From Spreadsheets to SaaS: How Pequity Built a New Category in HR Tech

From Spreadsheets to SaaS: How Pequity Built a New Category in HR Tech

When a company is growing 2x quarter over quarter, compensation management becomes a serious challenge. At Cruise Automation, this challenge led to an unconventional solution: smuggling a software engineer onto the compensation team.

In a recent episode of Category Visionaries, Warren Lebovics shared how this makeshift solution evolved into Pequity, a company pioneering the “compensation tech” category. The journey offers valuable lessons for founders considering the consulting-to-product path.

Finding the Problem Through Hands-On Experience

The story begins with Caitlin Canop, who joined Cruise as employee #180 with a mission to build their compensation program. “She actually snuck a software engineer onto her team to help with connecting the applicant tracking system into pulling data from there, pulling data from the HRIS,” Warren explains. The solution was “spreadsheet based with, I think, some app script involved and a little bit of zapier thrown in there as well.”

This cobbled-together system worked well enough that other companies started taking notice. After leaving Cruise, Caitlin found herself fielding calls from HR leaders across the industry. “They called her and said, hey, can you do what you did for me at cruise, or can you repeat what you did at google and come in? We’ll pay you $20,000 for a couple of weeks of work to get that up and running.”

Using Consulting to Validate the Market

Instead of immediately building a product, Caitlin took on consulting projects. This approach provided two crucial benefits: immediate revenue and deep market insights. After about 20 projects, the pattern was clear – companies needed a better solution for compensation management.

The consulting work revealed a fundamental problem: compensation data lived in silos. As Warren explains, “Most ATS are focused on just the candidate data, and then HRIS are focused on just the employee data. So you really needed to build something custom.”

The Transition from Services to Software

The decision to build Pequity came after seeing the same problems repeatedly through consulting. Warren quit his job leading product and design at a Series A startup to focus on building the solution. Their first hire came through an unlikely source: “We actually met our very first engineer on Reddit, where Caitlin reached out the day that we decided were going to do it… Her name’s Iona, or IO as we call her. And the crazy thing is, that’s been three and a half years. She’s our very first engineer and she’s still with us.”

Creating a New Category

Rather than trying to fit into existing software categories, Pequity created their own: “compensation tech” or “compensation SaaS.” As Warren explains, “We really are pioneering this compensation tech environment… every company needs compensation software, and some HRIS have little bits and pieces of it, but it doesn’t really do what it needs to do.”

This approach has proven successful – even in the challenging tech environment of 2022, Pequity doubled their revenue. The company has grown to a team of 45 people, serving mid-market and enterprise customers.

The Power of Services-First Validation

For founders considering the consulting-to-product path, Pequity’s journey offers valuable lessons. Consulting provided not just market validation, but deep insights into customer needs and pain points. It allowed them to test solutions in real-world environments before building a product.

The strategy also helped them identify gaps in existing solutions and understand exactly what customers would pay for. As Warren notes, “Companies are recognizing that they’re already spending all the money on Comp consultants and on their Comp team and on these range creations and builds… they’re able to actually save money by going to products like Pequity.”

By starting with consulting, Pequity built not just a product, but a new category in HR tech. Their journey shows how services can be a powerful path to product validation and category creation.