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Build Your Company for the Long Term Humanizing Business - Joshua Reeves + Lila Preston

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2020 Startup Grind Global Conference
February 11, 2020, Redwood City, CA, USA
2020 Startup Grind Global Conference
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Build Your Company for the Long Term Humanizing Business - Joshua Reeves + Lila Preston
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About speakers

Joshua Reeves
CEO at Gusto
Lila Preston
Partner + Co-head at Growth Equity, Sustainable Solutions Fund

Josh is the chief executive officer and co-founder of Gusto. He leads the company on its mission to create a world where work empowers a better life, and building Gusto to its full potential is a multi-decade mission for him. Gusto exists at the connection between employer and employee, helping over 100,000 companies across America with payroll, health insurance, employee on-boarding, HR, & more.

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About the talk

A Fireside chat with Joshua Reeves, CEO of Gusto talking about How You Can Build Your Company for the Long-Term Humanizing Business. Interviewed by Lila Preston, Partner + Co-head, Growth Equity + Sustainable Solutions Fund.


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Hello everyone and Welcome to our session on build your company for the long-term humanize your business and we'll get into those two topics. But first, my name is actually Lila. Lila. Although I'm interchangeable. Sometimes given the FedEx and I'm a partner with generation investment management. And for those who aren't familiar with generation where a dedicated sustainable investment firm that was set up just over fifteen years ago in London, but now with the presents here in San Francisco and we managed around 25 billion of assets across both public and private Investments

and we put sustainability research at the core of everything that we do importantly we do this because we think this is a very best way to invest over the long-term. I'm one of the co-heads of our growth Equity strategy. Where were seeking to deploy Capital to companies that are accelerating the transition to a sustainable economy. We spend time in three areas of planetary Health people health and financial inclusion, and we're really excited to be here today with one of our portfolio companies. And a candidate to explore some of those areas. So Josh Reeves is a CEO and co-founder of Gaston

who is many of you will probably know is a form that is helping small businesses to both start up and support and take care of their teams. They provide payroll health insurance benefits 401k onboarding and other services. And so when I remember first meeting Josh, it was a few years ago my colleague chalany and I had spent time with him. It was around the topic of what is the people platform in the vision? And I remember you had a reaction to the term human capital. I think you've been quoted as saying humans are not

Capital they aren't resources. So, can you share your thoughts with the audience in the history and story behind Gaston quickly as a show of hands in the audience. Do we have any gas to customers? Thank you for the folks raise your hand. We're honored and privileged to serve you. We started the company eight years ago now and your rights to your question in early on was I wanted to build this kind of multi-decade durable business and we really thought about people being at the core of every

company. We're kind of surprised by some of the language in our industry. So we look at the broader space wherein there's language like human Capital Management HCM. There's this concept human resource Information Systems ATP used to stand for automated data processing. It just seemed like a very dehumanizing sterile cold way of talking about building a business where people are always going to be the foundation. So that was kind of one of the things that got us interested in the space in the first place was realizing that they actually work in a lot of companies isn't living up to what it

can or should be in could we focus more of the people side of it? Valiosa, do you know that move fast and break things and ultimately using no Capital as a competitive mode. Can you talk about how you interpret that Visa V you're going your business as a backdrop if you're not aware of some of you might be but I'm actually one of the few locals was born in San Francisco. Grew up in the Bay Area. My parents are both teachers. So I didn't have too much exposure to the tech industry growing up more exposure to the education industry, but I

haven't had kind of my entire life Journey as exposure to this thing. We call Hi-Tech in Silicon Valley and I'm a reminder to folks all the time is that it is a cycle. It comes and goes and the very core of it to me is about folks that want to tackle problems that are broken things that are painful want to go fix it and do it. Anyway, they're proud of but in the cycle is a lot of fluff that comes and goes and one of the things that I find quite distracting is this concept of landgraab which can at times be a way to wrap. Analyze kind of growth at all cost move fast break thing is kind

of his whole set of philosophies that again run amok or actually just bad business practices in my opinion. And so I think we're not the first and we try to get better at this but just focusing on are you are you solving a problem? Are you building a sound business? Are you being intentional with your team? And your people to me is kind of been one of the the Hallmarks of our of our progress today. We do a lot of research which we call road maps and you're there was a road map on future of work and again are called Shalini who led much of this looking at ways in which technology

could help broaden compensation and benefits for you. Don't understand Park parts of the market and you don't understand a Taurus lie at the small business segments. It's been hard to serve and so I'd really be interested in some of how did you decide to go after this? And how have you succeeded when when so many other companies are really struggle. Bristol we feel like early in the journey. But thank you for that compliment. We do serve over a hundred thousand companies. Now today across the United States are focused today is still on the domestic market. And yeah, I guess if I were to go

back to the early days, you know, we we really wondered if you look at small business. It's always been a big segment. So there's about 98% of the companies in the US in that one to 100 employees segments and I'm from work for standpoint. It's about a third of the workforce, but it's incredibly fragmented and when you looked at even competition, it was very very fragmented. So we wondered that question, you know, why hasn't the segment in served? Why hasn't if it helps and we had kind of two hypotheses that I frankly been proven true and it helped us grow but I think help others tackle

small business one is that you had to have the right Technologies in place to go offer a product to this segment and in particular you needed things like paperless cloud in Mobile to be well established small businesses are not in offices like yours or mine. They're on the go there in car. Is there an shops there in stores? And someone isn't going to go install software 15 years ago when they're on their desktop computer at home late at night. They're going to go meet and do something with someone face-to-face which is again a most small businesses have worked very manual very paper days.

And so we don't have to go and then cloud or paper lesueur mobile. We frankly benefit from those Trends, but it it will just offer a product that actually can be used by anyone with no training. No background in building a business hiring doing payroll. Excetera. I would say pillar that enabled it. The second is for anyone tackling any segment. You have to be able to build a product that's different shades also have to be able to go acquire customers in a cost-effective way. And again, most of the folks in our space historically did outbound sales. That means you're going out and

meeting folks face-to-face. You need to have a certain Revenue per customer to justify that and it mostly didn't work for small business. And so again, it kind of just left small business kind of empty. No person is land where they couldn't go get great technology and they also, Really I'm being sold to and so fortunately I can't we didn't have to go invent things like social or Google or online or content. We are able to leverage those specific channels word-of-mouth remains of big big driver of our growth to actually get any smokes in a cost-effective way. So that's what I always

say the folks. If you're tackling small business you can make sure you have a differentiated solution. Make sure you have a cost-effective way to go acquire them. And then make sure you look at the cohorts and make sure the revenue retention stays good because obviously in small busy also has a larger percentage of companies going out of business giving how hard it is to run a small business to culture and this is actually a quote that came out on Paul Graham share this after your series D close, which said in Augusta is a counterexample to the idea that ambition and benevolence are

incompatible. I have a hunch it has something to do with the culture that you're growing at the company and so could you address that and ultimately how to use you know, the try to strike this balance when you are going through Fast growth we went through I see which is it and computer program in 2012 and he's been a wonderful sounding board over the years. I love that that quote because I really believe in it. I feel like there's a time that is false binary that's presented to the world where you either have to be, you know, like rude and like grow doll cost

and when or you know kind and sincere and lose and it's all these different binary is like that but just feel very very I guess inaccurate in my opinion when I think about what drives us as the company and when we hire people to come take today is about 1350 people we hire for motivations alignment in for that and for us that means people that care about the problem. We're trying to tackle right helping small businesses grow Thrive take care of their teams provide benefits etcetera. And so when someone joins an already cares about the mission the purpose they're already

excited to go work hard and contribute. Hand soap for me when it comes to that false binary like yes, what drives us is helping a customer if we do that in a way that has a sound business model attached sure. There's an outcome called we have more Revenue. We have a higher multiple. We have a higher valuation and that's also good but that's the byproduct the motivation is going in serving the customer. So my advice to folks who try to think about it that way if it helps what's the driver and then what's the byproduct and I think it looks good to cut up in the byproduct of your valuation

or kind of these other components. They lose sight of actually the the Inspiration Point we haven't talked about again. We use the term sustainability and thinking about the long-term and why we do that is because we think this is the very best way to invest and we don't trade value for values and I think you know, it is a Restless not always, you know seamless but you could ask the same thing and then I know some people ask well. That you had such great returns, like which of the portfolios where you don't to sustainability investing returns

to Super and sync with each other but that's kind of the focus of all of our our activities and then we think about it on two levels one, which is really what a business what a business model does. So this is effectively the products and services that they sell and how is this accelerating us again towards a more sustainable economy. I think I'm going to ask that question. Not a bad question to ask and then number two equally as important as how it is a business model operates. It's not just about the what which is products and services but it's the how it's the culture. It's the way in

which people are are supported. It's the governance practices. It's the alignment and incentives and all the components that go into the engine room of delivering a really outstanding long-term sustainable business. So so kind of going to the house so, you know humanizing how can leaders do more to humanize themselves with their employees and their As well as with their customers and how do you interpret that more tactical to start a liter or building a company or I'm in any startup frankly. One of the

best things we can do in my opinion is just spend time with the team and there are some things that do scale. So for example, I love to do kind of new hire onboarding workshops. I love to do this specific Workshop, vision and values that I do with every new person joining Gaston. So just one tactical tip is don't let yourself. If you don't want to become kind of put into this box and put on the pedestal on which I do not want to be in a matching some of you also don't want to be then then doing it happen. Right like go out spend time with teams do amas do q and A's there's a bunch of tactical

things that I try to put in place Augusta at this point to kind of prevent that Dynamic for you feel like there's your the people that have power and those that don't cuz ultimately the way any company works as individuals taking action to go benefits. Things that didn't work for me for a minute. Let's talk about broader context for Tech and today in NC CPA, you know recently introduced and potentially challenging a lot of companies and their business models. Can you talk about data privacy and in

particular kind of Regulation the how this affects your thoughts on running Augusta? Yeah, I sending the back shop here in the California specific law but has different laws in different places, I guess first and maybe as a lesson for four companies in the room is understand, you know, the trust that our customers are giving you is something that you worked really really hard to earn it can be very easily lost and so in our case we have a lot of very private very important information is given to us by our customers related to their teams related to their obviously turntable payroll

processing. We need access to bank information. If you have benefits set up at ties to your family your dependents, and so I guess one thing I really like Is the alignment that exists in our business model where you know, where is subscription business if we provide value to you you pay us if we don't provide value you leave us so we have to get paid to protect your data to keep it secure and we take that job very very seriously. I think as government and regulation gets more involved in it. We welcome those conversations. Frankly. The alignment with him is also pretty clean. They want to

protect people's data and make sure that people don't get taken advantage of again. I think it's easier if you're in a subscription business model and other business models because the customers are paying us directly for the value were providing or not trying to monetize that through other means and if you touched on this kind of the end of the current time, we're in and certainly polarization in society. And you know, you're a leader of Viet how many 1353 folks across multiple offices. You know, how do you think about what messages

you want to share with the you know that group of people if they go out into selling your products in the market. I think I guess the at the broader topic for me here is in building a tech company. You know, how is it to accompany different than any company in some ways? I think we want to think that it's different in every dimension in and I actually think for the most part it's not you know any company out there including a lot of the companies we serve simply want to go serve their Community solve the problem build a team in a build a livelihood in a way that their Prado one of the

biggest waves that it's a company is different though is there we obviously use technology to gain leverage to solve big problems at scale. So in Augusta is one example, you know several years in can be serving over a hundred thousand businesses. I would not be possible without technology being really Corridor Prada. And so with that skill Comes This Much broader impact in the question is how do you navigate that type of influence and for us personal product lines? We don't do our product as simply a technology. We view us as a partner to help you build your And so that should

manifest across the product across the advice. We give making sure that we're here to help you make those decisions on onboarding or benefits excetera. But as a leader in a company, I think it also manifest in terms of the community were Building inside Augusta. And so I would just say it's a topic we spend time on it's something I think is easier to shy away from but it's way more powerful and influential dive into it. I know what do we stand for as a business and I think you know kind of the unintended consequences of of technology and you know that how they have the industry has

affected Society for decades now and ultimately, you know, where can we shift towards positive. In fact, I mean reframe everything we do around Sustainable Solutions. So thinking about those products and services and how businesses operate and is is critical, you know, where should in the how should we shift that towards more positive impact? Electronic focuser and just thought about what is going on. It's kind of the meadow level with respect to Cuff text impact on society. You have an industry that used to be smaller than simply become the

biggest industry in the world, right? The biggest companies in the world have any of these trillion-dollar plus business is all our Tech related and so are you have massive concentration of influence power wealth influence and historically pretty geographically siloed. And so, you know, if I surprised me that's actually very logical that doesn't feel sustainable. That isn't feel healthy you for many reasons that one in particular the customers and all these products are actually all over the place, right the people that you actually exist to help serve provider

service to cross the us but rather see many of the much bigger tech companies are across the world. And those are actually they're the people that these companies should be beholden to my opinion. I think we're going through a rapid evolution in how we navigate that responsibility the and what is capitalism in some ways. Is it just about shareholder return? No, I think there's a broader discussion happening which is fantastic and I was generation is I'm sure a lot of ideas thoughts on how we're going to evolve our goals as a company going forward to giving it. They're one of our

clothes Partners, but how do you how do you optimize around your purpose? Which for me is always about solving a problem for the customer doing it? No way you're proud of which event size to your business practice in your team. And then ultimately again a byproduct of that to me is actually having lots of value creation take place whether we just stick out of gone to cut up in the in the outcome and not the ingredients as a broader Community is really critical. So, you know the blessings

that you find humanizing instead of having these discussions within a company and not just reserving them for you know the leader, but I catch you in the corridor. Resin and thinking about that with your customers as well. Just there last question can be on Lessons Learned. So if you think about the audience and folks were building companies from small to large. You know, what would you share is is is it by son on scale may be number one. Hopefully you believe in this as much as I do but what makes this community work and I think started crying in particular is a great example of this is that

folks don't do what is a zero-sum game. A lot of folks have helped us over the years and I'm sure are helping you or you can help others frankly and see if you focus on the problem you want to solve it. Anyway, you're proud of and you ask for help. You probably be surprised by the amount of folks that are willing to help you number to spend time early on in codifying what your core values are. We did it when we were three people and it created a set of attributes things like service mindset or Biased towards transparency that have been really really core parts of how we operate. I'm going to

see them on our walls if you ever visit our offices because to me either you lived values are you don't but they do manifest quite a bit in are hiring practices. Anatomy is one of the best places for them to manifest cuz he want to use your values as a filter for who shares them already. And so then the outcome is when they join they can just be themselves and if somebody is in align with your values, they're not at all a bad person. It just means they could be better work elsewhere. So I'll guess I'll spend time in that area in the last but not least in the context of scaling. I guess all

jokingly say in a part of my job is to find myself in as many jobs as I can definitely obviously investing in finding the right leaders, right people. You can trust I spend most of my time on recruiting and and team-building frankly. I think that's actually primary job of the leader. Thanks, Josh everybody.

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