Tomer London says Gusto is moving beyond traditional login-and-menu software with Gusto Co-Founder, a proactive AI agent built by 5 people in 8 weeks that runs a small business back office over SMS, iMessage, Slack, and WhatsApp. While the broader US economy lost 23,000 jobs in July, Gusto data showed small businesses added 38,000 net jobs, driven by rapid AI adoption where a 10% increase in AI exposure correlates with a 2% monthly revenue gain. London keeps a 2,000-to-3,000-person organization close to customers by forcing weekly hand-raises in product meetings, throwing out annual plans during crises like COVID-19 and the Silicon Valley Bank collapse, and equipping every PM and designer with Claude to query anonymized telemetry. On M&A, he evaluates targets strictly by roadmap acceleration value and warns founders that growing revenue too high before talking to acquirers can kill a deal. These signals are from an interview that Turner Novak did with Tomer London on The Peel with Turner Novak.
Raise Your Hand Weekly. When a company scales from 3 people out of Y Combinator to 2,000 or 3,000 employees, internal operations and OKR meetings naturally crowd out the end user. To prevent co-workers and bosses from becoming the de facto customer, London runs a check in Gusto product meetings: anyone who spoke with a customer in the past week must raise their hand. Product managers who keep their hands down feel immediate peer pressure that they are not doing their jobs. Rather than sharing static spreadsheets or 10 quotes, PMs are expected to bring live customers into the office or play video recordings for engineers so teams fix problems for real people. ▶ 4:42
Start All-Hands With a Customer. Gusto opens every biweekly company all-hands meeting with a live or recorded interview with a small business owner covering their daily operations, challenges, and view of the economy. London pairs this cadence with a recruiting filter that screens candidates for personal connections to small businesses—whether through family, past jobs, or a neighborhood shop. He says the goal is to hire missionaries rather than mercenaries who care about helping US entrepreneurs succeed. Keeping the customer’s life visible every two weeks prevents a thousand-person organization from drifting into internal bureaucracy. ▶ 6:26
A Proactive Co-Founder Over Text. A 5-person team at Gusto built and launched Gusto Co-Founder in 8 weeks to replace primary, secondary, and tertiary SaaS navigation menus with messaging over SMS, iMessage, Slack, and WhatsApp. Instead of waiting for a business owner to log into gusto.com, the AI agent wakes up in the morning, reviews the account, and texts proactively. If a business has 7 pending PTO requests before payroll, the agent approves 5 ordinary requests automatically and texts the owner for input on the 2 edge cases. It also spots when a company hires engineers and offers to set up R&D tax credits to save $15,000 the following year. ▶ 11:07
Small Businesses Gain From AI First. When the July national jobs report showed the US economy shed 23,000 jobs, Gusto’s economic dashboard—modeled across its 9% share of US small businesses—showed SMBs added 38,000 net jobs across every sector and region. Host Turner Novak points to Gusto data showing a 10% increase in AI exposure leads to a 2% monthly increase in revenue. London says small businesses capture AI gains much faster than large enterprises bogged down by complex implementation. While hiring a full-time employee requires $30,000 to $50,000 in minimum cash outlay, $2 AI tools let owners automate compliance, banking setup, websites, and marketing from day one. ▶ 14:24
Throw Out the Annual Plan. In early 2020, Gusto had just finished its annual planning cycle and sent 1,000 in-office employees home when COVID-19 shut down the economy. Internal data showed terminations spiking to unprecedented highs and new hires dropping 5 to 8 times worse than historical lows by June. London and the leadership team threw the annual plan into the trash can and replaced Run Payroll at the top of Gusto’s left navigation bar with a COVID-19 resource hub. They built one-click workflows that pre-filled PPP loan applications with partner banks and automatically faxed state tax credit forms to government agencies, driving Gusto’s NPS from 70 to 89 in an industry where an NPS above 0 is rare. ▶ 25:14
Step In When the Bank Fails. Learning cash flow mechanics during the pandemic led Gusto to launch Payroll Bridge, which fronts Friday payroll for businesses waiting on a client invoice to clear on Monday or Tuesday. When Silicon Valley Bank (SVB) collapsed on a Wednesday during a payroll week, Gusto’s own processing never went down because it runs redundant multi-bank payment rails. For customers whose accounts were frozen at SVB, Gusto determined the lockup was temporary, extended credit to run their payrolls on time, and debited their accounts the following week. London spent several days calling worried founders one by one to reassure them their employees would be paid. ▶ 31:38
Build Internal Systems Good Enough to Resell. London says a social network for dogs can survive a two-day outage, but financial software moving money and taxes requires absolute redundancy. He sets an internal engineering bar that core infrastructure must be resilient enough to sell as a standalone product. That discipline produced Gusto Embedded, which licenses Gusto’s tax and payment rails to JPMorgan Chase, U.S. Bank, Xero Accounting, and salon vertical SaaS platform Vagaro. Because gusto.com serves 9% of US small businesses directly, embedding a payroll tab inside vertical software lets Gusto reach the remaining 91% of the market through partners. ▶ 35:05
Fax Machines and Town Bulletin Boards. Wiring money directly to a worker without withholding taxes or filing a W-2 is illegal, and a single wrong number in a quarterly box can take 1.5 years to surface via a W-2C correction after the employee has moved away. In states like New York or Washington, a one-person business may report to 4 agencies, and across the US tens of thousands of localities create streets where 3 neighboring homes in a cul-de-sac sit in 3 different tax codes. Some small towns still post new tax resolutions only on physical bulletin boards or in local newspapers. Gusto pairs its software with veteran operations staff who know local town clerks by name, ask about their grandkids, and call in to capture rule changes before updating the codebase. ▶ 46:42
Reverse Regulatory Inflation. London’s father has run a clothing store in Israel for over 40 years, wearing every departmental hat from inventory financing to pricing and tax compliance alone. Lawmakers make that job harder through what London calls regulatory inflation: governments constantly add laws and almost never delete them, unlike senior software engineers who take pride in removing lines of code. At the same time, dozens of helpful federal and state tax incentives—such as veteran hiring credits or R&D credits—are so complex that only corporations with 8-to-10-person tax departments claim them. Gusto levels the field by codifying the rules and auto-filing the credits for small businesses. ▶ 54:17
Consumer Buyer, Enterprise Decision. Before ZenPayroll launched in 2012, co-founder Joshua Reeves had to meet a payroll rep in a suit with a briefcase at a coffee shop over hot cocoa, fill out stacks of paper, wait two weeks for headquarters processing, and fax or call in hours every pay period. Still, most software startups flee the SMB market because selling a CRM to a 5-person shop brings in $1,000 a year, whereas the exact same software sold to a 5,000-person enterprise yields $50,000 to $100,000—100 times more revenue for the same work. SMBs sit in a dead zone where deals are too small for street sales reps and buyer numbers are too small for mass billboards. London cracked distribution by treating the SMB owner as a single consumer decision-maker making an objective, professional choice, using an 80+ NPS to drive organic word-of-mouth referrals. ▶ 1:02:57
Minimum Lovable Over Minimum Viable. Because Gusto depended on word-of-mouth referrals to grow without an enterprise sales force, London rejected Minimum Viable Products (MVPs) in favor of Minimum Lovable Products (MLPs) from day one. He breaks user experience into three tiers: functional (health insurance works at the doctor), intuitive (an owner paying a contractor during a 1-minute walk to the bathroom needs zero manuals), and delightful (anticipating unasked questions). Where an MVP puts a benefits benchmarking chart inside a hidden left-nav tab, an MLP detects a first-time buyer and automatically shows what similar local businesses offer right inside the enrollment flow. ▶ 1:07:45
Every PM Queries Telemetry With Claude. To build anticipatory features faster, every product manager, designer, and engineer at Gusto has direct access to Claude hooked up to anonymized customer telemetry, including NPS comments, feedback surveys, sales notes, and customer care transcripts. Previously, discovering what questions business owners had in their heads while shopping for health insurance required a user researcher and weeks or months of recruiting and interviewing customers. Now teams ask Claude directly to surface top customer anxieties in seconds, using AI to jump-start product discovery before moving into design. ▶ 1:11:36
Boil the Ocean on the Roadmap. Referencing Y Combinator CEO Gary Tan’s essay on “boiling the ocean,” London says AI flips the classic product rule against spreading teams too thin across multiple initiatives. In the past, Gusto shipped 4 to 6 major feature announcements per year. By applying AI across customer research, prototyping, coding, and launch marketing, Gusto has already doubled per-engineer velocity, shipping 4 to 6 major releases every 6 months. London expects to double velocity again to quarterly releases and then double once more to monthly major releases. ▶ 1:13:07
Price M&A by Roadmap Acceleration. Gusto recently acquired leading 401(k) provider Guideline—a deal Turner Novak notes equaled roughly under 10% of Gusto’s size—bringing Kevin and his team onto the same codebase and Gusto Wallet mobile app. When evaluating acquisitions, London calculates a hard dollar number for acceleration value: how much time the deal saves across product roadmap, customer base, and go-to-market talent. He notes that AI has raised the M&A bar on product acceleration, because a feature that previously took 2 years to build internally now takes 1 year with AI. ▶ 1:15:59
Too Much Revenue Kills the Acquisition. London shares a paradox that has killed multiple Gusto acquisitions: Gusto might evaluate a startup’s product, codebase, and team and calculate that saving 18 months on its roadmap is worth $50 million in enterprise value. However, if that startup already generates $50 million in annual revenue, venture market multiples price the company far above $50 million—whereas if the startup made $5 million in revenue, a 10x multiple at $50 million would make everyone happy. Because Gusto buys technology to distribute to its own 500,000 customers using AI rather than buying standalone revenue, London advises Series A and Series B founders who want to be acquired to start M&A talks early, before their revenue prices them out. Looking ahead, he takes inspiration from Shimon Peres’s book No Room for Small Dreams, arguing that since small and large dreams are equally hard to achieve, builders should aim bigger. ▶ 1:19:54
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