YC Founder Firesides: Gusto on building for new verticals

**Anu Hariharan** (0:00)
Great, so welcome everyone to Yc's founder, Farsight. My name is Anu Hariharan, and I'm a managing director at Y Combinator, where I work with our growth stage companies.
I'm here today with Tomer London, the co-founder and CPO of Gusto. I've known Gusto for, I think, close to now seven years, and worked very closely with Tomer on the board. Gusto provides growing businesses with everything to take care of their team, and was part of Yc's Winter 2012 batch. Welcome, Tomer.

**Tomer London** (0:39)
Hello, thank you. Thanks for having me.

**Anu Hariharan** (0:42)
Thank you for joining us. And today, Gusto has a special announcement to make when you just released a blog post about it, which is you're making it easier for software providers to make compliance into embedded payroll, as well as new vertical SaaS partners, which is really exciting because now SaaS partners that sell laundromats, fast construction, restaurants, they can all offer payroll more seamlessly through Gusto.

**Tomer London** (1:13)
Yeah.

**Anu Hariharan** (1:15)
So congrats to you and your team. It would be good, Tomer, just to kick it off.
If you can just explain what Embedded Payroll is and what the announcement is today.

**Tomer London** (1:26)
Yeah, thanks Anu. Well, again, just excited to have this chat with you. Yeah, today's really, really exciting for me. I feel this been in a way more than 10 years in the making.
Basically what we're doing with Gusto Embedded is to help basically take over 10 years of our experience building payroll software and compliance built into it and making it available to any software platform, any software company wants to shift their own payroll product to the market. And it's not just the software side, it's also the service size and the operation side. It's everything that's happening behind the scenes.
Payroll is quite a complex thing. It's not just like a quick UX flow of, you put people's names and you say how much you want to pay them and you click and you're done. There's a lot happening behind the scenes with filings and tax calculations and multi-year long conversations basically through this compliance flows with different state agencies. There's 50,000 plus tax codes out there in the US. So anyway, there's a lot going on behind the scenes. It's not just the software. So anyway, today we're announcing this really, just a lot of great progress that's happening, both in signing up a lot of new platforms across all these vertical SaaS players that you mentioned, whether it's construction, vertical SaaS, or dental offices, vertical SaaS, or accountants, and more and more and more, but also a bunch of new features and functionality. But we can talk about it later. Don't want to take all the time right now.

**Anu Hariharan** (3:13)
I didn't realize this when I first met you all, maybe like seven years ago. But you know, for most Yc companies, we always say, ship fast, get you back, iterate. And I remember very vividly you pointing this out to me, which is I think in the first year of Gusto, you all had less than 100 customers. And I asked you, wow, that's slow. Because usually, before Demodevi often asks, hey, if you signed up 100 in two weeks, can you sign up 1,000?
And I remember this point you made. Well, if payroll doesn't work, there is no coming back. The customer will be displaced because they didn't get their paycheck. So it's one of those unique products where you had to make it work perfectly. There was no room for error.
And that's why you all took a lot of time to scale it.

**Tomer London** (4:05)
Yeah, yeah, exactly. When you get payroll wrong, someone is not getting paid. Or even worse than that, in my opinion, years later you may get a notice from the IRS saying that you did your taxes wrong and now you need to go back.
If you're an employee and fix your W2, get new W2s and work with IRS. Or if you're an employer, go back to employees who left you and are not a part of the company years now and go and work with their taxes. So the cost of being wrong is extremely high. So I really think that there's a set of product and technology software out there that you really have to get it right in order for you to deliver the promise for your customers.
And if the cost of not doing that is terrible for your customers and then terrible for your business.

**Anu Hariharan** (4:54)
Great, so I expect so many people today, I see it on the Twitter space, are actually founders and CEOs. So before we dive into your launch today, I'd actually like to take this opportunity to discuss how to build for new verticals and how to think about this as a founder and CEO, since quite a few of them are actually probably in the very early stages in the audience. So some background for the audience, over the last 10 years, Gusto has scaled to build for customer segments, many customer segments. I don't know how many of you know this, but Gusto first started servicing startups, then they started servicing SMBs, starting with Flores, then accountants, and now with Gusto Embedded Payroll, developers are their customers who are embedding payroll directly into software.