As I close out 2020, there are plenty of people to thank. One in particular is Matt Mottola, the founder of Venture L. Matt has been a particularly insightful and helpful colleague, and an important talent cloud whisperer. He’s also the author of a terrific new book with Matt Coatney entitled The Human Cloud: How Today’s Changmakers Use AI and the Freelance Workforce to Transform Work.
Over the past month or two, Matt and I have had several very productive conversations about the paths to success as a freelance entrepreneur. He’s helped me identify the set of paths that have led to sustainable freelance platform profitability. This analysis is largely anecdotal, based on a wide range of interviews and conversations with platform leaders, and the conclusions are mine alone. But I see seven distinct themes: network effects, access to unique talent quality, tie-ups, community building, outcome focus, small is beautiful (agency), and ecosystem services. This is a young industry and will continue to innovate. But, as of now, there are at least seven discernible pathways or, if you will, strategic orientations.
Network Effects. The impact of network effects, well-known in other industries, has certainly been at the foundation of the larger global and regional platforms. Upwork, Fiverr, and Freelancer.com are the best known given their size: At 18 million platform members, Upwork’s population if a country is between Guatemala and Zambia. Freelancer.com, with approximately 45 million platform members is just shy of Argentina. But, other large regional platforms like Flexing It in India, Workhoppers in Canada, and WePloy in Australia are strong examples. These are platforms with a wide “on demand” offering including both highly skilled professionals in many areas, and also “gigsters” providing a variety of retail services. For example, Workhoppers offers a range of skills from consulting and business analysis to virtual administrative assistants. Upwork, arguably the best know platform, describes itself as offering thousands of categories of gigsters and freelancers. They were first and are best known.
Unique Access to Quality. A second approach to sustained profitability is the offer of unique quality. This seems to have three keys aspects. First, the ability to both attract and warrant uniquely competent experts, typically in a narrow band such as tech, management consulting or marketing. A second challenge is maintaining the loyalty and singular ability to provide experts of this caliber; if they are available elsewhere, the reputation of the platform is less compelling and far less able to charge a premium for its talent. The third requirement is preserving and enhancing the reputation of these experts, and their ability to work together on a team basis when called upon, by providing a strong community that provides a range of services for these unique talents; for example, by providing ongoing education, meetups that connect up experts, and an outbound marketing capability that creates strong and consistent work opportunity. Toptal is a strong example of this approach, offering a much smaller population of talent on its platform, but the freelancers they represent in the tech, finance and project management space are arguably among the best in industry. . As Toptal CEO Taso Du Val put his vision this way in an interview, “You can think of us as a better, more scalable, more powerful McKinsey that is predicated on having an exceptional network.” But, Toptal is not alone. Communo, led by Ryan Gill is another, and earned respect by quickly and successfully making Jon Krasinski’s Youtube show “Some Good News” technologically feasible. HeroX has a similar reputation for quality. Independent management consulting platforms like Worksome in Denmark, Weem in France, and Comatch in Germany are also good examples, as is Catalant in the US. Each is focused on building a reputation as the standout in its space.
Tie Ups (aka Remora). A third approach is to tie up with a partner firm. There are a number of ways to do this, but what is consistent is a mutually beneficial relationship between the platform and its host or partner. For example, Experfy, an AI platform, found it helpful to partner with Deloitte. AceUp, an executive coaching platform, was helped in its early days, and continues to work very closely, with the Harvard-Maclean Institute of Coaching. Spacely, the tech platform focused on the space and satellite industry, works closely with Topcoder. Torchlite is tied at the hip with Salesforce, and OdeCloud is similarly connected with Netsuite. The challenge of course is for the platform to preserve strong relationships, and stay up to date and one step ahead of its host or partner. As the story goes, when the elephant turns over, it’s easy to be crushed. However, it takes advantage of the elephant’s significant and growing network effects.
Community Building. There is a fourth approach which is gaining interest and is focused on building a strong and vital community of freelancers who work together and help one another to generate shared opportunity. I’ve written about this elsewhere as “hunting in packs” and it is based on a common observation: most freelance opportunity doesn’t flow through the landing pages of freelance platforms but, rather, through relationships. To grow the freelance pie, this approach contends, build relationships that build cooperation. By moving from the traditional hub and spokes to a network of networks, the platform is positioned for mutual support. This approach usually has three important elements. First, there is a focus on building in relationships. This is accomplished through invitational or referential approaches to adding freelancers or by forming teams. Platforms like Hoxby in the UK and Contra in the US are good examples. Second, freelancers are incented and rewarded for bringing their opportunities to the platform. Third, platforms show commitment to their talent by creating opportunity for their members, for example, by hiring platform freelancers for project improvements to the site, offering ongoing education to help their freelancers future-proof their hard and soft skills as Distributed does, and by providing regular feedback on trends and emerging in-demand work categories.
Outcome Focused. A fifth strategy, more emergent than current, is taking full responsibility for a project. Virtasant is a strong recent example of this approach, as is Comet, a Paris based tech platform. I’ve written about this approach before with colleagues, and mentioned the FAST approach that was initially developed by the Stanford Engineering faculty. Startups like Omdena are providing project teams to NGO and commercial organizations, using AI and crowd sourcing methods. Freelancing Teams and Vicoland are other excellent examples of bringing full stack teams to organizations, as is Speakeasy a relatively new startup. Startups like Good Judgment and Neutigers are providing a similar service, bringing together experts to solve a critical problem or develop a new service or product. This is a big shift from the early days of freelancing in two main respects. First, there is a subtle shift from platform to agency when there is a commitment to an outcome rather than an offer to broker expert resources to a client company. And second, it expands the concept of freelancing well beyond an “on demand” supplementary resource. It will be very interesting to see how this approach performs in the next few years.
Small is Beautiful (Agency). A sixth strategy is really the inverse of network effects: it’s a return to the agency. I’ve written about this approach before and 10Xmanagement is a good example; the principals, Rishon Blumberg and Michael Horowitz were, in fact, talent agents for great rock and roll bands before turning to tech stars. We-cruit in Denmark, PR Cavalry in Scotland, Sneakers&Jackets in France and LifeSciHub in the US are all strong examples of the small is beautiful approach.
The Ecosystem. Finally, a seventh strategy is providing the supporting ecosystem for companies to create their own freelancing platforms. Zivio, Kalo, Bonzai, and others have followed the ancient but relevant advice of Levi Strauss during the gold rush in California: ‘you make more money selling equipment, tools and work clothes to the miners than by prospecting for gold.’ Twago and MBO Partners have found their place in the freelance revolution by offering help to enterprise companies in building their own “white label” platform. Meanwhile, companies like Payoneer provide payment services, Degreed offers education, and Collective Benefits assists platforms with insurance and other benefits. Not-for-profit organizations like Freelance Union in the US, IPSE in the UK, and commercial social networks like Freelancer.eu in Europe, Endo-exo in Belgium, FreelancerClub in the UK and The Vendry in the US are recent examples of the expansion of this category.
In addition to these major strategic themes, there are certainly other smart approaches to the freelancing business. For example, I haven’t mentioned more specific themes like the labor arbitrage approach of Netherlands based NS.work or Vietnam based Pangara, growing opportunities in verticals like Finance, HR, expert networks or R&D, or the rise of expert networks. I look forward to readers sharing the range of successful approaches they’ve employed or observed as well as those “spectacular failures” from which we all learn. Please point out other innovative paths to profitability in the freelance revolution. For readers interested in being the next freelance entrepreneur, or for current entrepreneurs, I hope this helps you to better articulate your vision for building a sustainable freelance platform business.
All the best for 2021. And, viva la revolution!