How Gusto built a $9.5 billion company by identifying a burning problem

Tomer London is the co-founder and Chief Product Officer at Gusto, the payroll and people platform used by over 400,000 businesses. He grew up helping run his dad’s clothing store in Israel — an experience that sparked his mission to build better tools for small business owners. After moving to the US for a PhD at Stanford, he met his co-founders and started Gusto. In today’s episode, we discuss: • Reinventing payroll without any prior experience • Why you should hire for humility, not just talent • Gusto’s scrappy customer research: cold calling from a walk-in closet • Why founders should embrace customer rejection • Why “emotional urgency” matters more than polite feedback • The weekly co-founder ritual that built trust • How Gusto expanded from payroll to a multi-product platform • Building products customers actually love • And so much more Referenced: • ADP: https://www.adp.com/ • Eddie Kim: https://www.linkedin.com/in/edawerd/ • Gusto: https://gusto.com/ • Intuit: https://www.intuit.com/ • Josh Reeves: https://www.linkedin.com/in/joshuareeves/ • Paychex: https://www.paychex.com/ • Steve Jobs’ “Secrets to Life” clip: https://www.youtube.com/watch?v=kYfNvmF0Bqw • Steve Jobs’ Stanford Commencement Speech: https://www.youtube.com/watch?v=UF8uR6Z6KL • Wells Fargo: https://www.wellsfargo.com/ • Y Combinator: https://www.ycombinator.com/ Where to find Tomer: • LinkedIn: https://www.linkedin.com/in/tomerlondon/ • Twitter/X: https://x.com/tomerlondon Where to find Brett: • LinkedIn: https://www.linkedin.com/in/brett-berson-9986094/ • Twitter/X: https://twitter.com/brettberson Where to find First Round Capital: • Website: https://firstround.com/ • First Round Review: https://review.firstround.com/ • Twitter/X: https://twitter.com/firstround • YouTube: https://www.youtube.com/@FirstRoundCapital • This podcast on all platforms: https://review.firstround.com/podcast Timestamps: (00:00) How a childhood around SMBs shaped Tomer’s founder mindset (03:24) The three things that led to the creation of Gusto (07:17) Hiring for humility, not just talent (09:28) The tug-of-war test for product-market fit (11:58) Why founders should actively seek rejection (15:34) Gusto’s scrappy customer research: cold calling from a walk-in closet (17:45) Betting on SMBs – and ignoring investor advice (20:44) “It’s not an MVP, it’s something that wows people” (24:09) Serving SMBs vs. startups (28:36) How to find the right co-founders (31:09) The weekly co-founder ritual that built trust (35:02) Reinventing payroll without any prior experience (38:49) Gusto’s “start small” GTM playbook (42:16) The big opportunity Gusto wishes they tackled sooner (43:58) How switching costs became Gusto’s moat (47:25) The two lucky breaks that gave Gusto an edge (51:56) What Tomer learned about customers from his dad’s clothing store