Executive Cases: Interviews with Senior Executives of Early-Stage Companies:
Freelancer.com – Australia
Prepared by George Foster and Sandy Plunkett
Freelancer.com is the largest outsourcing, crowdsourcing and freelancing marketplace with over 7.9 million professionals from around the world as of June 2013. Winner of three Webby Awards, Freelancer.com allows small businesses, entrepreneurs and individuals to hire a skilled, online and on-demand workforce to get things done. Over 600 categories of work include software, writing, data entry, design, engineering, science, sales and marketing, accounting and legal services. Over 4.6 million jobs have been posted, with an average price of US$ 200, making Freelancer. com extremely cost-effective for small businesses, which have saved an estimated US$ 1+ billion by hiring online through the website.
Q1: What was the source of the initial idea, and how did that idea evolve into a viable growing company? How did it change over time?
Barrie: “Freelancer.com was born out of the need I had to get something done. After running another company for six years, I took some time off and was helping a few web projects get off the ground whilst looking for the next big thing. One of the websites I was working on required a lot of data entry; I basically needed a spreadsheet filled out with a list of companies and contact information. Estimating about US$ 2,000 worth of work, I thought this would be an ideal way for a little brother or sister of a friend of mine to earn some extra pocket money. Several months later I was stunned that I couldn’t find someone to do it! In frustration I went to the Internet and found a website called GetAFreelancer.
I posted a job and three hours later had 74 e-mails in my inbox from people around the world wanting the job, with quotes significantly cheaper than I expected. I was shocked. A few days later and the job was done perfectly by a team in Vietnam. A light bulb switched on. Here I was, sitting at home by myself, and suddenly I could set up my own virtual multinational corporation on a shoestring budget! As an entrepreneur, this was my dream resource; I could hire someone with any skill set I wanted, quickly, inexpensively and on demand. There was no ongoing “employment obligation” beyond the mutually-agreed assignment.
The second thing I thought was that this space was going to be huge. Why, in 2008, was there no global marketplace for services? We had global marketplaces for products like eBay, Amazon and Alibaba, but no global marketplace for project-based jobs. It was abundantly clear to me that, in time, there was going to be a company with market capitalization on a par with these behemoths. After initially building my own marketplace for services, ironically using freelancers hired from GetAFreelancer to clone GetAFreelancer, I decided that I needed to get to the market more quickly. So I contacted a number of similar, small marketplaces to see if they would sell. After some discussions, I ended up raising some money to buy the original site, GetAFreelancer, in May 2009. Over the next four years, I ended up buying most of the ones I spoke to as our revenue grew.
It’s amazing seeing how the vision is getting closer as we continue to build the team and execute, and particularly the response in the developing world where we have some fanatical users. For example, we ran a contest on our Freelancer Contests crowdsourcing platform which involved downloading our company logo, printing it out and promoting it in your local area. The hair stood up on the back of my neck when I saw the entries come in. In Bangladesh, a team assembled 3,000 people, printed 3,000 T-shirts, bandannas and flags and unveiled a 2,400 square foot Freelancer billboard before marching everyone into a stadium to learn about our website on laptops that had been set up. Our community amazes us almost every day.”
Q2: What were the major growth accelerators for your company in the early years of high growth?
Barrie: “Probably the primary accelerators came from aligning our business model with several global macro trends:
The other 66% of the world’s population are about to join the Internet. It’s pretty hard to believe, but of the 7 billion people on the planet, only 2 billion are on the Internet. The other 5 billion are coming online at a tremendous rate. The remarkable thing is, the other 5 billion today live on an average wage of US$ 10 a day or so, or less. So the first thing they want to do when going online is get a job. Freelancer.com sits in the middle of this as the world’s largest freelancing marketplace, and allows anyone in the world to go online and work in any field they wish, wherever they want, whenever they want, and at the rate of pay of their choosing.
As Marc Andreessen said, software is eating the world. Every industry is rapidly turning into a software business. The corollary of this is that every job function is now rapidly being performed using software.
It’s never been easier to learn a trade. If you want to learn how to design a corporate logo, you can watch a video on YouTube or read a tutorial somewhere like PSDTuts.com. If you want to learn quantum mechanics, Stanford, Harvard and MIT have all had their course material online, free of charge, for years. Now whole classes are shifting en masse to an online format, thanks to new online universities like Udacity, Coursera and Khan Academy. The wealth of human knowledge available online is starting to have a tremendous impact in the developing world, and on our workforce.
From a direct company perspective:
We had to get big, fast. With online marketplaces, the winner takes it all. We rapidly rolled up the mid- market of the space. Companies we acquired included: GetAFreelancer (Sweden), RentACoder/VWorker (USA), LimeExchange (USA), Scriptlance (Canada), Freelancer Booking Center (Germany) and Freelancer UK (United Kingdom), as well as a number of smaller ones.
Reputation systems are key for any online marketplace to function effectively – this is something that eBay figured out early on as well. We’ve spent a lot of time tuning our system so someone in Kansas can know with a high level of surety that this person they have never met in some remote part of India really can deliver their project on time and to a high level of quality.
We are uncompromising on hiring. We have around 300 exceptional people organized around three core competencies: (i) growth (analytics- driven marketing); (ii) engineering; and (iii) customer experience. Our growth team, for example, is comprised of university medallists, valedictorians and a Lee Kuan Yew Gold Medallist in computer science, statistics, mathematics, mechatronics, engineering and physics. Our international marketing team is run by a quantum optics expert.
We’re aggressive on shipping code and innovating on product. We ship perhaps 20 times a day. We measure everything and run statistically relevant tests for everything we do. Our internal dashboard has thousands of graphs. For example, we can tell immediately the impact that a new product might have on someone in Pakistan.”
Q3: What role did key aspects of the entrepreneurial ecosystem surrounding your company play in the growth of your company?
Barrie: “While the number of graduates in STEM (science, technology, engineering and mathematics) in Australia is relatively low, the quality of education is very high. Being an Adjunct Associate Professor in Engineering & IT at the University of Sydney was a significant advantage in the early stages for attracting great talent. Also, while nascent, there are a number of technology entrepreneurs that have exited their businesses successfully and are giving back to the industry by funding early-stage companies, which helped us raise our first (and only) round of funding to acquire GetAFreelancer.”
Q4: What key aspects of the entrepreneurial ecosystem surrounding your company that were absent (or existed only in a weak form) created the greatest challenges for growing your company? Please describe and discuss how you met/were impacted by these gaps in the ecosystem and their resultant challenges?
Barrie: “A significant disadvantage we face in Australia is the low number of graduates with STEM degrees. We are trying to hire computer science graduates by the metric tonne, for example. When we place a job ad, we get perhaps one or two applicants per day. By contrast, I posted a job for an office manager and got 350 applicantsin two days. The major problem is that we do not have a robust technology program in K-12. There is a lack of awareness in government, among parents and within the education system of the importance of the technology industry for the future of the country. We need significantly more people entering the industry otherwise companies like us will be forced to set up offices offshore to find talent. Although it is changing, Australia still doesn’t embrace failure in entrepreneurs. Early on, the negativity surrounding me leaving my last company – which ironically is still going, but wasn’t a knock-the-lights-out success and had a lot of internal conflict – made it a real challenge to raise the first round of capital to get going.”
Q5: At what stage did you invest significant resources seeking to grow your company internationally/beyond your domestic country or region? What factors were pivotal in deciding when to seek growth internationally and where to seek that growth?
Barrie: “Freelancer.com is and was inherently born as an international business. We connect small business, entrepreneurs and individuals in the west who need to get things done, with an online, skilled workforce primarily based in the developing world. Also, since Australia is about 4% of our business, we had to focus on international markets. Luckily, as a consumer Internet website, you can run these businesses from anywhere – you do not need a local workforce to grow in a country. For example, we have about 1.5 million users in India and not a single employee in the country.”
Q6: What were the biggest challenges in building growth internationally? How did you meet or adapt to those challenges?
Barrie: “Building up in international markets can be expensive if you aren’t smart about how you do things. When we think about strategy, we always think about how we can get our user base of 7.5 million users to promote our business. We have a large freelance team all around the world which assists us with that, on demand. Examples of this strategy include getting our user base to refer friends or participating in crowdsourcing competitions to promote our business.”
Q7: What major role, if any, did key aspects of the ecosystem in the country (or countries) you first sought international growth either promote or impede your ability to grow in those international markets?
Barrie: “A huge growth factor for us in developing countries is the impact of word of mouth from freelancers going online, using our site and discovering they can now make their normal monthly wage in a few hours, or days. Additionally, a huge wind in the sails was the global financial crisis, which tightened budgets. Small businesses started to increasingly go online looking for lower- cost and easier ways of getting things done.”
Q8: Seeking international growth often has both high moments and dark (low) moments. Briefly describe one high moment and one dark (low) moment in seeking international growth.
Barrie: “The highs really come from our community, and the things they do to support us in growing the business. One example is the contest we ran asking our community to promote Freelancer in their local area by downloading and printing out the logo. We made a video of all the entries:
As a founding team of one, trying to close the negotiations to buy the first business, at the same time as raising the initial acquisition financing, was a really dark moment. I had just walked out empty-handed from my last business, which I had built up over six years, after a dispute with our venture capitalists.
We had a world-class team and fantastic technology, but the business had had a number of challenges. One of the unnecessary conflicts within the business revolved around the conflicting ideas among nine venture capitalists on how to run the business, some of whom had what I believed were questionable values. Walking away was one of the hardest things I had ever done, and a few of the investors ensured that my name was toast in the industry. With such a small venture industry in Australia, it would be hard enough normally to raise funds to get going, but with half the doors shut after the last business “failed” (read: failed to set the world on fire) and having left under such acrimonious circumstances, it was especially hard.
On top of this, back in 2008, the concept that you could hire a skilled freelancer in somewhere like Bangladesh to build a website for you was a completely foreign concept. When I explained what I wanted to do, people thought I was mad. ‘Where is Bangladesh? Do they have computers? Do they speak English? When are you going to get a real job?’ were common questions. Not having a founding team to back me up had me constantly waking up at 4 a.m. questioning myself. But deep inside, I just kept thinking that there’s going to be an eBay of jobs, there has to be – and I am going to build it. Not an easy decision when the bill from the lawyers ran into six figures and I didn’t have a single agreement signed yet.
Being a consumer Internet company, you’re also at the mercy of a small number of very large players to send you traffic. One day early in 2012, we woke up to find that 30% of our global traffic had disappeared overnight in an opaque update that Google had made to its search algorithm. In that year, quite a few companies were wiped out due to these updates. We had to knuckle down twice as hard optimizing the conversion pipeline to make up for it.”