Jul 1, 2025 · 55m · in-depth
How Gusto built a $9.5 billion company by identifying a burning problem
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Gusto co-founder and Chief Product Officer Tomer London shares the strategic and cultural lessons behind scaling a multi-billion-dollar people platform for small businesses. He details how hands-on customer discovery, first-principles product design, and an ego-free company culture turned payroll into an entry wedge for comprehensive business operations.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Brett holds 17.1% of the talking time here. How this is scored →
Brett as informed peer 3.6 Guest teaching 4.3 Guest disagreement 1.0 Brett pushing back 0.9
speaking balance: gold is Brett, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 47:45 Tomer rejects winner-take-most market framing
Tomer directly reframes Brett's assumption of consolidated market dominance, pointing out that incumbents like ADP and Intuit remain huge and unaffected due to massive switching costs.
Hardest push from Brett ▶ 6:40 Brett's oil-rig analogy on luck vs executionBrett challenges Tomer with a probing analogy asking whether Gusto's massive outcome was founder skill or simply drilling an oil rig in Texas instead of Connecticut.
Biggest teaching moment ▶ 37:50 Tomer educates on incumbent payroll software architectureTomer breaks down how established payroll software bifurcated payments and tax filings, revealing how domain ignorance allowed Gusto to combine them into an automated single click.
Brett holds their own ▶ 13:36 Brett challenges industry failure in basic customer discoveryBrett demonstrates sharp venture expertise by calling out how most modern founders and PMs fail to conduct regular customer interviews despite widespread conventional advice.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Brett as informed peer | Guest teaching | Guest disagreement | Brett pushing back | Why |
|---|---|---|---|---|---|---|
| Growing Up in a Family-Run Small Business | 2 | 3 | 1 | 0 | Brett asks a warm opening question about Tomer's childhood growing up in a family-run clothing store in Haifa. Tomer shares the reality of small business life and how his father advised him against entrepreneurship. | |
| Childhood Projects and Building Founder Confidence | 3 | 3 | 0 | 1 | Brett probes whether Tomer's early projects gave him a founder edge over more conventional childhood paths. Tomer discusses building confidence through early at-bats and his transition from Israel to Stanford. | |
| Lessons from Past Startups and Role of Luck | 6 | 4 | 2 | 4 | Brett offers a vivid oil-drilling analogy to challenge whether Gusto's success stemmed from compounding founder skills or sheer luck of geography/market timing. Tomer balances the premise by explaining how experience provides shortcuts and prevents repeat mistakes while acknowledging the huge role of luck. | |
| Hiring for Humility and Growth Mindset | 4 | 5 | 1 | 1 | Tomer breaks down hiring mistakes from his first startup, explaining why Gusto filters for growth mindset and humility over toxic geniuses. He explains evaluating product-market fit through customer emotional polarity rather than lukewarm politeness. | |
| Overcoming Fear of Rejection in Customer Discovery | 5 | 4 | 1 | 2 | Brett highlights the paradox of modern founders neglecting customer calls despite widespread awareness, asking why this friction persists. Tomer details how fear of rejection drives avoidance and shares his early routine of cold-calling Yelp businesses from a closet. | |
| Pivoting from Developer APIs to Main Street SMBs | 4 | 5 | 1 | 1 | Brett asks why Gusto abandoned the developer payroll API to focus on Main Street SMBs. Tomer explains the difference between pushing vs pulling ropes in customer demand and how early platform pitch meetings revealed zero urgency. | |
| Disproving Investor Doubts with Word-of-Mouth Growth | 3 | 5 | 2 | 1 | Tomer describes overcoming investor skepticism regarding SMB customer acquisition costs by betting on high NPS and word-of-mouth referrals. He shares early hustle stories of manually onboarding every single employee for their first 50 customers. | |
| Choosing Between Tech Startups and Broader SMBs | 4 | 4 | 1 | 1 | Brett asks about the early tension between serving tech startups versus broad Main Street SMBs. Tomer admits he favored startups while co-founder Josh pushed for broad SMB positioning, which proved to be the correct long-term call. | |
| Iterating the V1 Product with Monthly Scoping Deadlines | 3 | 4 | 0 | 1 | Tomer explains how monthly release cadences forced decisive product scoping by working backward from hard shipping dates rather than building forward indefinitely. | |
| Selecting Co-Founders and Creating an Ego-Free Culture | 3 | 4 | 0 | 1 | Brett raises conventional advice against starting companies with people you recently met. Tomer explains that iterating with multiple potential partners earlier allowed him to immediately recognize co-founder compatibility and ego control. | |
| Managing Conflict Through Weekly Founder 1-on-1s | 3 | 5 | 1 | 0 | Tomer details the founding team's practice of Friday 1-on-1s to air grievances and exchange direct feedback before resentments could compound. | |
| Rethinking Payroll Software from First Principles | 4 | 6 | 2 | 1 | Brett asks about entering payroll with no domain experience. Tomer explains that ignorance allowed them to re-architect payroll from first principles as an employee-payment tool rather than a complex tax-withholding filing tool. | |
| Expanding Beyond Payroll into Employee Benefits | 3 | 5 | 1 | 0 | Tomer outlines expanding beyond payroll into health benefits once execution on core payroll became predictable, noting how customers rejected his initial ideas about individual ACA plans in favor of simple group health insurance. | |
| Navigating Multi-State Compliance Pressures During COVID-19 | 3 | 4 | 0 | 0 | Brett asks what Tomer wished Gusto shipped sooner. Tomer reflects on multi-state compliance and registrations, which exploded in customer urgency during the shift to remote work in COVID-19. | |
| Capitalizing on Market Timing and High Switching Costs | 5 | 5 | 3 | 2 | Brett asks if market power consolidation created a winner-take-most environment for Gusto. Tomer reframes the premise, pointing out that incumbents like ADP and Intuit remain massive because switching costs protect them. | |
| Developing Unified Compliance Solutions for Small Businesses | 3 | 4 | 1 | 1 | Brett asks why unified compliance took so long to package. Tomer explains that Gusto previously embedded compliance into disjointed feature workflows rather than giving business owners an overarching compliance status dashboard. | |
| Sustaining Founder Urgency and Overcoming Complacency | 4 | 4 | 1 | 0 | Tomer discusses internal founder psychology and performance anxiety, stating that maintaining dissatisfaction and urgency is vital to prevent complacency in fast-moving technology markets. | |
| Lifelong Mentorship: Lessons in Long-Term Relationships from Dad | 2 | 3 | 0 | 0 | Brett asks about Tomer's greatest founder influence to close the interview. Tomer credits his father's decades-long approach to prioritizing relationships and customer trust over transactional optimization. |
Statements from this episode (27)
Tomer London: Prior founder experience accelerates validation, but PMF requires luck
“I think having multiple founding journeys for me, having Josh and Eddie, having previous startups, it helps you by one, knowing how to avoid some mistakes. So you don't repeat the same mistakes. So for me, like I can give you a bunch of mistakes. We can talk a…”
London: A true growth mindset means feeling embarrassed by your past self
“What I mean by humble is self-critical in a constructive way. It's kind of like growth mindset, right? Like knowing that you are a work in progress. Every day you're supposed to be better, which means that if, when you look at yourself a month ago or it's a ye…”
London: Strong customer intuition means predicting what customers will say next
“Speak with customers so much, in fact, that you know, you can just start predicting what they're going to say next, because you've heard it so many times before, right? That when you start knowing that, that's like, oh, I've heard this before. Then you know th…”
London: Polite customer feedback provides zero signal compared to extreme reactions
“You need to build a business that's built on either
I want it right now.
Can I get it?
And then you put a price tag and they're saying, I will pay for it, right?
So strong positive emotion or strong negative emotion.
It's like, this is absolute shit.
I w…”
London: Product Creators Must Actively Seek Rejection in Customer Discovery
“When you speak with a customer, you kind of need to be in the mindset of seeking rejection. You go out there to learn, and again, the learning comes so much from rejection, so you got to go out there and seek that rejection”
London cold-called Yelp businesses from a walk-in closet for early validation
“When we started the company, one of the insights that we had was, you know, I talked with like, I closed myself in a room, I mean like in a walking closet when we were, where we were living. And every day I was like, I'm going to, for a whole hour, I'm going t…”
London: Non-tech small businesses are eager to talk to product builders
“You would be surprised how many people actually are excited to speak with technologists. Most people outside of Silicon Valley, like small businesses and real, you know, industry and people don't get to speak with technologists often that can build products.”
Tomer London: Initial product-market fit means 2 out of 10 prospects love the product
“Product market fit for me is that when you talk with 10 customers, two people are loving this and want this. That's great product market fit. Now, you need to figure out who's the two, who, what makes them special, who are the segments, and then you can pick 1…”
London: Founders building multi-decade companies should codify values by hire three
“When you think multi, multi-decade, you put down your value. It makes sense for you to codify your values, put them down, make sure that you hire according to them, and you reward people according to them. Starting very, very early, like your first, second, th…”
London: Payroll onboarding makes adding adjacent HR tools frictionless
“Payroll data is very, very powerful because onboarding is so complex. There's so much that you need to, we need to know about you as a company in terms of your employees and where, Where, where they work and how much they get paid and like your company address…”
London: Gusto's YC Demo Day pitch mapped expansion beyond payroll
“The last slide was all about that. It was about, hey, we're starting from payroll. The next step is benefits and HR. And from there, it's going to be a full what we call their people platform. So everything, you know, to help you start building, grow your busi…”
London personally onboarded every employee across Gusto's first 50 customers
“I actually went, personally onboarded every single employee, every single one of these, the first, I want to say, 50 companies.”
London: Payroll pain is universal across industries, not unique to tech startups
“It ended up being that the inside is that payroll, the pain from payroll was across industries. It was not just startups. And the pain was strong enough that even if we did not have a personal network with dentists dentists love gusto.”
Gusto took one year to build its fully self-service payroll product
“So for a full self-service product, so full meaning, you know, you could onboard, run payroll probably took a year until that. And then the folks that used it before that year, that full year you know, kind of used me as an interface in a bunch of places. So w…”
London: Monthly release deadlines enforce disciplined scoping by building backwards
“Having a monthly release means that you're building backwards instead of building forward. So you have like, hey, by the end of this month, here's the stuff we need to ship, right? And those things you can talk later about how you know what to ship, but like, …”
London: Founders should build with multiple teams to recognize co-founder fit
“The advice here for every single, every founder is to try to build stuff with a bunch of different teams and a bunch of different people, you know, and kind of go through this iteration. Because then when you get someone that's like a fit for you, like it just…”
Gusto co-founders held weekly Friday 1-on-1 feedback sessions from early days
“The thing that really helped us is this idea of like having a weekly founder one-on-one. So what we did is every Friday we had three one-on-ones you know, Josh and Eddie Tom and Josh, Tom and Eddie. And in those conversations and this was from the very, very e…”
London: Framing yourself as a student or foreigner disarms customer interviewees
“The first one is, hey, I'm a PhD student from Stanford, and I have a few questions. Do you mind helping? So that again really opens the other person to kind of to being open. They feel like they're not being sold to, or something like that. Then the other one …”
London: Early payroll software separated paying workers from tax filings
“Most payroll services back then actually split that job to two different things. There's one which is paying your employees, and there's two is paying your taxes. There was two different workflows, two different situations. Some companies just did one and not …”
London: Gusto achieved an NPS over 85 before expanding payroll
“Once we saw we had product, or we had like a very high NPS, over 85, that was kind of what we knew that would be, you know, the customer love we need, and then we kind of expanded.”
London: 17 of 20 Gusto customers pre-signed for health benefits
“I remember sitting in a room and calling 20 of Gusto's customers that I thought could be a good fit for it. And I was pitching them like, Hey, we're going to build this. You know, here's how much it's going to cost. Can I sign you up? And I got like, 17 out of…”
Tomer London: Remote Work Made Multi-State Compliance Vital for Small Businesses
“Multi-state used to be something that, you know, only large companies cared about. So it wasn't like, it wasn't, it was kind of on our roadmap, but it wasn't like that important for us. And then all of a sudden with COVID, a bunch of people working remotely an…”
London: About 500,000 new employers are created annually in the US
“There's half a million new employers coming in to the US every year.”
London: Payroll is not a winner-take-most market as incumbents thrive
“I don't think it's a market win all, win most. Like, our big competitors when we started are still around and are doing really well. Like you know, Intuit, ADP, Paycheck all have really large payroll businesses still today.”
Gusto did not conduct formal market analysis before building its payroll product
“We did not do like a big market analysis. We actually, I didn't even know. We, I don't think we knew so much how hard it is to switch payroll providers. We took us a few months to actually, while building the flow for it, we're like, wait a minute, this is a l…”
London: Small businesses need centralized compliance dashboards, not just embedded workflow checks
“Yeah, I think because it wasn't totally clear what would be the business model around it, because compliance is a set of hundreds of thousands of interactions, and the way we kind of did it was every time we built something, well, we made sure it was compliant…”
London: It took five years and tens of millions in ARR to feel PMF
“It took me years, like maybe five years until I felt like, huh, ok, this is going well. So it may be like post-series B, like, you know, I don't know, like the tens of millions of AR, when I felt like, ok, this is actually, this is going well.”