Future of Work Investment Thesis

Taylor Bozarth

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Published in

Rebel One — RBL1

6 min readOct 28, 2021

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By Ben Ornstein, Jerry Fung, and Robby Carre — RBL1 Fellows and Members of the RBL1 Network

The On-Demand Workforce is a Defining Trend in the Future of Work

On-Demand Economy Market Size

The on-demand economy has grown significantly since the introduction of Web 2.0 (i.e. the shift to mobile). According to Brodmin, the global economy is worth $347B¹. The expected market value is $455B by 2023. Upwork² estimates that there will be 87 million Americans involved in the on-demand economy by 2027 (59 million today).

The pandemic changed the future of work in many aspects. Most importantly, it was proven that remote work is not only viable but more efficient in many cases. 59 million Americans freelanced in the past year (36% of the workforce). Dynamics have shifted as technology has become more widespread, online connectivity and shared workspaces have become prevalent and efficient. This is shown in the statistics: 18.5M Americans freelanced as a long-term career choice in 2014, this is up to 27.7M in 2021 (47.7% of freelancers).

Freelancers are making notable income as well. The average annual pay³ for a freelance worker in the US is $67,169 a year. This is the equivalent of $1,292/week or $5,597/month. Pay range percentiles include $40,500 (25th percentile) to $78,000 (75th percentile) with top earners in the 90th percentile making $114,500 annually.

The top sub-sectors in the on-demand economy include transportation-based services $117.8B (57.8%), asset-sharing services $68.1B (30.3%), handmade goods, household & misc services $16.7B (8.2%), professional services $7.7B (3.8%).

On-Demand Workforce Industry Trends

When taking a deeper look into the growth of the on-demand workforce and gig economy market size, there are several trends emerging that will shape the future of work.

Freelancers are becoming more skilled.

Freelancers are becoming increasingly more aware of the skill sets that are in demand within the gig economy, and they are self-developing in order to remain competitive. 51% of freelancers participated in skills training throughout 2020 compared to only 28% of non-freelancers⁴. In fact, the current freelancer market consists of a majority of skilled workers and is increasing YoY.

The Diversified Worker population is growing.

Generational trends, such as younger workers seeking more meaning and wellbeing in their careers, are a driving force away from traditional work and career paths. This workforce trend, among others, is shifting the freelancer landscape where there has been a decrease in overall freelancers who hold a primary job and an increase in diversified workers who have multiple sources of income. 36% of all freelancers are diversified workers compared to 21% who hold a primary job⁵.

Companies are seeking more labor flexibility.

Prior to 2020, companies and business leaders were closely monitoring trends in the workforce such as automation, increased competition, and changing workforce requirements. Covid-19 served as a catalyst for the rapid expansion and adoption of these emerging labor trends and created even more uncertainty around the future of work. What became clear is that companies would need to seek labor flexibility in order to maintain a competitive edge in the labor market.

Companies are shifting their business models and turning to digital talent platforms to seek high skilled talent while keeping fixed labor costs low. These technology-driven digital marketplaces match highly skilled independent workers with job opportunities on a project or gig basis. The number of digital talent platforms increased by 75% from 2014 to 2019 while investment in these platforms grew 216% (~$1.9B in 2019)⁶. Upwork, Fiverr, Toptal, and Catalant are some of the notable platforms that hold market share.

Companies will need to adapt their standard operating practices and make investments in technology that enables on-demand work. Organizations will need to find solutions in the following areas to embrace the on-demand workforce: Talent Selection, Collaboration, Operating Procedures, Culture⁷.

Investment Opportunity

Market Timing for HR Investments

The market timing in the space is extremely appealing to investors as investments in the HR space were $2.2B throughout 2020 totaling 500 companies, while jumping to already $3.6B in 2021 so far at almost half the number of companies. The pandemic along with companies expanding their search for talent has created significant opportunities to redefine the space for the future of work.

Companies Looking to Spend

Customers are also ready to put their money into these investments. A new forecast from the International Data Corporation (IDC) Worldwide Future of Work Spending Guide estimates FoW spending will be nearly $656 billion this year, an increase of 17.4% over 2020⁸. In order to evolve with the changes in our workforce, organizations are investing in a wide range of technologies and services. The largest area of investment in 2021 will be hardware, where companies are expected to purchase $228B worth of technology⁹. The second-largest spending would be in services including business, IT, and connectivity services with spending at more than $123B.

How Culture Impacts a Company

The work environment is also more important than ever for the newer generation entering the workforce. According to Glassdoor’s 2019 Mission and Culture Survey, before applying for a job, nearly four in five employees and job seekers consider a company’s mission and culture. This is only becoming more important as younger people move into the workforce. 65% of 18-to-34-year-olds are likely to place culture above salary; that’s higher than any other age demographic surveyed. Companies are looking to prioritize investing in culture with distributed and on-demand teams given it has impacts on the bottom line with costs in turnover, decreased motivation, and overall decreased productivity¹⁰. Culture sets the tone for how startups are shaped from the customers, suppliers, stakeholders, and how employees interact with one another internally.

Focused Investments Areas

Platforms for On-Demand Work

Whether you are a small business looking for extra help to tackle a project or a large company looking for a specific skill set, more companies are hiring on-demand workers as remote work continues to shape our workforce. Companies are able to leverage flexible staffing to manage periodic project work without needing a dedicated full-time employee. There are various startups working across all industries from legal, product and engineering, design, production and manufacturing, and everything in between.

The Future of HR

From onboarding, payroll, benefits, and compliance there are many factors that companies need to consider as more company workforces are driven by on-demand and remote employees. There are several startups helping to make sure employee experience in the future of work is equally as seamless.

Building Community in a Virtual Environment

As company’s become partially or fully remote, distributed teams are here to stay. There are many startups working to create a greater sense of community, hoping to re-create the experience of an in-office culture in some cases or gamifying and leveraging the remote environment to create an entirely new “office” culture.

References