The labor market is changing. More workers expect to keep working in a remote manner, even if many large employers are reticent to support the movement. The longer the pandemic drags on, the more it appears that work will look quite different in the future. As TechCrunch has reported, startups have already cast their lots in with a remote future, often building their early teams across time zones and geographies.
The trend is pronounced enough that we're seeing private tech companies get acquisitive to better support it. This morning, for example, payroll and HR provider Gusto announced that it is buying Remote Team, a startup that focuses on supporting far-flung staff.
As part of its news item, Gusto also announced that it now supports paying contractors in 80 countries and quick tax registration in all 50 American states.
Remote Team, unlike Gusto, is an early-stage startup. Crunchbase has but a dusting of data regarding its history and capital raises, for example. In the view of Gusto CEO Josh Reeves, Remote Team was at around the Series A stage of startup life. Putting current fundraising trends aside, that means that the smaller firm likely had customers and a go-to-market motion that was just hitting its stride.
In contrast, Gusto has raised nearly $700 million in capital, again according to Crunchbase data, most recently adding $175 million to its accounts at a valuation of just under $9.5 billion. Gusto is, therefore, in the current parlance, essentially a decacorn.
Or, as we like to think of it at TechCrunch, a company that should go public.
Regardless of our views of the current late-stage unicorn market, Gusto could offer Remote Team something that simply raising more capital could not, namely scale. Per Remote Team CEO and founder Sahin Boydas, selling his company to Gusto made sense because it could offer more reach into the global corporate footprint than raising oodles more private funds would allow the startup on its own.
Boydas indicated that support for more countries is coming, implying that Gusto's ability to support international hires will only grow in the coming quarters.
Terms of the transactions were not disclosed, but Gusto's CEO did indicate that equity was a component of the transaction. Translating that a little, the deal was executed in both stock and cash. Regarding the latter element, Reeves told TechCrunch that his company's Series E earlier this year was not put together to fund the company's day-to-day operations; Gusto still had most of its preceding round in the bank. You raise extra capital when you can, and, we'd add, when you want to buy some smaller companies that have tech or staff that you want to tack on to your current business.
We'd not be utterly shocked if Gusto bought another company or two before it goes public. (The company has now purchased three smaller firms, counting Remote Team. The previous two were Ardius and Symmetry, for those curious.)
On that front, Gusto said that it is growing at around 50% per year, but didn't share more than that. TechCrunch pressed Reeves on the lack of details regarding its financial performance, essentially curious why he won't share more at this juncture given that we expect to be able to look back at this period when his company goes public. As with every CEO we put that question to, the answer was polite.
Summing: Gusto's small and midsized business focus doesn't preclude it from seeing demand for more international and interstate hiring, so it's tooling its service to meet the need. It will prove interesting to see how the larger Gusto-versus-Rippling rivalry bears out. The two companies have a history of not getting along, and Rippling recently put together its own mega-round, adding $250 million to its coffers at a $6.5 billion valuation.
Looking ahead, we're curious if Gusto and related private technology companies get into the corporate spend game, another corner of the startup work that is awash in both venture capital and market demand. You can see the synergies somewhat easily; Gusto wants to help SMBs start and run their businesses regardless of where they or their workers are based. And if Gusto is going to help make payroll work for those firms, why not add in another category of spend to the mix?