The Problem:

Joshua Reeves, along with his co-founders, Edward Kim and Tomer London, noticed significant inefficiencies and complexities in the HR and payroll systems that small businesses were using.

Many of these systems were outdated, cumbersome, and not user-friendly, leading to administrative headaches and compliance issues.

Small businesses, in particular, struggled with these tools due to their limited resources. Joshua and his team saw an opportunity to create a streamlined, intuitive platform that would simplify payroll, benefits, and HR management for small businesses.

This vision led to the creation of Gusto, a comprehensive solution designed to automate and integrate these essential business functions, ultimately empowering small businesses to focus on growth and success.

Getting their first customers:

While building the MVP, the founders realized that “the build something scrappy & get feedback model” wouldn't work.

They needed to produce reliable, timely, and precise tax calculations, filings, and payments to earn the trust of customers. So they narrowed their scope down - Gusto would be a cloud-based payroll software for SMBs to automate all payroll actions.

They only targeted companies that (a) did not offer benefits or other deductions (b) whose employees did not mind getting paid four business days after the company ran payroll and (3) had only salaried employees.

Since they were part of YCombinator, they reached out to community managers at incubators who introduced the Gusto founders to relevant users in their network.

At the same time, they manually onboarded local SMB companies in California. They reached 1500 customers in 1 year via strong word of mouth and referrals. Their NPS score was 83/100 with 87% of customers recommending the product to other business owners.

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