Gusto (formerly ZenPayroll) has raised $50 million at a $1 billion pre-money valuation, CEO Joshua Reeves told TechCrunch.
That’s only natural for the startup, which is increasingly competing with the well-funded — and cash burning — Zenefits. Originally focused on payroll services, the company recently expanded into HR and benefits tools, an area where Zenefits is quickly growing after raising $500 million at a $4.5 billion valuation. Getting a war chest will be important for the startup, which while competing can capitalize on some issues Zenefits is having with its burn rate and growth.
Gusto raised $60 million in April this year at a $560 million post-money valuation with its eyes on continuing to expand, which includes growing its headcount. When it rebranded, the company said it had added more than 275 employees this year. It remains to be seen whether this round brings Gusto to unicorn status.
Reeves described the round as “opportunistic,” and said the company had more than $50 million in the bank when it did this financing in late November. Investors in the round included Google Capital, General Catalyst, Obvious Ventures and other existing investors. The company is processing several billion dollars in annual payroll, Reeves said.
Gusto rebranded from ZenPayroll in September this year — conveniently bringing the “Zen” out of its name — as it expanded into HR and benefits tools. That move brought the company more into competition with Zenefits, though at the time the company insisted that it wasn’t in competition with the larger and better-funded startup.
Still, with Zenefits rapidly expanding but finding itself encountering many issues along the way, it just proves that the whole area is a difficult space to continue expanding. Both Zenefits and Gusto have to work their way into small businesses across the country, which can be capital intensive as it essentially requires picking them up one-by-one. So it makes sense that Gusto needs to continue picking up cash in order to get ahead of Zenefits.