Gusto Acquires Remote Team to Expand International Hiring

The Evolving Landscape of Work

The dynamics of the labor market are undergoing significant shifts. An increasing number of professionals now desire the flexibility of continued remote work, despite some reluctance from larger organizations to fully embrace this trend. The prolonged nature of the pandemic is solidifying the expectation that the future of work will be markedly different.

Startups Leading the Charge

As reported by TechCrunch, startups have been quick to adopt remote work models, frequently establishing initial teams distributed across various time zones and geographical locations. This proactive approach is driving a notable trend within the tech industry.

Gusto Acquires Remote Team

This trend is becoming so prominent that we are witnessing private technology companies making strategic acquisitions to enhance their support for remote workforces. Payroll and HR solutions provider Gusto recently announced the acquisition of Remote Team, a company specializing in assisting businesses with geographically dispersed employees.

Expanded Global Capabilities

Alongside this announcement, Gusto revealed its expanded capabilities, now facilitating contractor payments in 80 countries and providing streamlined tax registration across all 50 U.S. states.

Remote Team's Stage of Development

Unlike the established Gusto, Remote Team was an early-stage venture. Publicly available data from Crunchbase offers limited insight into its funding history. However, according to Gusto CEO Josh Reeves, Remote Team was operating at approximately the Series A funding stage.

Gusto's Financial Standing

In comparison, Gusto has secured nearly $700 million in funding, with a recent $175 million addition valuing the company at just under $9.5 billion, as per Crunchbase data. This positions Gusto as a “decacorn” in the current market.

Potential for an IPO

Some observers, including those at TechCrunch, suggest that Gusto is well-positioned for an initial public offering (IPO).

The Value of Scale

Regardless of opinions on the current late-stage unicorn market, Gusto’s acquisition of Remote Team provides a benefit that additional fundraising could not: scale. Remote Team CEO and founder Sahin Boydas explained that joining forces with Gusto would provide a broader global reach than the startup could achieve independently.

Future International Expansion

Boydas also indicated that support for an increasing number of countries is planned, suggesting that Gusto’s capacity to support international hiring will continue to grow in the coming months.

Deal Structure and Funding

The financial details of the transaction were not disclosed, but Gusto’s CEO confirmed that equity was part of the deal, indicating a combination of stock and cash. Reeves also clarified that Gusto’s recent Series E funding was not intended for daily operations, as the company still held a substantial portion of its previous funding round.

Strategic Acquisitions

Raising additional capital allows for strategic opportunities, such as acquiring smaller companies with complementary technology or talent. It wouldn’t be surprising to see Gusto make further acquisitions before a potential IPO. (Including Remote Team, the company has now acquired three smaller firms: Ardius and Symmetry.)

Growth and Financial Transparency

Gusto reported a growth rate of approximately 50% annually, but declined to provide further details regarding its financial performance. TechCrunch inquired about this lack of transparency, particularly given the expectation of public scrutiny following a potential IPO. The response, as is typical, was courteous.

Meeting the Demand for Global Hiring

In summary, Gusto’s focus on small and medium-sized businesses doesn’t diminish the demand for international and interstate hiring solutions. The company is adapting its services to address this evolving need.

The Gusto-Rippling Competition

It will be interesting to observe how the rivalry between Gusto and Rippling unfolds. The two companies have a history of competition, and Rippling recently secured a significant funding round of $250 million at a $6.5 billion valuation.

Potential Expansion into Corporate Spend

Looking forward, it’s worth considering whether Gusto and similar private technology companies will expand into the corporate spend management space, another area attracting substantial venture capital investment. The synergy is apparent; Gusto aims to assist SMBs in starting and managing their businesses, regardless of location. Extending this support to include broader corporate spending seems a logical progression.