CEOInterviews.AIHe Slept In A Closet To Build A $8B Company

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Jessica Neil0:00

Hi everyone. Welcome to another episode of Truth Works. I am your host Jessica Neil and I'm here with someone that I met many years ago who I really admire. It's one of those conversations that sticks in your head and you think about them occasionally. This is that guy for me. I have Josh Reeves on the show. I'm going to have him tell you all of what he does, but he is a CEO and founder of Gusto. We met through our network and they connected us to have a chat. What I loved about Josh is how he thought about his role as a founder and how he thought about culture. You're just a rare bird. There's not as many of you out there as there should be. So welcome to the show. I'm happy to have you. I'm sorry it takes a podcast for us to reconnect.

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Josh Reeves0:56

Well, whatever gets us there. I'm really excited to be here. Thrilled to chat, thrilled to hopefully share some learnings and lessons. I'm always trying to learn myself.

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Jessica Neil1:04

Me too. So let's dig into it. If I remember correctly, you came out of Stanford. Did you have a job before Gusto or did you just do Gusto right out of school?

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Josh Reeves1:20

I can go back to then. Let's go back. Yeah.

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Jessica Neil1:23

Yeah, I can go back further if you want. Want me to start with a little bit of childhood?

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Josh Reeves1:27

Sure. Let's hear your whole story. I want to hear the whole story.

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Jessica Neil1:31

I won't go through everything. We don't have that much time.

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Josh Reeves1:32

Not everything, but the important things. Formative moments and formative impacts for me. Very much my parents. My mom and dad were both teachers, so this format itself I love because I view it as a teaching opportunity. My dad was a high school teacher, my mom was an elementary school language teacher. They're both the first in their families to go to college. I grew up with a younger brother. My dad taught humanities, so I loved math and science, but it was a very innate curiosity. I did go to Stanford. I studied electrical engineering. I was there during the dotcom collapse. I remember starting freshman year in 2001 and talking to some folks. It was obvious at that point: there's no future in software, it's all done, the internet is over.

Which obviously was an absurd statement, but a good reminder of not following conventional wisdom or what's popular at the moment, because that was the conventional wisdom in 2001.

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Jessica Neil2:32

Right.

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Josh Reeves2:33

And then I actually worked at a startup. To answer your question, I joined a startup called Zazzle, an e-commerce company out of college.

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Jessica Neil2:40

Yeah, they're still around.

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Josh Reeves2:41

Yeah, they are still around. You get coffee mugs and t-shirts. I got excited about the ability for anyone in the world that was creative to go create products on Zazzle. Initially, it was just things like cards and posters and shirts. Now they have many products. Anyone else could go buy those products. Zazzle would manufacture it on demand, but specifically that creator would then get a percentage based on the product creation. So to me, at 2005, 2006, Web 2.0 was just coming about, but this idea that the internet actually was this incredible distribution platform sounds very simple in hindsight. I got really excited about the chance for folks to make a living doing stuff they love.

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Jessica Neil3:24

Makes sense. And so you're at Zazzle for how long?

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Josh Reeves3:29

I was there for about two to three years. I was a product manager. I got my first exposure to how to build software with professionals, with engineers, with designers. Again, using a different tech stack than what we use today, but definitely the beginning of this next big internet boom that started in '05, '06. I was on High Street in Palo Alto. Down the street was Facebook with less than 50 people. It was a very interesting time. TechCrunch was just getting started. I remember going to some of the barbecues in the backyard of the owner.

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Jessica Neil4:02

TechCrunch. Okay. And so then you're there, then do you just kind of get an itch?

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Josh Reeves4:12

So I have Zazzle as a chapter where I learned how to build software in a more professional environment. Decided not to do the PhD in electrical engineering, so only finished with the masters. And then I have a startup chapter between Zazzle and Gusto. It's a useful story because it was a very different contrast to how we've approached building Gusto. So in 2008, me and a friend started a company. Why did we start a company? Because our friends were starting companies. I would say a very quick learning from that: that's not a good reason to start a company.

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Jessica Neil4:46

Um.

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Josh Reeves4:47

Yeah, just because your friends are doing it doesn't mean you need to do it. There was no purpose, no longer-term mission or goal. Facebook platform had just gone live. We started building apps on the platform. We started making revenue. I remember we were making like $1,000 a day in ad revenue. We were building these useful little applications. But whenever I got asked by friends, 'What are you working on?' I would just say, 'We're in stealth mode.' Which sounded cool at the time, but in hindsight, it's just an absurd way of saying, 'I don't know what we're doing.'

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Jessica Neil5:19

Right. I don't know yet.

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Josh Reeves5:22

Yeah. My mental model to jump to Gusto is: the problem we're trying to fix, the mission we have, I'm so into it that I want to tell every single person I know. One of my advice points to founders is: imagine when you're describing what you're doing the 10,000th time, will you be as excited as the first time? You almost want to not be able to hold yourself back from saying, 'Here's the problem we're trying to fix. Here's the thing we're trying to make better.'

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Jessica Neil5:48

And then you got to go deliver on that. Obviously, that's the hard work, and then do it in a scalable business.

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Josh Reeves5:52

But the problem to me was the main takeaway I had from that chapter. So fast forward to 2011, me and two co-founders started Gusto. At the time, it was called Zen Payroll. We had all run these prior startups. So my prior startup, I had set up payroll health benefits. I had felt some of that pain and frustration. That's actually how we got some of the exposure to the problem space was literally running these prior small startups, small businesses, and also having family run small businesses. And we said, 'Hey, this seems like a real problem. Maybe we can try to make it better.'

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Jessica Neil6:23

Yeah. And I mean, as a consumer of these products, it's a space that often doesn't get a lot of innovation and attention. Maybe more so for enterprise, but small business, not so much at all. The things that you can get are really not that great.

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Josh Reeves6:43

Yeah, two things jumped out at us. You just hit both on the head. I know it's relevant to why you do this podcast too. One was just that small businesses weren't getting access to great technology, great product. But two, the systems almost felt like they treated people like transactions. People were assigned ID numbers. There were all these acronyms. Especially in a small business where two-thirds of employers in America are less than five employees. These are not P&L transactional company systems. This is like four human beings coming together, a business owner and a team trying to go create something useful. It's a labor of love. So just thinking about it more as human moments: who's joining my company? What should they be paid? How much should I allocate towards benefits? How do I think about performance? How do I reward people? We got really excited about that human lens to the conversation, which I think in small business comes very authentically.

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Jessica Neil7:38

And ironically doesn't get done as well as it should in bigger companies often, but matters just as much in bigger companies as well. It makes sense that it was sort of transactional because I think for a very long time that was the relationship between employer and employee. It's transactional. I pay them to do this and it's administrative. It's not strategic. Nobody was coming at it from a human lens perspective. I'm so glad that you did and that you are because our systems have not been able to keep up with the progression of how people are approaching the workforce and culture. Things are catching up now because of people like you. But for a very long time, the space was very fragmented and not a lot of great engineers wanted to go work on HR software.

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Josh Reeves8:33

Yeah, we used to joke, the three of us are PhD dropouts. When we were in elementary school, our dream was to go build HR software. No, obviously we had no idea what HR software was. We want to fix problems. We want to fix broken things that cause pain. And we realized when we started interviewing all these small businesses, the sheer amount of time that's being wasted. All of our, you know, Tomer, one of my co-founders, his dad runs a small clothing store. Eddie, his mom and dad ran a small doctor's office. My mother-in-law did payroll for small businesses. You interview and meet small businesses are all around us and you realize this is really hard. Their journey is difficult. They have so many different hats they have to wear. And if we can make their life easier and better, that is what gets a lot of Gusties, which we call ourselves, excited. That is our progress is actually making their life easier and better so that they can survive not just be around in a year or two but actually maybe grow and be around in five or 10 years.

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Jessica Neil9:26

And so the three of you decide to do this and what happens?

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Josh Reeves9:31

We dive in.

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Jessica Neil9:33

And what do you find?

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Josh Reeves9:35

First thing we had to do was figure out could we build a functioning product. We started with payroll. We view that as kind of the least optional part of the stack. If you don't pay yourself or if you don't pay your teammate, they quit pretty fast. We knew that was going to be the required part of it. And we actually set up a goal where we weren't going to pay ourselves till we could use our own product to pay ourselves. I don't know if you knew that.

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Jessica Neil10:03

I didn't know that. That's good. I like that.

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Josh Reeves10:05

So a little added incentive.

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Jessica Neil10:07

Yeah, right. I mean, it's got to work, right? And you got to use your own product and be part of it so that you can build a better experience.

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Josh Reeves10:18

I hope all founders are doing that.

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Jessica Neil10:21

Yeah. Dog fooding, right? If you are a relevant target customer of your product, then hopefully you use it yourself.

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Josh Reeves10:29

We were a small business. We were focused on small business. We paid ourselves. We paid some friends' companies and then we quickly wanted to expand to mainstream small businesses we never had met who just heard about us through others. When we launched in December of 2012, we had a hundred small businesses sign up, on board, set up in minutes, pay themselves, pay their team. And we were like, 'Ah, now we're on to something,' because they told us how easy it was, how much time it was saving them. And then we knew, 'Hey, now this is becoming interesting. Let's keep trying to make it better and better.'

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Jessica Neil11:01

Yeah. And if you think about that, it sounds like a simple process, payroll, but it's really complicated. The folks that you were able to get to do it were pretty antiquated and not very sophisticated. When you're off for an employee by even a dollar, that's a big deal.

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Josh Reeves11:28

Yeah. I mean, the complexity, you know, very well. There's over 10,000 different payroll rules across the country. It's because you have local, state, and federal. The US in many ways is more like 50 countries. There's no coordination across states. So even if you're a two-person company in two states, you double the amount of paperwork, compliance overhead, filing requirements, calculations you have to process. When we take a step back, I think this is very true about part of what we do. There's just a lot of stuff that the business owner shouldn't have to become an expert in. A lot of it ties to compliance, but if you don't follow it and do it correctly, you get fined or get in trouble. So we kind of think of it as: can we take, I used to say two of the 20 hats off the head of the business owner. Now I say maybe we can take 10 of the 20 hats off and just take on that responsibility, give them peace of mind, save them time, save them money so that they can focus more on their product and their people. Back to kind of people are the core of every business. A small business owner, especially with a small team, they know everyone on that team. They care deeply about each of the individuals and obviously them staying if they're good or if they're not giving them feedback on how to get better.

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Jessica Neil12:34

Yeah.

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Josh Reeves12:36

Small businesses I think are much cleaner, simpler when it comes to talent and people than a big company because you have that much smaller scale.

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Jessica Neil12:42

I was as you were talking, I'm sure on this compliance side AI now is playing a big part in helping relieve a lot of that administrative burden, is my guess, and you're infusing that in the product is my assumption.

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Josh Reeves12:59

Yeah. I mean, I would say more lessons for entrepreneurs. You want to take whatever tech trends are underway and have a belief on how they help you. So when we started Gusto, this is now back in 2011, 2012. I would say then things like mobile, cloud, paperless enabled us to create a dramatically easier, simpler to use product. And then from a distribution lens, things like search and social gave us the chance to grow through word of mouth and have organic be the main way that we get more customers to Gusto. That's still the truth today. Organic word of mouth is the majority of how we grow. To your question, AI absolutely is an incredible tool now, a new technology. And in our case, we actually see it as a huge tailwind. It enables Gusto to be even more of a teammate, even more of a partner, even easier to use as Gusto is more conversational, more proactive, more of a partner, more of a teammate to the small business owner. But all these are technologies. Again, the goal is how do you go to the small business owner and very concretely describe the way you now are saving them more time and money? That's still going to be the outcome that we all strive for, or help them at least make better decisions, or maybe attract a better team, or retain their team better. These are the concrete actions that matter most to a business owner.

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Jessica Neil14:10

Yeah, time and money are very important. Okay, so you're doing the payroll thing. You then start to see some success. I'm guessing it's not as easy as I'm making it sound. I'm sure there were some days where you were very uncertain.

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Josh Reeves14:26

I mean, yeah, three folks who had never ever built product or software in this domain until we again did it for ourselves. The first question anyone asked me was, 'Can you even build it?' So you know, big milestone was being able to build it. Big milestone was then customers loving it. And then it becomes how do we scale it? And a lot of that comes back to people and how we actually build the team.

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Jessica Neil14:49

Yeah. How did you and your co-founders decide lanes that you were all going to take or not? Did that happen naturally or were there some conversations that you guys had to have around what really made sense for you as individuals and for the company?

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Josh Reeves15:10

So, we're very in hindsight very mature about it, but I would say some of the reason for that is each of us were second-time founders. So I would definitely not say I was as mature about it in my first startup, mostly because I was much more naive. But there's this reflection, growth, chance to learn, improve. It's why I'm a big believer in second-time founders. For us, each of us had these prior startups. But when we came together, we really wanted to tackle the big problem. We wanted to try to spend decades of our life making it better. We wanted to make sure it was really clear the value we were providing. And that's what drew us together. And so then we had conversations around yes, where each of us are going to focus. Initially we're all doing technical work, but Eddie was very clearly kind of the engineering lead. Tor was much more the product design, customer experience lead. And once we got the product live, I shifted to be much more focused on go to market, how we acquire customers, and then also kind of just generally call it the back office but running the business: how we do all hands, how we do hiring, how we do onboarding, how we do all the different nuts and bolts of day-to-day moving the business forward. And so we had direct conversations on roles, responsibilities. I was going to be CEO. We were all three co-founders. We also had direct conversations. The other big topic to tackle early on usually is ownership. We're equal ownership when we started the company. And my advice to founders is both roles, responsibilities, and ownership. Have that conversation as early as possible. And if it's uncomfortable, good. Have it even earlier. In our case, it was relatively smooth. But definitely a fan of having that combo as early as possible.

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Jessica Neil16:41

Yeah. Because when you don't, you can get into situations that aren't quite functional for the company. So it is important to have those.

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Josh Reeves16:50

Well, people make assumptions. Disconnects can develop like any relationship. Founder relationships. We're 14 years in. The three of us are as close, if not closer than when we started the company. We're as committed now as we've ever been.

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Jessica Neil17:02

And I'm not surprised by that. But it's hard work. There had to be the ingredients of like mission purpose, but also even when we were three people, we would have weekly meetings one-on-one, me, Tor, Tomar, Eddie, me, Eddie, where we would go on a walk and give feedback to each other.

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Josh Reeves17:18

And like it, we have lots of code to write, we have lots of product to build, but going on that walk and just highlighting three things I'm really excited about and that I think is working well in our partnership, three things that I feel like could get better or improve. Having that direct dialogue when we were just three people I think again is great advice I give to founders. You want to make sure you create the time for those conversations as well.

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Jessica Neil17:39

Yeah. No, I love that. When did you guys start doing that? Like how early?

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Josh Reeves17:44

When we were living in Palo Alto. Tomer and I were roommates. We had four other roommates not involved in Gusto. Eddie was living in San Francisco, commuting an hour each way when he's one-third of our entire team didn't make sense. So he actually lived in the upstairs master bedroom closet for like four months. I kid you not.

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Jessica Neil18:02

He lived in the closet.

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Josh Reeves18:05

He lived in the closet. It fit a queen air mattress.

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Jessica Neil18:11

Okay.

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Josh Reeves18:12

And it had a skylight.

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Jessica Neil18:14

Okay.

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Josh Reeves18:16

Also, our roommate still used it as her closet. So all of her clothes and shoes were in there.

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Jessica Neil18:21

Okay. So he had to sleep with the clothes and shoes, but he could fit a good bed and he had sunlight.

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Josh Reeves18:28

And we were highly productive working most of the day. But yeah, when we were living in that house, that was when we started that tradition. And again, it's not complicated. Just not letting things build up, the chance to release that pressure valve, have direct open dialogue, have that trust be the foundation. We were still getting to know each other from a work lens. And as we progressed in those first few months, those are actually really useful conversations for us to have. And then as the business progressed, we kept kind of seeing the potential of maybe we can actually spend decades doing this. And now we're one decade in, we have decades to go.

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Jessica Neil19:01

Yeah. Decades to go.

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Josh Reeves19:02

That was always.

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Jessica Neil19:04

I love that because to do what the three of you are doing is incredibly hard. Hardly any folks are successful at doing it. There's so much failure. But when you have trust and respect and admiration and you can work through conflict, your chances of success are just higher because those are all the things that are going to be thrown at you every day. And when you have a good foundation, you can navigate those things much more easily than when you don't. And I think as you're building the company, that sets the tone for what you expect of employees as well.

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Josh Reeves19:53

And it showed up when we were thinking of hiring our first teammate. So the three of us were there from the beginning, but when we were approaching now hiring our first teammate, you know, we need a designer, we need an engineer, that's the skill. But we also really wanted to figure out what about the way we're working that we want to keep and that has much less to do with skill, that has more to do with things like values. And so I just to close on the founder piece of this, I always say you can explore that values alignment early on when it comes to if you're founding something with someone. Your motivation matters, deep passion for the problem space obviously has to be there too. And then there's luck. Obviously there's still going to be luck. We all hope humans grow throughout their whole life and you hope you and a friend, you and a partner, you and a spouse, you and a founder grow together. Sometimes you might grow apart. But if all of those ingredients line up, then yeah, we can be 14 years in, more excited than ever about the chance to work together. But a lot of that was based on the building blocks that I just mentioned.

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Jessica Neil20:53

Yeah. And so let's talk about you hiring this first person. That's always a big deal because here it is the three of you living in a house together, going on walks, Eddie's in the closet with some clothes and shoes, but now you're going to hire someone and it's sort of hard to bring people into that connection that you have.

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Josh Reeves21:13

So, how did it work? How did it happen?

We started by trying to codify, just write down what are our values as a team. It wasn't a cerebral exercise. It was like, what about the way we've been working for the last several months that, you know, when we have disagreements, how do we resolve it? What about when one of us is tired, how do we talk about that? When one of us has a strong opinion on something, how do we navigate that? When we need to divide up responsibilities, how do we navigate that? Like what about the way we've been working has made this so much fun? Because we really loved those first several months. And it wasn't just about the product. It wasn't just about creating something useful. It was clearly also about the way we were working together. So I call that the 'how.' The 'what' is your product, your business, your business model, your pricing structure, whatever. There's a lot of important 'what' topics. But the 'how' is more where this is about. So we wrote down our values and then we said, 'Hey, now we're going to meet potential people to join this company. And when we're meeting them, let's not just focus purely on their skill set. Hey, we need an engineer, you're an engineer. Or we need a designer, you're a designer. But instead on top of that, also explore through their work experience.' We weren't experts on this. We just really talked to them about prior work, prior chapters, prior companies, prior internships. And we wanted to figure out did they have the same values that we have.

And so, you know, we eventually codified this as kind of a values interview and a motivation alignment interview. And then that became a part of how we scale. But for the first couple dozen people, it was just us and especially it was an interview I did with every candidate really trying to figure out like what makes this person tick, what makes them get excited, what when they're doing their best work, what are the reasons for that? What are the conditions for that? At a minimum, are they reflective and can they even talk about it? Sometimes people can't even talk about it, which means they haven't even thought about what are the drivers behind that. And then second, as they talk about it, does it align with our approach? And if it doesn't, that just means they'll do better work in a different company. It doesn't mean they're a bad person at all.

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Jessica Neil23:18

Yeah.

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Josh Reeves23:19

But we wanted to figure out could we de-risk that when they do join. You know, you're always taking a leap with a candidate. You're having them join the company. They're believing in you and joining your company and you still haven't done any work together yet. And so you want to as you start working together actually see the potential become real. We wanted to create that to be more likely. And we weren't perfect by any stretch. There were some hires we made that weren't the right fit. But I think thinking about the values piece of it and the motivation piece of it early on, not just the skill, was super helpful to ensure that we were bringing in folks that were more likely to be successful in the company.

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Jessica Neil23:53

And do you think because you were a second-time founder, you were more aware of this and the first time you weren't really as much aware?

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Josh Reeves24:01

I mean, there's definitely just more wisdom. Hopefully, we all gain wisdom as we progress in life. One thing that helped a lot was we had this goal. Again, we had to earn it. But we had the goal of like if we solve a real problem, it's a big problem, we build a real business, this could be something we spend decades doing. So there was always this backdrop of like if this works, this is going to be what we spend all of our working life doing. I think that brings a little bit more gravity and seriousness to some of these decisions that maybe earlier I would have been a little bit more flippant about.

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Jessica Neil24:33

Um, so I think that would probably be the main driver.

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Josh Reeves24:36

Yeah. Well, I mean, you know, Reed had been a founder before Netflix and you know, I always talk to people like it was a blessing for us because he got to learn what not to do, right? And it's not that he was perfect and didn't make any mistakes. He certainly did, but he focused on the things that you're talking about right now, which is how do you work? What are the values? How do you make decisions? How do you disagree? What constitutes someone great in our context versus another? And that was his mission in the company because he knew it would matter because at the company he was at prior, which was sold for lots and lots of money and he never had to work a day in his life, he would say that he hated working there.

And I think it probably just gives more kind of a license to not have as much FOMO, right? And just focus on like what do I have conviction in? And you know, every day is still the biggest, newest job I've ever had. I don't no one ever knows all the things they need to know.

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Jessica Neil25:40

But being able to trust your gut, you know, have kind of a more rational approach to like I need to make a decision. What do I know? What do I not know? What do I need to learn? And just kind of be a little bit more steady and even keel about it. Maybe that's called intentionality. That's definitely served us well in the journey of building Gusto. And I think it can kind of fight some of the like Silicon Valley hype cycle distractions that develop when someone gets too caught up in the echo chamber.

Yeah, that echo chamber can be very tempting and distracting, but don't do it. People listen to Josh. Okay, so then you start to hire. Now I guess take us back to today, present day. Let's talk about what's going on because I'm sure the challenge is maybe some are the same but I'm guessing much different because you've scaled the business and you've been doing it for over a decade as you said. So tell us what's happening now.

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Josh Reeves26:34

Yeah, I mean for us everything starts with the customer. That's been true from day one and we serve over 400,000 small businesses. We're honored to do that. We've brought in the products. So I can spotlight a few. We help set up small businesses often for the first time with 401k for their team or health insurance for their team or if you have an hourly workforce there's all these different time tools that we offer. So kind of trying to just problem by problem talk to customer hear their pain points and then kind of build something that's useful, helpful, usually takes manual stuff, compliance centric stuff, automates it, streamlines it so they can focus more on their product, their customer or their team. And so we've made progress. You know, we've been free cash flow positive for several years as a business. We've made progress in the journey, but I still say we're early in terms of what's possible because factually there are millions of small businesses out there that are still doing things like payroll by hand.

There are still millions of companies out there getting fined and penalized. And I just know that if they could know about Gusto and if we were to actually earn their trust, we could actually save them a lot of time and money.

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Jessica Neil27:39

Yes, you could. Listen up. If you got a small business, check it out. Okay. So one question that I get asked all the time just from my experience at Netflix and we had such a unique culture and well-known culture globally was that how did you scale it? How did you evolve it? Because when you three are in charge of all the interviews and you're very aligned on the mission and the values and you can weed people out pretty easily. And then as you get bigger, you don't have time to do all of those things because how many employees are you now?

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Josh Reeves28:17

So over 3,000 Gusties.

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Jessica Neil28:19

Yeah. So that's a lot of employees. Tell us how you were able to scale the culture and I don't know how you think about it but everybody would always ask me like how do you keep it and for me it was I don't want to keep it I want it to be better tomorrow than it is today. It's like how do we get better and better? It's not about preservation because as you three were hiring your first employee going to four to five to 10 very different than 3,000. You have to work differently.

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Josh Reeves28:56

Yeah. I mean, I think there's multiple thoughts you just alluded to that seem in conflict, but I actually believe you can it's possible to navigate. So one would be, yeah, we're not a museum. Like, nothing should be set in stone, right? Like invisible rules actually in a company that's been successful to date are a big pitfall because, you know, people think don't change this process. Don't change this system. It's worked so far. Well, maybe it'll stop working in the future, right? So we have to have this constant mindset of how do we make it better and improve which means change.

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Jessica Neil29:22

Right.

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Josh Reeves29:23

On the flip side, you know, what does persist? And if nothing persists then almost you have no identity, right? So you know, I would go back to values like one of our obsession core values principles is this focus on the customer is number one. I don't believe companies exist for the sake of it. We exist to make our customers' life better. We screen for talent and candidates we want to understand and hear authentic real stories in their life of why they want to go dedicate, hopefully years of their work life to helping small business. And like that has absolutely persisted no matter what stage we're at. And obviously I can't go screen for that, but it's not that hard to go create an interview which I alluded to earlier that is very focused on screening for a candidate's motivations and trying to figure out even if they've read a script or heard about, you know, Gusto likes to know that you love small business. It's our job and there's a set of interviewers at Gusto who get really good at figuring out how to get to not just the first or the second order but the underlying concept of someone sharing really what makes them tick. And that's a skill I always give advice to folks if you want to get really good at being a manager leader you got to build the interviewing skill and the only way I know how to build interviewing skill is to do it over and over again practice practice because every human's different there's always this joy of learning about someone and kind of how they think and why they think a certain way.

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Jessica Neil30:43

Yeah.

J

Josh Reeves30:44

And that's still a big part of what I spend my time doing. But I don't have to interview everyone. We can have a system of other Gusties. We have a hiring committee. I can review certain hiring packets. We can kind of, you know, aspire no matter what size we are to have just as much intentionality about that values and motivation alignment as when we were 10, 20, 30 people.

J

Jessica Neil31:02

Yeah. No, you do have to build the system. And then you, you know, at least for me, you have to have people in the organization as you were describing that really know how to get to that. At Netflix, it was not only people from my team, but people across the business who really understood our values and how to dig for them and they were kind of like detectives, right? And very curious. And you have to pull thread and you've got to get the person to tell you more. You can't just be on the surface because you're not getting to really the truth of things. And it is a skill and you have to practice it. And there's some people who are I think I don't know if you agree naturally better at that than others. And really utilizing those people even if it's not a job in their function, right, is really important.

J

Josh Reeves32:01

Yeah. Yeah, I think the innate interest has to be there. No one can and should be forced to do these types of interviews. But if that interest is there, I think it can be great for someone's career growth, development, and then it's all about giving them the chance to go act upon it. I also think there's moments in the journey, I can give some examples where you do stuff that doesn't scale. Like in 2015, we were opening our second office. That was really important to me that we didn't have this dynamic as a company where you have the headquarters and then the second office and you know, that never made sense to me. Like that's where the real work gets done and then what is this other office do again? Why would someone join that office? Why would you want to be there? And so we kind of had this mindset of no headquarters. Let's have these home bases.

We did a long search, chose Denver.

We do all hands every two weeks. As one example, it made sense to me that I was going to fly to Denver every month because we do all hands every two weeks. So we do one in SF, next one's Denver, one's in SF, next one's Denver. We're going to hire leaders in both locations. For example, the first 10 to 15 people in Denver, I went and interviewed. It wasn't because it was right for me to interview employee number 15, 151, 152. It was because I was Denver employee number one, two, three. And so some of it is, you know, doing stuff that doesn't scale. I can't do that with every office we've opened since then. But setting that example I think does build the momentum and make it clear that it's important so that others then reinforce that tendency.

J

Jessica Neil33:25

And Denver just as important as San Francisco. True today.

J

Josh Reeves33:28

Yeah, Denver is our biggest office. We have more Gusties in Denver than SF. I was there a few weeks ago. We have an office in New York. We have an office in Scottsdale. We don't have a headquarters. I really view it as these are different locations. We have teams in each. Some of these locations have more broader. Denver has almost every team at Gusto. Some of our locations might have a subset of teams, but generally speaking, we have a set of hubs where we want to be concentrated and it's where a majority of the 3,000 Gusties are located.

J

Jessica Neil33:56

Yeah. No, I mean, as we were scaling and opening up offices across the globe, many of us would go wherever that was and set it up, right? And it, you know, again, sometimes Reed was more involved, but it could have been our CFO, it could have been a CMO, it could have been me. And we would go and spend an enormous amount of time to set these offices up. I don't want to say correctly, but on the right foundation. And it was from a values perspective. Right? Of course, talent and skill mattered, but when you're building something and you're not building it with people who are aligned with your mission and your values, it can go south real quick. And there's not that many shortcuts. I think just intentionality, time, making it a priority is what's key. And then it can pay incredible dividends. Like we've attracted incredible talent in Denver. We're very proud to have that location. We've been there 10 years now, which is hard to believe. We used to say our goal was to be the darling of Denver. I think we've made progress on that journey. And there's great talent, too. It's not about.

Yeah. Talent's everywhere.

J

Josh Reeves35:04

Yeah.

J

Jessica Neil35:05

Talent's everywhere, but we're not necessarily going to be everywhere either.

J

Josh Reeves35:08

Right. Exactly. Um, okay. So, let me see where we are. Oh, we're running out of time. How's that possible? Um, okay. I have a few more things for you. So, now that you have all these customers, all these employees, and your job has changed dramatically from when you were at the house and Eddie's in the closet to now. Now you have kids and you have four kids which I just learned because the last time we talked you had two. But what is different about you from those days to now?

And to be clear we're not talking about a metaphor of children. I have yeah four kids. They're six, four, and twins that are two years old. So one.

J

Jessica Neil35:54

They're real kids.

J

Josh Reeves35:56

Real real humans that are a joy and also keeping us up at night sometimes. But grateful to grandparents who help out quite a lot in our family. How have I changed? I mean, besides some whiter hair, gray hair. I would like to think and I can focus more on the Gusto portion of it. You know, if you asked me 10 years ago what I've liked doing this job today, I would have said I don't know. And the reality is I love it. But I had to get exposure and kind of step by step, you know, figure out if this was going to be the thing I really love doing. I love our mission. I love our purpose. But you know at the size and scale we're at to your point the job has changed dramatically and there's been many phases along the way. But you know a big part of my job is building our leadership team for example, right? A big part of my job is in our all hands and when it comes to our biggest kind of parts of company strategy being a steward of where we're going over many several years and how that gets broken down and then how we measure progress and then how we celebrate and reward and get excited about the milestones along the way. But a lot of that is communication, team building, all hands, writing memos, doing video recordings, visiting sites from time to time, but it's not really possible for me to go meet every Gusty at the scale we're at. But one thing I realized in kind of hindsight was being able to be more at a systems layer where I can spend time, you know, on pricing, on software development, on team and onboarding, on how we do all hands, all these different kind of forums. I actually love it. I love being more horizontal. I love the ability to kind of pattern match and see how these different systems connect. I'm glad I didn't do the PhD where I would have been obviously much more in a specific swim lane.

Um, so for me authentically, you know, it turns out I really like a lot of the attributes of the role I'm in. And the due north for me is problem solving. Like how do we make our product better? How do we serve customers better? How do we get further along in our mission and also do it in a way we're proud of? And you know, that's fun, right? I don't view that as a burden. Like the fact that we have these 3,000 teammates, we have 400,000 customers trusting us, that's incredible. And you know, the future will not be given to us. We have to earn it through hard work and continuing to deliver value. But that's how I was raised, right? Put in the hard work, do the effort, put in the time. Nothing is given to you. You have to earn it. And I really love that mentality. And that's still a big part of how we run Gusto.

J

Jessica Neil38:16

Yeah, that's how I was raised, too. So I know that. Did you also like in learning all of these things because you hadn't done them before, did you surround yourself with a network of other founders that had done this and were at a similar scale? Did you go out and seek that or was it just sort of the three of you figuring it out on your own?

J

Josh Reeves38:41

Oh, absolutely. Learning and leveraging insights from others. I mean, even the two buildings that I most spent time in, the Hewlett building and the Packard building, were donations from the co-founders of HP. And I remember reading about when I was in college, the HP way and being like, what is the HP way? Which I'm sure you're familiar, but if your audience isn't, it's a set of practices and customs and a bunch of philosophy in the earlier phases of Silicon Valley that were all about the how. It wasn't about the product. It was about what was the environment that was created to enable this type of innovation to take place.

Um, you know that was a formative experience. You know when we did our angel round, we had these founders mostly CEOs co-founders that contributed that was incredibly helpful. I went to Stanford which obviously gives me an advantage when it comes to proximity to Silicon Valley. But I will spotlight you know I went to this seminar the entrepreneurial thought leader seminar almost every week when I was in school. I ended up running it for a year. Those videos are online. They're on YouTube. Anyone in the world can watch those videos and get the same type of wisdom, learnings, insights shared. Maybe you can't go meet the person as easily, but most of that interaction is just getting exposure to someone telling a story and sharing. And I find when people go talk to students in particular, 99%, not 100%, but 99% of people really take off their sales hat. They're not trying to sell their product. They're not trying to go pitch their business. They're really just trying to reflect on when they were a student, like what was helpful and useful to them and what would they want to go impart to students in front of them today. And I really again I guess plug there for just any type of college-based speaker series, seminar series, much of which is online. Those can be fantastic inputs to get exposure to brilliant people.

J

Jessica Neil40:22

Yes. So I agree. So go look it up.

J

Josh Reeves40:25

And podcasts like mine same approach, same mindset.

J

Jessica Neil40:32

Yeah. Tell your friends. Okay. So last thing because we are literally almost out of time. I always ask for my guests to give a piece of advice to the listeners, you know, like a little gift. What do you want them walking away thinking about? So what is your advice for the listeners today?

J

Josh Reeves40:50

Okay, I have one I love to do, but I'm going to try to think of an original one and then I'll do my go-to as well. The original one is something I say to my kids a lot these days, and it's I think very relevant. It's a big part of my life philosophy. We kind of alluded to it earlier, but I say to them, 'Hey, in our family, we do hard things.' And when I talk to college students these days or I talk to entrepreneurs or I talk to experienced professionals, it applies to every age demographic. The times when I've learned the most, the times when I've done work I'm most proud of. Right now it's our end of year. It's a very intense busy time at Gusto. These are also the times when I learn the most, grow the most, have the best memories of us overcoming obstacles and accomplishing something. Often as a team, usually it's not individually. So, you know, lean in, do hard things, obviously in a way that leads to growth and learning is a mantra, kind of a philosophy I wanted to impart to your audience. I can also share my other favorite one if there's time.

J

Jessica Neil41:47

Okay. I can just imagine you telling the two-year-old twins, we do hard things in this family.

J

Josh Reeves41:52

We do hard things. Usually, it's in the moment of them going, I don't want to pick up the cup, pick up the cup off the ground, and I'm like, we do hard things in this family. Pick up that cup off the ground.

J

Jessica Neil42:04

Okay. So, yeah. Which what's the next one?

J

Josh Reeves42:08

I mean, I really believe kind of juxtaposing my first startup to the Gusto experience. What really has worked for me is, you know, it all starts with the problem, the mission, the purpose, what we're trying to fix, make better. And so, I really believe that thought experiment: imagine it's the 10,000th time you're describing what you're doing. Will you be as excited as the first time? is really a great thought experiment for every entrepreneur to navigate when it comes to their mission, their purpose, what they're trying to fix and make better. And when it comes to team building, you know, we kind of started here, compensation does matter, but also if this is done right, people get purpose from work, right? It actually is a form of pride and impact. They want to tell your family, friends, like here's how I'm helping, who I'm helping today in my job. It's a form of community. Hopefully, you develop real connections with people you work with. And it's a form of again compensation. All these can matter if the alignment is there, but it starts with caring about the problem you're trying to fix. Otherwise, work is just a paycheck, which I think is not a very fulfilling, meaningful way to approach work if you can have it be more.

J

Jessica Neil43:04

Yeah, if you can, you should. And you're right. You know, I can tell that you're still so passionate about it and just the way that you speak and every time I interact with you, it oozes from you. And I hope that continues for decades to come. I think it will. And you're right. When you're doing hard things with people that challenge you, that inspire you, it's not not fun. It's fun. It's hard. You're working harder than you've ever worked. And but you're learning more than you've ever learned. When I look back at the best times in my career, it's when I did hard things. But I did it with people that I loved doing it with and it was incredibly fun.

J

Josh Reeves43:49

Yeah.

J

Jessica Neil43:50

Yeah. It's as simple as that. We want to do work we like, we're good at, that's helpful, that's useful with others that share our values and care about that mission and purpose. And when that's the case, work is more than just a paycheck. Again, it's a source of meaning and purpose and impact. And again, that's what we wish upon every business owner. To be clear, that's not just about Gusto. Every business owner, every small business owner especially, we think is authentic to that mindset. It's a community because it's a small team. Often it's a labor of love. Obviously, the compensation piece matters. It's how they often provide for their family. But that alignment to me is what we hope for every business owner out there. And it's part of our mission, part of our product to go help create that future, frankly.

Yes, it is, which I love. Okay. Will you do a career confession with me real quick before you go?

J

Josh Reeves44:35

Absolutely.

J

Jessica Neil44:36

Okay. So, here's a little context for the question. In high trust work, speed is often rewarded early, but it can quietly introduce risk that only appears later. So here's the question. What type of decision looks slow in the moment but actually prevents the most expensive failures down the line?

J

Josh Reeves44:57

So slow in the moment and prevents failures down the line. Is there a trade-off or is it just that they said? I don't know.

J

Jessica Neil45:05

Yeah. They're not here. So I would ask them.

J

Josh Reeves45:08

Yeah.

I mean I can think of examples if that's helpful. Like when we rolled out in 2012 we were just in California and we scoped the product. We were just focused on, you know, new employers, full-time employees in California. But that was enough for us to figure out, have we created something useful? And then it took us three years till 2015 to get to all 50 states. And we did it in a very intentional way. We wanted to be comprehensive. We wanted to cover all payroll rules and requirements, not have it be partial. We left revenue and money on the table. But because we were going to build a multi-decade business, we knew that that was the right call because it didn't dilute the message that if you use Gusto or Zen Payroll at the time, we got your back. We got you covered. So that decision seemed risky at the moment because we were a cash burning startup with very few customers still. But in hindsight over a multi-year arc, definitely proved to be the right decision. It seemed like a relevant example to the question.

J

Jessica Neil46:04

No, and I think it's a perfect example. And you know, you're choosing to go a bit slower versus just speed building and launching in every state you possibly can because you have to build a great product. And if you don't build a great product, it doesn't matter, you know, like if you're in that state or not, nobody's going to get it if it's not great. Right.

J

Josh Reeves46:29

When I have a framework for that, which, you know, we want to go serve millions of companies. So, we're an ambitious group. We obviously want to get there as fast as we can, but there's three checks and balances. One, you just talked about quality of our product. If the compliance, the accuracy, the reliability were to degrade, you know, obviously that's on us. We don't want that to happen, but that's a great reason to slow down because we're obviously not going to just grow and let the product quality suffer. We have to maintain that quality even at bigger and bigger volumes. The second check and balance is on the business model. And this is something also sometimes that Silicon Valley gets distracted by. But when we started scaling, when you're early in experimenting, obviously we're just learning. But when we started scaling, having good unit economics, right? Like our customer acquisition cost, our CAC payback, our gross margin, how much we pay to get someone, how much we pay to serve someone. We wanted to make sure that was going to be a good business. Otherwise, you kind of just lose more and more money as you get bigger. And again, that can work for some businesses, to each their own, but it almost feels more like gambling to me. And for what we were doing, we wanted to make sure that if we're delivering lots of value, people pay us for that value. It's a subscription-based business and then business model works and it's straightforward. And then it's just how do we get more and more customers in the door. And then the third check and balance is on team. If obviously we're growing in a way that leads to lots of people quitting or turning or having a short tenure in the company, something's wrong, right? We want people to be a Gusty hopefully over multiple chapters. So that's kind of my high level framework. We have numbers against and metrics against each of them. We obviously want to grow quickly, but there has to be checks and balances. Growth at all cost in my opinion can always burn even.

J

Jessica Neil48:01

Yeah, I think you're absolutely right. And you got to think about the trade-offs, you know, and the tax.

J

Josh Reeves48:06

Everything has trade-offs.

J

Jessica Neil48:07

And yeah, it does. So, I am so glad we reconnected. This was so nice. And can we maybe connect before our next podcast?

J

Josh Reeves48:19

Yeah, let's go on a walk. Let's hang out.

J

Jessica Neil48:20

You know, like I would love to go on a walk with you. I don't know when I'll be in your area, but I'm sure I'll be there at some point and we'll go on a walk and we can give each other feedback.

J

Josh Reeves48:31

I'm an Eagle Scout. If you want to go on a hike, too, I got a lot of choices to choose from.

J

Jessica Neil48:35

I will go on a hike with you. Absolutely. Let's make it happen. Thank you again for coming on. If our listeners want to find out more about Gusto or more about you, where should they go?

J

Josh Reeves48:45

Just come on over to Gusto.

J

Jessica Neil48:48

Okay.

J

Josh Reeves48:48

And then for me, I'm on Twitter, etc.

J

Jessica Neil48:52

Okay. Twitter, LinkedIn, all the things. And if you're a small business, you might want to try it out. It's a great product.

J

Josh Reeves48:59

With a great founder.

J

Jessica Neil49:00

Well, trying to get better every day.

J

Josh Reeves49:02

Yay. Well, thank you so much.

He Slept In A Closet To Build A $8B Company | Joshua Reeves

About Josh Reeves