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Building a New Category in HR Tech: How Pequity is Redefining Compensation Software
Most B2B software products start with a problem. For Pequity, it started with 20 spreadsheets. When Caitlin Canop, then a compensation manager at Cruise Automation, found herself building custom spreadsheet solutions to manage comp data for a rapidly scaling company, she didn’t just see a problem – she saw an opportunity to create an entirely new software category.
In a recent episode of Category Visionaries, Warren Lebovics shared how Pequity is pioneering what they call “compensation tech” – a new category that sits at the intersection of HR and finance. But unlike many startup stories that begin with a founder’s vision, Pequity’s origin story is rooted in deep industry expertise and hands-on problem-solving.
“Her solution was spreadsheet based with, I think, some app script involved and a little bit of zapier thrown in there as well,” Warren explains, describing how his co-founder (and wife) Caitlin built Cruise’s compensation system. This makeshift solution, while functional, highlighted a crucial gap in the market: neither applicant tracking systems (ATS) nor human resource information systems (HRIS) could effectively handle the complexities of modern compensation management.
The validation came through consulting. 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.”
This consulting work provided more than just validation – it offered deep insights into the market’s needs and pain points. After about 20 consulting projects, the pattern was clear: companies needed a better solution for compensation management.
What makes Pequity’s approach unique is their focus on user experience in a category traditionally dominated by clunky, complex tools. “B to C feels amazing. You cannot launch a B to C product that doesn’t just feel incredible and have all these delight factors, but for a very long time with B to B, you can launch something that kind of feels like crap and it was okay,” Warren notes. This philosophy has shaped their product development approach, bringing consumer-grade design to enterprise software.
The strategy is paying off. Even in the challenging tech environment of 2022, Pequity managed to double their revenue. Their success stems from a deliberate focus on product excellence over aggressive sales tactics. “We don’t oversell. We really do want to just provide an amazing experience,” Warren explains. This approach has led to an interesting pattern: customers who initially choose cheaper alternatives often return to Pequity after experiencing the limitations of less sophisticated solutions.
But perhaps the most interesting aspect of Pequity’s story is their mission-driven approach to category creation. They’re not just building software; they’re addressing a systemic issue in tech compensation. As Warren shares, “Compensation is directly going to contribute to obviously pay equity and gender gaps and race gaps and just general pay gaps. And where it’s mostly going to happen, actually, is in your 500 to 5000 person companies.”
For founders looking to create new categories, Pequity’s journey offers several key insights. First, deep domain expertise matters – their understanding of compensation challenges comes from years of hands-on experience. Second, product excellence can be a differentiator even in crowded markets. As Warren puts it, “If you’re not in a highly competitive market, I think it’s worth reassessing if the market’s big enough and if you’re actually going to be able to make a dent.”
The compensation tech category represents more than just a new software vertical – it’s an example of how focusing on a specific, complex problem and solving it exceptionally well can create space for category leadership, even in the crowded HR tech landscape.
Actionable
Takeaways
Infuse Design in B2B Products:
Prioritize user experience and design in B2B products to meet the high standards set by consumer apps. A seamless, intuitive interface can differentiate your product in a competitive market.
Address Specific Market Pain Points:
Focus on solving concrete problems that your target market faces daily. Pequity’s emphasis on flexible, scalable compensation solutions meets the unique needs of mid-market and enterprise companies.
Leverage Domain Expertise:
Building a successful product often requires deep domain knowledge. Caitlin’s extensive experience in compensation management provided invaluable insights that shaped Pequity’s offerings.
Strategic Product Positioning:
Align your product’s value proposition with current market demands. Pequity’s focus on pay transparency and compliance helps companies navigate new regulations while ensuring fair compensation.
Maintain a Customer-Centric Approach:
Continuously engage with customers to understand their evolving needs and ensure your product meets those needs effectively. Pequity’s proactive customer support and consulting services enhance its value proposition.
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