Gusto, best known for its American payroll management software and services, is playing in the big leagues.
TechCrunch+ has exclusively learned that Gusto has surpassed a significant revenue milestone: In its most recent fiscal year (the 12 months ended April 30, 2023), it generated revenue of more than $500 million, the company said.
The company also has a key profitability benchmark within reach, anticipating reaching free cash flow positivity in the next few quarters, where it expects to stay thereafter.
Gusto has so far held details regarding its financial performance close to its chest, so these numbers are illuminating. In 2021, the company admitted to recording revenue in the nine figures, but these new details place Gusto among the largest private-market tech companies in terms of scale.
We could better nail down Gusto’s place in the private technology company hierarchy if we had, say, a fourth-quarter revenue figure that we could annualize. But given what we have, Gusto certainly ended its last fiscal year on a greater run rate than $500 million, meaning that it is far and away large enough to go public in its current form.
Gusto declined to share information relating to its recent growth rate, but CEO Josh Reeves told TechCrunch in 2021 that his company was growing around 50% per year.
Reaching cash flow positivity is notable for Gusto in today’s business climate, which has many tech startups and unicorns working to conserve cash. Ending cash burn is not a simple process. “At-scale companies should have a path to be able to fund themselves,” Reeves told TechCrunch+, adding that his company has “been on a path” to cash flow positivity for the past four or five years.
Understandably, Gusto has no plans to raise more outside capital. That said, we don’t expect it to pursue a direct listing when it does go public.
How did Gusto breach the half-billion-dollar revenue milestone? By pursuing a multipart model. Back in mid-2021, the company launched an embedded payroll feature, which allowed other companies to offer its payroll services to their customers inside their app or service.
The work has paid off: The company told TechCrunch this week that since its launch, its embedded payroll service has grown to a partner base of 27. Those partners, in turn, support more than a half-million businesses. Gusto also said that it has agreements with a few “Fortune 250” companies but declined to share their names.
Gusto’s efforts to offer its payroll services to other companies via an API was foreshadowing, to a degree. Reeves indicated at the time of the launch that more of Gusto’s platform would become available via an API over time. That was made possible by the company’s work to use internal APIs to power its own software.
And this prior API-related work stands to pay dividends, given that Gusto announced this morning that it is teaming up with Remote to support international hires.
Remote + Gusto
In the United States, Gusto is best known for its HR tech business, including payroll and benefits management. Remote, in contrast, helps companies hire and support full-time staff around the world.
Gusto powers its American customers’ domestic payroll and supports international contractors, while Remote allows companies to hire internationally, handling the necessary work to do so in a compliant manner.
According to Reeves, demand for Gusto to support full-time international workers was clear — in a more remote-friendly world, this is not a massive shock — which makes the Remote partnership feel contentedly logical. Gusto confirmed that the deal is a revenue-share arrangement.
But why not build instead of partnering with another company? Reeves framed his company’s choice by reaching back in time, explaining that Gusto launched only with support for California before going on to support all U.S. states over the next three years. It chose to leave revenue on the table by being methodical.
He said that Remote has taken a similar approach to international markets, “expanding country by country” by building the “right infrastructure” to do so.
That shared perspective regarding careful compliance and the chance at a quick time to market made the Remote partnership a “no-brainer,” Reeves said. The two companies also share a backer in General Catalyst.
For Remote, the deal took a while to close but left both parties quite happy, its CEO Job van der Voort told TechCrunch+.
Van der Voort said that a few years ago, his company decided to offer its services through APIs, mirroring what we heard from Gusto back in 2021. The result is that Gusto customers will be able to add international talent via Remote inside of the Gusto app. There will be a button, van der Voort explained, which sounds simple enough.
To begin with, Gusto customers can start hiring via Remote in Canada, and more markets will be added shortly thereafter. Van der Voort said he wants to bring his company to as many markets as possible in time, past the 75 or so it currently supports. So, Gusto customers could have the ability to hire nearly anywhere globally when that happens. For both unicorns, that shared capability could unlock a new bloc of growth.
Before we get into the competitive considerations at play in the deal, we should note that both companies were not bowled over when we recommended that they just get it over with and do a merger.
Is Gusto’s $500 million number big?
According to PitchBook data, Gusto’s most recent private valuation was around $9.6 billion, just shy of the decacorn mark. Remote is worth a flat $3 billion, according to Crunchbase. The two companies therefore represent a massive amount of private-market wealth held by dozens of investors. If this deal goes well and allows each to do more total business, it could make a lot of pockets fatter.