The Origins of FairSetup – Nikita’s Personal Account.

The following is a personal account by our founder, Nikita Bernstein, of how the idea of FairSetup came about:

I co-founded JoVE (www.jove.com) in late 2006.  After three years, we figured out how to run the business and did about $3 million a year in revenues (no profits).  As time went on, I saw my employees’ performance starting to decline. When confronted, they asked:

“Why is the company making money, but we are still at startup wages?”  

To grow the company, the management team was reinvesting everything into sales, marketing, paying off investors, etc.  When I said as much, they responded with:

“That’s all good for you, but what do we get out of it?  We’ve been working hard for quite a while now…”

It was a reasonable question. They are not at the founder level, and so they don’t have equity. Stock options have unclear value. And they were most certainly paid less than they deserved at the time.  At the same time, if I increased their salaries, I we would not have been able to hire salespeople or engage in other activities that allowed the business to scale.  And, ultimately, growth should be in their interest as well as in mine.

So I was faced with a major problem: I needed to make them happy, quantify their upside – show that, if the company succeeds, they will succeed with the company.

That is when I came up with the idea of FairSetup. I’ve set the model up in a way, such that my employees, upon the company reaching the goal of 10MM in revenues at a 40% margin, would make 80K.  

At the same time, since the IT department is small, they can have a tremendous impact on the company.  So, if they figure out a way to double our profits, they should themselves profit from that impact getting them to triple-figure salaries.  And our initial goal was quite modest given company potential.

So far, I have been very happy with the results.  At the time, the team consisted of 4 full-time employees with different, but complementary, skill sets.  Their productivity went up, they set high expectations of each other, there was reduced politics, and, despite receiving below-market compensation, they worked like founders rather than employees.  And I felt and still feel that I am treating them fairly.

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