Payroll startup Gusto announced Wednesday (July 24) that it has raised $200 million led by former U.S. Vice President Al Gore’s Generation Investment Management and Fidelity Management & Research Company.
Gusto aims to unravel payroll complexity for small and medium businesses (SMBs). In the past year, signups surpassed 100,000 customers, according to a report.
“I feel like we are still at the beginning stages,” noted Gusto’s Founder and CEO Josh Reeves.
Every state in the U.S. has its own set of diverse and complex labor laws, making it hard for SMBs to find a suitable payroll product.
“I like to take complex systems and take them apart and make them better,” Reeves said.
Reeves said he plans to pursue new products beyond payroll and HR as the company grows, adding FinTech features like its Flexible Pay, which allows wage advances for employees. He would also like to get into healthcare: “We want to be a force for universal healthcare,” he noted.
The company also has New York City expansion plans for its R&D team, the article said.
Gusto began piloting its Flexible Pay system in Texas in 2018 and started rolling out the program across its U.S. customer base. With Flexible Pay, Gusto assumes the risk of advancing funds to employees without requiring any underlying changes to how businesses schedule their payroll cycles.
Although the payroll space already has two big-name players, ADP and Paychex, their market share is only about 10 percent apiece. For the estimated six million SMBs nationwide, advanced technology to handle payroll is virtually nonexistent.
Gusto raised $140 million in a round led by T. Rowe Price Associates, Y Combinator Continuity and General Catalyst.
The company was launched in 2012 as ZenPayroll, changing its name to Gusto a year later.