A Product Market Fit Show | Startup Podcast for Founders

How Gusto’s $10B founder raised $6M, built a team of 5—& hit $5M ARR in just 2 years. | Josh Reeves, Founder of Gusto

Jan 6, 2025

Josh Reeves, Founder and CEO of Gusto, discusses his impressive journey in creating a payroll software giant now valued at $9.5B. He emphasizes the power of starting small, focusing on tech startups in California, and the value of iterating on product with a lean team. Reeves shares how customer interviews clarified their target market and the significance of addressing real pain points. He also reflects on the role of Y Combinator in accelerating their growth, highlighting the importance of maintaining a strong company mission and fostering customer loyalty.

56:33

Episode guests

Josh Reeves

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Episode notes

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Quick takeaways

Focusing on a niche pain point in payroll for small businesses allowed Gusto to build a meaningful and impactful product.

Maintaining a small team in the early stages facilitated faster decision-making and enabled effective iteration on the product.

Early customer feedback and insights directly shaped Gusto's offerings, ensuring they genuinely addressed user needs and promoted satisfaction.

Deep dives

Founding Vision and Early Days of Gusto

Josh Reeves emphasizes the initial challenges and motivations that drove the creation of Gusto, highlighting a focus on solving significant pain points for small businesses. The founding team, comprised of second-time entrepreneurs, intentionally targeted payroll as a critical area in which they could make a meaningful impact. Despite raising $6 million from notable investors, they operated frugally in the beginning, launching with just a five-person team and prioritizing the needs of small businesses over larger enterprise clients. This commitment to address a niche, albeit unexciting, service like payroll laid the foundation for their success, as they recognized the need for simpler, more accessible solutions.

Intro

3min

Innovating for Impact

14min

Revolutionizing Payroll: From Paper to Digital Solutions

3min

Pioneering Product Development and Market Strategy

3min

Navigating Y Combinator: Community and Fundraising Success

2min

Navigating Early Startup Challenges

11min

Measuring Customer Love: Qualitative and Quantitative Insights

2min

From Referrals to Growth: The Gusto Journey

18min

Gusto is a $9.5B startup that does $500M ARR. Josh built an absolute monster of a company-- and it all started with payroll software for SMBs. Not just that, he started by servicing only new tech startups that were based in California. It was exceptionally niche, and it worked.

After YC, he raised a $6M seed round from tier 1 angels, back when large seed rounds were not at all common. But, unlike others, he didn't spend the money. He kept his team small as they iterated on the product. By the time they raised their $20M Series A, they were only 10-15 people.

Here's the story of how they got started, gained initial traction, and took off.

Why you should listen:

Why starting super small can lead to massive outcomes.
Why you need a huge, no-brainer pain point to succeed.
How to use early customer interviews to deeply understand your ICP.
Why small teams allow for faster decision-making and execution.
Why deep passion about the problem set is so important.

Keywords
Gusto, Josh Reeves, entrepreneurship, startup, payroll, small business, Y Combinator, business model, innovation, technology, fundraising, startup, product-market fit, team building, customer satisfaction, growth strategy, small business, Gusto, entrepreneurship, SaaS

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