Gusto Reaches $1 Billion in Annual Revenue

Gusto has reached more than $1 billion in revenue, the company confirmed to Fortune. The figure represents cash received over the preceding 12 months through February. Gusto CEO and cofounder Josh Reeves said the company is accelerating growth and is now higher on annual recurring revenue.

The company began in 2011 as ZenPayroll, founded by Reeves, Eddie Kim and Tomer London. The three started building the service from a house in Palo Alto. They did not pay themselves until they could process payroll through their own product. One of their earliest customers was Christina Stembel of Farmgirl Flowers, who needed to set up payroll for her first employee.

m. She has remained a customer for more than 13 years. "I don’t know anybody else who would come to a flower mart and set up payroll for a small business like mine with one employee," said Stembel. Gusto reached $1 million in revenue in 2014 with about 5,000 customers.

At that stage the focus was proving the business could build a useful product and acquire customers efficiently. The company saw rapid growth, adding 500 customers in one January after starting the month with 1,000, then reaching 6,000 the following year and adding another 3,000.

The period from $1 million to $100 million in revenue marked a significant shift for the company. Gusto hit $100 million in 2019 with about 95,000 customers. Reeves said the milestone required changes in forecasting, planning, communication and operations.

"When you get to one million in ARR, you don’t know every customer anymore," said London. Reeves described reaching $100 million as moving from having an engine to operating a factory. The company had to learn how to run, fine-tune and expand that operation.

The cofounders said the jump from $100 million to $500 million, which occurred in 2023 at roughly 300,000 customers, and then to $1 billion involved less internal change by comparison. Gusto is now a $9.3 billion company by valuation. Its investors have included Ontario Teachers’ Pension Plan, T.

Rowe Price, General Catalyst, Fidelity Investments and CapitalG. The company currently has about 3,000 employees and more than 500,000 customers.

The cofounders said the $1 billion revenue milestone supports their original focus on serving small businesses rather than moving up-market as an end goal. Reeves said the company does not expect to hire many additional employees in the coming years and believes current headcount could support one million customers.

The founders anticipate small businesses will thrive with artificial intelligence reducing barriers to entry. Kim noted that barriers to starting a small business have declined over the last 15 years and AI will accelerate that trend. A recent LinkedIn analysis showed founder titles on the platform increased 60 percent year-over-year.

Reeves said the Industrial Revolution shifted work toward larger companies, but AI could reverse that pattern. He observed that in the 1850s about 90 percent of the workforce was in small business. Before recent AI advances, about half the workforce was at companies with more than 500 employees.

Reeves suggested the share in small businesses could return to 80 or 90 percent. "Clarity is kindness," said Reeves.