Customer Obsession Made Gusto A $9.6 Billion Company

**Josh Reeves** (0:00)
I love being in SAC, I went to Stanford, I studied electrical engineering, I've lived and breathed software since I was young. But there was something that all three of us really were drawn to, which is tackling a problem that wasn't just for Silicon Valley. Something that was across the country, across the world, frankly, when it came to what we were doing around enabling payroll to start to be easier, simpler. This is a mainstream small business customer, it's people we were talking to that we connected with. We looked at the lay of the land and saw how painful and frustrating it was, you saw how many folks were doing it on pen and paper still. Forty percent of companies in the US were making mistakes and getting penalized every year. Like we saw stats like that. We were like, oh good god, like we could help these people, these small businesses, these mainstream business owners. And that just resonated with us more.

**Harj Taggar** (0:51)
Hi, everyone, I'm Harj Taggar, one of the partners here at Y Combinator. And today, I'm very excited to be joined by Josh Reeves, co-founder and CEO of Gusto. I've known Josh for almost 15 years now, and we met when he went through Y Combinator with Gusto in 2011 Welcome, Josh.

**Josh Reeves** (1:10)
Excited to be here, looking forward to chatting.

**Harj Taggar** (1:12)
Why don't we start by just telling us a bit about what does Gusto do?

**Josh Reeves** (1:15)
Yeah, so our purpose is to make entrepreneurship easier and more accessible. What that means today in terms of our product is we do things like payroll, we set up health benefits, we have a whole bunch of products around hourly workforce, things like time tracking, shift scheduling. We also make it easier for you to hire in different locations, could be multi-state, could be international, contractors, employees, and there's a whole bunch more, but broadly in this world of back office and more people-centric products today. But more to come.

**Harj Taggar** (1:43)
Let's rewind and go all the way to the start. You actually apply to Y Combinator with a very different idea to Gusto. Can you tell us about that? What you applied with and why did you change the idea?

**Josh Reeves** (1:55)
So I'll take us back to 2011 This is when we were talking about when we connected. I had four kids now. I had no kids then. I had definitely much less white hair.

**Harj Taggar** (2:07)
More time.

**Josh Reeves** (2:08)
More time. I was living in Palo Alto. Now, Gusto started by three co-founders.
So Tomer was one of my roommates, and Eddie was living in San Francisco at the time. And we had all had prior startups. And so when we came together, we were really excited about wanting to tackle something that we could spend decades on. And then to your question, you got to start iterating, find problems, build solutions. So one of the first things we got excited about was actually, and not surprising, many people think to their own personal experience. You know, my mom is a teacher, but at that point, I had a lot of friends contacting her for advice on having children. Eddie's mom actually helps his dad who's a doctor. A lot of people were pinging his dad for medical advice. So we thought of this like pain point around accessing experts who are not going to write, and you have to think back to 2011, they're not going to write blog posts, they're not in the online kind of web environment. Like how do we make that knowledge more accessible to people? And so we started brainstorming from there. Within like a week, we had a prototype where you could basically call a number, it would ping us, we'd have it route effectively. You could just buy some keywords on Google, and then all of a sudden start getting real people calling you with questions they have that they want expert advice on. And what we realized within a week or two was the questions were not related to the things we really were interested in helping people with. It was a lot of questions around astrology and relationship advice. And none of us felt equipped to answer those questions first and foremost. But also we thought about, is this the type of space we want to be in, given what we initially see as the signal on the type of questions people are going to have? So this was all actually within November, December of 2011

**Harj Taggar** (4:00)
You interviewed, I remember, you interviewed with this idea, and we accepted you. Behind the scenes, we were more excited about the team.