
Payroll startup Gusto raises $200M - edawerd
https://techcrunch.com/2019/07/24/smb-payroll-startup-gusto-raises-200m-series-d-plans-rd-expansion-to-nyc/
======
Meekro
I love it when I don't have to think about things, and Gusto combined with
Stripe (Atlas and card processing) have made it possible for me to not ever
think about a whole lot of things.

Now if only there was a company as good as Stripe/Gusto that did
accounting+taxes, I'd really be set! I mean, "I give you access to my
accounts, (almost) never think about you, and I have a proper set of books and
my taxes are fully done every year."

~~~
jbarnold
Pilot.com founder here. This is exactly the startup that we're working on! We
have 500+ customers including 100+ YC companies and fully take care of
bookkeeping + taxes. Feel free to drop me a note at jeff@pilot.com if I can
help.

~~~
x2f10
Fascinating. However, being an accountant, I have to wonder how it's possible
to scale. With (accrual) accounting being so dependent on management's
estimates, how does it work? Do you offer audit protection? Do you work with
ext. auditors? Do you provide GAAP / tax guidance?

~~~
jbarnold
Startups and other SMBs have been using third party bookkeeping providers long
before Pilot.com. We provide essentially the same interface/service as those
companies, but we are leveraging technology to a much greater degree, which we
think allows us to provide higher quality books and better service (ask our
customers for their verdict there). We can connect companies with ways of
meeting their audit and GAAP/tax guidance needs (providers who we work with
regularly).

------
doh
I'm really happy for them.

I used to like Gusto a lot. It worked fairly well when we were a few people,
but as we grew, things started breaking, especially as our setup started
becoming more and more complicated. For instance, we have offices in 5 states
and two countries. Gusto doesn't support outside of US folks, so we had to
maintain two systems.

One of the most frustrating things was the 2 day payroll. They turned it on
for us, and the capped it at something like $60k even when we have millions of
dollars in the bank account they have direct access to. Every two weeks, when
the payroll supposed to be run, we had to contact support to request and
exception which required a screenshot of our bank account balance. EVERY TWO
WEEKS.

There is a lot of small things like this that forced us to talk to their
support almost on daily basis. In some cases we waited for an answer for
months.

As such, we recently switched to Rippling and are very happy with the
decision. I'm glad that Gusto is working for so many people. I really enjoyed
it while it did work for us.

~~~
x0x0
They completely fucked me over. Not only did they not pay out commuter
benefits (send the confirmation emails, didn't actually put the money in my
account), but they ignored 4 (!!!) support requests in a row, sent once per
day for a week. It wasn't until I got on the phone and was rude to someone
that they deigned to help... and then missed their self-imposed communication
deadlines.

Complete incompetent shitshow.

So yeah -- in case you were pondering using Gusto, just know that

* not paying out $250 in commuter benefits owed;

* not noticing the extra cash in their bank account;

* ignoring 3 polite emails to the support addresses, and one less polite request;

* ignoring the first phone call;

* requiring you to be rude;

* blowing their self-set update deadline;

is all part of the wonderful Gusto experience!

If you use them, I'd strongly suggest checking that all your commuter benefit
reimbursements actually landed in your bank account.

~~~
rdgthree
Are you sure this isn't your employer's mistake?

With commuter benefits the employer has to manage everything themselves. If
the benefit is a contribution it'll show up on your paystub, but your company
needs to either reimburse you the amount (after you have already paid the
commute cost personally) or provide you with a transit/benefits card. If it's
a pre-tax deduction, it stays in the _employer 's_ bank account, again to
reimburse you or provide a benefits card.[0]

It doesn't really make sense for this to work any other way. Commuter benefits
are pre-tax, so if they just paid you the money outright it would be a pretty
explicit violation of tax law. There needs to be a paper trail showing that
the benefit money was spent on the actual benefit itself. I imagine their team
might be confused by your questions.

[0] [https://support.gusto.com/benefits/other-benefits/payroll-
de...](https://support.gusto.com/benefits/other-benefits/payroll-
deductions/1007585111/Add-a-benefit.htm)

~~~
x0x0
100 percent.

Gusto manages (well, let's be honest, bedshits) benefits for my employer.

Gusto has gotten the money from my employer (and fyi, I'm a founder, so I'm
very certain because I see the payroll pulls). We use a Gusto benefits card; I
was getting refunds because the benefits card didn't work for my parking
provider.

~~~
rdgthree
Well to be fair to them, I think their benefits card provider is a white
labeled product from the neolithic era.[0]

Normally I'd say no excuses, but it seems like this was a regulatory necessity
if they wanted to provide benefits cards at all. I'm a founder as well, so I
can understand the need to provide a significant feature in the short term,
even if it sucks a bit.

Being a founder (especially in compliance) I think you could be a bit more
forgiving on your stance. A bad experience with a third party benefits card
sucks, but saying they "completely fucked you over" feels fairly extreme -
especially if your payroll has otherwise been running smooth.

[0][https://www.alegeus.com/demo/wealthcare-
administration](https://www.alegeus.com/demo/wealthcare-administration)

~~~
x0x0
So, the thing is, it's not a compliance problem. I also understand mistakes
happen. Let's recap:

gusto

0 - stole a couple hundred dollars, and didn't notice at all (and for clarity,
this was post reimbursement approval via their whitelabeled partner);

1 - ignored 4 support emails, one per day, for a week;

2 - blew off my first phone call, at the beginning of week 2 attempting to get
this fixed;

3 - lied on my second, impolite phone call, about when they would follow up
with me

4 - took another couple days with no status updates to acknowledge what
happened and tell me what they would do.

The above is why I'm doing close to pulling rank and firing Gusto. None of the
above is how a competent company treats a customer.

Bluntly, if a CSM at my company did that, either the CSM or his or her manager
would be terminated. We can screw up, but we do not blow off customers, commit
to following up and then fail to do so, or fail to take ownership over
mistakes and at bare minimum communicate with customers.

------
nemo1618
I remember switching to Gusto early on in the life of my startup, and how
surprised I was to realize that I was excited about payroll software. The UI
and UX were 100x better than the stuck-in-the-90s software we were using
previously. It made me really optimistic that starting a startup would only
become easier as services like Gusto popped up to meet their needs.

My only gripe is that I liked the old name (ZenPayroll) better :P

~~~
CPLX
> My only gripe is that I liked the old name (ZenPayroll) better

I think you can blame the “laws, what are those” guys over at Zenefits for
necessitating a rebrand.

~~~
Astroloth
False. ZenPayroll rebranded as Gusto in September 2015, months before Zenefits
legal troubles went public.

~~~
jaxn
Though the name change did seem to coincide with a shift in focus away from
only payroll, to include services similar to Zenefits.

They did send me some cool Gusto socks during the rebrand though.

------
ryanmercer
I truly don't understand why a payroll company would need to raise 200 million
dollars and what they could possibly do with the bulk of it aside from buying
24k gold toilets. You're not going to hire 200 million worth of people, or buy
that many ads, you could build your own server farm for a fraction of that and
cloud services would take quite a long time to burn through that. So why?

Why would you sell that much of your company to investors?

Why would you invest that much money in a payroll company?

I can sometimes understand it, say a company was working on some sort of
energy generation and needed tens of millions of dollars of
equipment/infrastructure to even start truly testing their idea, or you were
going to sell some physical good that was going to sell for hundreds or
thousands of dollars per unit and you've already been selling other versions
but need a large amount of cash for the MOQ to manufacture your new hardware
in the best setting and banks are hesitant to pony up, but for a payroll
company?!

This stuff always blows my mind.

~~~
user5994461
One way to think about it is that each employees costs $100k or $200k a year.

So for $100M, you can comfortably afford a few hundreds people for a few years
with all the office space, benefits and hardware required. A regular small-
medium business really, nothing special.

~~~
ryanmercer
>One way to think about it is that each employees costs $100k or $200k a year.

Those are some expensive employees, me and my friends don't cost anywhere
remotely near that. I make 34k a year after 13 years on the job. A company
doesn't have to hire in one of the highest COL cities in the country.

~~~
fhbdukfrh
You're a software dev with 13 years experience and make $20/hour?

You've been significantly undervaluing yourself for a long time

~~~
dragonwriter
> You're a software dev with 13 years experience and make $20/hour?

Assuming a consistent 40hr workweek, $16.34/hr from the annual pay posted.
Which reinforces rather than contradicts your point.

------
tempsy
It seems like a good product, though I always get very uneasy by companies
that have extreme company cultures. If you work there, you can’t wear shoes in
the office (to give the feeling of being at home?) and apparently you need to
change your LinkedIn headline to say you “Empower” X or Y. I feel like every
blog post I’ve ever seen from this company is about their “mission-driven
culture.”

Can we go back to a time where employees aren’t asked to be 100% emotionally
attached to their work, in ways like this that are clearly made more extreme
by the company itself?

~~~
stevekemp
In Finland it is common for people to remove shoes indoors - I guess walking
through slush/ice/snow in winters makes that a good habit - and that often
extends to company-offices.

Of course outside there it would seem a little odd to many, I'm sure. Though
sliding around polished floor, in your socks? Never gets old. Maybe I'm just a
child..

~~~
tempsy
This is in SF and I assure you no other company does this.

~~~
bennylope
Given SF's reputation for feces-free streets this does seem rather odd.

------
jedberg
Oh good! I love Gusto, and their customer service has been stellar.

I hope this allows them to get into more areas of payroll that I hate dealing
with, like worker's comp insurance, or just managing my insurance for
employees in general. That's my biggest sticking point, especially since I
have people working in multiple states.

~~~
edawerd
Hi! Cofounder and CTO here. We offer workers compensation insurance in all 50
states!

~~~
jedberg
Is that new? Last year I had an employee in Washington and I had to call the
State of Washington to set it up, for example. If it's new, that great! You
should have told me. :)

~~~
edawerd
nope! we've had it for many years now!

~~~
jedberg
Then maybe we aren't talking about the same thing. When I added an employee in
Washington, I had to apply online and then call them directly to get the
employee set up. One of the things I had to do was buy Worker's Comp insurance
through the State of Washington, because no one else will sell it. Also, I had
to get my UBI number from them.

Ideally I would tell you guys "I have a new employee in Washington!" and that
would be the end of the story, you'd do all the rest. That's what I'm hoping
you can get to at least!

(To be clear, the part you can do today is already amazing and super helpful,
I'm just being greedy because I'd rather spend time on product than on calling
the State of Washington

------
golover721
I’m happy for them, seemed like an interesting company. Personally I had a bad
experience with them as far as their recruiting went. As a very experienced
candidate I was working with a senior recruiter who thought I was perfect for
a position, however hearing my compensation requirements said he had to check
in and get back to me. I never received a response. Perfectly fine with it not
being a good match, but have the common decency to have some kind of response.

~~~
thewarpaint
I've never understood this behaviour. Is it because they don't want to send
any official communication stating that they don't want to/cannot match your
compensation request? Is it just bad blood? No idea.

~~~
aksss
90% of the time it's just because people are busy and have a god-awful amount
of crap on their plate. They figure your interest will time out gracefully.

------
dawnerd
I tried to use Gusto but no where on their site did it say I couldn't use it
if I only had contractors. Their support was pretty bad about it too.

Ended up going with Square Payroll which supports my model AND does it all for
no monthly fee.

------
qiller
One thing I don't like about Gusto is a platform lock-in for new features.
We've been a customer since before there were health benefits available (and
now have no intent to switch). Things we've been asking about like HSA
contributions or prorated benefits were eventually added - but only if you use
Gusto's own program. That's annoying...

------
sergiotapia
Whenever I work in a company that uses Gusto for payroll and benefits, I
breathe much easier as an employee. It's easy and out of your way. Please send
the design team love and compliments from me. A+

------
jsaundersdev
Good for them. I've loved using Gusto so far! Nothing but good experiences
compared to my last payroll company

------
mbajkowski
Good for them. Used them for startup a few years ago. Worked really well and
super simple to use when all employees were in a single state and we only
utilized their payroll services. Once we started venturing into offering
health insurance to employees though and our employees spread across multiple
states / countries we were not able to customize the plans to our liking (we
had some very specific ideas about how we wanted to subsidize insurance) and
ended up switching to different provider. We ended up trading the nice Gusto
(ZenPayroll) interface for a much more clunky one and most likely a higher
premium, but the other provider was able to customize our packages without us
having to devote much time to it, which at that point was worth the trade off.
I'm sure Gusto has improved hence, and I would likely give them another try
today as needed. By the way, for those switching payroll providers, in my
experience it is better to do either on a quarter end or year end - while not
necessary by any means, it can make it easier to gather all needed documents
in case there are tax questions down the road.

~~~
cassowary37
nope (re being sure their ability to handle health benefits has improved)...
just used them for a startup and their response to questions about integration
with health benefits was essentially (3 days later) - um, we don't do that,
but we'd be happy to sell your name to a broker.

agree the interface is pretty, but failure to really support benefits will be
a dealbreaker for many startup/small business folks.

~~~
mbajkowski
Thanks for the input. I was assuming things may have improved since I last
used them a few years ago. My experience was similar to what you mentione
above, back then. This may save me some time evaluating options for future
ventures.

------
jeron
Used to work at a company that was using Gusto, much prefer them to the
payroll my company is currently using, ADP

~~~
blang
Care to elaborate? Not being snarky, I've also been at companies using both
and have had no preference.

------
charleyma
Very exciting to see more companies open up prod + engineering divisions in
NYC - I feel as though typical bay area tech satellite NYC offices are go-to-
market focused first before expanding out to prod/eng so interesting to see
Gusto go the other way first!

------
git-pull
Wish list:

\- international employees (US, European countries)

\- better support for employees across-states (they already do many things
well in this regard)

\- taxes

\- general accounting

\- atlas-type stuff (bank, incorporation)

\- maybe a specialized account manager / team to handle the above (I guess
it'd be region-based CPA/lawyers?)

Some of those are sophisticated things, but having one hub to view/manage it
all from the top down would save oodles of time.

Aside: Gusto's support has been very helpful, even as an employee, when I
contacted them directly they went out of their way to help me solve a payment
issue.

------
toomuchtodo
What R&D does a payroll provider do? (Genuine question)

~~~
jasode
_> What R&D does a payroll provider do? (Genuine question)_

Halfway down the Techcrunch article, Joshua Reeves mentions what "R&D" in NYC
intends to work on:

 _\- While Gusto’s central product is payroll, Reeves sees two other product
arcs he intends to develop more in the coming years as the company scales. One
arc, which we talked about last year, is fintech features like Flexible Pay, a
product that allows employees to receive their unpaid wages in advance, with
the goal of reducing reliance on usurious payday lenders. The other product
arc is health care and helping SMBs offer insurance benefits to their
employees. “We want to be a force for universal health care,” Reeves said._

 _\- As Gusto explores additional products built around its payroll service,
it has sought to expand its engineering R &D team. The company announced
recently that it will open an R&D office in New York City in September, which
it hopes will be able to both execute on these two products as well as others
not yet planned._

So, another way to state "R&D" is _" new product development"_. Gusto wants to
offer more SaaS capability than just plain payroll processing such as short-
term loans, health insurance management, and other yet-to-be-disclosed new
products. Presumably, in Gusto's slide deck to raise the $200 million, they
convinced new investors that the money would be used to build new products.

(side note: I didn't downvote your comment.)

~~~
toomuchtodo
Appreciate the reply, don't worry about the downvotes.

------
Oblouk
Love Gusto! Some other services I love in a similar realm include: \- Stripe
\- Pilot \- OpenA401k (For me and my wife's solo 401k plans)

------
peterlk
This is an aside, but can we define what a "startup" is? To me, if you have a
repeatable business model and have scaled it to thousands of customers, you're
no longer a startup.

Is the convention that if you take private investment, then you are a startup?

------
eldavido
I keep wondering whether these guys will go public. They're at least 6-7 years
old, have healthy revenues, and seemingly a lot of customers.

I've wanted to see the financials for a while. Show us the numbers, Josh!

------
foobaw
Will Gusto ever expand to larger start-ups? (200~300 employees)

~~~
tejasmanohar
Just one datapoint but When I left Segment (400-500 employees), they were
still ok Gusto

------
joevandyk
Gusto uses a Rails monolith.

[https://engineering.gusto.com](https://engineering.gusto.com) describes some
of their experiences with it.

------
ulfw
Congrats to Joshua and team. Awesome product, awesome team!

------
sealthedeal
And to think Rippling could raise this for their series B

