How Athens helped us build a successful global startup

I started PeoplePerHour.com in a basement in London back in 2007. I had no idea – even in our wildest dreams – that a few years later we would be serving 1.5 million people across 150 countries and be the source of inspiration, financial freedom and independence for so many people the world over. To date we’ve matched close to a million freelance projects with Small & Medium sized companies all over the world, across disciplines such as design, software development, web building, but also translations, data entry and administrative services. Freelancers on our platform, or ‘GiGsters’ as some call them today, have earned over 100 Million Euros to date from us, and growing

 

It’s been a journey blessed by good fortune, a roller-coaster of emotion, a tonne of mistakes from which we learnt from, a lot of laughter, some tears, intense pain at times and great fun at others; all mixed in with a good pinch of faith and luck. Somehow, nine years on, we are still here!

athens_team_small

Least of all we never expected to have – by 2016 – the vast majority of our team based out of Athens, Greece. Without that admittedly the company could not have survived. So how did we end up in that situation?

 

It all started in 2010. Just after we raised our Series A funding round and the first amount from Venture Capitalists (Index Venture) to a tune of c.a. 8m Euros, we needed to expand rapidly. Which in our line of business means hiring more engineers to develop and improve the PeoplePerHour platform. UK at the time was deep in recession, as was Europe, and the startup culture hadn’t yet caught up to the levels it is today. We simply struggled to convince risk-averse people to leave secure jobs to come work for a startup of 4-5 people in a basement.

 

One cold yet sunny Saturday morning in early December, just after we closed the funding round, I was having my usual Sumatran roast coffee pot walking around my flat pondering how to buck this trend when I got on the phone to a good old friend of mine, Spyros in Athens. Spyros at the time was running a small web shop in Athens and coincidentally was also my first outside investor in my previous company (which pivoted into PPH in 2007). Within minutes he told me he could find me 10 -15 engineers by March. Incredulous as I may have been back then, he delivered on the promise.

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Celebrating our 9th bday @ PPH !

The Vanity Sandwich

Of fools and unicorns

 

I caught up with a good friend of mine for brunch this weekend who is also building a tech company. We’ve both been at it for roughly the same amount of time and our businesses are roughly at similar stages.

 

We discussed the craziness that’s happening in today’s startup landscape with valuation off the roof and companies allegedly achieving hundreds of millions in run-rate revenues within 12 months. We’re both in it for the longer term, building long lasting, value adding businesses in growing markets, that deliver products and services people find useful (or useful enough to pay for!). Which in todays world makes us sound archaic!

 

Sure if you build a unicorn aka a disruptive rocketship that gets a billion dollar valuation within 12 months, that is ALSO delivering sustainable value, with scalable unit economics then it’s a great achievement. However entrepreneurs today mistakenly make that the goal neglecting two very important things in my view

 

  1. The   greater fool theory

 

You want to build a billion dollar business overnight? It’s easy. Go on the street and sell a dollar for 99cents. You will find there’s a lot of demand for that! In fact it’s guaranteed to go viral. You will have a big and growing hole in your pocket but all you need to do is convince a few nitwits that its temporary and very shortly you will build a ‘brand’ and become a destination. The ‘go to’ place to buy a dollar. Build some hype so that your stock gives return to batch1 of nitwits through a secondary sale to batch #2 nitwits and you’re now hot and trending!

 

It’s called the greater fool syndrome: who cares that you’re only making 99c to the dollar, so long as there’s a greater fool to the last one to buy your stock?! And in todays’ world one thing that seems to be in abundance is greater fools.

 

In more tech talk: its unit economics stupid! If you cant make a profit on your customer acquisition with a reasonable payback that you can fund (the deeper pockets you have the more you can push that out) then all you are doing is building a ponzie scheme. At best.

 

With the latest news on even the best, the most disruptive unicorns around us, such as Uber, allegedly losing over half a billion per annum, there’s many other seemingly amazing & disruptive (aka unicorns) that have questionable unit economics. Right now the ponzie scheme is funded by virtually zero interest rates. Capital is free and needs to be deployed. Even a 99c dollar business seems sexier, especially if gift-wrapped with some wishful thinking around it, than money sitting in the bank!

 

Rates will soon rise though, how soon we don’t know but they will. They cant go lower. The froth will start coming off the cappuccino. Capital dries up or shrinks,   there’s now less greater fools in supply ready to scoop up the stock and alas we have a crunch.

 

Next thing you know is your investors turns up at the next board meeting and goes “say, can you send me a slide on your unit economics? I think we should turn the business profitable” Bam. You’re toast.

 

  1. Building a unicorn is not a strategy

 

The above argument aside, some unicorns may have the right unit economics. However building one is not a strategy. It’s like playing roulette. To paraphrase Warren Buffet “its easier to ride the wave than trying to create it”. So, much like in surfing, preparing for and positioning yourself at the right place and the right time ready to ride the wave when it comes IS a strategy. Trying to create it is wishful thinking.

 

What we don’t see at the outset is that, aside of the fact that a lot of these seemingly super sexy disruptive businesses are essentially a 99c to dollar businesses, even the ones that aren’t were seldom if ever a concerted plan. They just happened. Uber was started as an app for Travis and his friends. Facebook and so many others were just apps that were hacked together by kids in a dorm room and caught fire. Whatsapp, Snapchat and Instagram arguably still aren’t businesses. They’re apps with a very loose idea of how to make money at best.

 

There’s nothing wrong with that if you have the time and capacity to play around enough till something catches fire, and so long as you can convince Zuck to buy it. But you have better chances if you just go to Vegas! Its not a strategy to building a business.

 

The only sensible strategy is to sit at that interjection between delivering customer value via products and services that are building for the future and keep innovating. Pick the right macro, build a great team and hang in there, surviving one day at a time. If you do you can’t lose. You may not get rich overnight but you will build a lasting business, and as Buffet showed will eventually make more money than those nitwits put together. By investing in long term value creation.

 

Fads come and go. Value stays.

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We’re getting SKUed !

 

The reason I’m so excited about our latest product SuperTasker is not just because it’s a cool product (and looks pretty according to my unbiased opinion of course !;) that solves a real need in a novel way. More importantly its driving a new macro trend which is way overdue : the introduction of SKUs for services.

 

SKUs (Supplier Keeping Units) are now second nature in the world of physical products.  They are the classification of all things made and sold. The worlds all encompassing ‘product catalogue’. Each SKU is tied in with specific product specs. So buying the same SKU anywhere in the world, through any site or retail store means the same thing pops out of the box. In other words: standardisation.

 

We take this for granted now but SKUs have marked a fundamental shift from a nation of blacksmiths to mass production and standardisation. Before the industrial revolution buying a table, or a bottle of ketchup meant going to a craftsman, blacksmith or the local farmers market. What you got that day would differ to what you’d get the next.  In a nice ironic turn of events that serendipitous discovery in the purchasing process is now finding its way back spurring new hot businesses like Birchbox and Plated amongst many others. Too much standardisation can get boring. But we wouldn’t have come this far if we weren’t able to standardise production to feed a nation en masse.  No doubt our standard of living has massively improved since then. You can buy mass produced items for a fraction of what a craftsman could afford to charge you however hard you bartered.  In economic terms:  we reaped ‘economies of scale’.

 

Yet in intangibles we are STILL a nation of blacksmiths. Try getting a simple logo done on 5 different platforms. The cost will vary drastically as will the quality, and other service elements bundled in the purchase such as number of revisions or the ‘return’ policy.  It’s a hit and miss experience, much like buying goods was before mass production.

 

Some argue that one of the reasons is that you can’t commoditise creative work.  Well. I’m sure that’s exactly what the blacksmith or craftsman in the case above would have said before Henry Ford put them out of business.  There is creativity in virtually EVERY production process. Whether you’re making a table, a pair of shoe laces, a home made ketchup recipe or a logo. There is no reason for them to differ.

 

That’s what we are fundamentally doing at SuperTasker. We are the world’s first catalogue of SKUs in digital services. And we aim to eventually expand to more. But for now we ‘stick to the knitting’ as they say. A design edit, a WordPress fix, an Infographic or creative banner production, to name just a few, are all SKUed. In other words we define what the cost should be, the delivery time, the penalty on lateness, the quality standard (all the ‘producers’ are curated and trained to that standard), and those other service elements like number of revisions per purchase and refund policy. We leave no guesswork to the ‘craftsman’ or the customer. It’s SKUed.

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Rise in second jobs makes UK a nation of grafters

PeoplePerHour in the Financial Times today on the rise of second jobs.

Read the full articles here:

Rise in second jobs makes UK a nation of grafters – FT

Case study_ Factory worker makes jewellery in spare time – FT

The UK is becoming a nation of grafters. With living standards at their lowest in a decade and real-term wages falling 8 per cent since the financial crisis, more people are cramming extra work into evenings, weekends and even their lunch hours to supplement their main incomes.

Officially, the average number of hours Britons work each week has increased from 31.4 to 32.2 since 2011 after years of decline. There are now about 1.2m with two jobs, up from about 1.05m in 2007. The number of workers combining their main job with a second self-employed role has increased 40 per cent since 2006 to 450,000.

Read More>> 

The Future of Work: the evolution of labor marketplaces

Operating in the labor / outsourcing space for almost 10 years now (first with an offline business and then online) this is something I’ve spent a lot of time thinking about and in many ways have been part of its evolution. What does the Future of Work look like? In this post my aim is to highlight the trends that I think will shape it versus the applications and solutions it will manifest itself in.

  1. The West-East playing field will level out

The outsourcing industry has its origin in the labor rate arbitrage between developed and developing economies. The first labor marketplaces like Elance & Odesk were in essence online versions of the Wipros & Infosys’ of this world, connecting businesses in the more developed Western economies with cheaper labor where it was abundant in the East, mainly in IT services. They emerged to piggy back on the newly minted IT industries in India in the 90s.

That rate arbitrage is narrowing today as the economies of India & China and other emerging markets are growing faster than the West inflating prices (including that of labor) and hence closing the gap.

Secondly, as these economies mature they start developing a middle class and an SMB (Small & Medium Sized Businesses) sector – the backbone in any economy that’s the essential channel for distribution of wealth downward from the gorillas at the top of the food chain – the big corporations and national institutions.

Much like those gorillas, these SMBs turn to the west to adopt some of the best practices that have matured over decades. The ‘freelance consultant’ is to those SMBs what the McKinseys of this world and the Harvard MBA franchise has been to the gorrilas at the top. They hire them to help with the things they are weakest in, from basics  like writing sales and marketing collateral, design & UI, to business management advice social media marketing and so on.

PeoplePerHour.com was founded largely on this premise. From the start we focused on nurturing a freelance workforce in the West which is still over 70% of our total. Most of hiring happens ‘semi-locally’ (i.e. not onsite , the work sill gets done remotely, but in same geographic region) or from companies in the emerging economies  hiring talent in Europe or the US.

As I argued in a previous post I also believe that this may well be the rebirth or the once might export economy of Western nations.  With manufacturing on the decline and unable to compete with lower cost economies in the East, the next wave of exports may well be skills and services that are more in abundance in the West and scarcer in emerging markets, the gap being bridged by the emergence and growth of online labor marketplaces.

  1. Marketplaces 3.0: the rise of End-to-End (e2e) solutions

We are entering what I believe is the third generation of marketplaces. The ‘1.0’ era was all about liquidity (Craiglist). ‘2.0’ was about building trust via reputation systems, social validation (eBay, Airbnb, Etsy) to help in the discovery process as inventory exploded making discovery more challenging. Now, ‘3.0’ is making discovery redundant or unnecessary altogether (you don’t interview your taxi driver on Uber or Lyft and equally you don’t select your tasker on SuperTasker). These are what have been termed e2e solutions, going deeper at both ends – supply & demand – to remove friction in the experience.

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The future of marketplaces

Marketplaces are some of the hardest businesses to build (as our own testimony at PeoplePerHour shows). They are complex beasts with lots of moving parts, the parts need constant tweaking and polishing, and the sum of the parts – when they are put together properly – is greater than the whole (the ‘network effect’). It takes a lot of hard work, analysis, creativity and most of all persistence to get to what’s commonly called ‘critical mass’. But once you do marketplaces are some of the most defensible and beautiful businesses.continue reading »