In this theCUBE + NYSE Wired: Mixture of Experts segment, theCUBE’s Dave Vellante sits down with Jim McNiel, Chief Growth Officer at TAE Technologies, to demystify fusion vs. fission and explore how proton–boron fusion could reshape energy economics for enterprise and Wall Street alike. McNiel explains why TAE targets abundant, low-cost boron fuel and how its approach avoids long-lived radioactive waste, requires only light shielding and eliminates meltdown risk. He breaks down siting and regulation – fusion treated more like medical isotopes than fission – and outlines first-gen levelized energy costs in the 7–9¢ range with a path to sub-5¢ as the technology matures. The conversation ties these fundamentals to market dynamics: dispatchable, carbon-free baseload power for data centers, safer urban siting and a financing narrative that aligns with investor expectations and hyperscaler demand.
Listeners also get a clear milestone roadmap: Copernicus (commissioned to operate in 2028) targeting net energy out; Da Vinci as a 50-MW commercial prototype; and TAE Fusion 1 designed for 350 MW—scalable units that could colocate with gigawatt-scale AI facilities. McNiel details how AI already governs plasma stability via TAE’s “Optometrist Algorithm” developed with Google and notes strategic investors (e.g., Chevron, Sumitomo) plus near-term revenue from TAE Power Solutions and TAE Life Sciences. The discussion frames emerging trends in enterprise strategy – from energy as a core input to AI-driven productivity gains – and why the go-to-market has shifted from utility-first to hyperscaler-led demand for dispatchable, clean power.
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Josh Reeves, Gusto
In this theCUBE + NYSE Wired: Mixture of Experts segment, theCUBE’s Dave Vellante sits down with Jim McNiel, Chief Growth Officer at TAE Technologies, to demystify fusion vs. fission and explore how proton–boron fusion could reshape energy economics for enterprise and Wall Street alike. McNiel explains why TAE targets abundant, low-cost boron fuel and how its approach avoids long-lived radioactive waste, requires only light shielding and eliminates meltdown risk. He breaks down siting and regulation – fusion treated more like medical isotopes than fission – and outlines first-gen levelized energy costs in the 7–9¢ range with a path to sub-5¢ as the technology matures. The conversation ties these fundamentals to market dynamics: dispatchable, carbon-free baseload power for data centers, safer urban siting and a financing narrative that aligns with investor expectations and hyperscaler demand.
Listeners also get a clear milestone roadmap: Copernicus (commissioned to operate in 2028) targeting net energy out; Da Vinci as a 50-MW commercial prototype; and TAE Fusion 1 designed for 350 MW—scalable units that could colocate with gigawatt-scale AI facilities. McNiel details how AI already governs plasma stability via TAE’s “Optometrist Algorithm” developed with Google and notes strategic investors (e.g., Chevron, Sumitomo) plus near-term revenue from TAE Power Solutions and TAE Life Sciences. The discussion frames emerging trends in enterprise strategy – from energy as a core input to AI-driven productivity gains – and why the go-to-market has shifted from utility-first to hyperscaler-led demand for dispatchable, clean power.
>> Hello, I'm John Furrier with theCUBE. We are here at theCUBE's NYSE studio here in New York City. The New York Stock Exchange of course, we have our Palo Alto Studio connecting Wall Street and Silicon Valley as part of our NYSE Wired program in community. We got Josh Reeves here, the CEO of Gusto. Killing it in the market, multiple offices. Josh, great to have you on theCUBE. Thanks for coming on.
Josh Reeves
>> It's great to be here, John.
John Furrier
>> Talk about the company because we were talking before we came on camera. You got multiple locations, the business is doing well. Give us a quick update, some stats, what's the momentum? Give a quick update.
Josh Reeves
>> Yeah, so if you want to hear one word or two words associated with Gusto, we love helping small business. We serve over 400,000 small businesses today across America. I think we're probably going to talk about this shortly, but we're really excited. Last week we launched Gusto 401(k), making it easier for small businesses to get access to retirement benefits, so it's a busy time.
John Furrier
>> And how old is the company?
Josh Reeves
>> Company got started 2011. We launched in 2012, and I was just saying we are one decade in, many decades to go.
John Furrier
>> You got offices in Arizona, New York.
Josh Reeves
>> Yeah, New York.
John Furrier
>> Bay Area.
Josh Reeves
>> Denver is our biggest office. The team is about 3,000 people, and we all have one purpose, which is to serve our customer.
John Furrier
>> What's the customer base look like for you guys?
Josh Reeves
>> Small business. I like to give some stats, there's about 6 million employers in America, over two-thirds of them are less than five employees. When we say small business, we mean 2, 3, 4 person, five person businesses across the whole geography. Every state, every county, every zip code.
John Furrier
>> In small business, I mean I've done a lot of startups, you forget the little things that you have to do because you're so focused on building the business, running the business, figuring out how to grow the business, get some cash flow in things like benefits, payroll, usually on a spreadsheet. It's kind of a pain in the butt, big time.
Josh Reeves
>> That's what inspired us was we had run our own prior startups, which were small businesses. I had hired an employee. We had to set up payroll, health benefits, like you said, you had to do state tax registration and it was a lot of paperwork, manual compliance. Someone met me for coffee and they were a lovely human. They were very kind and friendly, but I kept thinking the whole time, why am I meeting in person with someone? I have work to do. Can I just do this online really efficiently, really quickly, but in a very secure and reliable way? That was the catalyst for why we started the company.
John Furrier
>> I've done a lot of setups of programs as we hit. I think we have 60 people now, so it even is still hard. It's end of the year. You got to make declarations, there's benefits, there's the 401(k). How do they create the benefits? And also it's like, okay, management and there's a lot of compliance involved. How do you guys make that easier? Because that seems to be the trigger. I've never seen something that's really easy that's usable for employees and the owners.
Josh Reeves
>> Well, that's what we've been up to, we have more to do. I would say starting with why is it complex? Maybe that's also people's question sometimes. It's because partially you have state, local, federal, you have all these different rules and requirements. Even just in payroll, you have over 10,000 rules and requirements across the country. With COVID, people started hiring in more locations. You can use Gusto to hire contractors full-time in multiple states, so you have all that complexity. The quick answer of how we do it is obsessively with technology and very accurately. We will file hundreds of millions of documents today, we will move hundreds of billions of dollars, and all of it's done with technology. It's not people doing it by hand, so it's going to be more accurate and more scalable. That business owner doesn't have to do it on their own anymore. They can just have Gusto do it for them.
John Furrier
>> There's really two problems I think I see. One is who administers the program? Someone on the staff, someone usually given responsibility to own it. And it's like-
Josh Reeves
>> The people side.
John Furrier
>> The people side, questions, "Hey, what about here?" And then there's the user, making the benefit changes. What's the biggest technology thing that you have to do to make that happen? Is it AI? You guys use AI to do all that?
Josh Reeves
>> Well, I can talk pre-AI, and then we're really excited about AI right now as well, obviously. So for us, it's the employer, the employee, that's the two stakeholders. Prior to AI, we would say paperless, mobile, cloud, people on the go on their phone in a native mobile app. All these different interfaces make it easy just to go run payroll for example, in a few minutes, or have an employee self-onboard in a few minutes. Now, with AI, what we're excited about is I think it lets us really evolve the interface so making it more accessible. Eventually, you'll be able to use Gusto on WhatsApp and iMessage and ChatGPT where you are, and you'll also be able to do it in a more conversational way. But if you still want to go through workflows and click through the application, that'll be possible as well. At the end of the day, whatever makes it easier for that business owner who's super busy to use the product is going to be our due north.
John Furrier
>> So pre-AI, you had to write a lot of software.
Josh Reeves
>> Yeah.
John Furrier
>> Do a lot, understand all the rules and regs in different states. You mentioned the one that probably is nuanced, but I could tell you it's a pain in the butt when you have virtual teams and someone lives in say Tennessee, and they got to file, there's certain rules in that state, it's different from California.
Josh Reeves
>> Or even in the county they live in, there might be specific rules based on the county they live in.
John Furrier
>> Now, how do you handle that? You just scour the web and get the rules and ingest it in and handle it?
Josh Reeves
>> Yeah, we've been doing that now for 12, 13 years. So it's a combination of people. We have folks on the team with decades of experience. They literally know folks that work in that tax agency because it might be a very bespoke process. They probably don't have beautiful APIs. So some of it is having relationships, but then a lot of it is just having the scale where we've processed payroll now for over 400,000 businesses. And so you hit a lot of different edge cases in that process and it's not pure software, it's also the document, the filing, the payment, the money movement that actually makes it hard. But once you're doing it well, it helps to do it at scale.
John Furrier
>> All right, post AI, because you guys started pre-AI, you did all that work. One trend that we've been documenting on theCUBE here is that there's been this, and COVID was the same way with cloud. If you're in the cloud, COVID was not that much of a big deal, you're there, but if you had the workflows and the data nailed down, AI is just a dream scenario. Take us through, as AI approaches, how did you handle that and what are you guys doing now?
Josh Reeves
>> I'd say my brain boasts to external what we do for the customer and internal, how we build the company. On the external front, I'd say the biggest thing is it's an interface change. Before, you would have to go through a workflow and click and find where to go. We still make that easy. With AI, we call it Gus. Gus is our more conversational interface. We have customers that log in and are like, "Hey, just remind me, when am I supposed to do payroll again?" They can just ask that in a very natural intuitive way. We answer for them in an automated way and they're like, "Oh."
But we might also flag, "By the way, Jimmy still needs to submit their hours. Do you want us to go ping them for you?"
And that's what Gus will be able to do is go ping them and say, "Hey, submit your hours," and then ping you back and say, "Hey, now it's time to approve hours."
Just all those interactions being able to get done in a much more intuitive way will save a small business owner a lot of time. And then again, all of the submissions, filings, documents, compliance is getting done behind the scenes. The business owner does not want to become an expert in that area.
John Furrier
>> On the customer base, the market's obviously a huge small business. There's a lot of people locked into other platforms. What's it take to switch? Because everyone I talk that uses, I won't say the names of the companies, we all know who they are, they're locked in and they're not happy. Between 10 to 50 people seems to be the breaking point of ease of use onboarding out of SaaS is a great solution for under 10, but when you hit 10 to 50, you're in real company mode. You've got HR issues, you got changes to policies.
Josh Reeves
>> I'd say first off, we focus on new employers, so there's about 500,000 new employers each year. We want to keep getting more and more of those folks and ultimately we're competing a lot with pen and paper because when someone starts, they might only have one or two people when they think I can do this by hand or manually, or they're not aware that there is a product out there that focuses on helping them. We have a product called Gusto Solo that if you're just a owner-only company, you don't even have employees yet, you can actually pay yourself through Gusto, we'll do the S-Corp tax election for you. There's just ways for us to help even a one person business today. And then we do have folks switching to Gusto. Typically, it's because they want something that's easier, faster, and more affordably, and saves them time because they're incredibly-
John Furrier
>> How long does that take?
Josh Reeves
>> How long does it take? So if you're switching to Gusto with a 10 person team, we will actually do that transfer for you. The setup might take let's say 10, 20 minutes, and then if you can give us access to going and getting the data, we will do that for you. If you want to do it yourself, that might take a little bit more time because you have to import, but one of the best times to switch payroll is January because if you switch in the beginning of the calendar year, you don't have to do any of that import process.
John Furrier
>> Well, you got January coming up, so you must have a big backlog coming in.
Josh Reeves
>> That's our Super Bowl of the year is January.
John Furrier
>> All right, talk about how many people do you guys have? Just give some stats on the employee base. How much money have you guys raised? What's some of the numbers?
Josh Reeves
>> Yeah, so we, Gusto has 3000 Gusties is what we call ourselves. We are here to serve. We've publicly shared that the company has been free cash flow positive now for three-ish years. I think we've also shared publicly, we're now pretty far past this, but we're well over 500 million of revenue so it's a real business at scale.
John Furrier
>> Yeah, it's awesome. It's a huge need too. And you're starting to see the SaaS 2.0 agentic AI wave coming in and you're seeing a lot of these, I won't say white spaces, they would be considered white spaces in the traditional sense we were talking about when you're at Stanford and the entrepreneurship program, go big or go home, you can pick a beach head and blow it out like you guys are doing, I mean whole nother mindset right now.
Josh Reeves
>> Well, small business especially was mostly a market that I think software companies pre-AI and now with AI just left behind because you want to move to those higher revenue per customer clients, you want to move up market. For us, we just very much obsess over small business, and another way to think about it is there's more dentist offices in the US than tech startups. And so that's who we're really-
John Furrier
>> This tech startup thing in California is we're getting the one person unicorns coming as they say in California, but you're seeing a lot of startups not having to have huge staffs coming out of the Bay Area. And with AI, you're starting to see, even in all verticals, the three or four person team turns into 15 and they're done.
Josh Reeves
>> I mean, my hypothesis on AI for this, and whether it's a big company, small company, I think there is going to be less hiring. On the flip side, I really believe, and I'm eager to prove that there's going to be a lot more people starting small businesses because what someone might've been on a track to just stay in a bigger organization for their whole career, what they can now go do by just being a founder of a small business doesn't mean it's a tech business. And what they can do is a two person law firm or as a small dentist office or as a small cafe. Using some of these tools, using Gusto to help abstract all that compliance complexity, I think it's actually going to be an amazing time to be a small business owner.
John Furrier
>> It's interesting, the monolithic company just gets decentralized or distributed. So the thesis is more entrepreneurship, more surface area of startup. But smaller teams.
Josh Reeves
>> Smaller teams.
John Furrier
>> That's what you're saying, and I agree with that by the way.
Josh Reeves
>> More nimble, right, and more flexible. And there's definitely a lot of toil work that still exists in knowledge work. And if that toil can be automated so someone can go do more, iterate faster, self-serve more quickly, and have more impact, that means people get paid more too.
John Furrier
>> That whole idea that AI is killing jobs is ridiculous in my mind. It'll kill the jobs that no one wants to do, but to your point, it'll increase more productivity for someone to either get funding or make money. So if you're two lawyers and you say, "Hey, we have a built-in customer base," get two or three customers.
Josh Reeves
>> Why scale? Why don't we go-
John Furrier
>> Low fixed costs. You can get the cash flow positive quicker.
Josh Reeves
>> Yeah.
John Furrier
>> So those "lifestyle businesses," so-called-
Josh Reeves
>> They become possible.
John Furrier
>> Are cash flow businesses and that's a trend.
Josh Reeves
>> Yeah.
John Furrier
>> All right. Talk about the technology, what you guys have. What are you guys thinking now? Obviously you're scaling up great revenues, good product market fit. What's the product strategy? What's the thinking around how you're using technology?
Josh Reeves
>> Yeah, I mean, so I'd say the underlying building blocks for Gusto are things like AI, cloud, paperless, mobile, but where do we direct that? For us small business and then we obsessively listen to them. We moved from doing just payroll to health benefits, and then from health benefits to now doing a 401(k). All of that was customers telling us, asking us, "Hey, can you connect these even closer and better together?"
You're going to see us continue to expand the breadth of what we do. Anything a small business has a pain point around. A lot of that is still compliance-centric, doing a lot around hourly. We're doing a lot around tax credits. We're doing a lot around cash flow management. We just launched Gusto Payroll Bridge. So if an employer doesn't have the money in their bank account, payroll's due in two days, but they know the money's coming in, they can actually use that product from Gusto to go close that gap, which we think has been a historically big pain point for a lot of our customers.
John Furrier
>> Your strategy, if I get this right, is get that system of record nailed down on the payroll, and then sequence to positions where you can extend out that benefit to the business.
Josh Reeves
>> Yeah, the entrepreneurial journey. I mean Gusto Solo is if you're just a one-person business, we can help you pay yourself. As you progress, some companies become two, some become five, a lot, stay under 10 frankly. And as you have different pain points in that journey, we're here to help you with that.
John Furrier
>> Josh, take me through that, through the key moments of your journey. Obviously you guys had startup experience, some scar tissue, some momentum. Obviously, you've been entrepreneurs, you've been there, done that. What were the key moments where it's like, you know it's working or were there near-death moments or take us through those early days, and then when did you hit, what were the key milestones that kicked the trajectory?
Josh Reeves
>> Well, every day I'm in the biggest job I've ever been in, so there's definitely no been there, done that to how I approach what I do. But I'm eager to learn and always get better. But yeah, I'd say big, big key moment. When we started the company, three founders, none of us had built any type of software related to payroll or running a small business. We had done other stuff was actually being able to pay ourselves. We actually decided not to pay ourselves until we could do it using our own product. That added a little bit more incentive to us to actually get that system working correctly.
John Furrier
>> Innovation comes from the necessity.
Josh Reeves
>> Yeah.
John Furrier
>> Mother of all inventions is necessity, got to get your payroll figured out.
Josh Reeves
>> I mean, it was a helpful additional urgency piece, but it has to be even with one, it was us at that point then we added a few friends' companies, but it had to be done accurately. Maybe that's one big difference in our mindset, given what we do, even with one customer, two customers, it has to be done correctly because if it's not, then you get fines and penalties and something goes wrong. A big milestone was running payroll for the first time, I'd say then we raised a seed round of funding and having some amazing angel investors decide to support us folks. We were just talking about Kevin from Instagram or Drew from Dropbox or Max from PayPal. These folks became our angel investors. I honestly would've paid them money for all the advice they shared. Instead, they gave us money, but they also got ownership and they've done fine in terms of that equity stake. We launched in December 2012. That was a big milestone because given we're focused on small business, we had to figure out could word of mouth be the main way we grow? At that point, there was a lot of people spending on Google and search, and you can always easily turn $5 into $1. That's never a good idea in my opinion. So we had to figure out, could be launch, could word of mouth, people having a great experience loving the product, finding it easy and intuitive mean that they get so excited, they want to tell someone else about it? And in that first month we launched in California only, we had over 100 customers sign up, the vast majority of which we'd never met. And we were like, "Ah, now we're onto something interesting," because that word of mouth is working.
John Furrier
>> And that was key to early days.
Josh Reeves
>> Even today. Today the biggest way Gusto grows, the majority of our leads come from word of mouth referrals, organic.
John Furrier
>> And when did you guys have the moment where, okay, we have to do a Series A. You had some great seed investors. Those names, obviously legendary entrepreneurs, and Silicon Valley's like that. They see some good ideas and they bank it, but then it's now growth capital. You got to get a board, you started to grow up a little bit.
Josh Reeves
>> Yeah, we had to go through our own growing pains. I mean early on, you're just-
John Furrier
>> Did they just come at you with term sheets or do you guys have to go hit the funding streets?
Josh Reeves
>> I always took lead on fundraising and I think in aggregate we've raised, to answer your earlier question, probably over $700 million. We have a lot of hundreds of millions of dollars from that still in the banks. So again, good business. Good business model means when you raise money, it's really to collapse time and do R&D, right? So having good gross margin, having good customer acquisition cost has always been important to us. I don't think raising money is a way to make up for a bad business model, for us at least. And so when we raise money, it was because we wanted to accelerate building more product. So when we thought about, "Hey, let's go do health benefits specifically," and we knew we were going to hire an R&D team, engineers, designers, product managers, that's when we raised our series. And that was from General Catalyst, Hemant Taneja, and he's been a close partner since 2013.
John Furrier
>> That's the way to do it. I mean, that's the way you're bolting on new growth strategies. Where are you guys at now? You guys thinking IPO, you're thinking next phase of the journey?
Josh Reeves
>> At some point. We are in this beautiful place that we have no news to share at the moment. I'm just in New York. We have a team here. I love visiting Gusties. I'd say focused on being a private company, serving the customer, compounding for many years.
John Furrier
>> Well, I think that as you sequence from that core position, making the business operations just more accurate, easier, you can go into multiple directions. I'm obviously going into these adjacencies, but ultimately there's other things you could do.
Josh Reeves
>> Well, and I would say also just from a hygiene lens, I mean I think now five, six years ago started doing quarterly earnings calls because we shifted to public equity investors. We are proud to have T. Rowe, Fidelity, Franklin, some of these great firms that are on our cap table because when Gusto in the future is public, we want people that are going to be long-term shareholders of the business so that we can stay focused on our product and our customer.
John Furrier
>> I mean, naturally managing the cap table, equity plans, you guys get into this stock options. I mean, small businesses may or want to do profit sharing, it's different incentives. What does that look like? Because usually not giving, they're not usually having a stock option plan, but they want to have some sort of ownership.
Josh Reeves
>> It's less common with our customers. Obviously, Gusto, we give options and RSEs at this point to Gusties. For our customer, I'd say the related concept is 401(k). I mean people want to be able to say for retirement, a lot of times if you think about life-changing financial moments, if you join a tech company, it's the equity you get in that business. But for a small business owner, it's their business they're building. And for the employees that are working there, it's actually the ability to save for not just retirement, but if you have a kid, their college savings account, or even just for a rainy day, that's a product from Gusto. You can set aside 10 bucks from your paycheck into an account so if something happens, then you actually have that money set aside rather than overdraft fees, credit card debt, or payday loans.
John Furrier
>> I mean, most small businesses that I talk to and friends that have either solo entrepreneurial ventures or small teams, it tends to be benefits driven and cash, bonuses, those kinds of things which comes into payroll. You got to pay them somehow.
Josh Reeves
>> To your point on data, at the end of the day, all the data goes through payroll because that's where filings get impacted, that's where tax withholding gets done. And again, whether it's health insurance, which a lot of small businesses think is too complicated to get, we can get you healthcare if you're a two person business or three person business or a 401(k). a lot of states now, if you didn't know, are putting in mandates. So I think of it as carrot stick. The carrot is the obviously tax benefit of saving for retirement through a 401(k). The stick is in 20 states. Now, if you don't set up retirement benefits for your employees, you could get fined or penalized from the state government. And so that's scary. We want to make sure that doesn't happen to small businesses. That's also why we're excited to launch.
John Furrier
>> And it's also the owner time. I can tell you from personal experience, I've been in meetings where it's because someone didn't elect the benefit percentage. We're putting money in as a company-
Josh Reeves
>> You felt the pain, you've been a business owner.
John Furrier
>> And then they think they're owed money because they didn't elect properly, but we're paying. So you get at these inaccuracies, small little mistakes could compound, not only just from a fine standpoint, just time sink. You can get sucked into these meetings. There's personnel issues. It can get hairy if you're not accurate.
Josh Reeves
>> I mean, accuracy matters. People are not experts. They're all busy. Mistakes can be made, but particular what's fun about payroll and 401(k) being together is we can actually make sure the money goes into your account to go fund whatever thing you're doing, whether you're buying a mutual fund, index fund, stock, et cetera. And if you add up the amount of time over every payroll run, it actually can mean meaningful, more exposure to whatever you're investing in.
John Furrier
>> We got the Gusties. Are they here in the building with you today? You guys didn't have an office in New York?
Josh Reeves
>> We have an office in New York. We have a couple hundred Gusties here. I have one Gusty with me in this room.
John Furrier
>> Yeah, she's here. Talk about what you're working on. Final question for you just to wrap up. What are you focused on now? What are you optimizing for? Put a plug in for what you're working on.
Josh Reeves
>> Yeah, I mean, due north for us is always going to be how do we make the life of a small business owner easier? I'd say 401(k) we've been talking about. I think it's just the easiest, best moment for a small business to get a 401(k) and we can make that easy. Health benefits, we're going to continue to invest a lot into R&D tax credit. A lot of small businesses don't know that they have free money available for their business if they fill out the right form and document, and they don't have time to fill out that document. But if we do it for them, we can literally give them more money back in their pocket.
John Furrier
>> It's a great venture. Josh, congratulations on the success to you and your founders and fellow Gusties. It's a great example where these markets, you think, well, it's kind of boring, but if you solve the problem and scale it and leverage technology, you can actually change the category.
Josh Reeves
>> I mean, it's a fun segment to serve. Everyone knows small businesses.
John Furrier
>> Great to have you on.
Josh Reeves
>> Thank you.
John Furrier
>> Josh was here as CEO of Gusto really killing, I mean, if this is a great example where you have a target market, it looks like it's been served, you come in, disrupt it with a better product, and then next thing you know you're growing to a billion dollars in revenue. So of course, we're doing our part in theCUBE to tell that story. I'm John Furrier, thanks for watching.
>> Hello, I'm John Furrier with theCUBE. We are here at theCUBE's NYSE studio here in New York City. The New York Stock Exchange of course, we have our Palo Alto Studio connecting Wall Street and Silicon Valley as part of our NYSE Wired program in community. We got Josh Reeves here, the CEO of Gusto. Killing it in the market, multiple offices. Josh, great to have you on theCUBE. Thanks for coming on.
Josh Reeves
>> It's great to be here, John.
John Furrier
>> Talk about the company because we were talking before we came on camera. You got multiple locations, the business is doing well. Give us a quick update, some stats, what's the momentum? Give a quick update.
Josh Reeves
>> Yeah, so if you want to hear one word or two words associated with Gusto, we love helping small business. We serve over 400,000 small businesses today across America. I think we're probably going to talk about this shortly, but we're really excited. Last week we launched Gusto 401(k), making it easier for small businesses to get access to retirement benefits, so it's a busy time.
John Furrier
>> And how old is the company?
Josh Reeves
>> Company got started 2011. We launched in 2012, and I was just saying we are one decade in, many decades to go.
John Furrier
>> You got offices in Arizona, New York.
Josh Reeves
>> Yeah, New York.
John Furrier
>> Bay Area.
Josh Reeves
>> Denver is our biggest office. The team is about 3,000 people, and we all have one purpose, which is to serve our customer.
John Furrier
>> What's the customer base look like for you guys?
Josh Reeves
>> Small business. I like to give some stats, there's about 6 million employers in America, over two-thirds of them are less than five employees. When we say small business, we mean 2, 3, 4 person, five person businesses across the whole geography. Every state, every county, every zip code.
John Furrier
>> In small business, I mean I've done a lot of startups, you forget the little things that you have to do because you're so focused on building the business, running the business, figuring out how to grow the business, get some cash flow in things like benefits, payroll, usually on a spreadsheet. It's kind of a pain in the butt, big time.
Josh Reeves
>> That's what inspired us was we had run our own prior startups, which were small businesses. I had hired an employee. We had to set up payroll, health benefits, like you said, you had to do state tax registration and it was a lot of paperwork, manual compliance. Someone met me for coffee and they were a lovely human. They were very kind and friendly, but I kept thinking the whole time, why am I meeting in person with someone? I have work to do. Can I just do this online really efficiently, really quickly, but in a very secure and reliable way? That was the catalyst for why we started the company.
John Furrier
>> I've done a lot of setups of programs as we hit. I think we have 60 people now, so it even is still hard. It's end of the year. You got to make declarations, there's benefits, there's the 401(k). How do they create the benefits? And also it's like, okay, management and there's a lot of compliance involved. How do you guys make that easier? Because that seems to be the trigger. I've never seen something that's really easy that's usable for employees and the owners.
Josh Reeves
>> Well, that's what we've been up to, we have more to do. I would say starting with why is it complex? Maybe that's also people's question sometimes. It's because partially you have state, local, federal, you have all these different rules and requirements. Even just in payroll, you have over 10,000 rules and requirements across the country. With COVID, people started hiring in more locations. You can use Gusto to hire contractors full-time in multiple states, so you have all that complexity. The quick answer of how we do it is obsessively with technology and very accurately. We will file hundreds of millions of documents today, we will move hundreds of billions of dollars, and all of it's done with technology. It's not people doing it by hand, so it's going to be more accurate and more scalable. That business owner doesn't have to do it on their own anymore. They can just have Gusto do it for them.
John Furrier
>> There's really two problems I think I see. One is who administers the program? Someone on the staff, someone usually given responsibility to own it. And it's like-
Josh Reeves
>> The people side.
John Furrier
>> The people side, questions, "Hey, what about here?" And then there's the user, making the benefit changes. What's the biggest technology thing that you have to do to make that happen? Is it AI? You guys use AI to do all that?
Josh Reeves
>> Well, I can talk pre-AI, and then we're really excited about AI right now as well, obviously. So for us, it's the employer, the employee, that's the two stakeholders. Prior to AI, we would say paperless, mobile, cloud, people on the go on their phone in a native mobile app. All these different interfaces make it easy just to go run payroll for example, in a few minutes, or have an employee self-onboard in a few minutes. Now, with AI, what we're excited about is I think it lets us really evolve the interface so making it more accessible. Eventually, you'll be able to use Gusto on WhatsApp and iMessage and ChatGPT where you are, and you'll also be able to do it in a more conversational way. But if you still want to go through workflows and click through the application, that'll be possible as well. At the end of the day, whatever makes it easier for that business owner who's super busy to use the product is going to be our due north.
John Furrier
>> So pre-AI, you had to write a lot of software.
Josh Reeves
>> Yeah.
John Furrier
>> Do a lot, understand all the rules and regs in different states. You mentioned the one that probably is nuanced, but I could tell you it's a pain in the butt when you have virtual teams and someone lives in say Tennessee, and they got to file, there's certain rules in that state, it's different from California.
Josh Reeves
>> Or even in the county they live in, there might be specific rules based on the county they live in.
John Furrier
>> Now, how do you handle that? You just scour the web and get the rules and ingest it in and handle it?
Josh Reeves
>> Yeah, we've been doing that now for 12, 13 years. So it's a combination of people. We have folks on the team with decades of experience. They literally know folks that work in that tax agency because it might be a very bespoke process. They probably don't have beautiful APIs. So some of it is having relationships, but then a lot of it is just having the scale where we've processed payroll now for over 400,000 businesses. And so you hit a lot of different edge cases in that process and it's not pure software, it's also the document, the filing, the payment, the money movement that actually makes it hard. But once you're doing it well, it helps to do it at scale.
John Furrier
>> All right, post AI, because you guys started pre-AI, you did all that work. One trend that we've been documenting on theCUBE here is that there's been this, and COVID was the same way with cloud. If you're in the cloud, COVID was not that much of a big deal, you're there, but if you had the workflows and the data nailed down, AI is just a dream scenario. Take us through, as AI approaches, how did you handle that and what are you guys doing now?
Josh Reeves
>> I'd say my brain boasts to external what we do for the customer and internal, how we build the company. On the external front, I'd say the biggest thing is it's an interface change. Before, you would have to go through a workflow and click and find where to go. We still make that easy. With AI, we call it Gus. Gus is our more conversational interface. We have customers that log in and are like, "Hey, just remind me, when am I supposed to do payroll again?" They can just ask that in a very natural intuitive way. We answer for them in an automated way and they're like, "Oh."
But we might also flag, "By the way, Jimmy still needs to submit their hours. Do you want us to go ping them for you?"
And that's what Gus will be able to do is go ping them and say, "Hey, submit your hours," and then ping you back and say, "Hey, now it's time to approve hours."
Just all those interactions being able to get done in a much more intuitive way will save a small business owner a lot of time. And then again, all of the submissions, filings, documents, compliance is getting done behind the scenes. The business owner does not want to become an expert in that area.
John Furrier
>> On the customer base, the market's obviously a huge small business. There's a lot of people locked into other platforms. What's it take to switch? Because everyone I talk that uses, I won't say the names of the companies, we all know who they are, they're locked in and they're not happy. Between 10 to 50 people seems to be the breaking point of ease of use onboarding out of SaaS is a great solution for under 10, but when you hit 10 to 50, you're in real company mode. You've got HR issues, you got changes to policies.
Josh Reeves
>> I'd say first off, we focus on new employers, so there's about 500,000 new employers each year. We want to keep getting more and more of those folks and ultimately we're competing a lot with pen and paper because when someone starts, they might only have one or two people when they think I can do this by hand or manually, or they're not aware that there is a product out there that focuses on helping them. We have a product called Gusto Solo that if you're just a owner-only company, you don't even have employees yet, you can actually pay yourself through Gusto, we'll do the S-Corp tax election for you. There's just ways for us to help even a one person business today. And then we do have folks switching to Gusto. Typically, it's because they want something that's easier, faster, and more affordably, and saves them time because they're incredibly-
John Furrier
>> How long does that take?
Josh Reeves
>> How long does it take? So if you're switching to Gusto with a 10 person team, we will actually do that transfer for you. The setup might take let's say 10, 20 minutes, and then if you can give us access to going and getting the data, we will do that for you. If you want to do it yourself, that might take a little bit more time because you have to import, but one of the best times to switch payroll is January because if you switch in the beginning of the calendar year, you don't have to do any of that import process.
John Furrier
>> Well, you got January coming up, so you must have a big backlog coming in.
Josh Reeves
>> That's our Super Bowl of the year is January.
John Furrier
>> All right, talk about how many people do you guys have? Just give some stats on the employee base. How much money have you guys raised? What's some of the numbers?
Josh Reeves
>> Yeah, so we, Gusto has 3000 Gusties is what we call ourselves. We are here to serve. We've publicly shared that the company has been free cash flow positive now for three-ish years. I think we've also shared publicly, we're now pretty far past this, but we're well over 500 million of revenue so it's a real business at scale.
John Furrier
>> Yeah, it's awesome. It's a huge need too. And you're starting to see the SaaS 2.0 agentic AI wave coming in and you're seeing a lot of these, I won't say white spaces, they would be considered white spaces in the traditional sense we were talking about when you're at Stanford and the entrepreneurship program, go big or go home, you can pick a beach head and blow it out like you guys are doing, I mean whole nother mindset right now.
Josh Reeves
>> Well, small business especially was mostly a market that I think software companies pre-AI and now with AI just left behind because you want to move to those higher revenue per customer clients, you want to move up market. For us, we just very much obsess over small business, and another way to think about it is there's more dentist offices in the US than tech startups. And so that's who we're really-
John Furrier
>> This tech startup thing in California is we're getting the one person unicorns coming as they say in California, but you're seeing a lot of startups not having to have huge staffs coming out of the Bay Area. And with AI, you're starting to see, even in all verticals, the three or four person team turns into 15 and they're done.
Josh Reeves
>> I mean, my hypothesis on AI for this, and whether it's a big company, small company, I think there is going to be less hiring. On the flip side, I really believe, and I'm eager to prove that there's going to be a lot more people starting small businesses because what someone might've been on a track to just stay in a bigger organization for their whole career, what they can now go do by just being a founder of a small business doesn't mean it's a tech business. And what they can do is a two person law firm or as a small dentist office or as a small cafe. Using some of these tools, using Gusto to help abstract all that compliance complexity, I think it's actually going to be an amazing time to be a small business owner.
John Furrier
>> It's interesting, the monolithic company just gets decentralized or distributed. So the thesis is more entrepreneurship, more surface area of startup. But smaller teams.
Josh Reeves
>> Smaller teams.
John Furrier
>> That's what you're saying, and I agree with that by the way.
Josh Reeves
>> More nimble, right, and more flexible. And there's definitely a lot of toil work that still exists in knowledge work. And if that toil can be automated so someone can go do more, iterate faster, self-serve more quickly, and have more impact, that means people get paid more too.
John Furrier
>> That whole idea that AI is killing jobs is ridiculous in my mind. It'll kill the jobs that no one wants to do, but to your point, it'll increase more productivity for someone to either get funding or make money. So if you're two lawyers and you say, "Hey, we have a built-in customer base," get two or three customers.
Josh Reeves
>> Why scale? Why don't we go-
John Furrier
>> Low fixed costs. You can get the cash flow positive quicker.
Josh Reeves
>> Yeah.
John Furrier
>> So those "lifestyle businesses," so-called-
Josh Reeves
>> They become possible.
John Furrier
>> Are cash flow businesses and that's a trend.
Josh Reeves
>> Yeah.
John Furrier
>> All right. Talk about the technology, what you guys have. What are you guys thinking now? Obviously you're scaling up great revenues, good product market fit. What's the product strategy? What's the thinking around how you're using technology?
Josh Reeves
>> Yeah, I mean, so I'd say the underlying building blocks for Gusto are things like AI, cloud, paperless, mobile, but where do we direct that? For us small business and then we obsessively listen to them. We moved from doing just payroll to health benefits, and then from health benefits to now doing a 401(k). All of that was customers telling us, asking us, "Hey, can you connect these even closer and better together?"
You're going to see us continue to expand the breadth of what we do. Anything a small business has a pain point around. A lot of that is still compliance-centric, doing a lot around hourly. We're doing a lot around tax credits. We're doing a lot around cash flow management. We just launched Gusto Payroll Bridge. So if an employer doesn't have the money in their bank account, payroll's due in two days, but they know the money's coming in, they can actually use that product from Gusto to go close that gap, which we think has been a historically big pain point for a lot of our customers.
John Furrier
>> Your strategy, if I get this right, is get that system of record nailed down on the payroll, and then sequence to positions where you can extend out that benefit to the business.
Josh Reeves
>> Yeah, the entrepreneurial journey. I mean Gusto Solo is if you're just a one-person business, we can help you pay yourself. As you progress, some companies become two, some become five, a lot, stay under 10 frankly. And as you have different pain points in that journey, we're here to help you with that.
John Furrier
>> Josh, take me through that, through the key moments of your journey. Obviously you guys had startup experience, some scar tissue, some momentum. Obviously, you've been entrepreneurs, you've been there, done that. What were the key moments where it's like, you know it's working or were there near-death moments or take us through those early days, and then when did you hit, what were the key milestones that kicked the trajectory?
Josh Reeves
>> Well, every day I'm in the biggest job I've ever been in, so there's definitely no been there, done that to how I approach what I do. But I'm eager to learn and always get better. But yeah, I'd say big, big key moment. When we started the company, three founders, none of us had built any type of software related to payroll or running a small business. We had done other stuff was actually being able to pay ourselves. We actually decided not to pay ourselves until we could do it using our own product. That added a little bit more incentive to us to actually get that system working correctly.
John Furrier
>> Innovation comes from the necessity.
Josh Reeves
>> Yeah.
John Furrier
>> Mother of all inventions is necessity, got to get your payroll figured out.
Josh Reeves
>> I mean, it was a helpful additional urgency piece, but it has to be even with one, it was us at that point then we added a few friends' companies, but it had to be done accurately. Maybe that's one big difference in our mindset, given what we do, even with one customer, two customers, it has to be done correctly because if it's not, then you get fines and penalties and something goes wrong. A big milestone was running payroll for the first time, I'd say then we raised a seed round of funding and having some amazing angel investors decide to support us folks. We were just talking about Kevin from Instagram or Drew from Dropbox or Max from PayPal. These folks became our angel investors. I honestly would've paid them money for all the advice they shared. Instead, they gave us money, but they also got ownership and they've done fine in terms of that equity stake. We launched in December 2012. That was a big milestone because given we're focused on small business, we had to figure out could word of mouth be the main way we grow? At that point, there was a lot of people spending on Google and search, and you can always easily turn $5 into $1. That's never a good idea in my opinion. So we had to figure out, could be launch, could word of mouth, people having a great experience loving the product, finding it easy and intuitive mean that they get so excited, they want to tell someone else about it? And in that first month we launched in California only, we had over 100 customers sign up, the vast majority of which we'd never met. And we were like, "Ah, now we're onto something interesting," because that word of mouth is working.
John Furrier
>> And that was key to early days.
Josh Reeves
>> Even today. Today the biggest way Gusto grows, the majority of our leads come from word of mouth referrals, organic.
John Furrier
>> And when did you guys have the moment where, okay, we have to do a Series A. You had some great seed investors. Those names, obviously legendary entrepreneurs, and Silicon Valley's like that. They see some good ideas and they bank it, but then it's now growth capital. You got to get a board, you started to grow up a little bit.
Josh Reeves
>> Yeah, we had to go through our own growing pains. I mean early on, you're just-
John Furrier
>> Did they just come at you with term sheets or do you guys have to go hit the funding streets?
Josh Reeves
>> I always took lead on fundraising and I think in aggregate we've raised, to answer your earlier question, probably over $700 million. We have a lot of hundreds of millions of dollars from that still in the banks. So again, good business. Good business model means when you raise money, it's really to collapse time and do R&D, right? So having good gross margin, having good customer acquisition cost has always been important to us. I don't think raising money is a way to make up for a bad business model, for us at least. And so when we raise money, it was because we wanted to accelerate building more product. So when we thought about, "Hey, let's go do health benefits specifically," and we knew we were going to hire an R&D team, engineers, designers, product managers, that's when we raised our series. And that was from General Catalyst, Hemant Taneja, and he's been a close partner since 2013.
John Furrier
>> That's the way to do it. I mean, that's the way you're bolting on new growth strategies. Where are you guys at now? You guys thinking IPO, you're thinking next phase of the journey?
Josh Reeves
>> At some point. We are in this beautiful place that we have no news to share at the moment. I'm just in New York. We have a team here. I love visiting Gusties. I'd say focused on being a private company, serving the customer, compounding for many years.
John Furrier
>> Well, I think that as you sequence from that core position, making the business operations just more accurate, easier, you can go into multiple directions. I'm obviously going into these adjacencies, but ultimately there's other things you could do.
Josh Reeves
>> Well, and I would say also just from a hygiene lens, I mean I think now five, six years ago started doing quarterly earnings calls because we shifted to public equity investors. We are proud to have T. Rowe, Fidelity, Franklin, some of these great firms that are on our cap table because when Gusto in the future is public, we want people that are going to be long-term shareholders of the business so that we can stay focused on our product and our customer.
John Furrier
>> I mean, naturally managing the cap table, equity plans, you guys get into this stock options. I mean, small businesses may or want to do profit sharing, it's different incentives. What does that look like? Because usually not giving, they're not usually having a stock option plan, but they want to have some sort of ownership.
Josh Reeves
>> It's less common with our customers. Obviously, Gusto, we give options and RSEs at this point to Gusties. For our customer, I'd say the related concept is 401(k). I mean people want to be able to say for retirement, a lot of times if you think about life-changing financial moments, if you join a tech company, it's the equity you get in that business. But for a small business owner, it's their business they're building. And for the employees that are working there, it's actually the ability to save for not just retirement, but if you have a kid, their college savings account, or even just for a rainy day, that's a product from Gusto. You can set aside 10 bucks from your paycheck into an account so if something happens, then you actually have that money set aside rather than overdraft fees, credit card debt, or payday loans.
John Furrier
>> I mean, most small businesses that I talk to and friends that have either solo entrepreneurial ventures or small teams, it tends to be benefits driven and cash, bonuses, those kinds of things which comes into payroll. You got to pay them somehow.
Josh Reeves
>> To your point on data, at the end of the day, all the data goes through payroll because that's where filings get impacted, that's where tax withholding gets done. And again, whether it's health insurance, which a lot of small businesses think is too complicated to get, we can get you healthcare if you're a two person business or three person business or a 401(k). a lot of states now, if you didn't know, are putting in mandates. So I think of it as carrot stick. The carrot is the obviously tax benefit of saving for retirement through a 401(k). The stick is in 20 states. Now, if you don't set up retirement benefits for your employees, you could get fined or penalized from the state government. And so that's scary. We want to make sure that doesn't happen to small businesses. That's also why we're excited to launch.
John Furrier
>> And it's also the owner time. I can tell you from personal experience, I've been in meetings where it's because someone didn't elect the benefit percentage. We're putting money in as a company-
Josh Reeves
>> You felt the pain, you've been a business owner.
John Furrier
>> And then they think they're owed money because they didn't elect properly, but we're paying. So you get at these inaccuracies, small little mistakes could compound, not only just from a fine standpoint, just time sink. You can get sucked into these meetings. There's personnel issues. It can get hairy if you're not accurate.
Josh Reeves
>> I mean, accuracy matters. People are not experts. They're all busy. Mistakes can be made, but particular what's fun about payroll and 401(k) being together is we can actually make sure the money goes into your account to go fund whatever thing you're doing, whether you're buying a mutual fund, index fund, stock, et cetera. And if you add up the amount of time over every payroll run, it actually can mean meaningful, more exposure to whatever you're investing in.
John Furrier
>> We got the Gusties. Are they here in the building with you today? You guys didn't have an office in New York?
Josh Reeves
>> We have an office in New York. We have a couple hundred Gusties here. I have one Gusty with me in this room.
John Furrier
>> Yeah, she's here. Talk about what you're working on. Final question for you just to wrap up. What are you focused on now? What are you optimizing for? Put a plug in for what you're working on.
Josh Reeves
>> Yeah, I mean, due north for us is always going to be how do we make the life of a small business owner easier? I'd say 401(k) we've been talking about. I think it's just the easiest, best moment for a small business to get a 401(k) and we can make that easy. Health benefits, we're going to continue to invest a lot into R&D tax credit. A lot of small businesses don't know that they have free money available for their business if they fill out the right form and document, and they don't have time to fill out that document. But if we do it for them, we can literally give them more money back in their pocket.
John Furrier
>> It's a great venture. Josh, congratulations on the success to you and your founders and fellow Gusties. It's a great example where these markets, you think, well, it's kind of boring, but if you solve the problem and scale it and leverage technology, you can actually change the category.
Josh Reeves
>> I mean, it's a fun segment to serve. Everyone knows small businesses.
John Furrier
>> Great to have you on.
Josh Reeves
>> Thank you.
John Furrier
>> Josh was here as CEO of Gusto really killing, I mean, if this is a great example where you have a target market, it looks like it's been served, you come in, disrupt it with a better product, and then next thing you know you're growing to a billion dollars in revenue. So of course, we're doing our part in theCUBE to tell that story. I'm John Furrier, thanks for watching.
John Furrier