The world’s largest freelancing network Upwork raised $187 million in their initial public offering this week. They currently have 375,000 freelancers working for nearly 500,000 clients.
Upwork is growing exponentially because of the network effect says Upwork CEO, Stephane Kasriel. “It takes a long time to build the network effect necessary to do this at scale. The spin wheel at some point starts to really accelerate. The network effect is one of the main sources of really strong competitive motes.”
Stephane Kasriel, Upwork Inc. CEO discussed their new IPO and business model on Bloomberg Technology:
Freelancers Use Upwork for More Freedom
The specific segment of the freelance economy that we serve people tend to be highly skilled. Over 80 percent of the users on Upwork have a college degree and 34 percent have a post graduate degree. These are people that are truly doing this by choice. If the wanted a traditional W2 job they could easily get one.
What they are getting through Upwork is they get more freedom. They choose to be their own boss. They get more flexibility, they can work from anywhere on the schedule they choose. They essentially choose their clients. On top of that, they typically make significantly more money than they would through the local job market.
50 Percent of Freelancers Don’t Want to be Employees
What we hear from freelancers is that they would rather receive a higher pay through Upwork and then choose their own benefits than work for a traditional employer. We surveyed freelancers and asked them how much money would a traditional employer have to pay you to convince you to take a full-time job with them and literally 50 percent of the respondents said no amount of money. This is really something choice as opposed to doing it by necessity.
Using IPO Funds to Grow the Business
We are going to use the IPO funds to try and get more new clients signing up every single day as well as getting the existing clients to spend more on the platform including cross-selling clients from one category to the other.
We see a lot is clients start, for instance, by hiring developers on Upwork and then we get them to realize we also have designers on the platform and progressively one thing leads to another and they start spending across the 70 categories on the site. Ultimately, this is about creating more jobs on the platform because that is what we need more to fulfill the need for work that freelancers have on the site.
The reason why investors have been really interested in the company is because of the competitive motes in this business. This is not an overnight success. This company has been around through the predecessor companies that merged together for almost 20 years. It takes a long time to build the network effect necessary to do this at scale.
100 Percent of Upwork Freelancers Are From Word-of-Mouth
Once you get the spin wheel going it feeds itself. Today, 100 percent of freelancers who signup on Upwork do so through word-of-mouth. Also, 80 percent of business on the buyers’ side come from free channels including word-of-mouth. The spin wheel at some point starts to really accelerate. The network effect is one of the main sources of really strong competitive motes. We think it is going to be really hard for others to imitate.
We continue to innovate a lot as well and spend significantly on research and development. By the way, we use freelancers a lot too. There are 1,500 people who work at Upwork and 1,100 of them are freelancers. We are able to attract really really top talent from around the world to innovate and continue to push forward as we build this freelance economy.