The freelance market is just the tip of the iceberg …

The established freelance market represents a peek into the scale of the future blended workforce.

How big is the market?

As outlined in the last update, the market is currently extremely convoluted, with many definitions and types of workers floating around in the same tranches. That makes it very hard to clearly demarcate a clear market value for the current and future markets. However, the market is so big that we can and have pieced together different parts to garner an exciting picture with a reasonable margin for error.

For the purpose of this update, I am only going to look at the UK and US to keep things simple. 

The self-employed market as a whole (unsegmented) is worth roughly £1 trillion in the US and over £300 billion in the UK. There are roughly 60 million self-employed people in the US and roughly 4.5 million in the UK. That’s roughly 30% of the US working population and 15% of the UK.

An estimated ~30% of people in the UK and US have a side-hustle generating a combined value of over £2 trillion to the two economies. 

On top of these side-hustlers, we have an additional 3.2 million limited companies in the UK with no employees (a one-person show) and 25 million in the US. 

Trying to unpack the complexity and overlaps of these different groups at an aggregate level is currently very difficult as the UK and US governments don’t gather enough appropriate information to really uncover the exact nature of these workers… yet. 

Because of this, understanding this massive movement is about piecing together the information gathered at the grassroots with the economic picture gathered from the top down. Something that requires boots on the ground and anecdotal and quantitative user interaction analysis. 

Perhaps the most interesting indicator of the future of this market to end this segment on is quite simply that 26% of Baby Boomers, 30% of Gen X, 44% of Millennials, and 50% of Gen Z freelance. These numbers track across side-hustlers too.

So, who else is addressing this market?

  1. Financials Service providers

Examples: Quick Books, Xero, Finmo, Coconut etc. 

The good: 

  • They have high retention rates due to the cost of converting to a new system
  • They are adopting exciting new infrastructure around open banking which streamlines accounting and payments

The bad: 

  • They are mutually exclusive tools in direct competition 
  • They have very high acquisition costs for established freelancers
  • They struggle to acquire early-stage freelancers as early-stage freelancers tend to focus on finding work and building a business before they look to financial solutions. This leads them to take the recommendation in front of them from the companies that deal with the earlier stages of professional development
  1. Marketplaces and recruitment 

Examples: Fiverr, Upwork, YunoJuno, Toptal 

The good: 

  • They create very simple interactions between freelancers and clients with clear terms
  • They give companies and freelancers access to quick wins

The bad: 

  • The open marketplaces create a race to the bottom and push freelancers into competing on price rather than quality
  • The high end platforms become expensive financial service systems for their users after a few interactions
  • The open marketplaces suffer form diminishing returns from their most successful users who leave the platform (masked by massive sector growth)
  • 80% of the value of the freelance market occurs off platforms which these companies have no ability to capture
  • For freelancers, they are inefficient formats for network development
  • Ultimately they will cease to exist for all but very short term project work in the long term
  1. Freelance project management tools

Examples: Bonsai, Workspace by Fiverr, Contra, Honeybook

The good:

  • They replace complex SaaS products aimed at SMEs with departmental functions
  • They focus on the freelancers’ needs as a business rather than a commodity
  • They operate in the 80% of the value generated off platforms

The bad: 

  • They don’t exist in the UK yet
  • They are only focused on managing existing workloads and do not help generate business
  • They focus too heavily on time as a measure of payment rather than value-based payments which is where the market is moving
  • They fail to engage and maintain early-stage freelancers because of a lack of business building tools
  1. Client-side project management tools

Examples: Open Assembly, Worksome, Cool Company, Talent Desk

The good: 

  • They focus on the management of talent pools on a rolling basis rather than single project-based transactions which generate more long term value

The bad: 

  • They suffer from a lack of engagement from the standard freelancer. The companies manage their own pools, but the freelancers use different systems for different companies. The really exciting long term opportunity is to connect client management systems to freelance business building systems

Where are the gaps?

On the side of the individual freelancer:

  1. A lack of education on how to commercialise skills and sell services beyond their immediate network
  2. A lack of access to business-building software as the market operants are focused on SMEs with departments rather than simplified horizontal systems
  3. A lack of access to a network to build a successful and sustainable business through. The most valuable activity a freelancer can do is network and a network is the only uniquely identifying characteristic of a successful freelancer
  4. Loneliness and isolation, or a lack of access to a community of peers

On the side of the client:

  1. A lack of access to systems to build, manage, and communicate with project-based talent

In the next update, I am going to dive more deeply into these problems and start to explore the solution that UnderPinned is offering. 

Why are we sending you these emails?

UnderPinned is at the very core of this movement, with deep knowledge and a network of people that have operated at the grassroots of this movement as well as a team that’s built for this specific problem. We’re in the midst of the biggest change in working styles since the Victorian mechanistic revolution. 

We will be opening our doors to formal investment conversations on the 9th May.

If you’d like to read about UnderPinned and these trends in the news, click here to head to our Media Room.

If you’d like to talk with me, please contact me here: albert@underpinned.com

This investment opportunity will open its doors to first formal conversations on the week commencing the 9th of May. If you’re interested in being part of these conversations, please email me directly for a private discussion.