“GIG” ECONOMY IS ON THE RISE
Read full story in the new issue of Money Of The Future 2016\2017 report
We know that freelancers are changing the way we think about work, with their flexible schedules and multiple employers. And we know that freelancing is on the rise. Increasing numbers of skilled professionals are driving the growth of the gig economy. And while there are those who ultimately expect that growth to level off, it doesn’t appear ready to do that within the next few years.
FREELANCERS ARE CHANGING THE WAY WE THINK ABOUT WORK
The 2015 report by the Freelancers Union and online freelancing platform Upwork found that over a third of U.S. workers (nearly 54 million) did some freelance work in the previous year. The majority (60%) who left to freelance said they now earn more than they did with traditional employment. A 2015 Freelancers Union survey found that 34% had done freelance work over the past year, and about 60% of those who had received 25% or more of their income from those jobs. The barriers to acquiring and sustaining freelance projects continue to drop.
Taking out all of those leaves only 11.3 million self-employed freelancers, or 7.7% of the total workforce. Here’s how the 2015 FU/U survey breaks it down:
* Independent contractors (36% of the independent workforce/19.3 million professionals) — These “traditional” freelancers don’t have an employer and instead do freelance, temporary, or supplemental work on a project-by-project basis.
* Moonlighters (25%/13.2 million) — Individuals with a primary, traditional job with an employer who also moonlight doing freelance work. For example, a corporate-employed web developer who does projects for nonprofits in the evening.
* Diversified workers (26%/14.1 million) — People with multiple sources of income from a mix of traditional employers and freelance work. For example, someone who works the front desk at a dentist’s office 20 hours a week, and fills out the rest of his income driving for Uber and doing freelance writing.
* Temporary workers (9%/4.6 million) — Individuals with a single employer, client, job, or contract project where their employment status is temporary. For example, a data entry worker employed by a staffing agency and working on a three-month assignment.
* Freelance business owners (5%/2.5 million) — These freelancers have one or more employees, and consider themselves both freelancers and business owners. For example, a social marketing guru who hires a team of other social marketers to build a small agency, but still identifies as a freelancer.
Harvard Business Review recently called this phenomenon “The Rise of the Supertemp.” These days, even professionals like attorneys, CMOs, and consultants with world-class training are choosing to work independently. There are many reasons why independent work is on the rise, from shifting economic conditions to corporate downsizing and employee dissatisfaction. But two things have slowly fueled the trend in a much bigger way, lowering the barriers that once made independent contracting much more challenging.
There are now more ways to work remotely than ever before, from devices, apps, and other personal technology that lets us communicate with one another from virtually everywhere. But there’s another kind of technology that plays an arguably bigger role — platforms designed to match companies with talent. New online marketplaces are launching in a wide range of categories, helping talented freelancers to find jobs in their chosen fields.
It allows businesses to find more targeted and better qualified talent to address their needs — typically at lower costs. Rather than bringing someone in full-time, with benefits and a salary, a company can hire a consultant who’s ideally suited to a particular project. And that consultant is likely to have more resources to tackle it than at any time before. HourlyNerd designed by Harvard MBA students to connect companies with talented business consultants. The community lets businesses compare consultants’ profiles to those who correspond with their needs. Users can bid on projects within HourlyNerd’s platform, making it a flexible option to find qualified independent partners.
By 2040, the American economy will be “scarcely recognizable,” according to a new report published by the Roosevelt Institute and the Kauffman Foundation. In the next 25 years, this shift will accelerate in a major way towards entrepreneurship, independent contracting, and “peer-to-peer” work on platforms like TaskRabbit. Additionally, there will be major diversification of entrepreneurship as new platforms like crowdfunding and relocalized production become increasingly popular.
As we veer from this traditional work model, Dane Stangler, vice president of research and policy at the Kauffman Foundation, says the government will end up losing major payroll taxes, and that’s going to create challenges for our fiscal system unless some “very significant policy adaptations” are made. He warns: “There’s a whole ripple effect if this is going to be an actual and growing part of the economy.”
By 2040, the job market will consist of part-time assignments, portfolio careers, and entrepreneurialism. Instead of day-in, day-out work consisting of much of the same responsibilities, a “career, then, will be composed of thousands of [short-term] assignments spread out over a lifetime,” says the report.
As traditional jobs — with their health insurance, retirement planning, and tax withholdings — disappear, we will see more platforms and institutions develop to help workers and their families manage exigencies and mitigate risks.
In the past, talent agencies were reserved for performing artists and athletes, but in the next economy, talent agencies and headhunting firms will start to play a bigger role in the lives of the everyday professionals looking to further their career.
In particular, workers will be forced to think constantly about their next assignment, the skills required for that assignment, and the education and credentials required to gain those skills. There will no longer be specific guidelines or career ladders to guarantee a career trajectory. Instead, workers will have to be savvier than their predecessors, because life has gotten much more complicated. To be successful, individuals will have to be more entrepreneurial in thinking and planning their lives, meaning constantly selling themselves, defining one’s own work, and educating themselves for future assignments. In the next economy, work may be more lucrative and fulfilling, but the idea that you’ll be professionally rewarded because you’ve been loyal to a company will be a thing of the past.
Valuations are falling, financing is getting more competitive, and plenty of money-losing startups are cutting costs. But not all entrepreneurs have been greedily chasing investment dollars, and many have been building lean businesses, creating meaningful products, and growing organically. We’re likely to see a vindication of sorts for “lean startup” practices. For the heads of those businesses, anyway, there’s still tremendous opportunity to build sustainable ventures.
GIGS ARE EVERYWHERE
It’s been argued that by 2040, the economy will be “scarcely recognizable” as a result. But just how that shift will reshape the next generation of work is much more difficult to forecast, partly because it’s so hard to generalize about what roles freelancers will play in companies of different sizes all around the world. Still, the watchword of the new global economy is fluidity, thanks to the rise of freelance work.
The rise of the freelancer is hardly an American phenomenon. A study from the U.K.-based business group Approved Index recently explored the rate of entrepreneurship on a global scale by calculating the percentage of the population that owns or co-owns a business in each nation. With a massive 28% of its workforce classified as self-employed, Uganda ranks №1 in the world for entrepreneurship. That’s pretty remarkable for a nation that was quite recently released from the grip of a dictatorship. Not far behind Uganda is Vietnam, a nation with an extensive history of socioeconomic distress. By 2013, Vietnam had moved up into the category of “middle-income” nations. The Approved Index study reveals that 13.3% of Vietnam’s population is self-employed, ranking it №5 for entrepreneurship across the globe. China is №11 (10.2%). The desire for autonomy is strongest in China, especially among young people, indicating a generational shift towards greater freedom, entrepreneurship, and specialist skills. According to the PwC report, the “desire for autonomy is strongest in China, especially among young people, indicating a generational shift towards greater freedom, entrepreneurship, and specialist skills in this rapidly evolving economy.” Half the Chinese respondents in the study said they don’t expect traditional employment to be available to them in the future.
Technology is revolutionizing the way we connect, communicate, and relate to the world. Yet one thing that’s remained true of workers regardless of geography is that all want to survive and succeed. As technology penetrates more corners of the globe than ever before, that basic desire is growing more complex. Not only do more people simply want work, they now want more control over how they work — whether that’s better work-life balance, choosing a passion-driven career, or being their own boss. Put simply, the gig economy makes all those things possible on a scale like never before.
Here’s how the rising gig economy stands to reshape businesses of different sizes:
* Startups: Entrepreneurs often need to understand that they can’t do everything themselves. If they bring in a freelancer to do a specific task, they’re often getting the best possible result for the lowest possible outlay. Since freelancers are usually “management-light,” they also let their clients get on with running their businesses rather than consuming their administrative time.
* SMEs: Small and medium-size enterprises (SMEs) have been in a squeeze over the past decade. They don’t offer the dynamic environment of a startup, but they can’t always offer the same career-growth opportunities as the biggest corporations. In recent years, that’s made it difficult for SMEs to compete for high-quality employees.
* Corporations: Large corporations may well see huge benefits from the freelance economy, too, but for them it will require big changes in the way they manage their workflows. There’s an obvious advantage to taking on specialized talent for the most innovative and experimental projects, without big companies needing to sunder important relationships with their other major partners. One way companies can continue to survive and thrive in the new economic landscape will be to replace certain clearly defined hierarchies with looser talent clusters. As PwC researchers point out, “Looser, less tightly regulated clusters of companies are seen to work more effectively than their larger and potentially more unwieldy counterparts.”
The increasing number of independent contractors in the “gig economy” is quickly becoming a political issue. But for Samaschool, a nonprofit school with four locations in California and pilot locations in Arkansas, New York, and Kenya, the gig economy is not something on which to take a political stance. It is simply the best option many of its students have for work. “The average student we work with is unemployed for 16 months prior to program,” says the school’s managing director, Tess Posner. “For them to take training that is months or years, they don’t have that time. For people who have been unemployed for a long time, these job opportunities provide a way to reconnect to the labor market in new, growing industries.” Samaschool is one part of the Sama Group holding company, which started with a program in Kenya that connects marginalized people with digital work from companies like Microsoft, Google, and TripAdvisor. “The real catalyst [for starting a program in the U.S.] was actually from negative feedback that I got on our model from a guy in Ohio who said that we were ruining America by outsourcing American jobs to Kenya,” Leila Janah, its founder and CEO, recently told Fast Company. Classes in both Kenya and the U.S. now teach students digital literacy and in-demand skills like data entry and social media marketing.
MILLENNIALS AND GENERATION Z ARE NATIVE FREELANCERS
It wasn’t that long ago that if you were a freelancer, you felt bad about what you did — like you were somehow less than your peers. It was something that you did as a default move — you went through a life change, or you were trying to break into an industry that wouldn’t have you. That may never have been true; these days, it’s just dead wrong.
The Freelancers Union has partnered with Upwork (formerly Elance-oDesk) to commission our second annual independent study of the freelance workforce. The results are fascinating. Freelancers are a growing workforce. There are now almost 54 million Americans freelancing, an increase of 700,000 over last year. That’s more than a third of the American workforce. Millennials are native freelancers, and it shows: They are freelancing at a higher rate than any other group.
Independent workers are freelancing by choice. Survey respondents told us that they’re freelancing because of the flexibility, freedom, and balance that it offers. In our survey, 60% of respondents said they started freelancing more by choice than by necessity. Critically, half of freelancers we talked to said that they wouldn’t take a traditional job, no matter how much it paid. And because being a freelancer lets you work from anywhere, a third of freelancers say they have been able to move because of the flexibility their career provides.
Maybe most significantly, we found that full-time freelancers say they actually earn more than the average American worker, and a majority say they’re earning more money than when they had a traditional job. And nearly half predict that their incomes will go up in the coming year, with many directly attributing that to an increase in demand for their services.
The fixation on millennials — how they supposedly do and don’t work, what they supposedly do and don’t want from their careers — is overblown. Why? Because that conversation lacks focus. The oldest millennials are now turning 35 — they’re hardly the new kids on the block anymore. And they share little (in terms of experience, working styles, and priorities) with Generation Z, the youngest demographic of new workers now entering the workforce. Gen-Z roughly encompasses today’s teens and young adults born after 1995, the oldest of whom are 21 years old — next year’s entry-level employees.
As one observer writes, summing up recent research, “These are kids who grew up in a post-9/11 world, during a recession, and during a time in which 1 in 4 American children lived in poverty.” All that will have a major impact on Gen-Zers’ prospects and approach to realizing them. A recent Northeastern University study on Gen Z concludes that the generation is “entrepreneurial [and] wants to chart its own future,” and goes on to point out that:
* They are confident self-starters. They believe entrepreneurship is the best approach, as 42% expect to work for themselves.
* 72% would prefer to design their own college courses and majors altogether. They seek hands-on experiences and practical skills.
* 79% want colleges to integrate work experience with coursework in order to give them a leg up in the workplace. 64% are concerned about being able to get a job.
Some of this trepidation is well-justified, in light of issues like the student debt crisis and college affordability. But many of Gen-Zers’ traits seem likely to propel them toward innovation and growth hacking in a wide range of current and emerging industries. The fact is that for independent workers, tomorrow’s entry-level employees, entrepreneurs, growing startups, and establish corporations, sustainable growth and innovation are never one-time things. It takes a deep emotional, systemic, and cultural stake in the changing climate — which starts, of course, with an understanding of it.
But what people probably don’t realize is that this move toward freelancing will have a huge impact on our economy. Why? Because freelancers are working less and earning less than they did back when they had traditional full-time jobs. And that means they’re going to be spending less, too — in every facet of the marketplace.
The response we hear from analysts and sometimes even our government leaders is that we need to go out and buy more stuff — that it’s even our patriotic duty. But freelancers are rejecting that maxim in droves. It’s outdated. It promotes needless consumption, and as an economic philosophy, it ignores the fundamental changes transforming the U.S. labor force and disrupting the traditional idea of success. This new workforce faces episodic income — not on a temporary basis, but as a fact of life. That leads to a very different mindset about earning and spending. They’re questioning the constant drumbeat of consumerism.
Independent workers overwhelmingly reported to us that their main goal was to build lives that are “free, connected, and values-driven.” This notion ranked higher than maximizing profits. It’s all part of what I like to call meaningful independence — living a life that may be smaller in fiscal terms but bigger in personal dividends.
Their careers are unpredictable in terms of hours, income, and even location. So when they do spend, they’re turning to alternatives like sharing or renting rather than buying. In a recent report from PriceWaterhouseCoopers, 86% of people surveyed said that using a ride-sharing app or renting out someone’s spare room rather than booking a hotel “makes life more affordable.” More than 80% said it was “less expensive to share goods than to own them individually.” And 43% went as far as to say that “owning, today, feels like a burden.”
NEW REGULATION: ARE WORKERS INDEPENDENT CONTRACTORS OR EMPLOYEES?
But unlike their peers, they have no reasonable safety net. They don’t have access to unemployment insurance, so during fallow periods they usually have to cannibalize their own savings. They can’t take advantage of tax withholding, employer-sponsored health care, or retirement savings programs.
Freelancers are a large and motivated voting bloc. In our survey, 86% said they plan to vote. And 62% said they’d vote for the candidate who supports independent workers’ interests. That means millions of votes are up for grabs. But this isn’t just a discussion about electioneering — forging solutions for freelancers is the right thing to do. And not just because it would rectify the mistreatment of one segment of our society: With more and more Americans freelancing every year, the chance that you yourself will be freelancing one day is higher than ever.
These companies are also at the center of a debate surrounding the gig economy: Are workers independent contractors or employees? Critics say Stride Health’s (and other startups) service is a bandage that effectively lets companies like Uber avoid paying for health insurance, while supporters argue that policymakers need to rethink antiquated notions of what modern work looks like. About 50% of Americans receive coverage through an employer. But Uber drivers, for example, are classified as independent contractors no matter how many hours they work. As a result, they do not receive benefits like health insurance, which are extended to full-time employees.
This summer, Uber appealed the California Labor Commission’s decision that a driver should have been treated as an employee, which would require Uber to pay her expenses. In response, Noal Lang from Stride Health wrote a manifesto “for the modern worker class”. Rather than advocating for the status quo, he argued that policymakers should consider an entirely new classification for gig economy workers. Lang have suggested a potential third-category for workers: “dependent contractors.” In Canada, dependent contractors receive some protections, but they have more flexibility than employees.
Many workers who take jobs on “gig economy” platforms like Uber, Handy, Instacart, and Taskrabbit are independent contractors who aren’t entitled to the same benefits, insurance, and other social programs as their on-staff peers. Requiring (or even allowing) platforms to provide this type of safety net might be a matter of policy, but the National Domestic Workers Association (NDWA) thinks that platforms can and should do more to help their workers.
In October 2015, the labor group, which has historically represented house cleaners, nannies, and caregivers, announced a pledge called the “Good Work Code” that provides a framework for innovating around the principles of safety, stability and flexibility, transparency, shared prosperity, a livable wage, inclusion and input, support and connection, and growth and development. “What we are trying to do,” says Palak Shah, the NDWA’s social innovations director, “is build a legitimate center of gravity of folks who are already thinking about this stuff, and folks who are willing to say, yes, we have a role in creating good work, and we want the work in the digital economy to be good work.”
STARTUPS FOR THE ON-DEMAND ECONOMY
Noah Lang is the 31-year-old cofounder and CEO of Stride Health, a San Francisco-based insurance broker service that makes health care recommendations tailored to specific needs such as gender, medications, income, and preferred doctors. His startup has $15 million in funding to help Uber drivers and other gig economy workers find an affordable health plan. Those who sign up for a plan via Stride’s website or mobile app receive year-round support, including access to customer service reps who will sit on hold for hours with an insurance provider. Some of the largest gig economy companies, including Uber, Postmates, and TaskRabbit, have partnered with Stride Health. It operates in 39 states, including California, New York, and New Jersey.
Some executives want to do more to protect workers, Lang says, and that’s why they’re chosen to partner with Stride Health. But they are also under pressure to protect their bottom line, and avoid a sweeping action that would reclassify workers in a way that sets legal precedent. “Many people think that Uber doesn’t care about its workers,” said Lang. “But the company has invested heavily in the supply side and that’s an asset they want to protect.”
Stride’s team opted to focus its efforts on the fast-demand gig economy in December of 2013. “I didn’t want to come across as a cheerleader,” said Lang. “I know that we need to raise the bar to support workers.” The strategy seems to be working. In the spring of 2014, just 72 hours after the public launch, Stride secured a partnership with TaskRabbit. Uber came on board in the fall of that year, followed by Postmates three months later. “These companies don’t want the turnover,” said Bob Kocher, a partner with Venrock, a venture firm that invested in Stride Health. “It’s totally in their interest to make available new tools that benefit their contract workforce.”
Slice Labs offer insurance for on-demand workers and providers like Uber and Airbanb, starting with rideshare drivers and then homeshare hosts. The startup has raised $3.9 million in seed funding from Horizon Ventures and XL Innovate. These products will be available on a transactional basis — so a ridesharing driver should be covered from the moment they start driving or get into the car, but they’re only paying for coverage during the time that they’re working (making it more affordable than just taking out a pricey commercial insurance policy).
For the last year there were many representatives of neobanks and many discussions around them with a lot of attention. But most of them are neobanks for retail clients — and I think that neobanks for SMEs (like Holvi, Tochka, Tide, CivilizedBank) is booming right now and demand for “Simple banks for entrepreneurs” will rapidly increasing during the current year.
THE ”TECH MEETS PROPERTY” PLAY HAS BEEN A BOOMING FIELD IN RECENT YEARS
It’s not uncommon for independent workers to feel isolated. But the rise of co-working spaces in top urban centers is changing that, offering freelancers unprecedented support and resources. Co-working spaces are providing more than just a sense of community that comes from working around others. WeWork, for instance, is one of the most popular providers of workspace for independent contractors, and it’s expanding to major cities around the world. The company has raised the bar in part by focusing on creating a collaborative ambience you’d find at any cutting-edge startup. WeWork spaces even boast arcades, fresh fruit, and beer on tap. And more than 150 WeWork partners offer services like human resources, web consulting, and accounting help — removing some of onus on freelancers to do everything themselves.
RemoteYear should be a pretty appealing idea to anyone with a serious case of wanderlust: Participants spend a whole year working abroad, moving to a different city and country each month. Remote Year founder and CEO Greg Caplan told that he first had the idea about two years ago, and when he announced it, 25,000 people ended up applying to participate in the first group of 75 — which recently completed its year abroad. Now the company has expanded to include 500 traveling professionals across six programs.
In October 2016 the team at Highland Capital Partners was betting on the latter — it led a $12 million Series A in the company. Other investors in the round included Flybridge Capital Partners (where the deal was led by WeWork Labs co-founder Jesse Middleton) and Airbnb co-founder/CTO Nate Blecharczyk.
With the new funding, naturally, one of Caplan’s goals is to increase the number significantly, something that will be helped by tapping into two “mega trends.” “First, productivity has moved to the cloud,” he said. “Great work can be done anywhere. People are more creative and productive when they’re inspired by their surroundings … The second is that we no longer value the things that we own, but the experiences we share with other people.”
To expand the program, Caplan said he will continue to grow Remote Year’s team, which is currently 85 people (As you might expect, that team is all over the world — there’s no central headquarters.) Remote Year will also be building its own physical infrastructure. “In Croatia, for example, there wasn’t an existing coworking opportunity for us to tap into, so we created an amazing coworking space right on the beach [in Split],” Caplan said.
Remote Year participants make a $5,000 downpayment and also pay $2,000 a month for the first 11 months. That’s meant to cover travel, living accommodations and a workspace with Internet. Caplan said a cohort of 75 people feels like the right size and allows for continuity between the different programs. However, the itinerary can change from program to program — for example, some groups may consist of travelers who need to work US hours, and will therefore avoid traveling to Asia.
As for the actual job, that’s something you’ve got to figure out for yourself, but Caplan said companies are often happy when their employees participate as a form of education and development. Plus, his team “walks remotes through the best practices and a whole process of how to have this conversation with their company.” “The diversity that’s been most exciting for us is vocational,” he added. “We have people from all different backgrounds — a lot of engineers and designers, but the biggest category is marketing. There are journalists, writers, even a few lawyers. It’s a very, very diverse group of people in terms of where they’re from and in terms of what they do.”
Steps from the Utrecht Centraal Railway Station in the Netherlands, through a dizzying mall of winding pathways dense with the scent of freshly baked pastries, nestled between the exit of a grocery store and a restaurant whose tables and chairs spill far into the open hallway, through a glass door, then past another code-locked door, up a flight of stairs and down a hallway sits a group of 80 or so freelancers and startup employees at one of the city’s many free coworking spaces. The covert space comes with free Wi-Fi and printer access, free coffee and tea, free chairs and desks, and even free lunch. Their host is an organization called Seats2Meet, and their members can reserve any seat in the company’s 60 locations across Europe online. Prior to arriving, members build an online profile to state who they are, what they’re working on that day, and what they consider their area of expertise. Upon entering the workspace they receive an email, via the Seats2Meet Connect application, containing the profiles of some of their neighbors and desk mates for the day, whose projects and expertise most closely align with their own.
Seats2Meet’s vast network of permanent and temporary locations — 95% of which are based in the Netherlands — often take advantage of excess space in accounting offices, event venues, schools, libraries, hospitals, train stations, and other spaces that are otherwise not fully used to capacity. The organization offers nearly 80,000 seats across its locations in exchange for nothing more than “social capital,” or the sharing of knowledge and expertise, while another 240,000 chairs, located in the meeting rooms and private offices of Seats2Meet locations, range from €20 to €60 ($22 to $65) per person per day. “They can pay by sharing their knowledge,” said Ronald van den Hoff, the company’s 61-year-old founder and CEO, sitting inside one of the 23 meeting rooms of Seats2Meet’s flagship location in Utrecht.
The company also earns revenue through its loosely governed franchise system that only requires their location managers to keep 20% of space available for those who pay in social capital, and contributes €2 from each paid seat back to HQ. Seats2Meet also allows private organizations access to Seats2Meet Connect for €95 ($103) per month, providing them with a large network of talent to draw from.
“At this moment we don’t have a sales and marketing department, we don’t have a PR department,” said Van den Hoff, adding that members have created buzz using social media. With new branches opening in Ecuador, the U.K., Egypt, Brazil, and Japan, Van den Hoff says there’s “no reason” why the Seats2Meet model wouldn’t be successful in North America as well.
Such is the model at Dallas Fort Work, whose Frontline program — like many coworking spaces in North America — provides a number of free work stations to members who spend one day of their week working from the front desk, greeting visitors, organizing schedules, and providing tours. “By taking on the barter in this way, and not requiring us to staff a full-time person to actually be on the frontline, they’re essentially making it cheaper for everybody, because they’re allowing us to operate at a lower cost,” said Oren Salomon, the founder of Dallas Fort Work. “Some of our frontline people — and we’ve only had this program going for a month and a half — they’re picking up freelance gigs and side jobs from the people they meet just sitting at the front door.”
In March 2016 a new accelerator report by GALI and Village Capital suggested that independent work is most effective. Led by the Aspen Network of Development Entrepreneurs (ANDE), the goal of GALI is to determine how effective accelerator programs really are and how to develop best practices in different regions, given there are roughly 500 now dotting the globe. In fact, one of the biggest questions it is trying to address is whether accelerators work as well for developing-world entrepreneurs as they do for those in the developed world.
The report also finds some interesting programmatic differences between the highest versus the lowest-performing Village Capital programs, including that the highest-performing programs emphasized more time for independent work. Specifically, says the report, the percentage of time spent working on-site or remotely with other entrepreneurs or mentors in the program (versus time when the founders work on their own) was 53 percent of the time for the highest-performing program, versus 83 percent for the low-performing programs.
In another potentially interesting twist, the report says that Village Capital’s highest-performing programs spent less time working on finance, accounting, and formal business plan development and more time on presentation and communication skills, networking, and organization structure and design, suggesting it makes sense to spend more time on softer skills.
As explains Saurabh Lall, research director at ANDE and one of the report’s lead authors, “There’s been a tremendous proliferation of accelerators and incubators around the world, but while exciting, we’re concerned that we don’t have a good sense of whether they do a good job at supporting entrepreneurs in emerging markets. From our perspective, [this work] intends to help us answer: do they work, under which circumstances, and which programs are more likely to work for certain entrepreneurial segments.”
Co-working spaces and membership clubs with a heavy tech bent have proliferated across the planet in recent years as the industry itself has exploded, and startups look to find flexible spaces to work. But not many have gone for such an eclectic mix of fashion, designers, startups and investors (among others) as Second Home, the club and work space created by Rohan Silva (former adviser to the UK Prime Minister who ignited government interest in the tech startup community) and serial entrepreneur Sam Aldenton.
In January 2016 at DLD in Munich, Silva revealed that he’d be launching Second Home Lisbon later that year. The timing probably couldn’t be better, given that about 50,000 people were expected to attend the Web Summit in the city later that year. He has also announced a new £7.5 million ($10.7 million) funding round from Yuri Milner (a personal investment, not DST Global); Martin Lau, chairman of Tencent (this is his first ever European investment); and Index Ventures.
Created in close association with Alexandre Barbosa at Faber Ventures, Second Home Lisbon looks set to join the burgeoning startup scene in the city, which already has accelerators like Beta-i and Startup Lisbon, but as yet hasn’t had many co-working spaces/clubs where the tech ecosystem can hang out.
Silva told: “Right now Lisbon feels like East London just before the tech cluster exploded. It’s a super-creative city, but there are not enough places for creative people to come together. At the same time, big companies are shrinking, my more people are becoming entrepreneurs and the built environment of cities needs to evolve to keep pace with this.” Second Home Lisbon will feature a huge 100m long work table snaking and bending along the full length of the entire building; private meeting rooms, all equipped with AV; a 400-person events space; and a late-night bar with a bookshop.
Plus, unlike some members clubs, Second Home members will be free to move between London and Lisbon without paying any extra for membership. Meanwhile Second Home in London will be adding three new floors, and opening in Los Angeles early this year.
In September 2015, a new coworking space that host 250 people or up to 50 tech startups inside its 50,000 square feet launched in São Paulo, Brazil. Cubo aims to make São Paulo — Brazil’s largest city and the economic capital of Latin America — into a startup hub to rival Silicon Valley by fostering entrepreneurs with the same perks American startup founders enjoy, like a close-knit community, access to investors, and what Cubo’s founders are calling the “serendipity” that’s so vital to making connections in business.
Achieving those serendipitous encounters means that the sheer volume of entrepreneurs in one place has to be high. Entrepreneurs among São Paulo’s 20 million people are scattered far and wide without a major hub like Silicon Valley’s Menlo Park, says Cubo project lead Flavio Pripas. Cubo was born out of a three-pronged collaboration from Pripas, the São Paulo-based Internet entrepreneur and CEO of Bitinvest; Brazil’s largest bank, Itaú Unibanco; and Redpoint e.ventures — a partnership between Menlo Park-headquartered Redpoint Ventures and San Francisco’s e.ventures.
But that’s not to say that São Paulo isn’t already an entrepreneurial force to be reckoned with. Brazil is a country full of highly engaged web and social media users, and with its large population and a GDP of more than $450 billion, São Paulo is responsible for much of that activity. According to Anderson Thees, founding partner of Redpoint e.ventures, the city accounts for 30% of Brazil’s high-growth businesses, while Brazil’s next-largest city, Rio de Janeiro, accounts for only 8%.
“We believe our involvement and our link to Silicon Valley will help ferment the participation of the ecosystem — not only of the residents but of the community at large,” Thees says of São Paulo. “Talking to players in the Valley, a lot of them say that we are similar in many ways to their ecosystem 15, 20 years ago. What we really have to do is make sure we close the gap faster. The ingredients are here.”
Stone&Chalk is an independent, not-for-profit Fintech hub based in Sydney that houses more than 80 Australian startups. Since opening its doors in late 2015, Stone & Chalk has been helping financial startups accelerate their business through the use of office facilities and collaboration with government and corporate partners. It fosters all areas of the Fintech landscape including peer-to-peer, crowd-funding, automated advice, capital markets, crypto-currencies and everything in-between. Being not-for-profit, all office equipment is currently donated by corporate partners.
The sprawling shared workspace currently houses 250 entrepreneurs which are spread across two floors. Rather than a traditional reception desk, Stone & Chalk boasts a touch screen terminal where guests check themselves in. An email alert is then sent to the recipients. One of the most striking aspects of the Stone & Chalk workplace are its chalk-covered walls. This includes a community charter, words of wisdom, artworks and the logos of various corporate partners.
Stone & Chalk’s ceilings were left deliberately unfinished to match the company’s culture and ethos. The idea is that an innovation hub should always feel like a work in progress; it’s never meant to be complete.
Stone & Chalk deliberately organises seating to maximise collaboration between companies that can benefit from each other. With headcounts constantly shifting and new startups entering the fray, this can be quite the challenge. The Fintern Fever Nook is where university students, startups and corporate partners congregate for Stone & Chalk’s fintech internship program. This provides interns with a taste of working for a startup while the startups receive much-needed help in getting projects across the line.
Each week, everyone meets for a “Sweet Spot” event where the whole community meets for a 15-minute injection of sugar and coffee while welcoming new members and sharing success stories. Whenever a startup raises or secures a deal, it gets announced on a bell.
Co-working spaces were home for 72.3 per cent of the 685 verified start-ups in Australia that responded to the 2016 Startup Muster survey, up from 49 per cent in 2015. The arrival of international co-working brands such as Rocketspace and WeWork have helped popularise the concept, according to Brad Delamare, general manager of Tank Stream Labs, which rents desks and hosts networking events for 90 companies across nearly 3000 square metres (sqm) on Bridge St in Sydney’s CBD.
“Co-working has become the natural option for start-ups before they’re big enough to rent their own offices. The contacts and growth you get out of it speak for themselves,” Mr Delamare said, pointing to professional services marketplace Expert360 as recent “graduate” from his space after growing too big for it. However, co-working has become a victim of its own success. Many of the sites in or near CBDs now have long waiting lists, including Tank Stream and Fishburners in Sydney and York Butter Factory in Melbourne, and face constraints on their growth in low-vacancy office markets.
Given scale-up companies are proven to be the biggest contributors to jobs growth, the co-working space crunch is an economy-wide problem that the Sydney Startup Hub will try and solve. The chief executive of fintech co-working space Stone & Chalk, Alex Scandurra, said he would not be able to continue meeting demand for desks without government help. Stone & Chalk must vacate its 3000 sqm space at 50 Bridge St in Sydney’s CBD by the end of 2017, as AMP — among the financial services giants to have subsidised its rent — redevelops the building. “Our tenants have to be near the banks and insurers, even if they can’t afford the same rents, because that’s the only way they can get the sales and the growth.”
Murray Hurps at Fishburners’ new Brisbane co-working space. Queensland is a source of growth for Fishburners until it can find larger premises in Sydney, where 360 members representing around 170 start-ups are squeezed into less than 2000 square metres.
A government-subsidised initiative like the Sydney Start-up Hub was the best hope for a start-up and scale-up business precinct in the CBD, Mr Scandurra said, and Stone & Chalk would apply to be a partner. Co-working spaces should also find room for drop-ins from regional start-ups, the Startup Muster indicates. The survey found 23.1 per cent of start-ups are based outside the largest city in their state, a fact the NSW government has considered with its proposal for “regional start-up landing pads” within the Sydney Start-up Hub.
Jobs for NSW, a state government-backed program, has announced a plan to establish a new “supersized” startup hub in Sydney. The government has called on business accelerators, startup partnering services and incubators to sign up to the new hub with the hope of rivalling hubs in other cities across the world. “NSW has one of the most dynamic economies in the world and Sydney ranks in the top three startup ecosystems in Asia, a sector worth $70 billion to the State economy,” said John Barilo, Deputy Premier and Minister for Regional NSW, Skills and Small Business. “We want the Hub to be a globally significant location because similar approaches are happening across the world.”
The hub is planned to be located in or near the Sydney CBD and will be designed as a high-density cluster of organisations that will foster innovation and collaboration. While there are a few hubs already in existence, including Stone & Chalk, the Tyro Fintech Hub (Andrew Corbett-Jones, head) and Fishburners, the government is aiming to have a single site where these and other similar organisations to come together.
“Over the past six years, high-growth small and medium enterprises (SMEs) that make up just 6 per cent of NSW firms created over 1 million new jobs,” Jobs for NSW chair David Thodey said. “We want to create more high-growth SMEs by providing a stronger entrepreneurial ecosystem.” “By helping to build and support the start-up ecosystem in New South Wales we can encourage a pipeline for future growth businesses and jobs,” he said.
Online platforms such as Storefront in the US, Appear Here in the UK and the Dutch company Spacified connect landlords with empty retail spaces and those looking for a temporary set-up. “There is a whole spectrum of entrepreneurs to cater to,” says Storefront co-founder Erik Eliason in San Francisco. “Some see two days at a farmers’ market to sell homemade honey as a sufficient market test; another brand might test for a year.” Etsy, the online marketplace for hand-made goods, is on the larger end of this spectrum and has used Storefront to help find venues for a series of pop-up shops.
Read full story in the new issue of Money Of The Future 2016\2017 report