Gusto launches instant payroll and stablecoin international payments for 400K small businesses

our next guest, Gusto, coming in from the ream waiting room. Welcome, Tor. How you doing? Good. How you doing, guys? We're great for having me. Thanks so much for I'm such a huge fan because I went through YC in 2012. I believe you were in the 2013 batch. Correct. We were in winter 2012. Yeah. Oh, winter.

So, is that I think winter at that point was after summer or maybe just before. It's usually after summer. It is Mar. Yeah, it usually does come after someone.

But but I remember that I was running I we the first the first payroll we ran for our YC company was just uh literally a $5,000 wire like from one account to the next. And we were like yeah like uh everyone needs to figure out what to do with the taxes.

And then we got on Gusto which was then I believe Zen Payroll, right? That's right. and uh and it and it solved a ton of stuff and it was it was amazing experience and uh yeah Jordy and I have been using Gusto for a long time since um big uh big launch today. Yeah, take us through it. Thank you. Yeah. Yeah.

Well, very very excited to be here. I'm also a big fan of yours in fact. No way. There we go. There we go. Thank you. That's fantastic. And sorry, I need to stop you for a second before we get into lunch. Where are you? The the office behind you is teaming. Is this just your H?

This is the same place that Josh was calling him from. It's remarkable. Yeah, thanks. Yeah, we're in Pier 70 in San Francisco. We actually have our office here right next to the YC right in front of YC. Exactly. Um and today actually we have this uh showcase uh conference. Uh we're doing it for the first time live.

Uh and it's really really cool because you have hundreds of small businesses here, accountants who are all coming in and we're um unveiling a bunch of new products uh to them. Um, so you know, we have showcases uh twice a year. We've been doing it for a while.

It's kind of our big big two product moments of the year, telling the world about all the new stuff you can do with Gusto. We started with payroll, expanded to benefit. We, you know, announced a couple weeks ago about the guidelines, acquisition, uh, pending approval. Yep.

And, uh, you know, all the different things that we've been doing over the year, time tracking, HR, um, and you know, tax credits, compliance, and and other things. But yeah, today we're launching a bunch of really really important um uh functionality around cash flow.

So you know when I speak with small businesses often what I hear is that that you know in the context of gusto is that the hardest thing that where they get frustrated the most and feel like most anxious and kind of unhappy is when they can't make payroll for their employees.

They don't have enough money in their bank account. Right. And when you you dig into it and learn why and what's going on exactly, it's not that they don't make enough money as a business. the business is growing. They're doing really well. They're doing better than ever. So, how can that be? Right?

And it's all about cash flow. It's all about this tricky thing of like when does money come in and when money goes out. So, often, you know, think about like I talk with a customer who's like a um you know, they they do like equipment for um um you know, different uh you know, conferences and things like that, right?

Like uh you know, lighting and AV equipment and stuff like that. So, guess what? they need to buy the equipment and buy the stuff before the event and they get paid 30 to 60 days after the event, right? So, you have all this money going out, you payroll going out, all these expenses going out or you didn't get paid yet.

And this is like not a random like one-off story like this happens all the freaking time for small businesses. Um, you know, and and that's true like for consultants that work before get paid and many other type of businesses. So, um, that's what this showcase is about.

I'm really happy to share more about like, you know, this the features functionalities. No, I I we're one of the few shows on earth that actually want to understand. I'm super interested. I have like we've run businesses our whole life.

I've been in that position, you know, early on with my first business where it's just like, oh, like, you know, totally. It's like every two weeks it's like, you know, public companies, they got the quarterly reporting.

Maybe maybe it's going to switch to every six months soon, but with a with a with a small business, you know, it's like every every couple weeks, it's like that crazy.

So, I mean, where where I want to start is like this sounds like you're going to be lending money or bridging on a short-term basis with small businesses who are on the platform. Uh, where does the money come from?

I feel like when we usually hear about uh a fintech company or a or businessto business company starting to offer some sort of credit like product, uh, we usually hear, oh, well, they they have a facility on the other side. They raised money for this. They're not maybe funding it off their balance sheet.

like what structurally how does the the money flow to the actual customer? Yeah, exactly. That's that's a really really great question. So, listen, there's a few kind of products here that come together in order to get people to have better cash flow so they they're they're not late for their payroll.

One is just like a set of functionalities about making faster payroll. So, payroll, if you remember, often people need to run like the the historical standard is four days. Yeah. So, you run the payroll on Tuesday for people to get paid on Friday.

Well, that's four days of cash that could could be in your bank account and that makes a really big difference because payroll is often the biggest um expense that customers that you know small businesses have. So, you know, we we're launching next day payroll.

Um we're we're launching uh same day payroll and we're also launching instant payroll. So, these are three new products all about making sure you have enough money in bank account till the last moment. Um so, that's how do you actually how do you actually do that?

Because payroll companies forever have loved probably loved to say like people ask can you make it instant? and they say ah it's not possible. Yeah. And we've heard like oh it's the AC system, it's the government regulation. What's the unlock? Exactly. Okay.

So so for these set of products it's all about actually our relationship with the bank. So you know the nice thing about being on one side we're a tech company. We're still a startup. We look at at ourselves as a startup but on the other side we've been around for 12 13 years now.

Uh over 400,000 small businesses use Gusto every day. Um and you know I knew you'd do that. I love it. I love it. I want a gong, too, today. Oh, yeah. You know, tell me when the gong is coming. Um, but yeah, over 400,000 small businesses use our product every day.

And, you know, with that scale, we now have the ability to work with each and individual bank and um um kind of create partnerships. So, in the end of the day, we're actually not taking uh credit risk uh on it and and it just uses the, you know, the kind of some of the newer rail rails that banks have.

I can't go into all the specifics, but let's say this is not like us. We didn't need to raise any money for this, but it's a technological solution, which is exactly what you want. You don't want just like, oh wow, now we have this great uh massive liability that's growing on the balance sheet forever.

No, that's not There is one thing though. There is one thing though, which is a payroll bridge.

So, Payroll Bridge is um a different product and that's like um not about making payroll faster, but that's like even if you if you still don't have the money in your bank account even on payday and you still need um uh somebody to finance that that payroll, we can come in and help uh or maybe even just a piece of it because it's totally possible that I have a $100,000 in payroll going out, but I'm just 10k short and I don't want to hold up everyone.

Um and so I could maybe take a smaller amount. Exactly. Yeah. So, so um um that happens more often than you would think. You know, again, it's that kind of cash coming in, cash going out. So, uh we partner with a company called Paraffin um as an embedded um um partner um who's helping us with the loans here.

So, what happens here is again as a customer, you come in uh to run payroll. Let's say it's a Friday, you need to pay instant payroll on Friday and then oh gosh, I'm missing 10K, I'm missing $20,000, $50,000, whatever that is.

um you know u with our partnership with paraffin we take a look at all your history and we figure out like hey can we help you um kind of basically make that payroll on us um and then you're going to pay us later on so that that's kind of that uh piece and I think you know honestly it's the biggest biggest pain point in the world of payroll it's funny like we've been doing it for 12 years you would think like oh you've already innovated in everything around payroll there's nothing else coming in that's not true even 12 years later there's more kind of basic payroll stuff um we're also doing it on the international payments by the way that's another um fast payroll um uh faster international contract store payments using stablecoin as again now techn technology that is available now it was not available when we started what percentage of of the businesses on gusto do you think are like I'm sure you looked at the data right there would have been opportunities to to launch this feature you could have launched this a while ago I'm sure you guys wanted to wait until there was regulatory clarity on stable coins but was this something that customers were asking for because it's one of those things that that is it's it's helpful.

I mean, it's helpful to both sides. Like the freelancer benefits cuz like they're like, "Okay, I got when the person hit pay, I got paid. I don't have to wait for, you know, it's it's ends up being more than 4 days. It can be longer than that.

" And the companies too historically would just be using these like, you know, random either like dedicated international payroll platforms or um you know, special freelancer payments platforms, things like that. Yeah.

So totally I think you know there the past couple years again there's new technology so we can we can use now and that's both on the banking side domestically as well as on the stable coin side. Um that's why we're able to do it today.

It takes time until you you know we work with these partners and often we're the biggest um uh kind of partner they work with.

And the reason is, you know, you may have a bunch of startups, technology fintech companies that are using um stable coin payments or using, you know, kind of instant payments uh through banks, but they usually have small amounts. Payroll is huge amounts, right?

Tens of thousands of dollars um sometimes millions of dollars per transaction. So, you know, you really a lot of these um kind of protocols, fintech protocols when they come out, they have like a maximum limit. So, we need to kind of work with the providers and um get there.

And then, yeah, you're right about the compliance side of it.

like you know we we work really really closely to figure out that you know one of the things that we do is is um you know I think that was a little buzzword before you know AI came in and like took away all the buzzwords um but uh compliance uh compliance technology you know so there's financial technology fintech compliance technology um and in that world you know that's kind of what we do every single day we think about how do we take all the compliance worries uh and anxiety that small businesses have that they don't want IRS knocking on their doors um and then help them you know kind of figure out all the compliance for them.

There's a couple more features that I wanted to talk about. So, one is um um just Gusto money. Uh it's a new platform. It's a new area for us. You know, when you think about Gusto, you always think about people, right? Pay your people, onboard your people, benefits, all that stuff.

Uh Gusto money is us entering and expanding into a new world. So, that's the world just just really focus on cash flow. Um so, you know, one of the things when we talk with customers is like, hey, you know, I get paid so much later.

wouldn't be like can you help me get paid faster or you know when I pay my bills like oh gosh that takes you know that you know they need to be paid immediately can you delay that payment for me and that's why we brought in uh invoice payments as well as like bill pay into Gusto and we're going to keep investing in that area because it's all connected you know payroll is your largest expenses but you have a bunch of other expenses in the business so if you bring it all together to one platform I I think that we can really really help people with that big anxiety around um not having enough money to run payroll and and kind of to run their Does that change uh are a lot of these different uh products feel like they might have different underlying economics?

Do you think that the like the structure of the economic model of gusto is going to change over the next few years or is this sort of like purely additive like how are you going to think about actually underwriting like the core business?

Uh I don't know what your plans are for the future but uh it does feel like some of these are are you know uh exchange fees or interest rate based or volume based others might be seatbased. There's a variety of different financial models or economic models.

Is any of that changing like the overall structure of where you think the business will be driving value in a few years? Yeah. Yeah, that's a great question.

I think for us, you know, I would say number one, we're really really focusing on um understanding what are the biggest pain points for business for small businesses and figure out how we can help them. Now, sometimes it means, you know, business models uh for different products are different and we're okay with that.

However, if you still zoom out at Gusto and you look at Gusto as a product and where we're going, by far like really our our majority of what we do is uh in terms of business model is software. Software as a service, you pay per employee, you pay for services. um very high margins.

This is not like a uh like a fintech sort of um you know play.

Um and as you notice we're using a lot of partners um on the embedded side um when we do things uh and you know that that are those type of kind of fintech businesses and we really obsess and focus on the user experience to make sure that for the customer they don't feel like they're being moved from one you know one system to another.

It's all behind the scenes. It's all API. So for you it's just one service. It's gusto. Um but um you know that's kind of the core of what we do. We're really really um focused and and are really strong on the user experience side um for small businesses. Great.

What's the most exciting thing in tech to you outside of payroll in technology at all? Um let's see. You know I I know and it's okay to say that that your your eyes never stray and that it's payroll compliance compliance. Payroll compliance. I love compliance. Listen, I love compliance every single day.

That's what I'm living and breathing.

Um, and you know, but jokes aside, like the truth is that when you talk with customers, um, this is not a cerebral sort of like analytical kind of um, question and like, you know, world for them like for them it's it's missing Friday night with their kids because of this sort of stuff, right?

For them, it's like, you know, the pain of, you know, the embarrassment of like needing to to call every single employee telling them they got they can't make payroll on time. I mean they're on the employee on the other side sometimes you know u you know needing to manage all of that what that means to your family.

So you know for me it's you know I love technology I live and breathe technology every day. I love your show that always keeps me up to date to what's going on uh in in the world of tech.

But you know I think the the biggest connection for me and the thing that gets me going is that um customer u painpoint and see what software can do to help them. Yeah that's great. Fantastic. Amazing. Well hey I want you guys to come in here next time though. By the way, we have we have the again the showcase uh here.

It would be really cool in six fun when we do the next one. It'll be cool to have like a live live performance here from Glasto. How many people are there? How many people there? Let's ring the gong for the total attendees. How many? Oh, I think there's around around hundreds of small businesses.

All right, we got that's a lot of small businesses to come to. Hey, you love it. Great to see you. Congratulations. Thanks so much for hopping on the show. We'll talk to you soon, Summer. Have a good one. Great to see you. Bye. And let's go. We No one loves software for small businesses more than more than me.

I don't think so. I don't think so. Don't go. Uh Daniel Tenerero says, "The core political divide today is pickleball Americans versus letter boxed Americans. " I would I'm I'm in neither camp. I don't really participate in either, but I would put myself in the letterboxed American camp.

Uh Tyler over there is a pickleball American, right? I guess, but I'm also I I would say I'm more of like a cinnaphile than a pickle ball player. Okay. But I've never used Letter Box. You've never used Letter Box. It's just like a It's like Good Reads for movies. Yeah, it's good readads for movies.

I feel like there's an underated Tiny snapped this up. Oh, Tiny owns it. They bought a cent stake. Whoa. I had no idea. That's fascinating. Um well, uh the uh Antichrist lecture is in full swing up in San Francisco. The the private Did they find the guy yet? Did they find him? The hunt for the antichrist continues.

Uh, and it has spawned a ton of uh, fun posts on the timeline. Uh, Pablo Penish says, "Perito Teal talked about this at the Antichrist lecture. " No, he didn't. Did you attend the lecture? No. Did you? No. Just people me Daniel uh, Growing Daniel says Peter Teal announced the name of the Antichrist, but I'm not telling.

And, uh, people are having a lot of fun. Will I just said that it's crazy. I saw some of the protesters showed up like disguised as Satan. I I needed to put some of the protesters in the truth zone because one of the protesters said Peter Teal's latest acquisition, the US government.

And if you know anything about PT, he doesn't buy whole companies. He believes in founder firms. He doesn't do private equity deals. So, little bit of a little bit of a misunderstanding of the financial markets there, protester. Anyway, Tyler, uh, are you bummed that you're missing out on the Antichrist lecture series?

I was just gonna say the protesters are like pretty hilarious. Some of the signs I I sent them in the So, the the protesters, it's easy to get riled up by the by the images of the protesters and see the protesters as like this like, oh, they're really over the top. They must really be aggressive.

Um, but for the most part, like I've seen there were protesters at just some random FAI conference I spoke at. I actually interviewed Alex Wang there, who we're talking to tomorrow. tune in. Um, and uh, this is just like Foundation for American Innovation, like a very vanilla tech conference.

Um, and uh, so being able to protest things is important. Yeah. And so the protester was outside with a funny sign, but people were taking photos with each other. Like it it was very very friendly. I I when I first heard like, "Oh, we're being protested," I was like, "Oh, what what does this mean? Is this like serious?

Are they going to be really I was going to be protesting outside of gusto if you didn't roll out instant payroll. For sure. For sure. Uh anyway, we have