Gusto is cash flow positive–and it got there by sticking to mom-approved values

As a kid, Gusto cofounder and CTO Edward Kim made his mom software for their family’s business.

Growing up in Los Angeles, Kim’s dad was a doctor with a small practice, and his mom, Sheena, did everything else as both back office wizard and front desk receptionist. So when his parents started selling an improved diabetic lancet online, Kim watched Sheena fight through the boxes and logistics of shipping orders. Then, he acted.

“He made me a software with Endicia, where he weighed one box, two boxes… then it automatically printed out the postage,” said Sheena. “How many kids would see their mom having trouble, then make a software program? It really was problem-solving.”

Today, Kim and his Gusto cofounders CEO Josh Reeves and CPO Tomer London are very much doing the real thing. Gusto, an HR and payroll software company, generated north of $500 million in revenue in its 2023 fiscal year. Upon closing its latest funding round in January 2023, the company was valued at $9.5 billion.

And it’s profitable: Gusto has been cash flow positive for multiple quarters in a row, the company (which has more than 300,000 customers) exclusively confirmed to Fortune.

In a world where lots of people—Silicon Valley entrepreneurs especially—fashion themselves as acts of radical reinvention, Gusto’s cofounders are something possibly more radical: the realization of what they’ve always been. And I know, because I talked to their moms.

On a windy Monday in May, I met Eliana Reeves, Sheena Kim, and Irit London as we huddled at a table outside the Walt Disney Museum in San Francisco’s Presidio, I met the moms to try to understand the pieces of this story that are about through-lines, from childhood to company-building. It felt like an apt time to do it—it is, after all, nearly Mother’s Day.

Gusto expressly says it’s a values-forward company, and a lot of Gusto’s values, from “embrace an ownership mentality” and “adopt a service mindset” have echoes of stories that the moms tell about their children.

As a kid, Reeves was an Eagle Scout who knew his way around trails in Marin, and the story Eliana most relishes telling about her son was about a day he and some other Eagle Scouts, with their bare hands, helped park rangers steps up a Muir Woods hill—wooden log steps that are still there to this day.

Kim and London even have parallel childhood-software-selling stories. Across the world from Kim, in Israel, London was on a similar kick—working at his dad’s clothing store, he built a software application to help manage inventory. Soon, he was going door-to-door, hoping to sell the product to nearby stores in Haifa.

"He sold a lot of software before Gusto,” recalls his mom, Irit.

In some ways, these founders and their moms all are American Dream stories. Sheena is an immigrant from South Korea, and Eliana is an immigrant from Bolivia, while London, encouraged by his mom, emigrated from Israel to the U.S. to go to Stanford.

When I asked a Gusto customer what she thinks of this tale of immigrant success and maternal values, the point really resonated. Nafy Flatley, owner of African-inspired food and beverage Teranga, has used Gusto since 2021.

“These three moms must be extremely proud of their kids,” said Flatley, who’s herself a mom of three. “I would tell them that I'm extremely proud of them that they brought their kids to this country, and then they were able to make my life easier. As a mother, I have extra time to take care of my kids because of Gusto.”

Staying together

That said, Gusto isn’t a “family business." It’s a point Reeves made to me with absolute seriousness, looking me dead in the eyes. Like me, Reeves is averse to the idea of calling a company a family in any capacity whatsoever, perhaps for the lack of ambition it connotes. We get caught up in linguistics.

On one hand, he says, yes, okay, sure—”technically, we’re at sufficient scale where sure, people are going to literally get married and have kids and create a family, but that is definitely not something we organize for or expect,” said Reeves. “It’s very much a serendipitous thing.”

And, after all, Gusto has some very competitive, results-oriented investors, who definitely aren’t backing the company for fun or sentiment. Gusto’s investors include General Catalyst, Fidelity, T Rowe Price, Franklin Templeton, and Dragoneer. To date, the company has raised more than $746 million, according to Crunchbase.

But this is also a pretty layered dynamic. Gusto is absolutely not a family business, but it has created a chosen family. Over the last decade, the cofounders’ moms have all become close friends, and as the company has grown, so has their friendship.

The three moms first came together in 2014 for London’s wedding, held in Haifa. It was the first time the cofounders' entire families had spent time with each other, and over the next three days touring Israel while crammed in a bus, the moms hit it off. Since then, Sheena, Irit, and Eliana have gone on trips together that they tell me about with utter joy—jaunts to Spanish island Tenerife and Disneyland.

As we all sit together at the table, with Irit on Zoom from Israel, the love between the three women is clear and real —”We can really talk about anything and feel very accepted,” Irit says.

"I feel so grateful to just be here, be with you guys,” Eliana chimes in. “It's just such a beautiful feeling."

Cofounders break up all the time, of course. But Gusto’s threesome have managed to stay together. (Their mothers call them the Three Brothers, a bit that goes back to a rollicking trip to Yosemite years ago.) The value of this relationship isn’t something they take for granted. The trio began doing regular feedback walks and sessions in the early days of the company—and still do.

“It’s an example of working on the relationship,” said London. “At the beginning, when we were writing code 14 hours a day, just working super hard to get this thing up and running, we realized there’s always feedback, as you learn how to work together… So, the way we’ve done it is that we just do these walks and say ‘here’s what’s going great, here’s what we need to do to improve every day.’”

Gusto also has the distinction of being a company where the product was actually built to be used by people much like the cofounders’ parents—in fact, Sheena is a customer. Once, sitting next to his mom on a plane, Kim was floored as he watched her use Gusto to do her business’ payroll on her computer. For Kim, it was a “mind-blown moment.”

‘That’s my son!’

So, Gusto isn't a family business, but it is a business devoted to its values and to its past. But that’s not incompatible with prioritizing growth and moving fast, Reeves says.

“It ultimately only works if we’re a leader in the market, if we deliver and actually have great returns for our investors, if we can attract talent… if we can grow revenue because we’re serving more customers,” Reeves says. “Otherwise, it’s just an overly principled approach that didn’t deliver results.”

It’s a thought that reminds Sheena of the Three Little Pigs fable, which to refresh your memory, goes something like this.

“They built the house really quickly with straw, then they built another house quickly with wood, and then slowly they built the house with bricks—and then when the storm and the Big Bad Wolf comes, that was the only thing that survived,” said Sheena.

I gently tease Reeves about this, because I know he’s about to tell me that Gusto does move fast.

“Well, for the house, we could create a new compound for the bricks, so they dry faster and it’s a process where you have high efficiency gains,” Reeves suggests.

Eliana, sitting next to Reeves, illuminates in a way that only a mom can: “That's my son!”

When it comes to Gusto itself, the company has been a survivor in the famously complicated payroll space, known for its deluge of regulations, which vary state-by-state. Gusto has also outlasted and outgrown competitors formed around the same time (consider, for example, Zenefits).

It's not easy to quantify how much of Gusto’s resilience ties back to the founders’ attitudes about honoring values and to the influence and support of smart, loving moms—perhaps that's why such aspects are overlooked in the metrics-obsessed startup world. But if you look closely at some of the underlying themes that have contributed to Gusto’s success, it’s there.

Gusto’s gains are also a reminder that the best business ideas often come from an instinct to be of service; to recognize when someone needs something, just like when Kim, as a child, saw his mom struggle to ship orders from their family’s doctors’ office. He figured he could drum up a software answer, and he did.

"Companies don't exist for their own benefit, companies exist to help someone," Reeves told me.

And is that all that different from what Gusto does now? In all the ways that scale and are adult, yes, of course. But at its heart, this is an idea that seems to stem back to childhood for them all.

“I think my mom really taught me about the importance of serving others,” said Kim. “Yes, it’s a business and it’s so important to run a good business, but the way to do that is by going above and beyond for your customers because you want to help them out.”

Thank you, Mom.

This story was originally featured on Fortune.com