Inside Guideline's mission to modernize 401(k)s | Building from first principles, finding strategic edges, and rewiring retirement | Kevin Busque (Co-founder and CEO)

Brett: Thank you for joining.

Kevin: Yeah, thanks for having me.

Maybe we'll just start at the beginning. What what was going on like a year before you started the company? Yeah, so that would have been 2014. I was still at TaskRabbit. Uh, really the inspiration behind Guideline was some of the earliest employees there not using this benefit called 401k. and that was something that, you know, me as a little bit older, as in my late twenties at that point had come from previous startups and also larger companies like IBM.

I knew what a 401k was, I knew what a pension was, um, and I saw a ton of mistakes and the biggest mistake you can make in 401k is not participating and that's exactly what happened at TaskRabbit. So for that, that's kind of where the inspiration came from. It's like, why it kept coming up. 

As a founder you always think of yourself as wearing, you know, so many different hats. And this was one, I just, I wasn't qualified to wear, but people were asking me anyway. I was like. The older person there, I guess, and kind of I did, you know, VP of engineering and technology stack, etc. But I also ran some portion of HR and they're asking me about this and I couldn't really help them.

I wasn't knowledgeable in it and I started digging into it and that was really the inspiration. This is a problem and I'm a problem solver and a builder and I figured, you know, I could probably take a Take a hard look at this and see if I can find the right angle for me and also to develop a product that I would want.

Brett: And did you offer a 401k?

Kevin: Yeah, we did.

Brett: But it wasn't being taken advantage of?

Kevin: It wasn't. It wasn't. It was a 36%. I remember this number because I was like, so flabbergasted when I found out about it, 36 percent participation rate. And it happened to be pretty much director and above, right? The younger folks weren't using it in any way.

They, they took that piece of paper home with them. Never to see it again. Right? Like that was the enrollment form where you have to, uh, add up all the stocks that, you know, get it to a hundred percent and then magically pick a number that you want to Contribute. month or every pay period.

people just weren't doing it and no surprise. Right. so yeah, we had one, but it took a while for us to get there because they always thought 401k was. You know, a big company benefit. Right. And that's just, that's not true. But back then, you know, this is 2014. it was really like, that was kind of the MO of, of 401k.

It's like you go to work at Google or Facebook or something like that. And you get a 401k. But as we started hiring vice presidents, et cetera, and Taskrabbit scaling, people are asking about the 401k. We didn't have one. So we, we went down that path and we looked, all right, payroll. So we were on ADP at the time.

 and then we hired another third party administrator on top of that that was supposed to bring some sort of value, uh, called Sequoia, I think they're like Sequoia Benefits or Sequoia One or something like that now, and all of that just still meant that people weren't using 

weren't using the benefit and we were paying 20, you know, a year for it for a benefit. Nobody was using and we're supposed to be this scrappy San Francisco startup. Right. So we had to look into like what, what we're spending money on. And that was really the, you know, the precipice of like this issue.

And I thought I could solve it. I was a data engineer before in healthcare space. so I figured, I could probably come up with some sort of angle to make this a better experience.

Brett: When you started to notice it, did you start to think about it as a startup opportunity or you were just, this is odd. I was curious

Kevin: Yeah, and that was just about the timing, right? This is 2014, 2015. TaskRabbit is 7, 8 years old. Getting a little bit long in the tooth. you know, behind the scenes, Leah had already met with the IKEA folks numerous times. That deal was long in the works. Kind of knew it was coming. Um, and that wasn't something I was interested in doing.

So, um, I was kind of looking for the next thing anyway. And, and this, you know, opportunity popped up. And, and I started running with it. And did about. A year and a half, two years of research before we really did much with it. 

Brett: and were, when you started to think about doing something else, and this was sort of one of the areas you were exploring, were you exploring other areas or are you mainly focused on this.

Kevin: Yeah, I'm a problem solver and a builder and like, this was one of the things that I was most interested in. I was getting ready to leave. I'm like, what am I going to do with this money? I had 401k assets, right? Like trying to figure out a little bit of self interest there, like figure out what was going to happen.

Most people don't know, but we actually Leah and I at the time when we founded TaskRabbit, we actually cashed out some IBM pension to go and start TaskRabbit. We bootstrapped TaskRabbit for a couple of years before we took the first investment. So I'm thinking about these assets. Can I do something similar again?

And I was like, this is such a mistake. Because had I left that money when I was in my mid twenties, I would have had so much more in my retirement. it's just over and over this problem just kept coming up and I finally just sat down and I went through the IRS code Um, and it's 401 dash k right? So that is that's where the name comes from.

Um, etc so, started reading through it and it was just like This is such a regulated industry and there's the rule sets on what is fair and not fair and it's By the Department of Labor, the IRS, and the SEC And I love being able to piece things together in a way that comes out to like this win win win.

Brett: You mentioned a second ago you spent like a year and a half going deep on it. Can you, in, in sort of some level of detail, talk about what the research was? 

Kevin: yeah, absolutely. So what I wanted to solve was obviously we had an onboarding experience. I think generally speaking, 401k is a set it and forget it. You should join when you first start. It's part of your onboarding process. People weren't completing that. And that's where you get to that 36 participants.

Percent participation rate. So that was one, like that was tried and true. The next one is like, what do I invest in? I don't know. Like you have this list of funds, you don't know what those funds are. What's a Lord Abbott, you know, s and p, whatever. Like nobody really understands that when you're first starting in your early twenties.

So I wanted to solve that. part of the reason to, to even go and try to do something different in 401k or in retirement in general, is the pricing is incredibly opaque. You don't really know what you're paying. You don't know who's paying it. If it's, if it's a company paying for it because it's a sponsored benefit or it's a participant paying for it in an asset based fee.

What is my asset based fee? Is it wrapped in the mutual fund expense? All of these things were just like completely opaque and I started digging through them and Really understanding what an asset base fee was. And it's really a lot of people just not adding value to your 401k plan, but getting paid for it.

And I figured if I could do this the right way and come up with this win, win, win situation, I wouldn't have to do it the same way that everybody else does it. and that was really like one of the things that I unpacked and that was kind of the epiphany early on was like, I could actually figure out a way that's best for the participants, best for the company, and also Guideline can make money.

when you started to think about the problem space, because you were sort of one of the key stakeholders, in observing the problem when you were building TaskRabbit, did you kind of commit to, I'm going to go after this and then do this work? Or did you do the work to give yourself the confidence that you would go spend the next decade plus on this?

Yeah, I did the work. I'm pretty conservative overall, as far as like, Taking risks, but you know, something that's always stuck with me is something my grandfather said was when you thoroughly understand something, it's nothing to it. So I truly believe that. And I went down this path of just like understanding absolutely everything about 401k.

And in the end, I just found my angle and that was really important. And then I talked to Mike and cabs about it, that I convinced them they liked the product. They hated the original product that they were also using, And that was the end. And we just. Went and committed to fundraising, before doing any work.

Brett: But 

was this after you did all the research?

Kevin: This is after the research.

Kevin: We didn't build anything yet. So we had to come up with something flashy, to build and show people what kind of this problem exists. Cause most people didn't really know that it existed.

and the SMB wasn't one of those things. There's like clamoring for 401k. We totally made this market with the help of Gusto in our early days. and that was just something that we had to tell the story to be able to raise capital to get this done, but we were pre product. We didn't have anything before we raised the seed.

How did you think about, validating the opportunity in the eyes of the company versus the eyes of the employee? Because a lot of what you were articulating was pain points for the end employee, but obviously for it to be successful. the initial customer is the business owner. Yeah, naturally, right? So at TaskRabbit, I was the business owner, but also the employee. Uh, so I saw both sides of this. And when you start talking to people early on about this idea, and I did a bunch of, you know, talking to other startup founders. I'm like, what are they using for 401k? Did they think about it?

A lot of them just came back and was like, Hey, that product you were talking about. I also want that product. and generally speaking, I like to build things that I want, just personally. I did that with, with TaskRabbit, I did it with Guideline as well, and I feel like that was kind of the need, and that was kind of the core validation, at least for me to do the first year of work on it.

Brett: what's the type of work that you did to validate that there would be market pull for the product that you were going to

Kevin: Yeah, talking to pretty much anybody that would listen to me, um, including Mike and Cabs my earliest co founders, talking to VCs that I knew through my experience at TaskRabbit as well about the market opportunity size, right? The TAM, everybody talks, it's a massive TAM for this industry. I'm not one of the guys that believe in stealth mode. I figure. Like if you, if you can't talk about it, then like, you don't really have an advantage because everybody has an idea. So, I don't believe necessarily in first mover advantage. It's always about execution for me. So I talked to everybody that would listen to me, including some of our earliest customers, like Zach at Plaid.

And I went to Zach because I wanted to know if he could get me the data that I was looking for, for other people's outside investments, what did they already have? Because I wanted to do something at Guideline that could either mimic. Sort of their investment philosophy or take into account at least that philosophy so I could do something that was additive to it.

So I was talking to him about this. He came back and was like, hey, I want that product too Which is great and they became our first customer before anybody else and it was Guideline and Plaid, early on.

Brett: What kind of work did you do on other companies in the space already? And did you think a lot about who the competitors are or would be, or were you just more problem and customer centric?

Kevin: No, absolutely investigated the space a ton, mostly because I wanted to get Taskrabbit off the ADP in Sequoia. and that was really the precipice to like, Hey, I gotta go find something that's better than this. And I didn't find it. So for me, that was just some people ignoring the SMB opportunity completely.

Nobody wanted to talk to us. Fidelity didn't want to talk to TaskRabbit, you know, we had. 70 employees and zero in assets, right? So in a legacy 401k ecosystem, if you don't have assets, other people aren't making money because they're not charging a SAS space fee. We were the first one charging SAS space fee for a 401k benefit in the country.

So that was really important to kind of understand. but I also knew that Fidelity wasn't going to punch down into my space immediately. They tried to now, but they weren't going to do it immediately because there wasn't a lot of assets right in their mutual fund company. So for them, I knew they weren't going to be in the space.

My research turned up a couple of others. One had just started. the other one was originally called the online 401k, which became Ubiquity, um, as well. So they were still kicking around, but they were doing some things differently that I thought, well, you don't really have an advantage. You're kind of just being like everybody else.

charging asset base fees. so I knew that if I was going to go and do this, it was going to be completely vertical. I was going to own absolutely everything in the software stack to be able to deliver a differentiated product.

So walk through. What was the set of insights that you landed on before you actually built or ship the first product,Yeah, so on the plan sponsor, the small business owner side, you hate wasting money, right? At least, at least I did at TaskRabbit. So, if you're going to offer a benefit, you want people using it. So again, that participation rate, why are they not using it? I'm paying 20 grand a year for this. Nobody's using it.

Nobody's getting the benefit. Nobody understands the benefits. So that was one and then the other one was like people need to understand that small businesses can afford a 401k if it's done properly just because you don't have assets doesn't mean they won't build over time, right? Like that's the whole point So and then make it as easy as possible.

So for us and ADP and sequoia like Our payroll and our 401k weren't even integrated and it came from the same company and that was just like mind blowing to me. Why am I validating contributions after every pay run? Why, why am I doing this? This should all be handled in the data set in this product. Um, and it wasn't, and that's kind of the way it is even today with some of the larger legacy companies, uh, they still haven't figured out that you need to have this seamless integration.

The small business owner doesn't. And isn't qualified to administer 401k, Um, and, and part of our first product was building these 360 degree integrations with forward thinking payroll companies like us though. And that was absolutely so important to product market fit for, for Guideline, because if we had to go back to the small business owner every two weeks or every week on a payroll run and ask them to validate all this stuff, that's a ton of work that they don't want to do and they don't have time to do it. So that was really a key insight into developing the product we have now. On the participant side,

I truly felt that 401k overall. had kind of lost its direction, right? The whole point of this benefit is to get people to save successfully in retirement in 20 or 30 years. And to be able to somewhat guarantee a success, or at least the probability of success, you need to do a few things. And this is where Modern portfolio theory kicks in, and that's truly what we believe at, at Guidelines.

So we don't have to differentiate on what is actually in your 401k, from an investment product. We're not trying to beat the market, but I'll take that six, seven percent of market appreciation for every year for the next 20 years, and I'll show you a huge difference. By controlling the things that I know I can control.

And those are your fees. And your fees pay, play a huge portion of this. So this is your asset based fees that most people don't know they're even paying. It's like 65, 70 percent of people don't understand they're paying asset based fees in their 401k. No idea. so that was really important insight for me.

So we really brought that forward. And when we launched, it was incredibly low. I think we launched at 0 percent AUM and people couldn't believe that we could do something like that. The truth is, it was very difficult, but we were in early startup mode and we weren't making we didn't need to make a profit.

We just raised the seed. So over time, we're still incredibly focused on what we call a participant outcome. And that drives absolutely everything that we do. Uh, at Guideline, we're really focused on keeping those asset based fees incredibly low. So those are the two things. And then obviously what's my experience in 401k.

I remember resetting my password for ADP like 30 or 40 times. it seems like maybe you've done that in the past too. that was really important. Just, it needed to be a modern product experience and you need to understand it, we need to have a mobile application. all of those types of things just, and the next one was really fixing.

That onboarding process where you had to pick from a fund menu and understanding how much you can afford To invest and what it looked like from your paycheck perspective, right? Like you could say I want four or five percent But what does that mean in actual dollars in two weeks, right when you don't have that those funds anymore So that was really important to understand and we built a suitability algorithm inside So essentially a robo advisor for 401k had it certified by a third party at the time and and that was really important.

So now you could Pop in, go through a web experience that was modern and fresh and like used common language. None of the co founders were in finance in any way. We're two software engineers and a product designer. So we used just really clear sort of basic English. We weren't overwhelming or intimidating with the terms being used.

And that was very intentional. get people through this experience and then make a portfolio recommendation to them. All they had to do was click yes. If they didn't want it and they are You know, maybe more financial literate than than most they could bounce out of it. There's an escape hatch They could pick from the fun menu.

That was fine, too. But 92 of all of our participants 

take our recommendation

Brett: Going back to the fee structure, were fees set up as just money grabs that people didn't recognize? Or was there a structural reason that there were fees and you basically using software sucked things out of the cost structure that allowed you to do something that incumbents couldn't do from a fee perspective?

Kevin: Both right. So traditionally speaking and 401k and the legacy ecosystem, people charge asset based fees from your record keeper to your TPA to your fund investment manager, all the way through to even the 316 who administers the, the overall 401k plan, they all charge asset based fees, right? And they just all stack up.

So in the end, the asset base fee for task rabbit early on was 1. 67 percent or 167 basis points. and that's just insane, right? Like I'm literally investing in S and P 500 target date fund. Like, what are you, what are you doing that that needs to be 1. 7%. It just didn't make sense. Um, and that was really just the structure of 401k.

It's not that way anymore and I think Guideline had a lot to do with that. Um, but that industry average has come way down. It's now maybe like 80 basis points, 90 basis points or something like that. just feed compression over time, but, Yeah, that was kind of just the structure that it was and it didn't need to be that way.

And again, focusing on participant outcome, that was my opportunity, right? So they're charging 1. 67%. I could charge something completely different if I built the software correctly. And this was the most important thing that we ever did, was understanding why was every person in this ecosystem or every company rather charging an asset based fee.

It's because once you charge an asset based fee, Everybody else has to charge an asset based fee. So if I want to offer you a modern, and some of our competitors did this, and this is where we kind of surpassed them very quickly. If I want to bring you a modern 401k experience, I can go about it in many different ways.

But the most easy one, the basic one, is to put a flashy front end on it and use all of the legacy Institutions under the covers, right? Like I'll go get a census for a record keeper. I'll go find a TPA, another third party to administer the plan. I'm just going to do the front end software. And what I'll do is I'll just tack on a little bit of asset base fee, right?

That's my margin, but that's 15, 25, 35 basis points of that 1. 7%. and that's over time. That's just so detrimental to the participants. So when you look at it and you're like, okay, if I'm going to do that. I have to pay a record keeper all this stuff all the way down the line. And I said to to Mike and Cabs I'm like, look, if we're gonna do this, we need to start at the bottom.

It's gonna be super boring. We're gonna spend a year building record keeping. Um, but it's gonna give this advantage all the way through. 'cause we don't have to charge any of these asset based fees that everybody else does. And then we can just pick off. We used to call it hands in the cookie jar. So we would pick off each hand in the cookie jar.

As we went up the stack from the bottom of record keeping all the way until we delivered an end product on a web experience. And that was super important. Gave us the advantage that we needed.

Brett: Going back to sort of the phase before you raised money and before you wrote a line of code, at what point did you commit? Did you find that it was like a moment in time or was a slow build over months?

Kevin: It's a good question. I think honestly, it was, it was a slow build and then it was a moment. And that was a moment that Leah and I had together and it was very much like, Hey, I'm going to quit. I'm going to leave TaskRabbit. And this is going to be a thing. Um, we tried to make it not a thing and it went extremely well, actually.

people thought I had just kind of disappeared a little bit, but, I was actually, I had left and I committed to fundraising and that was really it. the moment in time is like. I need to raise capital because I need to pay employees to come build this thing with me, and that was really important.

That was the moment in time, but I knew I was going to do something different at some point, but I just felt like that was the right time for me in my life to kind of go out there and do my next thing.

Brett: So when you were doing a lot of the research to understand the opportunity, you were still working at TaskRabbit at the time?

Kevin: Doing the research, I was still around. I didn't have a lot of responsibilities. Actually, how I met and became like really good friends with, with Mike and Cabs is we were set out to do a whole different product. Um, besides TaskRabbit, there's a company called Kelly Services, 

It was hourly work that you could outsource like a Robert Half, etc And they were super interested in coming outside of the brick and mortar and doing it all online. So we built this entire product for them that sat on top of the TaskRabbit platform to be able to hire people immediately. we were back and forth to Detroit.

They're based out of Detroit. so we're in the winter, they're going back and forth, just going through specs and delivering product and doing demos, and it was just the three of us. And it was a designer and two engineers. And essentially I was the face of the company doing the demos, et cetera. So, I really figured out that these two guys, like we whole company to this other company.

and then I forget what happens, but they had some sort of reorg in The section of the company, the innovation side of that company got completely shut down. And then we were kind of stuck. And that was also like the moment in time, like we were going to go back to TaskRabbit and be reabsorbed into the organization after running on this sprint essentially for the last almost three or four months.

And that just felt like disingenuous to come back into the company knowing I was going to leave it as well.

Brett: So what were you hearing in research and spending time with customers that gave you the conviction to then effectively go heads down and build all this plumbing?

Kevin: Early on our very first product wasn't 401k, wasn't Guideline. It was really just surfacing these fees to the people that were already participating in a 401k. So we built this tool so you could look up your 401k and we would give you an estimate of the fees that you're paying. and we would show that to the people responsible, the small business owners, the people in the plans and get their feedback from them.

And most of it was like, I had no idea. Like I'm looking for a new solution. This is before we raised money. Yeah. We actually ended up using that demo in the fundraising process, which is super interesting. Actually, Rob and I have a funny story about that from way, but you might've been, you might've been here.

but it was a funny story about that, but you could essentially look up people's 401ks and figure out how much they're paying and then take it and make it personal, right? Like take it to an individual and show them how much money they're losing over the next 20 years. Just by paying those fees. And it's a large sum of money.

Some of it is 400 to 600 thousand dollars. The difference between 1. 6 percent and 8 basis points is, it's a ton of money.

Brett: seeing people's eyes light up gave you the conviction or like what, said, okay, I'm gonna go spend a year plus to get this thing off the ground?

Kevin: Yeah, I mean that was really it and I knew that I thought we had a A tactical advantage between Mike and myself, and Cabs as well, because he was delivering what that product experience look like. But I was a data engineer previous to my life at TaskRabbit in healthcare space. Mike is one of those 10 X engineers that, you know, we could build something super fast and that was just what we really liked doing. So I felt like we had the right skill set. We had the right team to be able to actually go and build this where a lot of other people were going to come from it from a financial point of view and think, why would you do that?

Just hire a census or hire a matrix. And I knew they were going to go down the wrong path. and for us as software engineers, we were like, let's go, let's go do the hard thing first and build bottoms up. That was really the con the conviction came from the customers and the insight into fees that they didn't know they were paying.

Brett: And then it was like, I was really excited to go build this product. When you were spending time with founders or business owners as one of the key stakeholders, when you were intersecting them, were they all like emailing you, when can we have this we want it or it was a mix of sort of, yeah, I don't really care about this. I'm focused on other 

Kevin: No. 

Brett: range of

Kevin: Yeah, it was it was definitely the former and so when we have it Zach was very adamant about like hey If we're not going to do this now, like when are you going to do it? and I think we launched Zach's plan, and so this is Plaid, in december of 2016 so he was very first to market. We didn't have the integration yet with Gusto, et cetera.

So, it was very manual process, but it was really important to get that first year because then we had to do 5500 filing and integrate with the IRS shortly thereafter so that we could keep those plans in compliance. Yeah, I mean, so many people that I were talking to are like, when are you launching?

When can I have this? Have you thought about this? Can I connect you with this person? just super helpful. And I think that's part of the beauty of San Francisco. Uh, overall, it's just like people want to be helpful. And as long as you talk to them and are authentic about what you're doing, what you're building, there's generally a good amount of excitement around it.

Brett: Did you think about early customers in terms of separating the Plaids, venture backed tech companies versus main street small businesses, or didn't think about who the first 10 or 1000 customers would be in that lens?

Kevin: Yeah, I didn't think about it and quite honestly didn't care. Um, and that was really important because we wanted to, you know, encapsulate that whole TAM and the TAM

for a formal game. 

Oh, every side of it. We had cupcake

Brett: Yeah.

Kevin: makers in San Francisco from bakeries, that we were using it, you know Taskrabbit that I knew about that I talked to We talked to VC's, VC's wanted it as well.

They're highly educated financially literate folks, right? They understand they get the game with the asset based fees and then we had forward thinking companies like Gusto, who also was a customer at the end, right? we built this whole ecosystem with them and they became a customer. So it was a very easy sell early on.

It was really about what does it go to market going to look like? How do we tell people that we've built this thing? and how do we educate people that it's not just a big company benefit?

Brett: Did you create some sort of basic financial model to sort of get your arms around is there a real economic engine to this or you just thought if we solve this we'll be able to make money?

Kevin: No, we definitely, you know, did a lot of work going into it and came up with pricing, etc. We knew we were going to change the game a bit on pricing, because we're focused on delivering a SaaS, you know, software as a service. 

 when we actually did go live and become generally available, it started taking off almost immediately. and that was really important, but of course you do the modeling on that, even to raise capital.

You're like, this is what we're going to charge. This is, you know, how much money we're going to make in year one, year two, year three. We get a lot of validation, mostly from VC folks. I'm like, can you actually sell, 10, 000 plans in a year? Like, can you do that?

it seems like a lot. And you look at ADP and paychecks and like, they weren't selling 10, 000 plants in a year. So how are you going to do it as a San Francisco 

Brett: On

that point, did you think about distribution? Like, I think one of the reasons why Fidelity and others haven't gone after the market, or if you think about what did Square do in the early days, it was the identical thing. The main merchant processors didn't want to deal with somebody selling cupcakes at, you know, some sale some weekend.

So did you think about how can we get efficient distribution into SMBs? Or again, was it more the pain is really High and if we build a great product that's priced correctly Distribution will take care of itself?

Kevin: Little bit of both. we definitely wanted to deliver on the product. PLG was super important product like growth, was going to be, you know, our go to market motion. And it was absolutely going to build a product. That's what I had been selling when I was talking to all of these folks early on about, this is the product, this is the experience, et cetera.

They want that product, right? They weren't talking about where they found out about it or what it was going to be to sign up, et cetera. But in the end, that model that you show venture capital needs to have some go to market motion and whether it's going to be sales led growth or product led growth and what that looks like over time is just incredibly important.

So my angle there, not being a salesperson and actually generally being uncomfortable talking to people, was like,

Brett: broadly uncomfortable

Kevin: uh, we just need to understand that, right? I don't want to hop on the phone. This is, you know, zoom was a thing, but like it, it wasn't going to be a sell motion. I wasn't going to take people to steak dinners and do the fidelity thing or the ADP thing that was just, wasn't how we're going to do it.

So I look for our advantage and our advantage was really in and around our integrations. so where, where do people actually look to bring on new benefits? And that's what the payroll company, I'm thinking back to my taskrabbit experience, that's what I did. I went to ADP like. Actually, the probably the worst place to go and buy a 401k is through your payroll company, right?

Like it's like buying it from your bank. Like what do they know about those types of benefits in the end? Um, so that was really insightful for me, but also it's like, okay So how do I make this also attractive for this payroll company? And that's why we pay for integrations And that integration gives us operational excellence and scale in the end.

So it's good for Guideline, but it's also great for Gusto. It's a hundred percent margin business for Gusto. They don't have to be involved in

the bill. Yeah. So what we do. So Guideline in general as a 401k you need payroll data. It's a pre tax benefit. It's a post tax benefit It needs to be set up in payroll so that you know how much money is going to be put away So that Guideline can invest that money on an individual basis, right?

So to do that and do it Well, you have to know what that data is and this is my point earlier about with ADP in our existing 401k plan. We had to go and validate all of those contributions. We had to validate that somebody didn't change their contribution from 4% to 5.2%, et cetera. All of that is data.

All of that is in the payroll system, and we needed to ingest that. So we built this first of its kind integration with Gusto and honestly like. Guideline wouldn't exist without the forward thinking folks over at Gusto and Tomer and Josh who knew that, who understood what I was trying to build that was so important to us.

So we built this 360 degree integration where you change your contribution on Guideline, I'll update it in Gusto for you. You change it in Gusto, it'll come back to Guideline. We change something in one system, changes in the other. Of course, there's like some sort of source of truth and that's kind of industry stuff.

But that was so important to get right and it allowed us to get to the scale that we are right. So 92% of all of our customers are on an integrated platform and that's where we play like really well. So we're we're 400 people at Guideline, but we service almost 60 000 small businesses at this point and if you look at any other like ADP or You know paychecks, etc that are at our scale.

They have hundreds and hundreds of people just servicing 401k We do it all in the system.

Brett: Did you figure out the integration insight before you started the company and raise money?

Kevin: I didn't

 That came after, obviously I knew I had known about this problem with ADP. So I was experiencing it myself, at TaskRabbit, but I couldn't figure out the angle to make Gusto care or make my first payroll partner care that I was going to go do this. and eventually we figured that out and that was really important to, to understand.

But one of the things that I didn't realize until after the fact, and Gusto actually told us this, So payroll in the United States is incredibly fragmented, right? They have high churn. It's 25, 35 percent on the higher end of their annual logo churn. So when you take that into account and you attach a 401k or an integrated 401k solution to the payroll product, it cuts it in half, right?

So their LTV doubles, which is fantastic for them, right? So now I'm starting to think, this is why they're going to care because I'm going to cut their churn in half when they attach a integrated 401k and now I can start paying them as well. Right? Like the long tail of it with that integration, it gives me operational scale.

I can actually start giving them money. Now I'm giving them, I'm giving them money for essentially maintaining an API, right? That's a hundred percent margin business for them. So that makes it really exciting. Doubles the LTV. and I pay them. Now I'm starting to understand like, Hey, this go to market motion has legs.

Now I have like the win win win win, right? Now I have my payroll provider. I understand that the participant is so much better for them. The small business, it's hands off and Guideline makes money. This is a scalable

business. did you come up with that?

I mean, just all the way through, right? Like I'd never thought that I would convince Gusto or an Intuit, et cetera, to be able to give me this data, right?

Like we'd have to go down through, you know, lengthy partnership process. Luckily for me, like Josh and Tomer are amazing. they saw it right away. I didn't, didn't take a lot of convincing to them. they also wanted the product, right? So there's a little bit on their end of like, of course I want to, I want this kind of 401k as well.

So, 

Brett: you spend time saying, okay, I need payroll providers to align with me to make the whole distribution thing work? How can I get them? 

Kevin: No, that's exactly how I did it. So for us, and I remember talking to Mike and Cabs, I'm like, we've got to figure out how to make this worthwhile for, for the payroll partner. If we're going to do Gusto or Intuit or whomever, Zenefits, we're going to need to figure out our angle.

Otherwise they don't really have much. We're going to have to be sold, Cause people need to find out about us some way. But we also, you know, failed early on in. You know, we, we brought in a few sales folks. There's probably two or three of them.

I was like, you guys sell 10 plans this year. I will take you to Mexico. We didn't sell 10 plans. Nobody went to Mexico. So the next year we sold many hundreds of plans. So that was only after unlocking, the payroll partner. 

Brett: Because we're going down, we're cold calling small businesses. We're trying to, you know, tell them about our value prop. We tell them about our fee structure, et cetera. They're excited about that. How much work is it going to be for me? Well, here's the kicker, right? Like every two weeks or whenever you run payroll, you need to validate your payroll.

Kevin: You need to validate your contributions. You need to make sure there's not an error. No, by the way, if you get it wrong, there's a bunch of penalties. So for that reason,

Brett: and were these folks that weren't offering a 401k

Kevin: Yeah. So 

Brett: what about going after the people that did have a 401k and getting them to switch

Kevin: No, because we didn't have a sales force, right? So like that's a long sales cycle we had early on.

It was just people that knew 401k, but they weren't salesmen, right? They're answer folks. Like what is the vesting schedule or, those types of questions. So we didn't have this and we still generally don't. Compete in like a sales led motion. We're starting to now, but that's very recent. That's within the last eight months.

 for us, it was just like, Hey, build a product that people want. I knew once we did the demo, we would see a higher close, right. But it was actually getting people to do the demo. and they didn't have a 401k before, so they didn't know how bad it was at an ADP or Sequoia, etc, right?

So, they didn't have anything to compare it to. For them, that was their first experience. And that's still the case for many of our customers. They think 401k is the easiest thing in the world, but they've only had Guideline, um, which is a great, great spot for us to be in. But early on, it was, it was tough to sell, to sell plans until we unlocked that, Hey, you don't have to worry about anything.

Like we're going to ingest your, your employee census. We're going to invite them via email. They're going to click on some links. That's going to automatically happen for you. Um, that was really the unlock.

Brett: Why did Gusto Not want to compete and own this category. Why why do you think they wanted to partner?

Kevin: Yeah, it's a good question. I mean, it took some convincing on my part to like, Hey, let us, let us build this thing, was very, is very interesting. Early conversations for sure with myself and Tomer. but also there's a lot of regulatory issues around 401k. So if you want it to be completely. full stack or bundled solution.

You also had to become an RIA. Becoming a registered investment advisor means you have to register with the SEC. The SEC has all of these different things. Now you have the SEC, the IRS and the Department of Labor, and you have to comply with all of those rules and regulation. It's actually very difficult for a company that's growing as fast as Gusto was at the time, and probably still is, to say like, oh yeah, I'm going to go and figure out this RIA thing.

 That in conjunction with like, oh, Kevin's going to pay me anyway for accessing my API and get a hundred percent margin. That's a no brainer, right? So when they go through a build by partner motion, it definitely points towards partnership. And with Switzerland. we partnered with, you know, pretty much every forward thinking cloud based payroll in the country that is at scale or matters.

Brett: I wanted to sort of recontextualize the journey with, you raise money and then you said you had to go heads down to build all the building blocks because you wanted to own basically the whole supply chain. Talk about more like what was year one and who was there and what was the order of operations?

Kevin: Year one was, it was a trip. So it's myself, my co founders, Cabs and Mike, it's Jeremy. and then our first employee was actually a lawyer. and this was a person, you know, generally not fresh out of law school, but somebody young enough to essentially interpret, interpret ERISA, the IRS regulations, Department of Labor, SEC, et cetera.

And that was really important to understand. We actually had a blueprint, right? the blueprint was the regulation. as like completely opposite to TaskRabbit, where it was kind of the Wild West. You had some like gray area around the employee versus 1099, but in Guideline, like you have regulation and you can look things up.

There are books sold on Amazon that dictate what you can and cannot do. for us, like we brought in an attorney that just was an amazing, amazing employee early on. And she helped us essentially productize all of those regulations. So as much as Guideline is a FinTech company or reg tech company too, that was year one.

There was probably five to eight of us fluctuating in between all engineers, no salespeople. We started bringing in some marketing positioning folks towards the end of year one, then an attorney. And that was, that

Brett: And so at that point, you're not interfacing with customers. You're just building and you explain this a little bit, but you had to build each part of the supply chain in software from scratch. How did you figure out how to do that? There's like these legacy entire companies that have been around for decades and decades and you were trying to rebuild what they were doing in software?

Kevin: Yeah, absolutely. So each hand in the cookie jar that I mentioned, anytime there's a fee being associated with, an entity was something that we had to go build. Right. So you look at record keeping, you look at TPA, which is the three 16, sorry for all the acronyms.

and then there's an investment manager. These are the people that control which funds you can actually invest in. Then there's the product delivery folks, right? Like, what does this thing look like? so each one of those things we had to build and we essentially built them independently. so that at any point we could kind of move things around and control that product experience.

there was a lot of learning. Going into that, 

Brett: how do you go and build any of those things? 

Kevin: we rebuilt record keeping where I think we're probably on the 10th generation at this point, right? Like you don't get it right the first time, but you do your best and then you have to file taxes and like all those types of things.

So, um, we always joke, like there is no beta at Guideline because you can't sign up for a free 401k. Like the IRS does not care. Like I promise you that like you better be licensed day one so that was really important to kind of understand that we needed to get this right That's why it took us a year to go to market where actually some people launched ahead of us but they weren't doing the hard things, right?

Brett: They were doing the easy thing they're putting a front end on a census or whomever So, but if you don't have experience with record keeping, how do you go build that?

Kevin: Yeah, so I did have experience with record keeping because I was actually

Brett: With the healthcare

Kevin: That's right. So like we did a bunch of I was doing employee health records on unstructured data, knew generally speaking, like how to build a data store, people call it a ledger ledger is kind of like the front part of it. But there's so many things that you have to do underneath of the ledger, which is just You know, something that Mike and I were again, like we had a unique skill set that we understood how to go build this Taskrabbit was not a simple product either. When you look at it, it's like, yeah, you might've been doing like burrito delivery and all that stuff. But there's a ton of data that goes into that as well. that was just really important to understand. But again, like you go back to what are the things that we need to understand?

We need to understand, you know, when somebody buys, an equity, right? Like, what does that mean? What are all the dates associated with that? For cost basis for say, like there's so many different things and we just needed to understand that. And that's where we really leaned on our first employee to help us with that.

Brett: Did you use any existing providers or every single thing was built from scratch?

Kevin: everything that we could at the time we built from scratch and that what I mean by that is the thing that we were very careful to understand was. If we're going to be build record keeping what we're not going to build is like the trading platform, right? like where's the money actually clear, right?

So we signed up with state street bank through an intermediary or custodian And that was really important to understand. So there's a lot of the early questions. We're like, hey, you're san francisco Startup and you have 90, 000 in AUM, which was like, you know, mine Cabs and Mike's money at the time.

Like, What happens if you guys disappear? Like, where does my money go? And that was really important to understand. So it wasn't just Guideline, but it was Guideline and intermediary, um, sub custodian, then State Street Bank. So the assets were all at State Street Bank. So when you say that, and it's like the oldest financial institution in the world, like your money's over there.

In the end, so like that gave people a lot of peace 

Brett: if you went out of 

Kevin: yeah that it was still there Right, like at that point we would just have to deliver like who owns what portion of it and luckily for 

us Like we were really good at that. 

Brett: talk a little bit about the first customer. And I think you said that Plaid was the first customer. once you sort of built this infrastructure, you went to them and you just focused on making them successful, Did you build the Gusto integration at that 

Kevin: No, we did not. It was separate. Yeah. So the Gusto integration didn't come until maybe early 17, late 2016. we had two customers to start. It was Guideline ourselves eating our own dog food, which was super important, right? Like we were building this product for, you know, me, Mike and Cabs at the time.

Like, what did it look like? What did we want in the product? And then it was like incorporating like Zach and and his engineers at the time where there's, these are financial folks, right? Like they understand what the institution looks like. They understand ounces and like how things move.

They were giving us so much good feedback early on some of the stuff. I'm happy to say we're actually launching this year. One of the earliest engineers was like, you need mega backdoor Roth conversions. Like you need to be able to do this. And I'm like, We're just trying to figure out like, hey, payroll day one, what does that look like?

so that was just really important to, to understand, but it wasn't, it wasn't a hard sell, uh, with Zach and the early folks over there, they really wanted that, that product. And luckily enough for us, they were great about it and we could work with them. If there was an issue, we would work with them on solving it, et cetera.

And that was really important just to keep it small, but they grew incredibly fast in the, in that timeframe. So actually keeping up with Plaid, we called it the Plaid problem. Like that enabled us to go up market. Even today that enables us to go up market.

Brett: The version of the product they had required them to do the weekly or bi weekly sort of manual process?

Kevin: That's right. Yep. And I think at that time we were probably outsourcing to another third party to actually do all those checks because Zach didn't have time to do that, right? So, and I wasn't going to do it for him. think we were outsourcing at a time we called it a non integrated plan or NIP. Uh, we still have a few of those today for the bigger plans that maybe have a homegrown payroll or something like that.

but that was really important to kind of understand and get in the weeds there and look at it and then essentially take that back. Take that experience and productize it and bring it back in house and develop it in software so that you got all the things correctly.

Brett: when you got them set up as effectively the second customer, because you all were the first customer, was it immediately apparent that you had really strong customer set?

Kevin: Not really. we definitely saw high usage. even when we started, the onboarding flow wasn't where we ended up. Right. It wasn't a perfect suitability algorithm at the time. We didn't do a lot of the validation that we should have been doing early on. and that was really important just to build confidence in that recommendation.

The, the recommendation wasn't at 92%, that's for sure. It was, you know, in the mid fifties on, on taking that. we just. Open the floodgates for product feedback. we got a lot of it early on which was great I think i'm sure there's still stories that exist from those time frame from that time frame.

Brett: And so what percentage of people in those first few months signed up?

Kevin: Yeah, it was like 80. or

Brett: is that started to give you confidence? If it TaskRabbit, you were in the thirties and Absolutely. Yeah It was so validating. And one of the earliest decisions we made, and this really came out of my experience at TaskRabbit, was to be what is called an opt out plan, or automatic enrollment. So essentially, you're going to be in the 401k plan if you do nothing. You're going to be in it. I'm going to give you a target day fund.

Kevin: And you're going to be set at a contribution rate. And obviously the IRS, the department of labor allow this to happen inside of 401k. So if you sign up as a company and your employees don't do anything, you actually, as the small business owner and the plan sponsor can set a default contribution rate.

Normally that's pretty low, two, 3%, just to get people in the plan, right? So now you're invested automatically. You probably didn't know that you got in there in the, in. You knew because we told you, but you probably ignored it, right? So now you're in there and you're investing and the market's going up and you're in a target date fund.

You're like, what is this 401k thing? Um, and that's just a really good experience overall to, for people to understand and first learn how to invest. I think the stat is 76 percent of all investors in the United States first learned to invest in their 401k, which is a great place to be at, right? So we were doing the right thing. Today, a hundred percent of our plans are auto enrolled. so we don't have anybody that's opted out. If you don't want auto enrollment, you don't get a Guideline plan.

Brett: Why did you decide that?

Kevin: It was just really important, like philosophically to me, if we're going to affect participant outcome, we want to prevent people from making the wrong decision.

The only wrong decision in 401k is not to participate. So what's 

Brett: the story behind your third customer?

there was a flurry, after that, I think we probably signed up 10 a week from that point forward. they were all over the board. I think it was a cupcake company. So you had Plaid as your second and then likely something like a

cupcake company. 

Kevin: and it was very, it was a whole different. You know problem set for us hourly workers. They weren't salaried anymore. So like payroll look differently And then our companies from that point forward, we started with the Gusto integration and they were all over the board, but they're very small, right?

So six seven person companies, and they could be blue collar white collar behind the desk. It didn't matter They were all coming in. So we had to develop this sort of this product for everybody, uh, and that was really important for us to, to understand. And we've got a lot of learnings from that, but the next hurdle for us was hourly workers.

And we didn't really think about that being a startup in San Francisco. Kind of everybody was on salary, right? So when we went more broadly with the Gusto ecosystem, that kind of hit us in the face, day one, and we had to, we had to iterate pretty quickly.

Brett: How does that sort of align with the point you were making around you hired a few salespeople or quasi salespeople and they were unsuccessful? Where is that in the order of events?

Kevin: Yeah, I would say that's before the Gusto integration. The Gusto integration was the biggest unlock for us. And that was really about You know, selling people what the experience was going to be like, again, that was the issue early on after the fact, it was like, sign up, you kind of sign up through Gusto, you do an OAuth there, we can show you all the data right in the moment, we can show you your employees, we can show you how much they're making.

Brett: So we built a lot of trust at that point. So when you went from, call it your, the cupcake, customer, which was your third to your 20th or 30th, how were people finding you, like 

Kevin: Yeah 

Brett: Where did they come from and was it all inbound at that point?

Kevin: All inbound, at that point we didn't have outbound until maybe a year and a half ago and we're almost 10 years old. so all inbound, we did a lot of in product displays. So went to Gusto and said like, Hey, when people click on your benefits tab, let's show them a 401k, you know, Chiclet or modal or whatever you want to call it.

that they can actually just sign up for this thing now and make it really simple and like click through it. OAuth will deliver the, the census, go through some product, plan design features and away they'll go. And they can be start to finish. It was eight minutes. Um, and that was just like unheard of in, in the 401k land.

Was there ever a question of do you, would you be willing to white label it for someone like Gusto versus have your own brand?

Yeah. There's a lot that goes with white label. We have these discussions all the time from smaller companies than, than Gusto as well. in the end you have a customer service problem. So who owns the customer? are Gusto, you know, service folks? Qualified to answer 401k questions that just adds a ton of confusion, right?

So like for us we can do something That's you know powered by Guideline. We have those conversations all the time But in the end we need to own that participant for regulatory reasons as well Not just customer service, but you don't want to get it To be to a point where it's just really confusing on who owns what you don't want to be like, Oh, it's a Gusto 401k, right?

And have Gusto take these calls. It's a bad experience for them. So yeah, we get those calls quite a bit, but also we don't want to be a commodity record keeper as well. And that's where, you know, you go down that path bundling and delivering a full product experience is super important to us.

Otherwise you're going to look like in a census or a matrix or et cetera.

Brett: going back to sort of the third, fourth, fifth, tenth customer, how hands on were you with them versus it was pretty self serve and everybody just kind of did it on their own?

Kevin: Yeah, I remember the 6th or 7th, maybe the 8th, customer that came on. I didn't know about. Had no idea they weren't in a pipeline somewhere. I didn't know that we were talking to them, etc It came in through a through a uh a salesperson that had answered a few questions on like vesting schedule or something like that so at that point I I knew like hey, like I don't have to be you know, co selling everything It's not about vision or where we're gonna go.

It's about the product that I currently

have and that was a great that was a great moment for for Guideline

Brett: One of the unique things that it sounds like in that first 20 or 30 customers is how varied they were. Like I think more conventional wisdom is narrow in on a customer type and then just get repeatability and exhaust that and then move to the next one. Did you make that super intentionally or it was just people were coming to you.

We want to service everyone. 

Kevin: What we knew at the time,

I would say post Gusto integration, is that if you were forward thinking enough to have, you know, um, be a customer of Gusto, an online payroll company, you were generally open to new types of experiences in software. and we knew we wanted to enable that. So if you're on that platform, We wanted you as a customer of Guideline. we had to enable that because Gusto isn't just behind the desk. I think. Maybe 50 or 60 percent of their businesses behind the desk, but then they're in every SIC code, just like Guideline is right, across the country. You have all these different sort of buyer personas, but in the end, it's the same.

It's a small business owner that doesn't want to pay high asset base fees and doesn't want to administer a 401k. So we had to be able to service them. so early on There was only one restriction, that I fully remember. And that was like, if you didn't want an auto enrolled plan, then we couldn't service you.

And that was, baked into the product. We didn't have an experience where you could, you know, you had to opt in. It was only opt out. We had only created opt out. We'd only developed that feature. so we couldn't, we actually couldn't do it. and opt in, opt out plans rather are heavily regulated by the Department of Labor on what you need to do, what types of notices you need to give, etc.

So that was a lot of, you know, development and engineering work and we weren't compromising.

Brett: was that an easy decision for you to make?

Kevin: It wasn't, we definitely lost some early plans in the first 100, I would say we probably lost 5, 10 plans, um, and then we had to build a talk track around it. Right? you can always click the button to opt out and like, let them have the ability to do that.

And then at some point, you know, we were looking about different ways that the small business owner could opt people out with their consent if they didn't want to log in or have anything to do with Guideline. but in the end we kept it. It and just stay true to who you are. And now it's funny enough, secure 2.

0. All plans are auto enrolled. So we were totally way ahead at the time. but we, we did that nine years ago, eight years ago

Brett: And when you were originally making the decision before you came to market, was that an easy decision to make?

Kevin: it felt right again, focusing on participant outcome definitely took I had a lot of conviction around this was the right thing to do. It might feel weird to kind of demand that somebody do this or participate there. But in the end, like you could just click the button to get out of it as well.

If you didn't want to participate, we weren't forcing you to give us your money. but in the end, like we have so many thank you notes of people like, Hey, like, thanks so much for putting me in. I didn't have time to do it. I've been in it for three years. I've made 30 percent or whatever it may be. so many of those types of emails.

So I feel like. We did do that correctly and now obviously like the US government agrees. So it's a good spot.

Brett: you mentioned that up until very recently, call it 12 or 18 months ago, the entire distribution engine was inbound. Do you think knowing what you know now that was correct, it should have been like that? 

I think probably the largest, you know, sort of decision that I didn't actively make at the company, was just being so focused on PLG, and not actually thinking about the opportunity for sales led growth. I didn't know about that. I've never been in a sales environment, at all.

Kevin: I didn't know how to hire these folks, etc. Definitely a big opportunity and we, we love it now. Like it's working in conjunction with PLG. So we're, you know, roughly 50%, depending on how you measure it as bought on our website. And then 50 percent goes through the sales 

process. 

Brett: Already just in like 18 months, or.

Kevin: Yeah, we've had it for a little while.

So the way that we do it, the way that we measure it now is like, if we get a lead from a payroll company, we give them a set amount of time to essentially close on their own. And then they go into a sales process, right? So we're changing that up a little bit and being much more clever about how we do that and the type of lead and lead scoring and all that sort of stuff.

But, Right now I would say, as far as like actually selling, but it's not true outbound, right? We're not dialing for dollars. These leads are warm.

 Sales assisted. but now we're actually like, Hey, you came to us a year and a half ago. You never made a choice. Like we're calling you now.

you briefly talked about this that the way that you price the product was a big part of the product experience. But how did you actually figure out what you were going to charge? Because it seemed like there was a ton of room because the fee structure was so high. 

Brett: this was so lazy and I'm just going to tell you the truth. Eight was my lucky number. I was starting there. It's going to be literally a placeholder on the website was 8 dollars. and then in the end it, it matched up at the time. It was the same amount that you would pay for your Google suite, your Gmail account, or your corporate one.

Kevin: And I wanted to be able to say like, Hey, this is a financial benefit for you. It's the same price as your email.

Brett: And it stayed that way?

Kevin: Stay that way. We've done so many different sort of pricing, you know, what's your pricing power, et cetera. It's still 8 dollars we always come back to 8 dollars and it turns out like that was just a lucky guess.

Brett: do you think it lucky guess? Or did you accidentally sort of educate the market and set expectations?

Kevin: it's possible since we were first, In the market doing this with the with the SaaS offering But we've experimented going up and we've definitely surveyed and and like there's something about eight it's under 10, but it's not the tricky nine where it's like Might as well be 10 if you're at 9.

99, right? So there's something about 8 that just works really well. The pricing changes that we didn't make because we had a lot of, early folks where it was kind of all inclusive. We've had different iterations on pricing over, over the time. When we first started, it was just 8 dollars. Whoever used it, we would charge 8 dollars to.

And that's a big difference. Even today on Guideline, we charge on participation. we still only charge you if you use the product. So if you have a 10 person company and seven of you are using it, we're only charging you, you know, seven times eight.

then did you have a, a, uh, AUM style fee as well?

Yeah. So early on, we didn't have any asset based fees whatsoever. So it was zero. That was really important to get to, but we were losing money, right? I had to pay the custodian. So that was really important to understand what I didn't understand early on is that custodian, not only were they charging a very small asset based fee at the time, but they're charging a transaction fee.

So when you had certain things happening in a 401k, you want to take a loan or a hardship withdrawal or a distribution of some sort. You got charged, uh, essentially a distribution fee. They mailed out a check, right? Like that costs them money. They charged us money. We had to charge money for that. The experience that really brought it home for me was actually, uh, an early participant.

Was in a car crash or had a flat tire or something and needed money and they needed it immediately and Guideline was charging them I think 100 to get a distribution because that's kind of what we were getting charged and that was really important for me to understand So somebody's coming to Guideline who've they trusted to like save for retirement now, they need help And we're going to charge them 100 to get it, uh, just felt really terrible, quite honestly.

So we started charging a small asset based fee on the entire platform to cover all transactions. So that's what we do today. We charge asset based fee, but that really covers just every transaction on our platform. So if you want to have a loan, you don't pay a loan origination fee. You want to have withdraw, you don't pay for that, et cetera.

So that was really important to understand. And it was really just bad timing. So people will pay a small amount, pennies, et cetera. You know, every month or whatnot, but they don't want to pay like the 50, 100 to get a check. 

So now we charge a small asset based fee.

Brett: Were you tempted early on to charge a larger asset base fee given you, if 

sort of the standard quote was 167 bips, 

it gave you, you were giving away a lot.

Kevin: We definitely were giving away a lot, but it was really important to just stay true to who we are. And even today, we're focused on participant outcomes. We could charge a ton more money and be wildly profitable. but that in the end, like that's not what we're here for. We're here for people to save for retirement and charging a high asset base fee.

It's just counterproductive to that. So if you at the way that our assets grow compared to everybody else in the industry. It's the night and day, right? Like we're not charging these asset base fees. We're not pulling down capital from being invested and that's really important. So we managed almost 17 billion in assets now.

Brett: when you think about the first five years, it's clear that this insight you had around integrations was sort of a phase shift for the company. Were there anything else like that that you unlocked that sort of brought you into some sort of next step function of the company?

Kevin: I think we're kind of in the middle of one now, which is really interesting. something in conjunction with franchises and LRGs. LRG is a legally related group. So they have some sort of co ownership across multiple businesses. That's incredibly difficult to administer, on an individual basis. And that is a huge unlock for us right now.

We're selling a lot of these types of businesses just because it's so complex to do the compliance testing and the tax filing across all of these different entities as one single service provider. 

Brett: like, if Subway wants to come to you and have 

Kevin: 100 percent Subway is a great 

example. So Subway, Chick fil A, McDonald's, Dunkin Donuts, like all of these, the biggest thing right now for us, when you think about these types of companies, and generally speaking, like blue collar service workers, retail workers, etc. They're not in a position now because of regulations and mandates, state mandates in particular to say like, Hey, these people don't need a 401k. They're actually mandated to have one 

in in California. There's 16 different states that

have required 

benefits. So you have to have some level of retirement benefit.

And now this is like really easy for us to compete in, right. We're competing against the state saying you have a mandate to offer retirement program. You're in sort of a franchise, a subway, a Chick fil A, whatever. You have a very complex entity structure. What you have to do from to meet that mandate is either take the state run program, the state run retirement IRA program that has no integrations whatsoever, is completely burdensome on the employee or the common owner to be able to administer that plan, or you can take this forward sort of modern 401k solution and give your employees a benefit they actually truly appreciate. So we're in this unlock right now. And this is all around 2025. It's probably going to be our biggest opportunity that we've seen since you know launching

Brett: is that regulatory change something recent or it's

Kevin: it is yeah, so the state mandates are relatively new I want to say that cal savers came into effect in 2023 but it was always like all right, they started in wave So it's 10 plus employee companies had to meet the mandate then it was five plus and now it's one to four. So if you have one or more, employees in California, you now have to meet this mandate, which is just a huge, that's 200, 000 small businesses across Gusto and Intuit alone.

Brett: What did your experience building TaskRabbit from day zero In what way did that inform anything that you did, in this company?

Kevin: There's so much to unpack there, but. I learned a lot about Silicon Valley in general and like what not to do, what not to get caught up in, how to focus on delivering and staying true to kind of who you are. In TaskRabbit days, this is 2000, I think 2010, we moved to San Francisco.

Brett: Because you were Boston

Kevin: We were Boston based.

Yeah. So from Boston, we started. Taskrabbit it was called run my errand in 2008, but really bootstrapped it for those first two years and then took first investment when it was actually through Facebook. It's called Facebook Rev or Facebook Fund or something like that. and that was just like our first, you know, foray into Silicon Valley as a whole.

We're in this large conference room and, you know, next to us is, Zimride aka Lyft. All of these companies that became quite large actually. Um, we had a very cool cohort of experiences there, but You could see a lot of people pivoting and moving quickly and not having conviction on what they were doing, or looking for data that, you know, brought them down a different direction.

so I think for me, uh, at TaskRabbit, we tried absolutely everything we were chasing, you know, product market fit forever. I don't think they even have it now. I don't know what's going on with that company now, but, for us, there were so many different things that looked like hey, there's heat over here.

Let's run that down. There's like this whole thing in Silicon Valley around cleaning companies I forget the names of them now, but like Homejoy great great example Like everybody on the board was like homejoy is kicking your ass. Like you need to go beat homejoy. 

Brett: Now the interesting thing is that Instacart came up at the same

time. And that was the one that that form factor did work.

Kevin: Oh, there's so many beyond just Instacart right like The first 10 Lyft drivers were TaskRabbits because John at the time didn't know how to do background checks. And like we wrote background checks for TaskRabbits, right? So like, there's so many missed opportunities, but again, like it was focused on what are we going to do and what, and that was, that's been true for Guideline for me.

It's just like, Hey, we're, we're focused on retirement here. We need to focus on one thing in it, participant outcomes, all these other products that have heat that we know of. We can do over time and we're starting to do that this year But, and not ignore them, right? Like, but also don't just get distracted by like, what's new and shiny and all that stuff.

Like in the end, TaskRabbit should have been Uber, right? Like, or it should have been, DoorDash. we were just talking earlier, like we developed a whole micro site called BurgerToMe, um, and we were just doing like super duper cetera. And like, there was so much heat around that.

And then we got all these cease and desist. I always joke like we collected cease and desist for everybody in the ecosystem that was like in this economy. But that stopped us kind of in our tracks, right? Like we didn't have the foresight to push through and like continue on or pivot into like, okay, unlicensed drivers, like let's go get black car limos. Like 

we missed that. 

Brett: And so, did you deliberately choose to build this company differently?

Kevin: I did I specifically chose to build something that had guardrails. That I could read and fully understand again This goes back to like the gray area of 1099 Versus W-2 employees I love the fact that there's an irs code. There's an ERISA Regulation that I can read and I can understand I can look for my angle inside the Guidelines that are given to me now.

And I love that because people haven't looked at those for so long. I don't agree with all of them and definitely you could try and push on certain aspects of them, or you can lobby for those changes. And they are happening. The biggest thing that's happening in 401k now is deregulation. That's secure 2.

0. That's enabling us to build whole new products like starter K, et cetera. So that's been really cool to see. again, like going back to my risk aversion, I love having sort of the playbook to be able 

to operate in.

Brett: Do you think part of the reflection is that the shape of the company that TaskRabbit Was was actually not the best shape for your personality or no?

Kevin: I think that's true for sure. double sided marketplaces are incredibly hard. you're dealing with different types of folks on both sides of it. Um, and that's really difficult to understand. And all, all of the attributes in between all of them, um, were really hard. And the, the thing that I also said I would, I would never do again would be a transaction based company. 

I love the recurring revenue model. Like AR is like just where it's at. At Taskrabbit, it was like, all right, get all these tasks posted. And then at the end of the day, you go to bed and you wake up and you start from zero. So tough and so hard to like, understand and build momentum around that. I just knew I was never going to do that again.

Brett: up until recently did you choose to be a single product company for almost 10 years or did you Start to introduce other products?

Kevin: Most people don't know, but we've had IRA for almost four years. So individual retirement account IRAs in the United States are just essentially catch all buckets for every other, corporate, 401k or pension or whatever it may be. Most people less than two percent actually contribute to an IRA annually from all the taxpayers in the united states so we've had that product from day one and it's really about giving people when they're dismissed or terminated or what, whatever they quit they leave the change Jobs, which happens a ton, give them a place to essentially keep their same investment philosophy so that they don't have to like redo all the decisions that we helped them do in the first place. Uh, so that was a really easy one for us. And really we just kept it the same pricing to start.

Now it's half the price of the 401k cause we don't have to pay integration fees, Um, so that was really, just a product that we knew we had to build just to keep people, keep the users that we obtained from the B2B relationship. B2B2C now becomes a larger component of what we're doing at Guidelines.

So there's some other products that are very similar that affect your retirement outcome. One of them is a healthcare event. So healthcare is the second leading cause of unsuccessful retirement in the country. so what can we do about that? Like healthcare, savings plans or HSAs are going to be really important to us.

And turns out you can invest them and they don't, you don't. Have to use it or lose it at the end of the year, right? So that's right in our wheelhouse and what we can start affecting, from a retirement outcome. And then there's some tax advantages to be able to move from a 401k to an IRA to an HSA when you do have a healthcare event.

so all of those types of things, again, like focusing on participant outcome will unlock all of these other sort of products, but 401k for us is still the best vehicle in the United States and offers a company match. So it'll always be the tip of the spear for us.

Brett: Do you think sort of Doing multiple products or use cases relatively late in the company's life. Looking back is the correct decision?

Kevin: I think so even today, you know, I question, like, should we be spending investment dollars, R and D, time and resources, on other products rather

than 401k, it's really quite honestly, like 401k TAM is just so large. but now where we're at, like we've, we have every feature that you could possibly want, we're getting into like the sexier ones with the mega back door stuff and all of those, you know, after tax contributions, like stuff that doesn't exist in most plans, like we're getting to those now and we'll have those before we launched the other products.

So I feel like. As far as like left to build, we can always have a better participant experience, but like the core feature set for 401k exists in Guideline now. Now's the right time to start innovating on what the interaction between your 401k and these other vehicles to deliver a participant outcome.

Now's the right time to be focused on that.

Brett: how do you define product market fit?

Kevin: this is a funny story. So one of my employees was, telling another person who was in the Bay Area, what they work on. And that person said, Oh, like Guideline.

And she was like, actually Guideline, like that is product market fit for me when we become synonymous with 401k Guideline's a, 401k company, or like, you should just have a Guideline 401k. That's really important for me to understand that people think of the best 401k companies is Guideline. that's product market fit for me.

I've always had this vision of becoming the default 401k so that you can't make a bad decision if we stay focused on participant outcomes. There should be no other choice other than like you just default into Guideline and that's going to be Eventually, hopefully that'll be like true success.

Brett: in sort of that lens of being the category winner or leader. Did you think about how do we build a moat here in the early days? How do we build a compounding advantage? How do we make sure there's not thirty YC companies that are going to compete was that a part of any of the strategy or the direction?

Absolutely

Kevin: I think starting at the bottom and 

Doing the hard things first, isn't necessarily like the MO of YC, at least not out of the gate, not that they don't do really hard things they do, but they don't do them first. and that was going to be really important for us to understand and kind of get in and build our technical moat. Our technical moat lead to our pricing moat. You couldn't compete with Guideline on pricing. Still, it's very difficult to compete with us on pricing because we don't have to pay all these middlemen. so that was definitely very intentional. and probably one of the smartest things that we did. now I would say I'm less worried about moats.

I'm also less lazy in my thinking about, I have to win the whole space. It's a seven trillion dollar TAM. I don't have to be the only 401k provider out there, but i'm gonna win my my share of it and that's going to be really important but understand like saying I could be the only one is just lazy so I think that's enabled us to be like have some focus around maybe we're never going to sell google their 401k plan, right?

That's okay with me. but any company that comes to Guideline when they're five or 10 people, they should never have a reason to switch, whether they become a public company, etc. I want to hold on to them forever. If I can't do that for a technical reason, I feel like I've failed. I think the co founders would probably also think that way.

Brett: in a similar theme when you think back to the things that you did sort of the 18 months before you started the company and 18 months after you started the company, or kind of ship the first line of code. What do you think are like the higher order insights that other people can actually learn from? 

Some of them are pretty basic, right? Like you always look for your advantage. And there's a few of them at Guideline that I knew, like, Mike, and I were technical. Cabs is an award winning, you know, mobile designer that was going to be an advantage for us. So there are some basic ones when you construct the team, that's going to go do this thing.

Kevin: But the biggest unlock for, for Guideline is building this win, win, win scenario. I would hate to have to go and sell somebody something where I know it's not the best product for them. and that was really important to understand. So when you go to a small business and you say like, Oh, it's totally free for you, That means nothing if their employees are getting their faces ripped off with 167 basis points, right? So I never wanted to have that conversation. So I built this, this company around this win, win, win. And it turns out the one that I hadn't thought about was the payroll 

company. And I got lucky because I could find a win for them too.

Brett: Something you didn't mention you obviously weren't the CEO of Taskrabbit but and you are the founder and their co founder and CEO of Guideline What's been interesting about 

being in that seat that maybe you didn't even understand

Kevin: Investor relations are so difficult. being a builder, not speaking the, you know, the financial language of an investor, not measuring things the right way, or not giving them information in the right form factor. These are all conversations that I've had with my investors over time.

And as a company gets bigger, they get more in depth so hiring the right people along in the right time But that was a huge undertaking. I give Leah a lot of credit For being you know forthright and having those hard conversations and TaskRabbit was not always up and to the right and it was very difficult.

I really underestimated that going into founding Guideline 

Brett: If you sort of introspect and think about your own talents and personality, what's like, other than you got 

lucky, 

what's 

kind 

of 

your 

current theory 

as to, what way you were personally built that has worked so well in the founder and CEO role of this specific company?

Kevin: generally speaking, I don't give up and that's just who I am. I like to do hard things. you know, work isn't work for me. I'm building something and it's fun and I enjoy it. the parts that are hard are obviously like employee management and making sure that I'm hiring the right folks and having difficult conversations, around that.

So I would say, you know, for me, like just fortitude is, has been the biggest advantage. I have a. I think an interesting ability to kind of see all different angles, kind of all at once, that works out really well, specifically in this ecosystem led, growth arena that we're in. and being able to, you know, appease each of the individual partners that lead up to building this, this thing that is Guideline and having it be successful. But those are really the two things that I would say, like, you know, there's, I think there's some luck and timing is everything. If you look about, you know, look at TaskRabbit, we were too early. Like we should have waited. Five years followed on Uber or something like that. Like we could have done that a totally different way. but definitely some timing, right time, right place, solving the right problem. and 401k is one of those sleepy industries and you don't realize, but it's the second most requested benefit next to healthcare. But you would never think that it's like now everybody's like advertising 401k modern 401k Whatever it may be to retain good employees and that's true, but it wasn't true 10 years ago 

Why do you think people problems and building a team and why is that always so hard? I think there is this sort of curve to it You start off incredibly technical and you're setting the vision and you're talking to, you know, your co founders on what it should look like and et cetera. And like, that is a skillset that you already possess. You knew about it, you built your company around it. And then you get into a hiring phase where you're meeting demand, you have. product market fit, and you're trying to scale and now you're in a hiring process. And I'm a, I'm an introvert and like, it's very difficult for me to have, you know, large scale interviews when you're bringing on 10, 15 people a month. that is something that's just not natural to me as a person. And I think you're always going to find that an individual can't be everything to everybody all the time. so you lean into what you're good at. I think over time, when you actually have some success. You can start like picking and putting on like what you do want to work on and what you don't want to work on and Make sure that you fill the gap that you understand that you have. My CTO is a great example and we've been lucky enough to bring on an incredible vp of engineering But mike started early coding.

He was the only one we had he was doing all of it And then you know year three year four, he's like in this architect role. It's not really Pounding out the keyboard the keys on the keyboard anymore Um, and then we hire a VP of engineering and like even now like we're we're going into this new phase of these new products. Mike's coding again, and he's so happy. And I think you just have this up and down sort of thing as you build a company and it's the right time. It's the right place and you just have to be flexible and adaptable to it. but also as a founder, you just kind of have to do the things you have to do. I don't have a choice to not hire people.

I don't have a choice to not interview my CFO, right? And have him like, understand that Kevin knows nothing about, you know, corporate finance. and that's okay, but you find your right partner so that he can explain those things to me. I can talk intelligently or speak intelligently to my board or put him in front of my board instead. So that's really important to kind of understand as you grow a company that you don't have to do all the things. But generally speaking, I try to manipulate. Kind of what I do every day with the things that I like to do the most. And like, generally speaking, people management isn't one that I love doing.

So some of the things that we did early on was we came up with a CEO council. this is just a council where I bring all the executives together. I talked to them in a group. I don't have to relay what one said to the other. We just kind of all do it together. It's kind of like an executive stand up. and that's working incredibly well. Now I don't have one on ones with them every single time. I have a one on one with them when they need me to solve something or block something, but it's not taking a ton of my time, which means I can do more about on the product side and work with Cabs and the designers on what the new product should look like or what the integration needs to understand or how we need to sell it to a partner.

That's where I get, you know, my energy from. 

Brett: On that theme, how did you figure out as the company was growing? What things you weren't good at or you didn't really like that you felt like you were required to become very good at? Versus i'm just going to hire somebody that can be great and i'm not even going to work on that?

I 

Kevin: mean People just told me, right. So very authentic sort of conversations, even with the co founders, you know, Michael be like, Hey, you need to like rally the troops. I'm like, I can't do that. Like, how am I going to do that? Mike doesn't know how to do that. Cabs barely knows how to do it. So like those types of things, then you lean into what you're good at.

Like, I'm just going to tell you the truth. This is how I feel about how we're doing this month or what we could be doing or why we got our ass kicked or why we didn't or why we're successful. so those types of things are just. I don't know, really important, but generally speaking, listening to feedback, feedback is a gift.

Brett: Maybe just a place to end when you think about this evolution of of getting to product market fit scaling a company Is there someone that has had some disproportionate impact on you in this journey?

That is kind of like they imparted something or was a sounding board in a certain way that's just like a big part of the journey and if so, like what, what is the thing they imparted on you that was so useful?

Kevin: actually Aydin Senkut from Felicis who's one of our series B he passed on my seed and this is the feedback.

So you guys like when you pass and you do give the feedback, it's really important. So Idence was like you're biting off too much You need to focus on one thing. At that time we were thinking about something more encompassing in the benefit space and hadn't honed in on like, this is just going to be 401k. and he really like made me focus. And luckily enough, he came back in our series B and wrote the lead check on that one. 

Brett: Maybe just on that point before we end, talk a little bit more about how you narrowed the focus or what that was about.

Kevin: Yeah. Narrowing was, was really important. So I was passionate about finance and that was something I'd led with in the conversation, right? So I had gone down this path of buying hr. com. and I thought that we could actually get it, cause it had been like inherited and moved around a bunch of times.

So I'm like, man, this could just be like the whole thing. Like let's just go and become, you know, not Zenfits, but something bigger and like more HRIS type stuff. but I kept leading with in 401k and 401k and 401k. And then at the end of that meeting, Aydin was like, forget about this HR. Dot com stuff, like focus on this passionate thing that you're about.

And that was 401k. So that really like put me on this track and be like, you know, he's right. Like, this is where my advantage is. It's not in HR. It's actually in the data needed to become successful in 401k. 

Brett: when you started thinking about 401K as a problem, at what point in the journey did you start to sort of expand it and think that you were going to go broader?

Kevin: that was kind of a very interesting time for Mike and myself and Mike is very much my, my kind of thought partner as a, as a co founder. And we go down this path, and we're talking about 401k and what we can do differently, etc. And Mike's like, Oh, yeah, we could do we could do this kind of same thing for HR and like employee onboarding or something like that. But that's the trap, it's the same problem, we had a task rabbit, where it's like, we could do this one thing really well, or can do this thing. And then this thing and this thing, and it kind of took, Aydin to bring it back and be like, actually 401k is massive on its own. Do that really, really well.

So those conversations were very, they're fleeting, but we definitely had them. 

Brett: Well, 

Kevin: Yeah. 

Brett: for a great conversation.

Kevin: Yeah. This is awesome.