Gusto CEO Josh Reeves on acquiring Mozy to automate small business compliance end-to-end

Speaker 2: Well, congratulations. Thank you for taking the time to come chat with us. Have a great weekend. Congratulations. Congratulations to the team on the on the milestone yesterday. Yeah. We'll talk to you soon. Very, very cool. Thanks. See you, Andy. Up next, have Josh Reese from Gusto. He's the co founder and CEO. You're the founder acquisition of Mozy

Speaker 6: to expand into full stack compliance. Josh, how are you doing? There he is. It's been too long. Great to see you. Good to see you guys. This time this time on Zoom, last time in person. Yeah.

Speaker 2: Well, congratulations on the acquisition. What hey. Walk me through the problem that you were trying to solve, and then I want to hear about the process and how you met this team or how what you're planning to do once you bring these in. But first, sort of describe the problem because I'm sure you were feeling it among customers beforehand.

Speaker 6: Yeah. So the keyword here is compliance. Yeah. No one likes compliance. Yeah. There's a lot of compliance out there. Local, state, federal, and we've been tackling many forms of it at Gusto from the early days. If I were to case study, any small business owner knows this, you hire in a state, you have to go register with that state, you have to go obviously, file some specific documents, materials. Once you're registered, there's now filing requirements. There's entity management requirements. You might get notices. So what we're doing here is basically creating a end to end compliance solution. Compliance, basically, way to get stuff done for a small business so they don't have to do it themselves anymore. Yeah. And I mean And this was a shocking thing for me as a young entrepreneur on

Speaker 1: on Gusto, getting like a physical piece of mail from a state that I had never visited. Yeah. And it and it was always because we had hired some like, you know, paid some contractor one time Yep. For this tiny thing and now suddenly it's created Yeah. Hours of work I have to like call or or send mail back. It was And everything else is

Speaker 2: basically zero minutes a week for the executive team when you're on Gusto and you're set up. And maybe during onboarding you have to go through a quick flow to get someone on. But most of the time it's just nothing, which is amazing. And then when the compliance stuff comes up, it's always like,

Speaker 6: oh, what happened? They moved, you know, all this stuff. But then talk to me about the Like how does this actually get fixed? How does it get like I mean how quick can it be? From a product lens, like I'll give some examples. So anyone that's used Gusto before knows state tax registration has been a pain point. We will have a end to end just comprehensive state tax registration offering that gets it done at the quality and standard you would expect. Yeah. You mentioned notices. No one likes to receive notices. Even if we do a good job helping you with them, it'd be better if you just didn't get them in the first place. Mhmm. So the ability for Gusto to be a registered agent to have that mail actually come to us directly so the business owner doesn't even have to think about or consider the notice in the first place. Yeah. We think it's going to be really, really valuable and helpful as well. So I'm sure you're experiencing

Speaker 2: the productivity gains of AI coding and coding agents. What stuck out to you about this is the time to buy as opposed the as opposed to the time to build?

Speaker 6: So we're doing both. Mean I pinch myself because I told the team and we talked to each other this is the most incredible time in our lives to be a builder. Yeah. And I wake up every day with like just giddiness of like what we can go create and you know, you can basically pull forward on your roadmap because now it can get done with high quality much much faster. Yeah. So lots of first party on the way. Mozy, we had known the team for a long time. Sure. We actually were an early investor in the company. Got it. We've partnered for a long time as well. Mhmm. And it really came down to the team, the technology, the product, all of it's coming over to Gusto and the chance to bring it to small businesses earlier faster. But, yeah, stay tuned. Lots more first party builds coming from us as well. Amazing. What are you seeing on the small business hiring side?

Speaker 2: Generally, we talk to your chief economist about some of the trends. Yeah. And I'm and I'm wondering how you're processing, what you're expecting to happen with the shape of your of your business and just the small business community generally.

Speaker 6: So reminder to folks, there's more dentist offices in The US than tech startups. So when we say small business, we're talking mainstream small business here. Yeah. And, yeah, some puts and takes. One of the things that also got us really excited about the pain point we're able to help with Mozy. There's a lot more new businesses getting created Mhmm. And that's exciting. I think some of that's driven by folks getting inspired or feeling like they can take the plunge for the first time because of the tooling that's now available. Some of it, I think, is also affected by a lot of the job dislocation underway. Mhmm. And, you know, the happy path I look forward to is a lot more folks starting businesses for their first time because they realize they now can go do that successfully and and actually make a make a go of it and be accomplishing their goals. So we're seeing more businesses getting started. On the flip side, hiring within not just small businesses, but from talking to lots of bigger companies, hiring across the board is not as robust as it has been historically. So company growth, if a company might have historically grown from, you know, five to seven employees, maybe now it's growing from five to six. Mhmm. So there is an offset there. Again, I think tied to some of the productivity gains and some of the things that people can go do now with these different AI technologies.

Speaker 2: How have you been processing the the SaaS pocalypse? Like, when I think about the last thing that would get vibe coded, it would probably be a payroll system for a dentist's office. But how have you been grappling with this idea that just the instantiation soon as we get rid of our physical onboarding Yeah. Forms and our fax machines, we're gonna vibe code. Yeah. Every time I go to the dentist's office, I'm I'm like, oh, we're we're we're not even on, you know, like SaaS at all in many ways and and there's still a lot of paper and pen going around. I

Speaker 6: mean, number one thing a dentist should do, right, is be working in your mouth and that's about it because that's what they're actually best at. I'd say, like, we talk a lot about offense, defense. Like, the offense side is we can go deliver a lot more product functionality, solve a lot more pain points for small businesses, make the life of a small business owner easier, better, faster than ever before. That excites us. Think from a a SaaSpocalypse lens, Gusto has never been a pure software company. In my mind, if you wanna oversimplify, there's pure software, and then there's companies that do actions for you. Sure. So from day one, Gusto does the filing, says we did it correctly, and if there's a mistake, we'll go fix it. So we've always kind of had this mindset of we'll take five of the 20 hats off your head and be responsible for it. So now we can, you know, keep being responsible like we've always been. That pain point has always existed. It exists with AI. And the small business center doesn't wanna be the one responsible to make sure it's done accurately. And from what we can tell, the foundation model providers still also wanna be the one liable and responsible for it to be done accurately. So we have a chance now to be where our customers are, be inside ChatGPT, be inside Claude, be inside Slack Yeah. Be even easier and more accessible to them, and then still do these really important jobs for them.

Speaker 2: Can you actually contextualize the size of the per employee annual compliance cost? And then try and break it down for me because the number when I read it seems so high, I have to I I'm having trouble wrapping my head around, like, where this is actually getting sliced up, where the dollars are actually flowing.

Speaker 6: So probably we have to follow-up on that one. I mean, I'd say there are many, many drivers for it. One of them is a little bit how The US was formed. So this is more like 50 countries than 50 states in many And so you have not just state and federal that are usually wildly not in sync and creating their own versions of many different forms and requirements, but also state and also county and local that actually have lots of opinions as well. So, you know, in San Francisco, for example, where where I'm based, you hire a new employee, you have, you know, nine different taxes. You have multiple different jurisdictions. If you hire, you need to report to the EDD. This is a form that's specific to making sure if someone, let's say, has garnishments on their wages due to, like, childcare payments, it gets pulled out from their wage on time. Sure. There's just lots of different programs and activities that connect to employment. Yeah. And again, if you're not using a partner for this, it means the business owner and the employer on their own having to figure it out. Yeah. So when when I when I'm contextualizing that $14,700

Speaker 2: per employee cost, that's not just filing fees and paying and processing this any actual fees associated with comp with compliance. It's also the burden on the HR organization broadly.

Speaker 6: Is that right? Yeah. There's there's the time investment Yep. That could be spent elsewhere. Yep. There's the fines and penalties. There's the follow-up headache and hassle involved. And,

Speaker 1: yeah. All that adds up. Okay. Well, what what habits do you have as a CEO today that you wish you had a decade ago?

Speaker 6: Oh, good question. Let's see. I think one thing that shifted for me quite a bit, it could have been tied to having children. It could have been something I wish I did earlier. But I used to like go to bed at two or 3AM, and it was kind of more of the late night schedule. I actually really like waking up at five a. M. Five, six a. M, having multiple hours in the morning of you just shift the hours, right? Yeah. So it's the same couple hours I would have. You still need to sleep the same number of hours, but that morning time I find to be even more productive than some of the nighttime time I had in the past. No. Yeah. Makes a ton of sense. You're I mean, you're naturally more tired at the end of the day, and so even if you're getting those bonus hours when,

Speaker 2: like, maybe the messages aren't coming in at such a rapid clip, Better to have those in the morning. A lot of executives feel the same way. Well, thank you so much. Congrats on the acquisition, and we'll talk to you soon. Have a great I week, I with with

Speaker 1: all this acceleration in software development, I can I can honestly see I can I can see the world where you guys have legitimately hundreds of individual products, some very small, maybe some built by third party? And also just way more companies and small businesses,

Speaker 2: on the platform.

Speaker 6: Yeah. One thing I add, mean, there's systems of action. Maybe that term catches on, but there's a big difference to me between, like, systems of just pure software where you're kind of, like, on a database versus actually doing things on behalf of the customer, taking those hats off their head. And Gusto's always been a system of action and we're excited to add many many more actions going on. Yeah. And you guys are you guys are like selling the work. Like in some ways you compete with like that there's actual stores, you know, physical places where you can go to run have someone run payroll. Sure. Sure. So the original product Yeah. This has become a popular

Speaker 1: VC market, you know, market map Yeah. Type pitch over the last couple years. But you guys have been doing it, for what is it fourteen years now. So yeah. Very cool. Well, one decade plus in. Still early. We got we got decades to go. Lots more small businesses to help. Fantastic. Love it. Have a great weekend. Great to see you so guys. Much for taking the time to come chat with us. We'll talk to you soon. Good to see you guys too. Goodbye.

Speaker 2: Is there anything in the timeline that we should review? Because we do have to get out of here

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Speaker 2: This might be the first one. There there there's a new benchmark out there for AI models. Kelly Bench, long horizon evaluation for frontier models. Kelly Bench evaluates models within a year long sports betting market, a challenging and highly non stationary environment. Every Frontier model they tested loses money. They struggle to design ML strategies, manage risk, adapt as the world changes. Can language models beat the market? Some of them got it appears to get lucky in the beginning and then sort of sell off. You would sort of expect that none of them would be able to outperform necessarily. But if they get really, really creative, I mean, might you might expect to see outperformance in the future. I want to dig into more about how this benchmark was implemented because you either need to, like, hold back all the data or run it for a full year to see because otherwise, if it has tools, it can go and just look up the results before you ask it to Mhmm. Make a bet on a particular sports team. Anyway.

Speaker 1: Well, folks, it's been a fun week. Yeah. It's been a great week. We hope you have an incredible weekend

Speaker 2: Yeah. Ahead. Leave us five stars on Apple Podcasts and Spotify. Sign up for the newsletter at tvbn.com, and we'll see you on Monday at 11AM sharp. Goodbye.