Tomer London on Getting Gusto's First Customers
Charging $2 per employee per month, while competitors charged $20, seemed like a smart way to remove friction for early customers. Tomer London, co-founder and Chief Product Officer at Gusto, now calls it a mistake. "The price is a message," he says. "When you price something very low, especially something like payroll that you want to depend on, people are going to ask: is this company going to be around?"
Recall Sessions, a Village Global Podcast hosted by Somrat Niyogi, goes back to when Gusto, now one of the most-funded payroll and HR tech startups to come out of a YC batch, was still called Zen Payroll: 100 businesses in California, no sales team, and a pricing mistake London and his co-founders would spend years undoing.
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Key Insights
Price is a message. Gusto sent the wrong one early on.
The logic behind Gusto's early pricing was simple: remove any reason for someone to say no. Price sensitivity felt like the main obstacle for early adopters, and revenue optimization could come later once the product proved itself.
High-stakes categories break that logic. Payroll carries real consequences: IRS notices, compliance failures, employee trust. When you promise to handle something that consequential for nearly nothing, the natural question from a small business owner is whether they can actually count on this company. Gusto's price told customers the company might not survive, whether or not anyone at Gusto intended to send it.
"The most common advice I give startup founders is to raise their prices," London says. "Not to optimize revenue. It's messaging the market that your product is valuable." Founders underprice because they're thinking about what it cost to build. Customers are thinking about what it costs them to get it wrong. Those are different calculations, and conflating them is one of the more common ways early-stage companies undermine themselves.
Going upmarket is the rational choice for SMB startups.
Going after SMBs is tough.
"It is startup in hard mode," he says. "The dynamic of the past 15 years is that 90% of companies that start with small businesses just go upmarket the fastest they can. These are capitalistic companies optimizing for their success. That tells us something."
Gusto stayed small because the pain in payroll was deep enough to generate word of mouth without a sales machine, and because London and his co-founders had genuine conviction about the market. When investors asked when Gusto was going upmarket, the answer was always the same: that's not the plan. London is clear that passion alone doesn't make SMB work at scale. The pain has to be severe enough that customers seek out the product. "Find problems that are really, really painful for people," he says. "Put all your energy there."
Killing a product is hard. Look for these two signals.
Gusto has killed products over its 13 years. London's framework for when to pull the plug: both the quantitative signal (adoption, conversion) and the qualitative signal (customer sentiment) must go negative before a product is gone.
"Don't believe in your thing unless you see both of them being very positive, and don't kill your thing until both of them are really negative."
The intermediate states each have a prescription. Good numbers, bad sentiment: there's traction but friction, so improve the product. Good sentiment, low adoption: customers who find it love it, but almost no one is finding it, so fix the onboarding and go-to-market. Neither intermediate state is a kill signal on its own. Both negative at once is.
London acknowledges giving losing products too much runway as a repeated failure. At Gusto's current scale, a clear signal often arrives within a month. They've let things run nine months. "That's probably the repeated mistake," he says.
It makes sense for executives to start shipping again after AI collapsed the spec-to-product distance.
London has an engineering background but stopped writing code years ago. The gap between a product idea and working software was too large to justify. Getting something built required weeks of professional engineering time, which made it irrational for someone at his level to write the code himself.
He now ships something every weekend. "Work of two weeks can now be done in a day," he says. A dashboard he recently built would have taken weeks; he finished it in roughly 24 hours.
Engineers at Gusto who have adopted the tooling, running multiple agents in parallel, are 10x to 20x more productive on greenfield work. The caveat London offers is honest: deep legacy codebases don't get the same multiplier. "If you're looking at a very complex codebase, maybe it's 30 percent faster, maybe 50 percent. But it's definitely faster." The gap between engineers who have adapted and those who haven't is already visible inside the company. Ignoring the tools, he says, is a mistake.
About the Guest
Tomer London is the co-founder and Chief Product Officer of Gusto, the payroll and HR platform he has been building since its YC batch in 2012. He grew up in Israel, where he taught himself to code at age 12 and built an inventory system for his father's clothing store. He holds graduate degrees in Electrical Engineering from Stanford and is an active investor and mentor to early-stage startup founders navigating their first rounds.
About the Host
Somrat Niyogi is the founder and GP of Recall Capital and a Village Global Network Investor, writing pre-seed and seed checks into AI-native companies. He previously served as General Manager and Head of Business Development at Gusto, with earlier operator roles at Clari, Miso, Stitch, and Salesforce. Together, Village Global and Somrat back early-stage founders across AI, fintech, and B2B SaaS.
