Exclusive: Gusto crosses $1 billion in 12-month trailing revenue

After closing, a San Francisco flower market isn’t exactly idyllic.

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But in 2012, Eddie Kim and Tomer London, cofounders of HR software startup Gusto, were there to see Christina Stembel. The owner of Farmgirl Flowers, Stembel needed to hire her first employee and, accordingly, had to set up payroll for the first time. She’d been working since 3 a.m., but knew payroll was something she simply couldn’t bungle.

“The flower market closes at noon or 1 p.m., so I was the only person still there,” Stembel laughs. “It was me and the rats, and the rats were as big as cats. It smells like the subways of New York, with chain-link fences between stalls and single-light bulbs hanging from the ceiling. It literally looks like a murder den.”

She was, to say the least, surprised London and Kim showed. At the time, Gusto was an eight-person company. Stembel has now been a customer for more than 13 years and, even so, she’s still surprised.

“I don’t know anybody else who would come to a flower mart and set up payroll for a small business like mine with one employee,” Stembel said.

Much has changed: Today, Gusto is a $9.3 billion company that recently reached more than 500,000 customers. The company’s investors over the years have included Ontario Teachers’ Pension Plan, T. Rowe Price, General Catalyst, Fidelity Investments, and CapitalG. Now, Gusto has confirmed to Fortune that in February it surpassed $1 billion in revenue. That’s cash-in-hand, taken in over the preceding 12 months, and that’s an intentional framing, said Gusto CEO and cofounder Josh Reeves.

“Clarity is kindness,” Reeves said. “The clearer, the better. We’re much higher on ARR now, we’re accelerating growth, and we’re happy with that trajectory.” Reeves had read the story I did last year on the ARR “creativity” hitting an AI boom fever pitch, and he wanted to remove any ambiguity.

This opened the door to an entirely new conversation: It’s an enterprise software company that serves small businesses—a vital but somewhat contrarian market. The enterprise software half-myth is that a couple big contracts make your entire business, but serving small businesses demands a company closer to consumer scale. So, for Gusto, more revenue did mean more headcount, more customers—and a business that had to evolve at the intersection of consumer and enterprise pressures. How did Gusto get to $1 billion, and what milestones along the way mattered?

Read the rest of the story here, where I took a case study-angle. The revenue milestone along the way that mattered most certainly surprised me.

Term Sheet podcast… Gusto CEO and cofounder Josh Reeves is our guest on this week’s Term Sheet podcast! We talk about the revenue milestone, why he doesn’t think AI labs like OpenAI and Anthropic will touch tax compliance, and Gusto’s path to what Reeves believes is a trillion-dollar opportunity. Watch the full episode here.

See you tomorrow,

Allie Garfinkle

X: @agarfinks

Email: alexandra.garfinkle@fortune.com

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