There's another mechanism – Employer of Record (EoR). Sometimes, clients come to our platform looking for EoR, even though they might be unaware of it. It's a separate service where employees are hired not by the client company, but by a mediator who assumes responsibility for taxes, social and insurance payments, vacation pay, job description drafting, and so on. The client pays a gross salary, as well as all service fees. Typically, this is expensive for companies.
Who are your clients and for what work scenarios do they choose EasyStaff?EasyStaff caters to a diverse clientele, primarily small and medium-sized businesses, particularly startups. These companies often operate internationally with employees located in various countries. Instead of navigating individual payment processes for each employee, they find it more efficient to partner with a provider like EasyStaff. We charge a fixed fee, typically 5-6% of the payment, a small markup on the freelancer's total compensation. This simplifies the payment process for startups, eliminating the need for complex payment system integrations.Our client base includes numerous companies based in the US, Europe, and Mexico.
We also work with international businesses, including enterprise clients who make payments to over 50 countries through us. We are their key payroll contractor for employees in various countries. This typically involves large businesses that became unicorns a couple of years ago and are now expanding rapidly. Instead of building their own infrastructure and team for organizing payments, they delegate such tasks to professional services like ours, focusing on their core product.
We successfully handle microtransactions, large payments, and compliance. It becomes significantly easier for companies to undergo audits when working with a primary provider – us – under a single contract, which reduces the number of invoices to one or two per month instead of managing hundreds of different documents.
We support businesses working with freelancers in complex regions where independent payment arrangements are difficult. EasyStaff simplifies and legalizes this process. Clients value the ability to maintain relationships with contractors through our platform. We have numerous successful case studies, shared on our
blog.
You built your business on the KiwiTaxi infrastructure. Did you attract external investment? Currently, you are building your business with your own funds. Are there any plans to attract investment in the future?Initially, we considered the possibility of attracting partners. I was actively searching, but I was not so much interested in financial investments because EasyStaff became profitable almost from the first client. Instead, I focused on building networking and strengthening the service's reputation. I wanted to attract a strategic investor to help us reach a new level and gain access to major clients.
In 2021, during the pandemic, I began negotiations with the Yellow Rocket fund. We went through the evaluation process (scoring), but fell short of a few points for approval. Nevertheless, we received positive feedback and a recommendation to focus on development in the United States, as working solely in the European market was not of interest to them. Unlike the fragmented European market, the US market is much more cohesive and larger – it's 300 million people, and it is also the primary hub for the global startup community.
However, after the events of February 2024,clients from the United States began to approach us on their own. I realized that venture financing was no longer a priority for me.At this point, I don't see the need for this path. Perhaps in the future, when our growth rate slows down or when we have a need for renewal and development, attracting investments may become relevant. But at this stage, we do not plan to move in this direction.
Do I understand correctly that both the pandemic and 2022 accelerated your business development?Yes, they were significant drivers.
You launched in 2018, and when did you break even? How did you celebrate?We didn't celebrate at all. There was no goal to break even.The priority was finding the right product.. When we achieved profitability, it didn't mean much because the product was still raw. It so happened that we started making money on a crude product, on a fragment of an idea that had crumbled. But our first international client became a unicorn, they grew, and we grew with them. We were a single-client platform in that initial period. They pulled us through and gave us the opportunity to earn capital, which we used wisely and managed to build a high-quality product.
The event of reaching break-even itself was not significant because at that point there was no great product, no diversification, no customer base. We had several versions of the platform. We had several versions of the platform; in fact, we are currently working on the third version.The first one, whose business model was similar to Solar Staff, quickly ceased to function because banks refused to conduct transactions between Russia and foreign companies, leading to the closure of our accounts. I then realized that Solar Staff had a strategic partner bank that facilitated their operations. I won't disclose the name of the bank.
The second version of the platform was focused on companies operating under a simplified tax system. However, it had liquidity limitations and difficulties with withdrawing funds. This scheme wasn't fully developed.
Finally, the third version, which we currently use, turned out to be the most successful. You asked about my feelings when we became profitable. It was a sense of relief. I told myself, "Thank goodness, it worked!" This happened on New Year's Eve of 2021. I realized that the product was starting to work: sales went up, foreign clients started paying to different countries. We stopped being a single-client platform.The key and most challenging task was to find our product, and this process took almost three years – from 2018 to the end of 2020. By the time we finally found the right solution, we were already financially stable. I believe that luck played its part, because in business, a lot often depends on a lucky break.
Have you ever experienced periods where you felt discouraged, unsure about the outcome of your plans, and like you were wasting your time? How did you cope?Yes, I have definitely experienced those moments, especially throughout 2020. I knew I couldn't simply abandon the project and return to working for someone else, but I also realized that the existing product had its limitations. It was too limited in its capabilities and relied on my personal resources – I couldn't scale it. It was like a small neighborhood store that couldn't become a chain supermarket.
There were certainly moments of despair, but I continued to seek solutions. When doubts arose, I would typically go for a run and brainstorm potential paths forward. This process of idea generation, "solution mining," was a constant endeavor. In July 2020, along with Evgeny Fedorov, we discovered a new idea that could be implemented. We built the current version of EasyStaff using a Zero Code platform and created a personal account for freelancers and clients, initially utilizing the KiwiTaxi infrastructure. We developed a new tax scheme and launched the updated product. The first transaction using this version occurred on October 30, 2020.
Tell me about the emergence of the payroll service market. Who was the first? What's happening with the market leader now? What are the forecasts?To be honest, the payroll market didn't appear in my mind the way it did in reality. When we built the third version of EasyStaff and started making sales, I discovered Deel.
It's like the era of pre-Columbian voyages. When explorers arrived on a different continent, they were surprised to discover that there was life there too!
Deel is the market maker and pioneer of the payroll market. It's a major player with a powerful product and a market capitalization of around $600 million. On the G2 marketplace diagram, Deel is in the top right corner, while other players, including EasyStaff, are in the middle.
The market has entered a stage known as the "red ocean," where opportunities for innovation are dwindling. We operate in an oligopoly, with Deel and Solar Staff being the main players, particularly in the Russian-speaking segment. Globally, Deel holds the leadership position.
However, EasyStaff boasts its own competitive advantages. We offer attractive pricing and top-notch customer support, setting us apart from our competitors. Unlike other platforms, we provide real, live communication with our clients, rather than automated chatbots. This is a crucial feature that our users highly value. While price dumping is nearly impossible, we remain competitive, and each client finds their niche.
Competing with Deel is challenging, but we possess certain advantages. For instance, we offer broader payment processing capabilities. Ensuring that funds and documents reach clients reliably is critical for us, and we surpass Deel in this aspect. We strive to compete through the quality of our product and service, guaranteeing high payment conversion rates and the reliability of all processes.
The payroll service market is highly competitive, but another significant factor is the stance of governments towards these platforms. Governments are keen on protecting their budgets, and these services raise concerns. For example, Deel has already faced a conflict with the US government, which they successfully resolved. In general, how do countries view such services, are they a source of concern for them?The relationship between countries and payroll services is a complex one. While these services don't violate national laws, they represent an innovative approach that disrupts traditional financial and labor relationships. This echoes the situation with cryptocurrency, which also challenged the global financial system. Payments became easier, borders blurred, and compliance requirements became less stringent. Governments are forced to adapt to this new reality, integrating innovations into existing systems while seeking balance.
The core issue revolves around "leaking" tax revenues. Freelancers receiving payments through these platforms do not benefit from state-provided services like healthcare or mortgage access. Lacking formal employment, these individuals do not contribute to government tax income. This benefits clients, who enjoy tax savings and flexible staffing options by hiring freelancers on a project basis. Freelancers gain access to global clients and potentially improve their standard of living.
However, the state loses out in this system, but it remains unclear which state – the client's or the freelancer's. Both sides benefit from tax savings, which is unacceptable to authorities. We have seen examples of governments responding to new financial instruments like cryptocurrency by introducing bans and restrictions. Payroll services may also face limitations in the future.
As a market leader, Deel is under intense scrutiny and often the first target of criticism. These discussions about the future of such services may continue for decades until a new generation emerges with fresh perspectives. Developed nations, responding to societal demands, are forced to adapt their legislation to reflect new realities, especially if society endorses these changes and calls for their legalization. Thus, the question remains open.