. “Does that pricing model work for everyone? Definitely not. It's super unsophisticated. But it got us to a point where we can apply it to most of the users and move to the next phase.”
My definition of PMF is that it's when you can consistently make mistakes and yet keep succeeding as a business. There is so much of a pull for your product that people use it despite all its flaws and shortcomings. You’re no longer pushing a boulder uphill — you’re running to keep up.
HOW TO HARNESS THE POWER OF SELF-DOUBT AS A FOUNDER
No matter how solid your product is or how enthusiastic your early customers are, until you’ve found product-market fit (and even after then), it’s normal to question whether you’ve made the right decisions. Grinich is no stranger to that.
A big part of having the grit to survive the startup process is this: How much doubt can you absorb? How long are you willing to be misunderstood? How long are you willing to be wrong, or think that you’re wrong, yet keep working on it anyway?
“The longer you can stay in that position of slight delusion, the more ambitious things that you can work on, whereas if you constantly need external validation, you're not going to work on anything that ambitious,” he says.
From his own experience spending over a year working on a product before it ever saw a single customer, Grinich has the following advice for founders questioning whether their idea is a dud, or if success is on just the other side of a long stretch of unmarked territory:
- Know the difference between productive vs. unproductive self-doubt. “If you can make the concern concrete, if you can point out a specific reason why your idea is not working, that’s useful self-doubt. But if you can't really make it concrete, it's probably just anxiety or existential angst.”
- It’s okay to seek occasional external validation. “Looking for bits of external validation is normal because you’re human. After we launched, we made this deck of all the positive tweets from people saying they’d love to use WorkOS. We just needed something to hold onto because we knew the feeling would evaporate in a month or two.”
- Accept that self-doubt never goes away. “To this day, there's stuff that we're investing in and shipping that has very little concrete traction, but we have really high confidence that long term it's going to be extremely valuable for us to build. The things that you work on that could have huge upside all look like a big bet without much definition around the success or the ROI. But you just have to have this innate belief that it's going to work in some way.”
LOOKING FORWARD
Three years post-launch, it’s safe to say Grinich’s seemingly “bad idea” has proven to be a good one.
Despite launching amid a global pandemic and economic turmoil, in less than two years, WorkOS managed to amass more than 350 paying customers across the globe, including unicorn startups Webflow and Loom. In October 2021, the company raised a Series B of $80 million and in June 2022 made its first acquisition, Modulz, which makes open-source design tools that WorkOS is leveraging to continue helping developers ship enterprise features.
Grinich’s startup has come a long way from being a few words scribbled on the pages of a notebook in 2018. Through the stages of validation, launching and finding PMF, the founder has dealt with his fair share of naysayers and self-doubt, so for founders fighting to give their ideas their best shot, he has these parting words of wisdom:
“Fall in love with the problem space rather than falling in love with your solution,” he says, which is something he didn’t do with his first startup, Nylas. “I'd built this email app where I was just obsessed with the design of it, like, just kind of fanatical: couldn't sleep, sketchbooks full of ideas.”
There was even a point where he was so fixated on creating the new mail notification sound that he hired an electronic musician and spent three days in-studio with her trying to come up with the “perfect” tone.
“I was that obsessed with my solution to this problem,” he says. “And it meant that when the solution wasn't exactly a bullseye, it was very hard for me to pivot away or change something. But if you're more in love with the problem domain, you can be flexible on how you solve it.”For example, with WorkOS, customer feedback came in telling him that the most urgent feature was SSO. Because he was in love with the problem, not his solution, he listened to customers and focused resources on single sign-on instead of being fixated on audit logs or directory sync.
We'll do whatever it takes to solve this problem, and that mentality is probably the thing that has let us adapt the most quickly to the market. And the faster you can adapt, the faster you can learn, the faster you can hone in on product-market fit.
Looking ahead at the path to building a multi-product platform, Grinich sees his role as founder/CEO as becoming an expert in finding product-market fit — because the search is never truly over.
“Every feature, every announcement, every new product has the same search for product-market fit. That means balancing iteration and improvement of our existing features with taking risks and making bets in experimental new areas,” he says. “This is a really tough thing to evolve a company to do, and making mistakes and having some duds is part of the process. But the truly great companies are the ones who are constantly reinventing themselves, adapting and evolving to the changes of the market.”