Gusto Raises $200M Series D At $3.8B Valuation To Power HR Within Small Businesses

SaaS company Gusto announced this morning it has raised a $200 million Series D that values the company at $3.8 billion post-money – nearly double what it was valued at when it raised its $140 million Series C one year ago.

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New investors include Fidelity Management & Research Co. and also Generation Investment Management, which is Al Gore’s UK-based firm that is focused on sustainable investing. Existing investors T. Rowe Price Associates Inc., Dragoneer Investment Group, and General Catalyst, also participated in the round. With this latest financing, Gusto has now raised more than $516 million since it was founded in 2012.

Gusto’s self-described “people platform” addresses a number of HR-related functions including providing services around payroll, employee onboarding, time tracking, retirement, and increasingly, health insurance. It also offers team management tools.

The San Francisco-based Y-Combinator backed company plans to use the money in part to double its headcount in its Denver office, grow its team in the Bay Area and open up a new R&D office in New York. Currently, Gusto has over 1,000 employees with its four-year-old Denver office being its largest with a staff of over 600, according to CEO and co-founder Josh Reeves. The growth in the number of its employees has been in the 50 percent range most years, he added.

“We’re excited about being in NY, and that’s all about accessing more technical talent, particularly in the financial services area, but also in general in the city’s growing tech ecosystem,” Reeves told Crunchbase News.

Gusto also plans to use its new capital to “double down on research and development” of its platform. Looking ahead, the company plans to invest more in its fintech and healthcare offerings. Its overarching goal is to help smaller companies have the same ability to provide “robust benefits” as larger companies do.

“A big area of investment for us is flexible pay, and helping individuals in how they approach finances,” Reeves said. “It’s also really important to us to help small businesses give their employees easier access to healthcare. Overall, we want to be a force for universal healthcare.”

Indeed, that was a key factor for Generation.

Gusto has “made health coverage available to many who would otherwise not have access to it,” said Shalini Rao, director in growth equity at Generation, in a written statement.

As part of the funding, Gusto also announced its first independent board member in Anne Raimondi, who also currently serves on the board of Asana, a work management platform. She also was SVP of operations at Zendesk as it worked its way to an IPO.

The addition of Raimondi led me to ask Reeves if Gusto was also looking to enter the public arena. “Being a public company is not a matter of if, but when,” he told Crunchbase News. “We’re weighing the pros and cons and I’m confident the pros will outweigh the cons.”

Gusto also recently announced a batch of new hires including former Google chief diversity + inclusion officer Danielle Brown who joined as chief people officer. Also, former Square CISO (Chief Information and Security Officer) Fredrick Lee recently came on board as Gusto’s new CISO.

Earlier this year, the company passed its 100,000 customer mark. Customers are in a range of industries including bakeries, flower shops, cafes, churches and hotels. Gusto makes its money by charging a monthly subscription fee. It earns more revenue as a company grows or uses more of its services, said Reeves.

All of Gusto’s customers are in the U.S. but it’s looking to expand internationally over time, according to Reeves.

“For now, we’re very focused on the domestic audience,” he said. “There are six million employers in the U.S. and 98 percent are in the 1-100 employee range. So there’s millions of more businesses to try and go help. There’s still a huge opportunity there.”

Inside Illustration: Li-Anne Dias