Building on its success of distributing more than $4 billion in Paycheck Protection Program loans and revenue growth of 50% last year, Gusto, an HR Software company is planning to leverage its growth to prepare for an initial public offering. Josh Reeves, Gusto’s CEO and Co-Founder said that Gusto had raised $175 million in a funding round in recent weeks. This makes it one of the most valuable private companies in the HR and payroll software space with a new $9.5 billion valuation. The funding round was graced by Gusto’s investors like Fidelity, Franklin Templeton, Generation, and General Catalyst and led by T. Rowe Price.

Gusto bought two companies in the past few months, tax compliance software firm Ardius and Symmetry, which provides tax calculation software. Talks of other acquisitions are also being held. The company had added two new board members, former TIAA Financial Solutions CEO Lori Dickerson Fouché and Vicki Fuller, a former chief investment officer of the New York State Common Retirement Fund and Fidelity Investments board member to bolster its management leadership ahead of an anticipated 2022 IPO.

Reeves revealed that the company generated “several hundred million dollars” in annual revenue, which has been mushrooming steadily at 50% year-over-year. Gusto's customer base recently surpassed 200,000. Its current challenge is to justify its new valuation in the market.

Gusto was founded by the painstaking efforts of its co-founders, Edward Kim, Josh Reeves, and Tomer London who met at Stanford University in 2008. They consensually agreed on the difficulty of managing HR and payroll services at small businesses. They received the initial push funding from the CEOs and founders of enterprise software companies like Instagram, Stripe, PayPal, and Box. Gusto invited more public investors in its $140 million Series C funding round, including T. Rowe Price in 2018.

Ken Chenault, ex-CEO of American Express said that Gusto had become a fixture in the industry from a marketplace standpoint and needs to establish itself as a critical infrastructure for the SMB economy. Scott Berg, an analyst at Needham & Co stated that a significant part of Gusto’s success will rely on its capability to maintain its swim lane of catering to small and medium businesses. Gusto faces tough competition from public companies like Paychex and ADP in the HR and payroll software space. 

Reeves cleared it out that Gusto’s new funding will be used to develop its benefits and payroll tools just like the last year. More than 1,400 employees work in offices in Denver, San Francisco, and New York which is a huge statement of its manpower and funding.