Gusto Secures A $10 Billion Valuation Tailwind As Its HR Software Sails Toward IPO

Updated: Last year, as the pandemic left offices empty throughout the country, Josh Reeves watched the small business customers of his HR software company, Gusto, fighting to survive. “They have to establish themselves as a critical infrastructure for the SMB economy, much like Shopify has done with its commerce platform.” Given its shared customer base with many of the big banks, something Chenault is acutely aware of, Gusto would appear an attractive addition to their portfolios and has been approached several times for acquisition talks, according to Reeves — a path its competitor, Zenefits, took in March when the previously valued $4.5 billion HR tech firm was bought by private equity firm Francisco Partners. But Reeves is adamant that his firm is bound for the public markets: Acquisition, he says, “is a conversation that I quickly decline.” Part of Gusto’s success will rely on its ability to maintain its swim lane of catering to small and medium businesses, says Scott Berg, an analyst at Needham & Co. Still, the HR and payroll software space is saturated with other public companies like Paychex and ADP, and Gusto’s growth will require a gradual climb, Berg adds. “If you do something right there, you’ll bring more customers on.” Now with more than 1,400 employees in offices in Denver, San Francisco and New York and more than $300 million in runway, Reeves says Gusto’s new funding will be used for development of its benefits and payroll tools.