Awaken* newsletter

March 28, 2024

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On January 3rd, I had the honor to chat with Eddie Kim. Like myself–Eddie happens to be a Stanford alumni. Unlike me–Eddie is the CTO and co-founder of a $9.6 billion company named Gusto: a payroll, benefits, and HR solution for businesses in the US. It’s already hard to find Asian unicorn founders, finding Asian near-decacorn founders is an order of magnitude rarer, making Eddie a certified legend. Despite his success, Eddie remains a very down to earth and genuine person, and I greatly enjoyed chatting with him. Without further ado:

PARENTAL PRESSURES

A common trope with some truth to it, is that many Asian parents pressure their children to pursue more stable, high-prestige careers, such as being a doctor or lawyer. I asked Eddie if he had experienced this:

I got pressure from my dad. My dad was a doctor and, like many Asian parents who are doctors, wanted their kids to be doctors. I think there was a fair bit of pressure from my dad, and then from my mom through my dad, to become a doctor and do pre-med and all that stuff. Of the STEM subjects, which I really liked and was good at, I was good at math, chemistry, and physics. The one that I didn’t like was biology. For me, it always felt like it was about memorizing things as opposed to actually using your brain. It seemed like being a doctor would require more of this, where I have to memorize all these different body parts and so on. I never really considered becoming a doctor, even though my parents really wanted me to. For them, it was the safe path, a prestigious occupation. There’s a lot of good to like about it, you’re saving lives and things like that, and you make a decent amount of money. 

However, once I was in college, my parents encouraged me to be in control of my destiny, which meant potentially starting my own business. They were supportive when I talked about it. Part of it was also that my dad is a doctor who started his own private practice, so he was an entrepreneur himself. When I was really young, my dad was just starting out. He immigrated from Korea and they didn’t have a lot of money. Once he became a doctor and had his own private practice, we were comfortable. We weren’t super rich, but money was not a huge worry. We’d always have food and basic necessities. We couldn’t buy super luxurious things and go on vacations, but it was enough that I could take risks early on. I think a lot of the reason why they were supportive of me starting my own business or doing something more risky was because even if it failed, it wouldn’t be devastating. I’d still have a home to go to and could fall back on my parents. It wouldn’t be a huge burden. So, I think I maybe had a little bit of a different experience than a lot of Asians once I was in college.

I asked Eddie if he thought that his parents were more understanding because they themselves were business owners:

Absolutely. My dad was a doctor and my mom was the one doing all the back office work. She was the receptionist, the insurance biller, the payroll runner. It was a small venture, just my dad and my mom, and they had one employee for 30 years. My dad never worked for a salary, he never joined Kaiser or anything like that. So, he definitely had a more entrepreneurial mindset.

My own mom is a small business owner, and Eddie’s parent’s attitudes paralleled my own parents’ so far. Since I sometimes ask my mom for advice when it comes to business, I wanted to see if Eddie did the same:

Not really. The whole tech world was so different from what they knew. Even questions about how to raise money or what is pre-money post-money valuation, all this sort of tech stuff, they had no idea. They weren’t practically helpful in that sense. But my mom was always super encouraging. She was very supportive, even though she didn’t really have a lot to contribute. It was more moral support more than anything.

SCARCITY MINDSET

Another common immigrant trope is having a scarcity mindset. This often persists even once families establish themselves in America. The traditional wisdom in startups is to build as lean as possible, and at first glance, having a scarcity mindset should help with this. I asked Eddie if he had this mindset and how it was expressed in his startup.

I remember, even though my parents’ practices were doing well, it wasn’t always like that. It started from nothing. We would rarely go out to eat, and when we did, it was at some chain like Sizzlers or maybe Red Lobster. Nothing super fancy. The thought of ordering an appetizer or a drink that wasn’t water felt wrong, like we were getting ripped off. There was definitely this mindset of being very frugal and not treating yourself to unnecessary luxuries. 

As I got older, I was influenced by some of my friends, who had less of a scarcity mindset. They would go out to nicer restaurants. We all had jobs post-college. We weren’t making tons of money, but while I was always about saving everything, they were not. At my first job at Volkswagen, I would pack lunch and figure out how to save about 60-70% of my salary. The rest was for rent, food, and gas. I was able to save, not a ton of money, but I had this mindset of frugality and saving as much money as possible. I’m not sure for what, but it was just the thing you do for a rainy day. My friends, on the other hand, were not saving money at all. They would go out to bars and fancier restaurants. That’s how I got exposed to it. Even though I was always a bit more on the frugal side, I started to see the value in treating yourself a little bit more. I learned from my friends that there’s no point in money if you’re not going to use it for something. What are you saving it for? I think the combination of how I grew up and my friends’ influence helped me find a balance.

I think it wasn’t until my second startup, Gusto, where we had the fortune of raising a lot more money than my first startup. Often, we had this mindset that you could spend a little more money and get higher quality stuff. For instance, instead of buying an Ikea desk, we bought from a company called Room and Board. It was a couple hundred more dollars per desk, but they were much nicer than an Ikea desk. Or like our first hires that we made, right? You can go for super cheap, outsource offshore to build your first product, or you can hire someone that’s really good, pay a little more, and be more generous with equity to get really top talent. 

So, I think it was at Gusto where I learned that if you have the resources to do so, it’s better to spend a little more. Don’t go super cheap on every single thing, don’t go frivolous and pay top dollar for everything either. But there’s a range, I would say, if it’s a range of one to a hundred, I would say a range of 70 to 80, or maybe 80 actually, where I think it’s worth spending that much because you just get so much more for it. Long term, it pays itself. 

There’s a moment where once you have the means, I think your mindset should shift a little bit. Not to go extravagant, but to not have so much of that scarcity mindset that we grew up with. 

BEING ASIAN AND BEING A LEADER

As I always do, I asked Eddie how he felt being Asian qualified his experience as a founder, and if it was something he thought about a lot:

I think to a certain extent, but not a ton. It’s not something that is always top of mind and something that I’m very self-conscious about or have imposter syndrome of. But also at the same time, it is something that’s kind of in the back of my mind. I sometimes ask myself, do I have what it takes to be a leader of hundreds of people in the organization? Will people not respect me as much because I’m Asian and Asians tend to be perceived as less of a leader than say, a white person. And so you definitely have a little bit of that, but also at the same time, I feel like whenever I have those thoughts, I tell myself that, no, why can’t you break the mold, right? Why can’t you be one of the first Asians that have done X or Y, right? Or one of the few Asian co-founders of a unicorn company, right? And so then I start to get excited about the concept of, “Hey, I can actually show people that it can be different.” And then, so it kind of turns into more of a motivating factor for me.

Eddie’s answer seemed to be focused on being a leader. From the research I did, it seemed like Eddie struggled in the transition from being an individual contributor to more of a manager role (or people empowerment at Gusto). I asked Eddie how he approached crafting his leadership skills.

One was, I had people that I could talk to that had more experience in it than I did that were very generous with their time and giving me advice and mentorship. Some of this came through investors that were early in the company. Our first seed round was basically a horde of angel investors that were entrepreneurs, right? It was people like Aditya, who was the head of engineering at Dropbox at the time. It was Jeremy Stoppelman, who’s CEO of Yelp. Drew Houston of Dropbox was among the founders of tech companies we wanted to invest in as some of the first investors. Through that, either directly or through people they knew, I got connected and would meet with some of these people regularly to get their advice on whatever issue I was facing. I remember actually talking to Aditya, at South Park in Soma, discussing how to structure comp bands. 

Having people around to ask was really helpful. I read a lot of books. I have this shelf full of business books. Things like High Output Management from Andy Grove, The Score Takes Care of Itself by Bill Walsh, and Mindset by Carol Dweck. Those are my three favorite business books that I read and they really helped me learn the tactics as well as the characteristics that are helpful in becoming more of a people manager. A lot of it is just experience. You do, then you fail and you learn. Like anything else that you spend time on, the more time you spend on it, the better you get at it. It’s really a question of how fast you progress. You will progress the more time you do something. Some people progress really fast, some people progress more slowly. But the point is that as long as you do something for a long period of time, you stick with it, you do get better at it. And then you like it even more. So it’s those three things: people, literature, and your own experience.

CUSTOMERS VS. FEATURES

When I spoke with Siqi, one of the things we talked about was how different potential customer segments can want completely different types of products and features, and how to think about where to prioritize. I asked Eddie for how he navigates this with Gusto:

In an unrealistic scenario where you have unlimited resources, it’s always better to have more features than less. However, the reality is that you have constraints in your resources and can’t do everything all at once. You have to decide how to invest your limited resources. You could build new features, improve the quality and scalability of what you have, or create new front doors into the product and focus more on acquisition and growth type efforts. 

At Gusto, we often have larger companies asking us for additional features for their businesses. At the same time, we have many small businesses that don’t know about us yet. So, we have to decide whether to focus more of our resources on creating more features for these large companies or creating more awareness of Gusto for all the small businesses that haven’t used any of our features. 

It really comes down to what you want to prioritize. For different companies, the answer will be different. It’s important to stay disciplined about who your customer is, who your target demographic is. It’s easy to just answer feature requests and get pulled into a direction that some of your customers want in the short term. This might help you get more money in the short term, but over time, you might find yourself not really focused on who your product is serving. 

Many companies have to be aware of this danger. If you start to prioritize too much of the short term feature requests and chase revenue short term, then you can miss the bigger picture. This company is building a product that works really well for this customer demographic. 

At Gusto, we always think about who our customer is. For us, it’s really the small businesses. It’s very enticing to try to go upmarket and land companies that are in the 100 or 500 employee range or a few thousand because they pay you so much more money than small businesses. Every once in a while, an opportunity comes along where a larger company says, “if you do this, then we’ll sign up”. This could be a huge deal for the company. It’s really hard to say no to those things, but you have to, because you really want to stay focused on who you’re serving. 

I asked Eddie to go a little deeper on the dangers of chasing the short term requests of the larger companies:

I think the danger is that there are two risks to this. One is you are diverting resources from something else. That could be a global maxima versus a local maxima. So that’s an opportunity cost that you could be missing. The second risk is that you lose focus on what makes your product or company so special. If we, for example, went and built a bunch of enterprise type features in Gusto that allowed any company to customize it to their heart’s content, that would be a very confusing experience for the 99% of our customers who are very small, who don’t want a customized solution because they have no idea how they want to do things and they want Gusto to guide them on how to do things.

GOALS FOR LARGER COMPANIES

Since Eddie is one of the few at the helm of a $500M ARR startup, I wanted to ask him what startups at that size prioritize, and if rapid growth was still the goal:

I think as you get more mature as a company, you start to think less about just growth at all costs. You start to think about growth at a reasonable price. There’s actually a non-standard technical term for this called GARP – Growth At a Reasonable Price. The rule of thumb for a later-stage company is that you want a GARP of 40 or above. GARP is essentially your growth rate minus your operating margins. So if you have a growth rate of 40% year on year, you’re growing your revenue 40%, then you should be breaking even because your operating margin is going to be zero. So 40 minus zero is 40. If your operating margin is 10%, then it’s 40 plus 10, which is 50. So that’s awesome. You’re going to get a really good response from your investors and the public.

Markets will be very happy if you could accomplish 40% year on year growth and 10% operating margins, right? You’re putting out 10% of profit cash flow every single year. If you’re growing at like, say 60% year on year, which is incredible growth, you can actually be negative 20% operating margin, and still have a GARP of 40%. You’re still going to be in a really good spot. So this formula really balances your growth with your profitability, your operating margins and using this rule of 40 is a pretty good rule of thumb for the markets when you’re a later stage company. When you’re early stage, it doesn’t really make any sense to use. 

Eddie’s comment on how “the markets would be happy” suggests to me that mature startups at this stage are looking at the numbers more at an IPO angle, and determining what public investors want to see.

BENEFITS OF DEI

At this point in the interview we ran out of time, but there was still one question I had for Eddie that I really wanted to ask. At the time of writing, the daily Twitter discourse was about DEI, so I wanted to get Eddie’s opinion on DEI. I emailed him the question after our interview and he graciously responded:

Gusto clearly takes DEI seriously given the RISE report. Do you feel that DEI is important at every stage of a startup or does it start gaining importance once a company is a certain size?

In my opinion, DEI is actually the most important in the early stages because there really is a vicious or virtuous cycle when it comes to building diverse teams. If you start early with a diverse team, you’ll attract more candidates from diverse backgrounds. The opposite is true too. 

I actually wrote about it a couple of times: 

https://engineering.gusto.com/growing-our-engineering-team-in-denver-diversity-begets-diversity/

https://engineering.gusto.com/staying-ambitious-on-diversity-new-goals-for-gusto-engineering/

SHOUTOUTS

If you are looking to start a business and/or hire your first employee or contractor, please consider using Gusto, the #1 payroll software in 2023!

Additionally, Gusto is hiring across technical and non-technical roles. You can find their job postings at https://gusto.com/about/careers

Thank you Eddie for speaking with us!

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Zepto’s Teenager Founders Share How They Built An App With A $900M Valuation

Zepto, an instant grocery delivery startup founded by two teenagers, Kaivalya Vohra and Aadit Palicha, brought their company to a valuation of $900 million in just nine months.

Vohra had “a couple of long conversations” to convince his parents for him to drop out of Stanford for his startup. But pulling them on board wasn’t hard, he added, his parents witnessed how rapidly they grew the business in front of them.

In a recent interview with CNBC Make It, the young founders shared how did they build one of India’s fastest-growing quick commerce apps.

People didn’t take the 19-year-olds seriously due to their age and their “crazy” under-10-minute delivery idea. However, their conviction in their product kept them going and helped them convince investors, senior executives, and government authorities. Zepto’s $200 million in May got it closer to unicorn status.

“If we don’t build it, somebody else will. When you operate with that mentality, everything becomes less intimidating.” Palicha told CNBC. 

During the early stages of Zepto, Palicha and Vohra handled all of the company’s customer service inquiries to determine a clear product-market fit. They even brought goods to customers so that they could have a brief conversation and gain valuable insight from them. Palicha claims that they are still doing it in the present day.

Palicha and Vohra had been friends since they were seven. For Vohra, it’s their ability to “hold each other accountable” that brought them this far. 

“Kaivalya and I really complement each other’s skill set. He has always been more technically sound than I am, so he’s made a great chief technology officer,” said Palicha. 

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Filipina Single Mother in Canada Grew Her Cleaning Job Into a Million-Dollar Janitorial Business

We’ve all heard the stories of people who have started with next to nothing and come out ahead. They are able to turn their passions into successful businesses while providing them with a sense of purpose. But what does it really take to become a successful entrepreneur? 

As a Filipina single mom who built a business in Canada, Lorephil Toledo had to overcome a lot of challenges before achieving success. She is now the CEO of her own company and an inspiring Filipino dreamer for female entrepreneurs around the world. 

At a young age, Lorephil was already used to running her own business. She used to sell clothes, shoes, and underwear at school to pay for her own food. She has never been shy, and she even uses her skills to provide tutoring services in order to increase her income. 

In 2011, Lorephil sought work in Canada. Her oldest was 2 and her youngest was 11 months. She was unhappy because she had to spend so much time away from her children in order to earn. 

She overcame homesickness and missed her children by cleaning. “I found myself distracted by cleaning houses because I was homesick. I’m dreaming that my children are in here while I’m doing housework. I felt good every time I cleaned the house,” she explained.

Lorephil quickly realized that she could turn her pastime into a profitable business. Lorephil started the successful CanaJan Inc., a janitorial services company. Through her entrepreneurial spirit and hard work, Lorephil was able to serve the community with the best janitorial services.  

She started out on her own and now oversees a team of 15 people. More than 350 of her clients are consistent, and she brings in millions of dollars annually. She is a multi-award winner, having been named Entrepreneur of the Year, New Citizen of the Year, and New Business of the Year in addition to being named Ambassador of the Filipino Canadian Trades. She was also invited to speak by the provincial government of Alberta.

When sharing her story, Lorephil mentioned a few of the lessons she has learned along the way. She encouraged everyone to have big goals. She believes that there is no impossibility in life, even for the poor, and that there should be no limit to one’s dreams. 

She advises to work hard, “If you want to succeed, you have to work hard for it.” She felt dreams can’t come true without labor. She worked seven days a week for her company. She got four hours of sleep, skipped holidays for five years, and reinvested her money.

Lorephil is a firm believer in the saying “ “Don’t Quit.” She is confident that every difficulty can be overcome and that there is always a way out.

She upholds that in order to properly serve your customers, you must first properly serve your team. This is her reason for treating her employees well and providing free services to her regular customers. She added,  “If you give something to the universe, it will come back double times.”

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The Notable Filipino Entrepreneur Who Used His Peanuts Enterprise To Establish An Empire

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John Gokongwei, a Filipino businessman, investor, and philanthropist, died in 2019 at age 93, but his legacy and business lessons continue to inspire. John created JG Summit, a worldwide conglomerate with assets in one of the Philippines’ largest Telecommunications companies PLDT, Manila Electric Company, and other international companies.

John’s grandfather, Pedro Gotiaoco, was one of Cebu’s richest persons in the 19th century. He was from Fujian province in China and was the owner of the massive trading firm Gotiaoco Hermanos. However, their family went bankrupt during the Great Depression, leaving them homeless.

John, his mother, and five siblings returned to China while his father stayed in the Philippines. At 14, he started selling peanuts to support his family. He quickly realized a bicycle would help him get more done. He saved money and eventually had enough to sell his goods in nearby cities.

At 17, he followed in his family’s footsteps and entered the trading business. He used a small boat to transport goods between Cebu and Manila. 

In order to put his siblings through school in China, he had to double his work. After the war, John saw it as an opportunity to expand his trading business internationally. Amasia Trading, his first company, sold and bought goods in the United States, Manila, and the Visayas region. 

Resulting from his fruitful dealings in Amasia Trading, John finally got to see his family again. When they get back to the Philippines, they helped run their father’s business which is American-Asia Trading. 

He then got interested in the cornstarch sector but needed the funds to get started. After numerous banks turned him down to secure a loan, Dr. Albino Sycip of China Bank lent him P500,000 ($8900). John founded Universal Corn Products in 1954, and eventually expanded into variety of products, it became Universal Robina Corporation (URC).

URC became one of the country’s major food and beverage firms, while one of the Philippines’ largest business empires, the JG Summit Holdings continues to grow. He also founded Consolidated Food Corporation (later CFC), Cebu Pacific Air, and Robinson Retail Holdings. According to Forbes, John was the third richest Filipino at the time of his death.

Big John’s success was largely a result of his management style and leadership abilities, in addition to the fact that he has proven to be a crafty business leader. He will be forever remembered as a self-made billionaire who began by selling peanuts and was one of the most enduring entrepreneurs in history. 

 

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Former Reddit CEO Ellen Pao On Being A Confident Woman In The Male-Dominated Tech Industry

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While women have made achievements in tech, their numbers are still low. A survey from AnitaB.org, a global group for women engineers, predicts it could take 12 years for women to see equality in the industry.

In 2012, Pao sued her then employer Kleiner Perkins Caufield & Byers for gender discrimination in San Francisco. The jury sided with the VC firm, but Pao became the face of the issue.

Pao shares with Jennifer Palmieri in her podcast that facing the Silicon Valley guys’ club inspired her to lead Reddit in 2014. During her time as the CEO of one of the biggest discussion websites, she didn’t have imposter syndrome as she had always thought that she had seen so many “horrible” male CEOs and board members.

The Taiwanese-American felt confident in her qualifications despite the Silicon Valley narrative that favors Caucasian and male college dropouts. “Maybe I’m not going to be perfect, and maybe I’m going to make mistakes, but it’s not going to be like some of these other mistakes I’ve seen.”

One of Pao’s priorities, when she was at Reddit, was strengthening the anti-harassment policy and clearing the site of nude pictures and revenge porn. Critics of the plan, mostly men, argued such measures were a form of censorship.

Today, however, Pao thinks that current tech leaders are driven to not prohibit hate speech because it boosts social media engagement and profitability.

As the majority white, male, and affluent tech leaders don’t see and experience problems the same way marginalized communities do, Pao believes that they can’t solve these issues.

Pao credits her mother, who is an engineer, for instilling in her a strong sense of right and wrong, which led her to speak up when she witnessed overqualified women and colleagues of color not getting promoted at the same pace as White men.