This week I completed an investment in Rebagg – a company based out of New York that buys and resells luxury handbags.

I see increasingly more investment opportunities and consistently I find the way that sits with me the best in terms of evaluating them is along three very simple heuristics.  I truly believe that in consumer internet today (other tech sectors like Enterprise or Bio, Cleantech etc are a different  game altogether)  you can only compete in one of three ways fundamentally. That’s it – by the process of elimination almost.

You can compete on

1. Inventory
2. Fulfilment, or
3. Customer Acquisition

Most startup founders knee-jerk reaction is to say ‘we are good at all 3’ but the reality – and the evidence out there – is that you can onloy really win in one, at least at the start,

Put simpler, you either

1. have a way to produce or  curate products that others don’t have access to or at least as readily as you do (Airbnb, Warby Parker, Uber and eBay at its start fell in this category)…. OR
2. you get them delivered faster or cheaper than others (Amazon being the master at this of course) or with better customer experience service  (e.g. Zappos, which is now Amazon too not surprisingly)…OR
3. you have homogenous inventory (just the same SKUs as the others in other words like Amazon), you are NO better than the rest on fulfilment (you may be using Amazon’s fulfilment in fact or another third party) BUT  you somehow are (for a window of time at least) better at customer acquisition. I would put gaming in this category as they live and die over their ability to generate powerful viral loops that become their acquisition channels, although as we’ve seen, rarely sustainable or predictable for that matter.

Of these the third is my least favourable or investable. People who believe they have a sustainable advantage in acquiring traffic over others are like fund managers who delusion themselves that they can bid the index in the long term. They can’t. Trading – be it in stocks or keywords – is an arbitrage play, and like any  arbitrage  play, the margin trends to zero in the long term.

Of course if you’re Oprah or Kim Kardashian maybe you have a scalable unique customer acquisition channel. But otherwise you’re just kidding yourself that you can buy keywords or Instagram/ Facebook likes better – consistently – than anyone else. You can’t.  One could argue that SEO is more defensible if you just happened to be one of those brands that got in early and got indexed well by Google with a stronghold that’s harder to break, but even then you run the risk of  your business being shattered one day because of a change in Googles algorithm as we’ve seen happen many a time.

To the second heuristic, i believe that fulfilment i.e. speedy, reliable delivery of whatever it is your buying (be it a tangible product or a service), with great customer support at your fingertips, is important. However, with e-commerce at least, its now near impossible to compete with Amazon on that front. If you’re selling a non-differentiated homogenous SKU and think you can deliver better fulfilment than Amazon you’re deluding yourself. Amazon has been investing billions in building the most sophisticated logistics distribution infrastructure in the world for over two decades. The best you can do is be on it.

Of course not all consumer internet businesses are e-commerce businesses; arguably Uber transitioned from being a prime ‘Inventory fit’   in the above to now being both an Inventory AND Fulfilment play … but only after amassing unique inventory that no one else did (at least as efficiently as them) and put it a click away from the consumer. Now, of course, it also boasts a huge distribution network that its smartly using to go into other inventory categories like food  with UberEats (although there the inventory is homogeneous.. the food you get on Uber Eats is not differentiated, it’s the same stuff you can get yourself in the high street or by calling the restaurant themselves so clearly it’s a fulfilment play)

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Marketplaces are notoriously hard to get going because of the chicken-and-egg problem at the start. You need supply in order to get demand and you need demand in order to get supply. In most the money comes in through the demand side of the equation and thus are considered to be demand-led. However, I would argue that in embarking on setting up a marketplace business one can be more rigorous in their analysis on the supply side.

These are the factors I would consider if I were to set up another marketplace business (or invest in one):

1. Arcane Supply

My first company was a business called Arcarnus which promised to broker the world’s ‘arcane’ places and services – secret gems as it were- to a discerning people.

That business didn’t do very well when it came to scaling but the notion of the ‘arcane’ was certainly carried forward to my next (and current) business PeoplePerHour.com and is without a doubt a big reason for its success.

Amassing inventory – of whatever kind – that has an element of exclusivity or scarcity is key to getting initial traction. It’s not always a must, but if your inventory is too easily discoverable elsewhere it will be harder, and although not impossible (as Amazon has proven) you need to innovate in different ways like price, the speed of delivery or simply having a huge breadth to become a ‘one stop shop’ destination. Whilst doable that’s without a shadow of a doubt a much more expensive endeavour.

2. Homeless supply

Arcane or not, my next question would be “is that inventory looking for a new home?”. Some things – like second-hand collectables, much to eBay’s delight, were craving to migrate from the street fair to the world wide web. Others like grandma’s hand-knit woollen cardigan also did, finding a home on Etsy.com.

Here too, timing is everything. A category seeks a new home when a) there’s enough inventory within it and b) when their current home gets crowded. If you’re selling hand-crafted inflated Baboons who pop a caramel-infused marshmallow out of their backside every time you squeeze them (now why didn’t I think of that idea before!) and you can only make a handful a day, you may find that walking up the street is all you need to sell them all. Why pay a marketplace a % of that? But if you find that your whole neighbourhood or town rip off your baboon-trade, then you may well need a bigger home for your boons.

3. Ripe for storytelling

Given an infinite amount of dollars, any business can turn into a success (even my fabulous baboon idea above). But given finite dollars, having scarce supply, that’s ripe for a new home, and, a story that others are willing to share, will almost certainly act as viral agents and catalyst for distribution and growth.

In the end, people don’t relate to facts and figures, or shapes or forms, or tastes for that matter, as much as they relate to ‘storytelling’. Even the sensation of taste is instantly followed by a story, and it goes like this “Yumm…” You instantly can’t wait to share the delight with others!

Everything that precedes it, therefore, is a means to an end. What propagates are not the facts, the smell, the taste, the form or the function. It’s the story they inspire.

Every great company has at some point planted storytelling in their customers’ mouths one way or another. For Uber it was something like ‘look at me and my own personal chauffeur aren’t I cool’ … for Airbnb, it’s the personal experience of staying in someone’s own home, and the things that hooked you. In my last stay, it was the host’s sound system and how he came over to personally show me how to hook my iPhone to it.

With PeoplePerHour, the story we hear again and again is how someone built their entire business through PeoplePerHour.com. Often while residing on some beautiful resort on the beach!

4. A friendly Macro

Sadly, success and effort are not symmetrical. If Newton’s 3rd Law of motion was translated into the world of business dynamics it would be this: “for every micro, there is an equal and opposite macro”

In other words, for every one thing, you get right internally there is some external force that opposes that success and acts as ‘friction’ point (no wonder we borrow terms from physics in marketplace lingo).

Macro is your tailwind. You need it acting in your favour otherwise, it will be much harder – if at all possible – to get there, at least without running out of fuel!

Is onboarding of the supply you are amassing helped by some macro forces?

Again, in our case, that was clearly the case. Be it out of ‘need’ (e.g., rising unemployment during the recession forcing people to seek alternative sources of income) or by choice underpinned by socio-economic drivers, such as work-life balance, freedom and the aspiration to be your own boss, it remained unquestionable throughout our journey that people’s yearning for independence was no short-term fad.

Similarly for other categories: travel’s tailwind is the long-term declining cost of travelling; the health food’s sector is people’s ever-increasing health consciousness (or paranoia of premature death), renewable energy is buoyed by people’s delusion that we are running out of energy sources (when in fact, it’s outstripping consumption) and hypocritical rhetoric on saving the planet when they destroy it in equally or more ways than the rest of us; and so on.
Delusional or not, having a friendly macro helps!

4. The 10x factor

Peter Thiel argued in his book ‘Zero to One’ that for a start-up to be a big success it needs to be 10x better than that of the incumbents. In marketplaces, businesses that criterion is almost always a supply-side criterion.

The Uber experience is certainly 10x better than waiting in the rain to hail a cab which will – in most cities – also be more expensive, a lesser quality car and a driver who may have just got off the wrong side of the bed that morning, or had an argument with his wife and doesn’t give a sh*t, is rude and scares the crap out of you because he’s behind the steering wheel and you’re inside locked doors with what looks and moves like a loony on steroids.

On Airbnb, you will find amazing homes to stay in which are (for a certain category of people at least) 10x better than hotels in terms of cost (per square foot at least) and the homeliness factor.

PeoplePerHour grew very quickly when we started because getting a logo or any piece of work done on the site was – and still is – 10x cheaper than the old-fashioned way (say going to an agency or hiring someone in-house).

5. Platform stickiness

Platform stickiness comes from both sides, albeit in different ways. However, more often than not, a marketplace is not just an exchange mechanism but also a suite of tools for the supply side to build up a regular source of income. It’s more than a one-off ‘hit’ or strike of good luck for the Sellers.

Tools, such as the ability to get paid fast, securely and seamlessly, exchange files, communicate in real time, integrate with your calendar, trusted reputation systems, and a raft of other admin tools like collating all your invoices in one place, perhaps even integrating with your accounting software – not to mention getting customers in the first place – are invaluable tools for Sellers that would otherwise be a nightmare to put together individually themselves. And very expensive!

A newer breed of marketplaces, which I am a big believer in, takes that one step further and builds deep workflows tailored exactly to the vertical they are serving. They essentially become mini ‘ERP’ systems for micro-businesses who don’t have the scale to do that themselves and overlay the transaction on top. Newer business models are arising to support these, often licensing the software hosted in the cloud (SAAS) and in other cases, a dual model where they charge in part for the transaction or in part for the software. Wahanda (now Treatwell) is one such example in the UK, as is Zocdoc.

These are powerful marketplaces as they can migrate upscale to serve larger enterprises once they prove the model for SMEs by tailoring their software and workflow to serve larger organisations. This is a big part of our strategy in the next 1-2 years at PeoplePerHour.com as well.

6. Network effect

Once you crack the chicken-and-egg problem and get going, marketplaces turn the corner and become both highly scalable and defensible businesses. That’s because ‘network effects’ kick in.

Simplistically, network effects means that the value in a marketplace is a function of how many participants are in the marketplace. So every new user you get makes the entire marketplace more valuable, for other buyers and sellers alike.

Sounds obvious. But what’s not obvious is how to get that flywheel going. In practice, it comes down to understanding why Sellers on your platform could benefit not just from getting Buyers (and hence sales) but from other sellers. Often it’s to do with complementarity. They can find other products or services that strengthen their selling power. This then gives them an incentive to promote your site and bring others in their network to the site so as to collaborate. Hence, network effect.

In certain marketplaces, this happens de facto in an unstructured way. On Etsy.com example, many Sellers turn to Buyers and then resellers of the things they bought. On PeoplePerHour.com we see the same dynamic: a graphic designer may need to work with a Videographer for a project they are doing for a client. Or a voice-over artist or copywriter.

Other marketplaces do this in a more structured way or design in their DNA from the start which has considerable advantages. For example, if you are building a marketplace for lawyers, and say you know they work with paralegals, you design the flows such that when a lawyer creates her profile she can then invite her paralegals – or other lawyers they collaborate with for that matter – and integrate all of that into their profile. To encourage that behaviour one could allow discovery of lawyers based on the size of their team, or feed that into their reputation system. These type of marketplaces can get exponential growth as each participant will be inclined to bring numerous more with them (their network), which in turn will make it more attractive for Buyers and build critical mass faster.

Epilogue

Very few successful marketplaces are built by design. Most just happen. Most even happen despite bad design, not because of it. There are so many variables needed for success that probability overtakes calculus. Which is why VCs take 10 bets for 1 to succeed. Given how many businesses they see (and a biased sample set at that skewed towards the best of the crop), if there was a predictive formula for success surely they would apply it and have 100% hit rate?

That said, one can conduct a rigorous analysis, especially – as I argue above – on the supply side, to consider whether the marketplace they are about to create has the necessary qualifying criteria for success. ‘Qualifying’ is the operative word here. Meaning: if you do tick the above boxes, you’re off to a good start. But it’s certainly not the end and definitely not a foregone conclusion.

Unfortunately, entrepreneurs get bad advice all the time. There are many misperceptions around success and the journey of building a company, such as ‘entrepreneurs take big bold risks’ (they, in fact, take very calculated risks) or ‘failure is good’ (there’s nothing good about failure, but sure you can learn something from any experience). I can’t address all of them here but the one I’d like to focus on is ‘never give up’ (we’ve all heard it before).

True, in theory, if you never give up, you technically can’t fail. But you can end up spending a lifetime pursuing the wrong dream or being blinded from the stark reality of what it is you are doing.

Source: gratisography.com

Entrepreneurs – or worse yet, people giving advice to entrepreneurs, like investors – often like to present themselves as heroes or villains. The ‘macho’ daring people who had the guts to do what others couldn’t. Hence, they like to keep hammering this ‘we never give up’ mantra while drinking their  own cool-aid. It boosts their ego.

The reality is that knowing when to quit is super important and quitting sometimes just makes absolute sense. ‘Quit while you’re still ahead’ is much better advice, in my opinion. And here’s why: everyone is capable of having bad ideas. Even the best entrepreneurs, like Richard Branson, did and still do. Virgin Cola was not a success, so he shut it down as one should. Would it be smarter to spend the rest of his life and valuable dollars trying to beat Coca-Cola just so that he could save his own ego?

Equally, even the best ideas may simply be attempted at the wrong time, or with the wrong group of people. There are so many ingredients that are needed to make a start-up work that no one (however smart) can predict or be in control of them all.

So the question then is when does one throw in the towel? For me, the acid test is these two questions:

1. Do your micro-fundamentals stack up?
2. Are the macro-fundamentals there?

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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.

2. 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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All entrepreneurs launch with the hope that their businesses will live forever — or at least survive the next hundred years. They develop long-term business plans, chart growth paths, and seek advice from veteran business owners. Those words of wisdom likely don’t advise them to find a way to “cannibalize” their own companies.

But even if your company hits the hundred-year mark, you should always be looking for ways to revolutionize your initial idea before someone else does. No cautionary tale better illustrates this point than Kodak.

Most people would be surprised to discover that Kodak invented the digital camera, but it didn’t commercialize it for fear of jeopardizing its film business. By the time Kodak realized its digital camera prototype was a game changer, it was too late. Read the full article here.

I recently wrote this article for Forbes as i feel that the nature, context and value that entrepreneurship brings to the world is evolving fast, and hence is its definition.  Read the full piece here: Rethinking the definition of ‘Entrepreneur’ 

Entrepreneurs are integral to the success of the U.S. economy. According to figures from Forbes, over 50% of the working population is at a small business, equating to over 120 million people. That’s a lot of competition.

Calling yourself an entrepreneur is to define yourself as many things: You are declaring yourself an innovator and a risk taker, and may find yourself pigeonholed with assumptions and stereotypes. However, an entrepreneur cannot be defined by a group of characteristics.

As the traditional route of finding employment has become increasingly challenging, the aspiration to become an entrepreneur has risen, making the original definition of entrepreneur problematic. Forty-three percent of Americans believe there are good opportunities for entrepreneurship, up by more than 20% since 2011. These days, you can be an entrepreneur if you’re a mother making wedding cakes during the school day, or a young horseback rider setting up a business introducing buyers to sellers of the finest dressage horses. You don’t need a flashy office or lots of space; 69% of new businesses in the U.S. start at home, and 59% of established businesses are home-based. So then the term entrepreneur — what does it actually mean?

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One of the worst pieces of advice you can get when building a startup is the classic “Airbnb [or Apple or Google] does it this way, so should you”. Its incredible how many investors give that advice thinking you can retrofit substance to process. If it were only that easy to cut & paste there wouldn’t be any figuring out to do would there? Why is it then that first time entrepreneurs have a higher success rate? Because they are hungry, and their lack of knowledge is the best weapon. They are not afraid to ask the dumb questions. They think fresh and solve problems. Ignorance is bliss.

Last week I met up with two different first time entrepreneurs, super smart founders and CEOs both of venture backed business. We went for a beer to catch up and share war stories. PeoplePerHour is a little further ahead in the journey so I had the benefit to reflect on some of my many screw ups and do most of the talking while they enjoyed their beer!

We discussed how we manage our time, our team, how we handle meetings . What we do and don’t get involved in. I was not amazed that each of them were making the same mistake (which I also made many times). One said to me “our VCs said to me recently that Apple’s leadership team spends 3 hours just ‘talking about random stuff’ on Monday mornings… so we should do the same. It fosters creativity and innovation lalala.”  My instant reaction was “are you out of your fucking mind?” Firstly, there is a slight difference between a ten person startup and a company like Apple. Maybe at their scale talking casually about ‘random stuff’ with no agenda works because a) someone else is doing the hard work of executing and b) they may be having a good problem to have which is – where the heck to we invest our cash mountain next? Do you really think that when Apple started in a garage Woz and Steve Jobs just sat in a room talking about random shit waiting for a business to get built?

The other Founder I met up with similarly was spending all this time doing X because his investors told him that it worked for another portfolio company. That’s absurd logic. You will find tonnes of things that work for what are seemingly similar businesses but don’t work for you. The devil is in the detail. All that matters is what YOUR business needs NOW. That may change tomorrow. You can’t retrofit substance to process. You figure out what builds and sells the shit and fit process around it. And in a fast growing startup you probably need to rethink that every other month if not sooner.

At PeoplePerHour we went through this cycle multiple times. A process of holding a management meeting with everyone round the table sharing what they’re each doing worked well. Until it stopped working! So we changed it. Why did it stop working? Because we HAD to go from a phase where we needed to innovate and hence conversation was necessary, to a phase where it was all about straight line execution. In that phase, you need as little conversation as possible. You just need to roll up your cuffs and execute. You’ve figured out how to climb the mountain, so now you need to shut up and start climbing!

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There are no certainties in a startup’s path, apart from one: you are bound to have a roller coaster ride, and a bundle of war stories to recount.  No matter how successful you end up being. It’s never a straight line to success or failure. Along the way, the true test of whether you have what it takes to make it is what you do in your lowest of low moments. When you are most vulnerable.  For make no mistake – they will come!

In my experience you can almost bucket people into two: those who stay down when they’re down or drift sideways, wither and die. And those who jump back up stronger.  My biggest successes, leanings and adventures always followed from such low moments. When I was weakest and most vulnerable. I’m one of those people who performs much better when things aren’t going my way. It’s like a slap in the face, it wakes me up, makes me more stubborn and determined to hit back even harder. Ben Horowitz put it perfectly in his last book ‘The Hard Thing About Hard Things’. He said ” there are two kinds of CEOs: peacetime CEOs and wartime CEOs”.  Peacetime CEOs are those who do well when things are doing well. They are typically the people who you hire to take a business from B to C and scale it up. They are smooth, political and great at blowing the trumpet. But the journey from A to B is definitely a wartime situation. You need to thrive in the gutter.

My first moment of vulnerability was when my first business – essentially a ‘brick n mortar’ version of PeoplePerHour.com – wasn’t scaling.  I was in my mid-twenties with no experience at all, no co-founder, partner or other senior member of the team, running what’s probably the hardest type of business to run – a service business.  I was essentially the head of sales, delivery, quality assurance, and the person everyone called when things went wrong. Which they did! Often! And in weird hours.
Exhausted and demoralized, with employees and clients jumping ship at an accelerating pace, I had to figure a way out.  Failure was not an option – I had friend’s and family money in the business and countless hours of sweat and anxiety. This being 2006 and in London where there is much more taboo around failure (decreasing no doubt but still much more than the US) I was petrified.  To make it all worse my then long-term girlfriend decided to split up with me because I was working too hard, so the one person I had close to me jumped ship too.

I felt like a brick had hit me on the head.  Fortunately my cost base was quite low  (and getting lower as more people were jumping ship) so going bust would take a while, but that’s like dying a  slow and painful death. It’s almost better if it’s a short sharp blow.  I kept racking my brain constantly  ‘how on earth will I scale this business up”. I decided to go away for a few days  (in the beautiful Cannes I recall) steam off and think it through (and in the mean time try and forget this ex girlfriend who ditched me at the worst possible time!). It was in that trip that the idea hit me. Why don’t I turn the business on its head, circumvent my own self by turning a service provider to a platform business that connects service providers (like myself) with customers and take a cut instead of delivering the service myself? That way it can scale. It was the eureka moment I was waiting for. PeoplePerHour.com was hence born.

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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.

2. 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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