Gusto's "Cofounder" AI Emerged from a Missed Flight

In a candid conversation, Eddie Kim, Co-founder and Head of Technology at Gusto, shared the unexpected journey behind the company's new AI product, "Cofounder." The story, as recounted by Kim and moderated by Harj Taggar, Managing Partner at Y Combinator, highlights how a personal travel mishap led to a significant technological leap for the small business software provider.

Gusto, a company that has grown significantly since its Y Combinator Winter 2012 batch days, recently crossed the $1 billion annual revenue mark and now serves over 500,000 small businesses across the U.S. Kim's narrative began with a relatable travel experience: a missed flight. It was during this period of unexpected downtime that the initial prototype for Cofounder was born.

The full discussion can be found on YC's YouTube channel.

From Missed Flight to AI Prototype

Kim explained that the idea for Cofounder stemmed from a desire to automate many of the recurring, time-consuming tasks that small business owners typically handle. "We want to automate most of the business processes that small businesses have, many of which they are already doing on Gusto," Kim stated. He elaborated on the product's core function: acting as an AI assistant that can "hand off the behind-the-scenes work that slows you down and get back to the work only you can do."

The prototype was built using AI, specifically designed to automate tasks that Gusto's existing customer base frequently performs. Kim highlighted examples such as flagging payroll deviations, scheduling reminders, running payroll via SMS or Slack, and generating weekly performance reports. "Cofounder works for you on the go. Just send a text to run payroll," Kim demonstrated, illustrating the product's conversational interface.

Addressing the "Blank Canvas" Problem in AI Adoption

Kim identified a key challenge in the AI product space for small businesses: the "blank canvas problem." Many AI tools, he noted, offer powerful capabilities but require significant setup and customization, which can be daunting for busy entrepreneurs. "We actually start with all the things that Gusto is already solving for customers... but we suggest ways that we can actually take it end-to-end," Kim explained. This approach aims to provide immediate value by automating existing workflows rather than requiring users to build new ones from scratch.

He further elaborated on the advantage Gusto has by leveraging its existing customer data. "We do have a lot of data on what customers are doing on Gusto, and data on what customers are trying to do in their business," Kim said. This allows Cofounder to offer more relevant and proactive automation suggestions, such as identifying if a business relies heavily on hourly employees and suggesting automated time-off approvals or payroll reminders.

The "Cofounder" Philosophy

The name "Cofounder" reflects Gusto's ambition for the AI tool: to be more than just an assistant, but a true partner in business growth. Kim emphasized that the AI is designed to be "your always-on AI assistant." The goal is to automate repetitive tasks, catch inefficiencies, flag upcoming issues, and proactively assist users wherever they work.

When asked about the challenges of designing AI for small businesses, Kim pointed out that many smaller companies still use AI in a "glorified search engine" manner, asking a question and expecting a response. "The more advanced version of this is like maybe you have it do some research for you, generate a report, or author something," he said. However, he stressed that for many small businesses, the immediate need is for AI to handle tasks they are already performing, rather than requiring them to learn entirely new workflows.

From Prototype to Product: A Fast Iteration

Kim shared a personal anecdote about the speed of development, mentioning how he built the initial prototype in just five hours after missing a flight. This rapid prototyping allowed Gusto to quickly test the core concept and gather feedback. "I was pretty excited about what I had built and then I started showing it to a few engineers, designers, and our leadership," Kim recalled. The positive reception and the realization that this could be a game-changer for their users spurred the company to develop it further.

The conversation also touched upon the importance of user experience and the potential for AI to become an indispensable tool for small business owners. "We want to build these workflows... that are seamless and straightforward," Kim stated, highlighting the product's focus on user-friendliness. The ability to interact with Cofounder via text messages, SMS, or Slack makes it accessible and integrated into daily workflows.

The session concluded with a look towards the future, with Kim expressing excitement about the potential for Cofounder to evolve and adapt to the changing needs of small businesses. The product aims to be a proactive partner, helping founders navigate the complexities of running a business and ultimately allowing them to focus on growth and innovation.