AT A GLANCE
FUNDING HISTORY
Gusto
Klarna
BUSINESS MODEL
Gusto
Gusto charges a monthly base fee plus a per-employee fee. The Simple plan starts at $40/month plus $6 per employee per month.
Plus and Premium tiers add features like time tracking, PTO management, and dedicated support at higher price points.
The per-employee pricing creates natural revenue growth — as customers hire more people, Gusto makes more money without any additional sales effort. This aligns Gusto's success with their customers' growth, which is a beautiful incentive structure.
Additional revenue comes from embedded financial products. Gusto Wallet (employee banking), Gusto-run health benefits, 401(k) administration, and workers' comp insurance all generate fees.
The payroll platform becomes a distribution channel for financial services — once you process payroll for a company, you have a direct relationship with every employee and can offer them financial products.
Klarna
Klarna makes money from merchant fees and consumer interest. Merchants pay Klarna 3-6% of each transaction — they're willing to pay because Klarna increases conversion rates by 30%+ and average order values by 45%.
On "Pay in 4" (interest-free installments), Klarna makes money purely from merchant fees. On longer financing (6-36 months), Klarna charges consumers interest up to 25% APR.
Klarna also earns revenue from its shopping app (affiliate commissions when users discover and buy from merchants), and from its Klarna Card.
HOW THEY STARTED
Gusto
Josh Reeves, Edward Kim, and Tomer London were Stanford engineering graduates who noticed that every small business owner they talked to hated the same thing: payroll. Running payroll meant calculating federal, state, and local taxes, filing quarterly returns, issuing W-2s, managing direct deposits, and dealing with an alphabet soup of compliance requirements (FICA, FUTA, SUTA).
One mistake and the IRS sends a penalty notice.
The existing solutions were terrible for small businesses. ADP and Paychex dominated the market but were designed for mid-to-large companies.
Their interfaces looked like they were built in 1998 (because they were). Their pricing was opaque.
Their customer service required calling a 1-800 number and sitting on hold. Small businesses with 5-50 employees were dramatically underserved.
The trio founded ZenPayroll in 2011 (rebranded to Gusto in 2015) with the mission of making payroll dead simple. The first version was a clean web interface that let business owners run payroll in a few clicks — enter hours, review the numbers, hit submit.
Gusto calculated all taxes automatically, filed them with the government, and sent direct deposits. What used to take half a day took five minutes.
Klarna
Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson were students at the Stockholm School of Economics. In 2005, they entered a startup competition with an idea: let people buy things online and pay later.
At the time, online shopping was still new and most people were terrified of entering their credit card details on the internet. The idea was simple — Klarna would pay the merchant immediately, and the customer would get an invoice with 14-30 days to pay.
The competition judges hated it. The idea was dismissed as financially irresponsible and the team didn't win.
But Siemiatkowski pressed on. Swedish e-commerce was growing fast and merchants were desperate for any way to reduce cart abandonment.
Klarna's "pay after delivery" model was a hit because it shifted the risk — customers could receive the product, try it on, and only pay for what they kept.
The first customers were Swedish e-commerce merchants selling fashion and home goods. Klarna handled the invoicing, fraud detection, and collections.
Merchants saw conversion rates jump because customers were more willing to buy when they didn't have to pay immediately.
HOW THEY GREW
Gusto
Gusto grew by being the payroll platform that accountants recommended. Accountants manage payroll for thousands of small businesses, and Gusto built a dedicated Partner Program for accounting firms.
When a CPA recommends Gusto to all their small business clients, that's efficient distribution at scale.
The product-led growth motion is strong. Gusto's clean design and simple setup meant small business owners could sign up, enter their employee information, and run their first payroll without talking to a salesperson.
Free trials converted at high rates because the alternative was going back to manual calculations.
Expanding from payroll into HR, benefits, and financial services followed the natural workflow. Once Gusto ran payroll, adding benefits administration was a natural upsell — the same system that calculates pre-tax deductions can also manage the benefits that create those deductions.
Klarna
Klarna grew by being embedded at checkout. The strategy was to sign up the biggest online retailers and become a payment option alongside Visa and PayPal.
Once Klarna was at checkout, consumers discovered it organically. The "Pay in 4" button became ubiquitous across fashion, electronics, and home goods retailers.
The Klarna app became a growth engine beyond checkout. By building a shopping app where users could browse products, discover deals, and track deliveries, Klarna turned from a payment method into a shopping destination.
The app has 35+ million monthly active users who start their shopping journey inside Klarna before even visiting a retailer.
International expansion was aggressive. Starting in Sweden, Klarna rolled out across Europe, then into the US, UK, and Australia.
The US became the biggest growth market — American consumers were especially receptive to Pay in 4 as an alternative to credit cards. By 2023, Klarna had 34 million US users.
THE HARD PART
Gusto
ADP and Paychex aren't going to cede the small business market quietly. ADP Run is their small business product, and they've been modernizing it aggressively.
ADP has 70+ years of trust, massive sales teams, and relationships with every accountant in America. Gusto has a better product experience, but ADP has distribution that's hard to match.
Rippling is the most dangerous competitor. Parker Conrad (Rippling's CEO) is building an "all-in-one" HR/IT/Finance platform that includes payroll alongside device management, app provisioning, and expense management.
Rippling argues that payroll should be one feature in a broader system, not a standalone product. If companies buy Rippling for IT management and get payroll included, Gusto loses the deal.
Moving upmarket is hard. Gusto's sweet spot is companies with 1-100 employees.
Larger companies have more complex needs — multiple pay schedules, union rules, multi-state compliance, custom integrations — that Gusto's platform historically hasn't handled as well as incumbents.
Klarna
The valuation collapse was humiliating. Klarna raised at a $46 billion valuation from SoftBank in 2021.
One year later, they raised a down round at $6.7 billion — an 85% haircut. It was the most dramatic valuation drop in fintech history.
Employee stock options were underwater. Siemiatkowski had to lay off 10% of the workforce.
The entire BNPL category went from hot to radioactive in months.
Credit losses are the existential risk. Klarna is lending money to consumers who want to buy things they can't afford to pay for right now.
When the economy slows, defaults rise. Klarna's credit losses hit $1 billion in 2022.
The company had to tighten underwriting significantly and pull back from riskier markets. The tension between growth (approve more loans) and profitability (reject risky borrowers) defines every quarter.
The IPO in 2025 was a comeback story but with caveats. Klarna went public at $15 billion — a major recovery from the $6.7 billion trough but still less than a third of its 2021 peak.
The company finally turned profitable by slashing costs with AI (replacing hundreds of customer service agents with AI chatbots) and tightening credit standards. But investors remain cautious about the BNPL model's long-term sustainability.
THE PRODUCTS
Gusto
Gusto Payroll — automated full-service payroll processing with tax calculations, filings, and direct deposits across all 50 states. Gusto Benefits — health insurance, dental, vision, 401(k), HSA, FSA, commuter benefits, and workers' compensation administered through the platform.
Gusto HR — hiring and onboarding tools, employee self-service portal, org charts, and document management. Gusto Time & Attendance — built-in time tracking with PTO management, holiday calendars, and overtime calculations.
Gusto Wallet — a free employee financial wellness app offering early wage access, savings accounts, and financial planning tools.
Klarna
Pay in 4 is the signature product — split any purchase into four interest-free payments over six weeks. Pay in 30 lets customers receive the product first and pay within 30 days.
Financing offers longer-term payment plans with interest for larger purchases. The Klarna App is a shopping destination — browse deals, track orders, manage payments, and earn cashback.
The Klarna Card is a physical Visa card that lets users Pay in 4 anywhere. Klarna Creator is a platform for influencers to earn commissions sharing products.
Klarna AI is their customer service chatbot that handles two-thirds of support queries.
WHO BACKED THEM
Gusto
Google Capital (now CapitalG) led the Series C. General Catalyst invested early and has been in multiple rounds.
Dragoneer, T. Rowe Price, and Fidelity participated in later growth rounds.
Y Combinator was the starting point (Winter 2012 batch). The company was valued at $9.5 billion in its latest funding round in 2022.
Klarna
Sequoia Capital, SoftBank, Silver Lake, GIC, Atomico, Commonwealth Bank of Australia, Heartland