Payroll startup Gusto raises $200M
techcrunch.com
techcrunch.com
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."
Also, they keep asking me to manually classify the same transactions every month, things that have always shown up in my books every month. I would think they would have learned by now, and that they haven't is a red flag that makes me wonder what else is broken.
Finally, they don't actually do taxes. My ideal bookkeeping system would automatically handle that so I don't have to think about it, in the same way that my Gusto payroll runs automatically without me having to even remember that it's happening.
I lived in LA at the time, so I looked for highly-rated local accountants on Yelp. The search led me to this one[1], who proceeded to make a series of nasty mistakes that led to a taxation authority seizing money from my bank account (among other problems). The whole mess took months of time and many thousands of dollars to clean up.
Later on, I settled on bench.co doing the bookkeeping, and found a CPA firm to prepare the taxes every year. It basically works, but it still feels archaic and clunky. Several people here suggested pilot, so I might look at that next.
If you have an accountant you'd like to recommend, I'd definitely be grateful!
Sorry to hear about your experience with us, Meekro. We try to provide as hands-free an experience as possible, but know we have work to do.
We're sometimes stuck relying on bank statements due to the poor quality of data coming from bank feeds. This means we need to wait until month end to finalize books (and sometimes later if a credit card statement has a late statement date), leading to the timing challenge you described. We do this to ensure your books are completely accurate and ready for tax-time, with no fixes needed.
To address the above problem, we recently launched a new feature we're calling Pulse, to help manage day-to-day cash flow and spending. We're releasing improvements to it every week. https://bench.co/blog/operations/cash-flow-pulse/
The manual classification issue sounds like a failure on our part. We should not be repeatedly requesting input on the same transactions. If you shoot me an email (joshua@bench.co), I'd be happy to help. From the Product side, we're experimenting with using clustering models to better tackle the problem and remove some burden from our bookkeepers.
Lastly, on the tax front, we've got you covered! Our ambition is to do exactly what you're looking for - handle bookkeeping and taxes together on the back end, so you don't have to think about it. We'll have a formal announcement coming very soon. Please reach out to your bookkeeper if interested.
I wish someone would do my regular tax filings in the same way that Gusto does the payroll tax filings: quietly and correctly, without making a huge show of it. Bench.co falls far short of that, for reasons I explained in an adjacent post here. They still make me go and manually classify the same transactions every month for some weird reason, and I have to double-check everything since I've seen them make plenty of simple mistakes. And they don't handle the tax filings themselves, either, which means more brain cycles on my part.
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.
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.
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...
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.
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.
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.
It pained me to return to ADP, but I had no choice. My employees would not be excited if I made the choice to return to Gusto.
My only gripe is that I liked the old name (ZenPayroll) better :P
I think you can blame the “laws, what are those” guys over at Zenefits for necessitating a rebrand.
They did send me some cool Gusto socks during the rebrand though.
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.
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.
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.
The median household income in my state (Indiana) was $54,181 in 2017.
It's my experience many people on HN generally have no clue what most of the country makes.
>The costs to this point (basic salary, employment taxes and benefits) are typically in the 1.25 to 1.4 times base salary range
https://web.mit.edu/e-club/hadzima/how-much-does-an-employee...
So when management says the overhead is only 1.25, they clearly missed out on a lot of things.
Commercial real estate is pretty cheap in most of the country, we have 3 shifts in my building and are open almost 6 days a week, sharing desks with another shift, my company isn't paying thousands of dollars per person per year for this building.
Not every place is the bay area with insanely expensive rent and insanely expensive cost of living.
I've still seen exactly no one even attempt to explain to me why a payroll company needed to raise 200 million dollars.
I'm making 62% of my state's -household- median income. This is the problem with HN, everyone thinks that everyone in America makes 100-200k. Minimum wage is 7.25 and there are TONS of minimum wage workers.
No one assumes everyone makes 100-200k, but since most people here work in tech of some sort, 34k is unheard of.
Yes it does, because I and many many many many other people are doing fine on one amount outside of the Bay Area. My job equates to effectively any non-coding job that they have, someone was trying to claim that every employee costs 100-200k, I pointed out that is patently false and gave my income as an example.
When I pointed that out then it changed to "oh yeah but rent costs 200 million!"
No.
I've still seen exactly zero sensible explanation in this entire thread as to why a payroll company felt he need to raise 200 million in funding, and why any sane investor would provide such an amount.
Let's say an employee DID cost 150k after salary, benefits, and a year of their share of the building rent though, 200 million dollars gets you:
- 1333 employees for 1 year
Pretty sure that a payroll company doesn't need 1,333 costing 150k just to grow/become profitable.
Pretty sure they don't need 100 employees costing 150k each to do so, even if they do that's 13 years of money, er sorry 'runway'. I highly doubt they're going to hire 100 software engineers.
But hey, I'm not a VC so I guess my question is silly to everyone here.
So I'll point out that the people investing the money, that some of them are also scratching their heads and concerned about such:
https://www.inc.com/business-insider/sam-altman-thinks-start...
You've been significantly undervaluing yourself for a long time
Assuming a consistent 40hr workweek, $16.34/hr from the annual pay posted. Which reinforces rather than contradicts your point.
I never said this, not everyone on HN is a coder...
As an answer to your original question, Gusto's CTO responded in the question above yours. His answer below:
Co-founder and CTO of Gusto here. This is a REALLY good question and something that’s hard to appreciate until you actually to build a payroll system. I think a common misnomer is that if you’re not doing ML/AI/AR/blockchain/[insert latest technology here], you’re not doing R&D. The domain of Payroll turns out to be an incredible complex business domain. I think Ron Jeffries says it best in his post: http://wiki.c2.com/?WhyIsPayrollHard The software design of such a complex business domain at scale turns out to be an incredibly hard engineering challenge, and something that is often overlooked when we think about big engineering challenges. A little known fact is XP and Agile were developed by Kent Beck while working on a Payroll system for Chrysler (In fact, Kent now works at Gusto to help us with our payroll system).
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?
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..
When I lived in a city in the US that had regular snow and ice, floors inside of the buildings were never slushy/dirty, despite everyone wearing the same shoes inside and outside (businesses only, inside my house I always take them off no matter the time of the year).
However, back when I lived in Russia, we had to bring an indoor pair of shoes to get changed into, as everything would be covered in a layer of outside of dirt otherwise.
I honestly have no idea why that was happening, but I wanted to make a point that both you and OP can certainly be correct on that one at the same time.
When was this? Post-War corporations sported a common uniform. Industrial Era culture was demandingly monotonous and before that we’re talking about guilds and their customs.
Broadly speaking, there are benefits at multiple levels to having a cohesive company culture (including eclectic traditions). We’re just seeing more variety in those traditions.
It was definitely common and acceptable for the machinists, techs, engineers and manager to say that they would rather be doing something else than working or that they would rather have a job more glamorous than working with machines and pieces of steel. In other words, back then, you had to do your job or risk getting fired, but AFAICT there was no risk to admitting that you didn't like doing your job. In fact, if you went around telling people you really liked your job, my guess is you probably would've been viewed as at least slightly socially inept for being unwilling to engage in the small rituals that lubricated social interactions -- or more precisely for getting one of the common rituals backwards.
This was at a large machine-tool manufacturer in Massachusetts. In something I read or heard IIIRC, this manufacturer was referred to as the IBM of machine tools. The owner of a motorcycle store (which employed many motorcycle mechanics) revealed in conversation with me that he considered being a machinist at this employer to be a particularly good job.
In contrast, does anyone reading this doubt that nowadays if a programmer in Silicon Valley tells his boss that he/she doesn't like his job or doesn't like working as a programmer, he/she risks getting fired unless he/she knows his/her boss at least reasonably well?
One example is "suddenly working to rule" just before a major delivery and getting paid back handers off the books for example. This is an example told to me by a hr/ir professional who came from Clydeside
I straight up lied in my interview and accepted the eventual job offer, only to renege on it after getting an offer from another company literally halfway through my first day on the job...
Perhaps it would've been better to hold off on accepting until you have had the responses from every potential employer (Source: have had people not show up on their first day of work way too often)
I read an interview somewhere by Joshua Reeves, and he seemed to answer every question like he was Tony Robbins or some top-level guru. Dude, I don't want your life advice, tell me how to run a profitable company.
Silicon Valley tech is overtaken by this need to project wokeness. That's one big reason I wanna leave this place and work for a more blue-collar tech place. Don't know where that exists.
(I am non-white, and an immigrant, so don't be quick to accuse me of extremist views)
I'm guessing you'll quickly find that a "blue-collar tech place" isn't quite the panacea you expect. There's a reason no one in Silicon Valley pines for traditional corporate culture. Because it sucks really bad. Putting up with some faux-wokeness is a small price to pay to get away from it.
Pay above average with good benefits, no uniforms (white collar equivalent of the uniform is in-your-face "culture"), no frills, no BS.
I think the Valley was like this 10 years ago.
Anyway, I list that as an example because what you're talking about isn't actually an example of political correctness (which is, again, a shitty term for basic respect and awareness of social context). Humans like black-and-white issues. It's really nice for us to be able to put things in boxes. So when we perceive someone's action in a certain way, our gut instinct is to cast that entire person as that way. Do people sometimes take someone's rudeness (even if accidental) and brand them a racist, discarding all of their opinions? Absolutely. Do some of my family members hear that I voted for Hillary and decide that none of my opinions have value? Also certainly. Humans are dogmatic. "Political correctness" is an umbrella term for cultural sensitivity, and can (like any idea) be applied dogmatically. It is not fundamentally dogmatic.
Why would you want to do this at work? No well-run place will allow this because it makes for a hostile work environment.
You have roughly 128 hr/week outside of work to do those things
One of the reasons I never applied at Gusto is that I didn't want to take off my shoes. The floor is a commons, and it only takes one person walking around with shoes on to turn it from a "no shoes floor" to a "shoes floor".
Any kind of behavior that gives me the feeling of kool-aid drinking or brainwashing is absolutely a red flag.
The way you describe it (not enforced in any way, not even through peer pressure) is very different from the way I had always read about it (fairly absolutist and you won't be allowed in the building if you don't remove your shoes). If I had heard about it that way, you're right, I would not take it into consideration.
Unfortunately I don't have citations handy for the absolutist version of the policy that I had read about.
And if you're still looking for a new job, feel free to consider us again! We promise you can keep your shoes on :)
I hear you on the empower language. It’s always sounded a bit forced to me but I see what they’re going for. Managers should focus on helping their reports be successful rather than getting into management because they want power or status or whatever. Which isn’t to say that renaming titles with fix that, but it is one small communication of what’s important to leadership.
How are the streets so dirty you can't wear shoes inside commercial building?
SF is not a clean city. Streets don't have to be 100% shit stained to think that maybe taking off your shoes before coming into the office is a not-so-bad idea.
Either way, like you said, I wouldn’t work for them for the same reason — obsessive company culture, which indicates a poor work/life balance. They clearly want the kool-aid drinkers.
If every employee is emotionally invested in the company you can imagine that they don't want to hire new folks that aren't - there would be huge culture clashes. Some people live to work, even if it's not for their own company. Why not let them all work with each other?
I've found it's only a problem when companies promise "Work-life balance is a priority" then on the first day you notice everyone's there at 8pm. At least if they're up-front about it you know what you're getting in to and can adjust expectations in terms of both time commitment and salary accordingly.
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.
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
We don’t use Quickbooks, but currently we are hacking the Quickbooks export with a bunch of JSON in the configuration UI, to provide extra context and more detail for team breakdowns, etc.
If you're interested in chatting again, I hope to make this right. Feel free to email me directly: john.kempe@gusto.com
Ended up going with Square Payroll which supports my model AND does it all for no monthly fee.
agree the interface is pretty, but failure to really support benefits will be a dealbreaker for many startup/small business folks.
- 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.
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.)
This is a REALLY good question and something that's hard to appreciate until you actually to build a payroll system. I think a common misnomer is that if you're not doing ML/AI/AR/blockchain/[insert latest technology here], you're not doing R&D.
The domain of Payroll turns out to be an incredible complex business domain. I think Ron Jeffries says it best in his post: http://wiki.c2.com/?WhyIsPayrollHard
The software design of such a complex business domain at scale turns out to be an incredibly hard engineering challenge, and something that is often overlooked when we think about big engineering challenges.
A little known fact is XP and Agile were developed by Kent Beck while working on a Payroll system for Chrysler (In fact, Kent now works at Gusto to help us with our payroll system).
I get the same question a lot. Most people could not imagine the amount of complexity that exists underneath the seemingly simple guise of paying rent. Just wanted to say I can sympathize and I respect what you've been able to do, specifically from the technical perspective. (We use Gusto and it's been absolutely fantastic)
Unrelated, my whole team was very impressed by the attention to detail in your rebrand. It's so difficult to transition the landing pages and internal product so seamlessly, again coming from the technical perspective. I imagine you're running a tight ship over there, and it shows.
Congrats on the raise!
Is the convention that if you take private investment, then you are a startup?
I've wanted to see the financials for a while. Show us the numbers, Josh!
https://engineering.gusto.com describes some of their experiences with it.