Hidden Gems behind Gusto – The “Good” HR Supernova for SMBs

The payroll and HR software industry has experienced significant growth in recent years. As businesses have become increasingly reliant on technology to manage their operations, the demand for software solutions that help streamline HR processes has rocketed. The adoption of cloud-based software, in particular, has grown in popularity thanks to its convenience and accessibility. 

Gusto, being a cloud-based platform, has been able to capitalize on this trend and has experienced strong growth as a result. In addition, the COVID-19 pandemic has accelerated the adoption of digital HR solutions, as many businesses have had to shift to remote work and find ways to manage their HR processes remotely. As a result, the industry is expected to continue growing in the coming years.

In this article, we will explore how this company draws interest in the HR world.

“Good Gusto Exists” to Remove the Hustle of Daunting HR Tasks

First, let’s take a closer look at Gusto’s founders. 

The company was founded in 2011 by Joshua Reeves (CEO), Edward Kim (Chief Product Officer), and Tomer London (Chief Technology Officer). Prior to starting Gusto, Joshua co-founded a company called Acclivity, which was later acquired by Intuit. Edward worked as a product manager at Google and as a consultant at Bain & Company, while Tomer has a background in engineering and co-founded a company called Etacts, also acquired by Intuit.

“Actually, all of the Gusto founders studied electrical engineering. As an aside, one summer I worked as an intern at Intel, in the fab. As an electrical engineering major, I felt like a kid in a candy shop, surrounded by billions of dollars of equipment,” shared Joshua Reeves.

Speaking of “entrepreneurship”, he shared, I” think of it as a mindset. It’s not necessarily about building a company. It’s about not accepting the way that things work now, and instead thinking of how it could work.

These days, small business owners often face challenges when it comes to managing payroll and HR tasks. The process can be time-consuming and complex, taking away valuable time and energy from growing the business. It can be particularly challenging because they often involve a lot of paperwork and legal compliance requirements.

Observing this outmoded norm and “not accepting the way that things work”, Gusto was born  to streamline payroll and HR tasks, potentially making the process more efficient and manageable, especially tailored to small businesses.

With Gusto, small business owners can automate many of the repetitive and administrative tasks associated with payroll and HR, freeing up valuable time and energy to focus on other aspects of their business.

To be more particular, when it comes to automating many of the manual tasks associated with payroll and HR, it can automatically calculate payroll taxes based on an employee’s salary, ensuring that the correct amount is withheld from their paychecks. It can also keep track of employee time off requests and approve or deny them as needed. This helps to eliminate the need for manual record-keeping and reduces the risk of errors.

“It’s a purpose within the customers that we serve, to my co-founders, around Gusties. This brings me to this point around motivation that comes from purpose. It’s really easy in today’s world where you can do anything you want,” proudly stated Tomer London. “Having some sort of a commitment is a wonderful pulling force to give you purpose. That’s what keeps me going for 10 years now. I think it will keep me going for a long time.”

How Commitment Does Matter to this San Francisco-Based Startup

From the perspective of this Chief Technology Officer, the company’s extensive experience in managing payroll and its commitment to compliance, customer enablement, and go-to-market support set it apart in the industry.  

The company’s commitment to compliance, which means that it takes compliance very seriously and puts a strong emphasis on adhering to all applicable laws and regulations. This is important for both the company and its customers, as non-compliance can result in legal and financial consequences.

By taking compliance seriously and putting a strong emphasis on adhering to all applicable laws and regulations, the company is demonstrating its commitment to operating in a responsible and ethical manner. This can help to build trust with customers, employees, and other stakeholders, as well as reducing the risk of negative consequences from non-compliance.

“Governments are slow machines, and in some situations, it takes years until a tax agency alerts employers about an issue with a payroll they have run. Employers then may need to go back to old employees and correct their old W-2s. It’s a terrible experience. That’s why there’s an adage in the industry: don’t trust your payroll with a processor who hasn’t done it for at least five years.”  

Gusto has processed hundreds of billions of dollars in payroll for hundreds of thousands of employers across America. “Paying employees is an important part of every business, though payroll can be complex with a lot of regulation and compliance. Our product Archy is an all-in-one platform to power an entire dental practice, and naturally, it made sense to offer payroll as an included service,” said Archy CEO Jonathan Rat. “By partnering with Gusto, we knew we would be able to leverage a company that has proven itself in the space.”

It is no surprise that Gusto has raised a total of $746.1 million over 13 rounds. The company’s most recent funding was a Series E round on May, 2022, in which it raised $55 million. Also, Gusto is funded by 117 investors, including Friends & Family Capital and Glynn Capital Management. These investors have supported the company’s growth and development, helping it become a leader in the payroll and HR software industry.

“You don’t want to be in a situation where it feels like an obligation to keep in touch with your investors or to listen to their advice. Imagine that you had an employee to whom you had to give useless busywork to keep them engaged. That would be absurd. I’ve made it a point that all of our investors are people that I’m excited to talk to.” Joshua Reeves stated.

“We’ve always viewed fundraising as another form of hiring. You can actually apply the same lens as you do to hiring an employee. The person becomes associated to your business in such an important way.” – He continued.

It’s The All-Rounded Product that “Clicks”

“Think about your long-term vision and don’t put yourself in a corner when you want to move to the next segment.” Tomer London stated.

He explained that small businesses tend to think and behave like regular consumers when it comes to buying software. They usually have one or two decision makers, and decision making is relatively simple, as they are often pressed for time. Therefore, they prioritize finding a product that they can trust and that has good recommendations online. To design and build software that caters to the needs of small businesses, one can learn a lot from the design and development of consumer products.

Tomer London shared: “Determine the parts of your product that are highly regulated and which areas are not. Build a culture that ensures quality-first in those highly-regulated areas, as well as a culture where people can iterate quickly in other areas. You can’t build a monolithic culture.”

In the past decade, Gusto has expanded its reach to cater to various types of customers, beginning with startups, then small and medium-sized businesses (SMBs), accountants, and most recently, developers who integrate payroll functionality directly into their software through Gusto Embedded Payroll.

Gusto Embedded Payroll offers the knowledge and expertise that Gusto has acquired over ten years in developing payroll software and ensuring regulatory compliance, and provides it to any software firm seeking to launch their own payroll solution in the market.

When asked about how did the founders decide to service Gusto Embedded, Tommer London said: “For many verticals, it is much better to have an all-in-one platform to run your small businesses. But payroll is really hard to build yourself. Gusto Embedded helps partners deliver a more integrated solution for customers without investing the several years and tens of millions of dollars.”

Gusto incorporates additional product features that align with the customers’ needs and preferences. They want to gain insight into customer’s daily activities and develop a solution that addresses their entire workflow, rather than just one aspect.

“If you are not making money on your product, you don’t know if there’s a product market fit. If you can charge and retain a customer, then there is product market fit.” Tomer London shared.

Besides, as the ease of use, adaptability, mobile accessibility, comprehensive setup resources, and payroll processing management, the company’s payroll services for extremely small businesses earned it an Editors’ Choice award.

“As a business owner, there are a lot of things that stress me out, but with Gusto, running payroll isn’t one of them. I know my employees will be paid on time and all reports will be filed accurately.” Said by owner of The Art Terrarium, LLC.

Great People That Make Great “People Platform”

“In Gusto, we were always kind of two steps ahead. We defined our values a little bit earlier than most companies, like when we were four or five people, as opposed to when we were 30 people. The other approach looking at this is that people are the most important thing that makes your company.” Tomer London stated.

Let’s take a closer look at Gusto employees, it could be said that they are an integral part of the company’s success. Gusto has a team of individuals who are dedicated to delivering an excellent product and providing top-notch customer support. The team is made up of talented individuals from diverse backgrounds and experiences, reflecting the company’s commitment to diversity and inclusion. 

Besides, Gusto team has shown persistence and adaptability in navigating the difficulties posed by the pandemic. Despite these difficulties, the company has persisted in developing and enhancing its platform, making it a useful resource for small businesses. The recent introductions of health benefits and workers’ comp highlight Gusto’s efforts to address its customers’ needs and streamline the payroll process.   

Also, the company values employee development and growth, and provides opportunities for team members to learn and grow within the company. The company is committed to being an equal-opportunity employer and providing reasonable accommodations for qualified individuals with disabilities and disabled veterans in their job application procedures.

“If you want to make sure you bring in the right people, you want to make sure you help them grow in a way that aligns with your culture in the long-term. So, I highly encourage to take this really thoughtful approach a little bit ahead of the curve, spending the time, having the tough conversation ahead of time to really talk about values.” said Tom London.

In terms of company culture, Joshua Reeves has emphasized the importance of values and motivation in addition to skill sets when hiring and building the Gusto team. He stated: “In interviews, I’ve found the easiest way to segue from someone just listing their accomplishments into discussing what they really care about: I channel my inner three-year-old. I just keep asking, “Why?” That helps get to the bottom of things, to motivation of why they do things, not just what they do”.

Additionally, he recognizes the value of repetition in a quickly-growing company, stating that it can help ensure that decisions and processes are well understood and followed by all team members.

Bottom Lines

“I learned throughout my time in Gusto, and I think every founder learns this: companies are not families. You don’t manage people out in families. You stick with your families through ups and downs no matter what,” shared Tom London. “Companies are more like teams, in my opinion. We are all here together for a mission. The most important thing is the customer and to do a great job for them.”

Gusto’s success is a testament to the growing demand for cloud-based payroll and HR solution. While it remains to be seen, whether HR departments can boost their productivity, decrease errors, and cut down on costs by adopting the same digital solutions utilized successfully by other small businesses, I am eager to find out!