Collaborative Startups Shift from Contractor to Employee Relationships

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On-demand startups, which are a subset of the Collaborative Economy, have been under scrutiny on worker treatment. They’re under the magnifying glass more than ever.

This new industry, which was birthed  the 2008 recession, provided rise to the “gig” worker, or independent contractors. These part-time workers were offering their idle time, working multiple jobs, and offering their spare bedrooms to make ends meet. Many of the workers see the benefits of “being their own boss” as they can choose the time, service, and how they work –rather than reporting to a salaried job.

In past months, there’s been increasing pressure to shift the relationship from contractors to employees. There have been lawsuits against Uber, where a single driver was able to win business expenses, but also we’re seeing American presidential candidates like Hillary Clinton suggest she’ll be influencing startups to provide fair wages and benefits to workers, while Jeb Bush takes Uber rides in San Francisco, promoting the service and free market capitalism.

Providing worker resources for freelancers isn’t new. For more than a decade, the Freelancers Union, featured here in The NYT, offers centralized healthcare, retirement programs, and other job-related services. Peers, a three-year-old sharing economy advocacy group, is also making signals that they plan to offer resources to these gig workers.

This blog is used to track the trends in this new economy and explain what it means to established businesses. As such, we will track how these contractor relationships are now starting to shift toward full-time and part-time employee relationships.


Startups are shifting from contractor to employees relationships:
Here’s a running list, mostly in chronological order.


This means: Short-term suffering for startups, but long term resilience for the Collaborative Economy.
Tech startups, under scrutiny from workers rights advocates and the political election, are shifting workers into employee relationships rather than independent contractor status. This does not mean the space will collapse, as nearly every other established industry from retail, to hospitality, to food, has successfully operated with workers that are employees.

It does mean that these companies will need to provide ample training, resources, and also hold employees accountable based on customer feedback and ratings –just as other established companies do. It also means that these startups will need to provide new forms of worker benefits, discounts, and perks under these new relationships.

We already see that these startups, and their workers, are lobbying for a third class of workers dubbed “Dependent Contractors” which could work several services at once while benefiting from 401k, retirement, healthcare benefits, and fair treatment of workers.

Want to learn more? You can check out my full body of work on the Collaborative Economy, which includes reports, graphs, databases, lists, frameworks, info graphics, essays, and points of view.

(Creative Commons, photo from Washington State Dept of Transportation)

Large Companies Ramp Up Adoption in the Collaborative Economy

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The tube

The Collaborative Economy market is growing at an accelerated rate. Not only is adoption increasing by individuals at a rapid pace, but the VCs have invested a massive $16 Billion to pad the war chests of these disruptive P2P commerce startups. Corporations aren’t standing on the sidelines waiting to be disrupted, the progressive companies are leading the charge by deploying these same strategies and technologies. The following three slides show market growth, adoption by brands, and indicate how companies are deploying, you can view all the data in a Google Sheet, live on the web and thanks to Amy Bishop for her research analysis managing the sheet.



Key Stats

Above: These five stats indicate the growth of the disruptive startups: Young companies, rapid growth, high volume, low assets, and high valuation show how business models based on networked based technology quickly achieve scalable growth. Often, traditional companies are based on the principals of the Industrial Revolution, owning many assets and achieving linear growth.



Large Corporations Ramp up Adoption in the Collaborative Economy

Above: Large corporations, which we define as companies with over 1000 employees, $1B in revenue, and are often Fortune 1000 companies are also adopting, many in the last two years. Towards the end of 2014 we saw a significant increase in adoption in part from Uber’s API which led several partnerships, and Lyft’s aggressive partnerships in early 2015. Coincidentally, Crowd Companies is just over a year-and-half-old, launched right before the large companies started to deploy in scale.



Corporations Deploy On-demand Models, Host Marketplaces, and Sponsor Startups

Above: You’re probably wondering what corporations are doing, in order of frequency, they’re deploying what we call as “Brand as a Service” which include on-demand models, such as Whole Foods partnering with Instacart, rental models like BMW’s DriveNow program. Corporations are also launching their own marketplaces, such as Cisco’s used networking marketplace, Patagonia’s used apparel store, and Ikea’s marketplace of used goods. Lastly, companies are sponsoring the startups with advertising, or co-marketing such as Lyft and MasterCard for “Priceless Rides”, or KLM partnering with Airbnb to offer a unique airline apartments for rent.


Conclusions
Companies are quickly jumping into the Collaborative Economy, but frequency doesn’t indicate success. While there’s been over 190 case examples, I only know of the business results of a few, and to my knowledge only one company (BMW) has indicated that a program was profitable, in public. One thing is for sure, this is the market for the brave early adopters who want to lead the charge, not wait for the movement to pass them by, and in many cases these corporations embrace innovation, and therefore the risk of not seeing direct results for a few quarters or years. Also, when we launched Crowd Companies there was approximately 70 case examples, and since then, there’s been about 120 more deployed in a year and a half, many by our own members, the pickup is certainly increasing. The adoption will only continue to increase in frequency, to the point where we can no longer accurately track deployments as every corporation will have dozens of iniatives.

Disclosure: MasterCard, Cisco, Whole Foods, BMW are paying members of Crowd Companies, an innovation council I founded. Want to learn more? view the entire live database on this Google Sheet, see the multiple tabs. Photo by Misty

Is the Crowd a Disruption or an Opportunity for Large Companies?

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Many are excited about the new collaborative economy, where people use common technologies to get what they need from each other. This has created disruptions for some industries, but overall, holds much business opportunity for progressive companies.

Progressive companies can glean greater loyalty through crowdfunding, turn to the crowd for new co-innovation and launch their own sharing programmes to expand how they serve their customers new desires. Companies who ignore this trend are likely to suffer from disruption, but those that lean in can benefit from using the crowd to their advantage.

In the next section, I’ll share examples of what the crowd is doing, and how large companies are responding to integrate the crowd into their strategy.

Crowdfunding is at an all-time high, there’s been $16 Billion of investments made by the crowd, reports The Economist. Despite the growth, there’s been concerns that in the case of the crowdfunded Occulus Rift being acquired by Facebook, that the investors are making donations for perks, and not actually gaining equity.

To solve some of these woes, large companies are applying crowdfunding into their strategy, DIY brand U-Haul has launched a crowdfunding platform called U-Haul Investors Club, enabling the crowd to fund new trucks, and in return these investors would receive dividends from the performance of the specific vehicle.

The crowd is creating their own goods in the maker movement, which appears to be a disruption for large companies who create physical goods. However, savvy companies like Hasbro are enabling makers who use 3D printing services to alter and 3D print Hasbro approved toys, fostering deeper engagement, and even generating new revenues as each 3D Print of a toy provides Hasbro with new revenues, see the Hasbro and Shapeways partnership called SuperFanArt.

Ride sharing and rides as a service continue to dominate the media landscape as Uber, Lyft, Sidecar, and BlaBlaCar continue to grow in adoption, funding, and market attention. Executives at some of these start-ups are aiming to reach a point where car ownership ceases to exist. Innovation groups at BMW have launched a new program called BMW Drive Now, which offers a membership programme for customers to borrow Electric 1-Series vehicles at lots in Urban cities. This innovative program enables BMW to offer a single car to more customers, increasing utilization, reducing inefficiency and generating recurring revenues.

In each of the above examples, the crowd shows growth, and large companies are tapping this trend to harness this strategy for their own benefit. What can we learn from U-Haul, Hasbro and BMW? They enabled the crowd to help them with funding, which in turn increased loyalty, let the crowd co-create products like Hasbro, and let customers rent your products instead of own them, like BMW. In each of these cases, companies are altering their business model, to tap the crowd movement.

This post was originally posted on the Virgin blog, read it here.

 

The Collaborative Sharing Economy has Created 17 Billion-Dollar Companies (and 10 unicorns)

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I partnered with VentureBeat’s market intelligence arm (VB Profiles) to further develop data on the funding, valuation, and employment impacts to the growing Collaborative Economy, this post originally was posted on VentureBeat’s website written by John Koetsier of VB Insight, I’ve republished their content, to share the key findings and you can find a summary of the research here.

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Sharing is big business. Big big business.

There are now 17 billion-dollar companies with 60,000 employees and $15 billion in funding in the sharing or collaborative economy, according to Jeremiah Owyang and VB Profiles, a market intelligence firm partly owned by VB. That includes the venerable eBay, founded in the dim mists of technological antiquity, and relative newcomers Etsy, Chegg, WeWork, Airbnb, and — of course — Uber.

Uber uber alles, right?

billion-dollar sharing economy companies

While most of the startups are relatively recent — many became billion-dollar companies in less than four years — they have their roots in tough times, Owyang says.

“Many of these startups birthed from the trough of the 2008 recession,” he told me via email. “The startups received unreported friends and family money, then got market traction with adoption, then were able to seek out traditional investors, resulting in the investment boom a few years later.”

Owyang classifies collaborative economy companies in a honeycomb rubric with 12 core verticals or categories, including transportation (where Uber and Lyft belong), space (where Airbnb sits), and goods (where he’s placed Etsy and eBay). Interestingly, the largest number of billion-dollar companies are in those three spaces, plus a fourth: money, which features LendingClub, FundingCircle, Prosper, and TransferWise.

sharing economy honeycomb

Other spaces, such as utilities, municipal, health, food, and corporate, have yet to see any kind of billion-dollar players.

Interestingly, eight of the 17 are based in California, while 12 of the 17 are U.S.-based. That preponderance may not last, Owyang says.


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“While these startups are often based in the SF area, they often serve global national markets,” he says. “Ola is an India-based ride sharing company that is well-funded, and existing Chinese tech companies are building their own versions which means that publicly funded data is unlikely to be surfaced. France’s BlaBlaCar recently received $100 million of funding which they used to purchase a competitor, earning them the title of largest ride sharing company in Europe.”

Perhaps the most unusual thing about the space?

The collaborative or sharing economy has received $15 billion in funding — more than the entire social networking space that has spawned giants like Facebook, Twitter, Snapchat, and more. If that’s any indicator, the collaborative economy is still in its infancy, and many more billion-dollar companies (and unicorns) are coming soon.

All 17 collaborative economy billion-dollar companies

One thing that these often counter-cultural startups won’t do is totally upend our capitalistic one-percenter economy.

“It’s worth noting that the early hope that this sharing market would foster altruism and a reduction of income inequality can now be refuted,” Owyang says. “The one percent clearly own the sharing startups, which means this is continued capitalism — not idealistic socialism.”

The 10 “unicorns” among the 17 billion-dollar sharing economy companies? Owyang defines those as the companies that are still private.

They include:

  • Prosper: $1.7B
  • Ola: $1B
  • Uber: $40B
  • Instacart: $2B
  • Lyft: $2.5B
  • WeWork: $5B
  • TransferWise: $1B
  • Airbnb: $10B
  • FundingCircle: $1B
  • Kuaidi Dache: $8.8B

The full Collaborative Economy ebook is available at VBprofiles.

Can Tech Startups Appease Wall Street While Achieving Their Social Mission?

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Etsy, at least, may have figured it out. (This post originally appeared on Fast Company)

Over the last decade, there’s been an outpouring of concern about how Facebook, Google, and other Internet companies treat their user data. This concern continues as the next generation of startups, like Uber, Lyft, Homejoy, and Postmates, are being taken to court by people like worker rights lawyer Liss-Riordan, who formerly filed class-action lawsuits on behalf of truck drivers, waiters, delivery men, cable installers, and call center workers.

Industry leaders have written about how these collaborative economy startups must start sharing value with their own community in order to quell concerns over worker rights, citing examples of how startups like Quirky and models from cooperatives are paving the way by sharing the financial rewards with their own community. Along with the entrepreneurs that run tech startups, we can all learn from these models.

Etsy, a 10-year-old marketplace, features makers from around the globe, and is a registered B Corporation. Recently, the company filled for an IPO. That’s right: Etsy, the social good marketplace empowering mom and pop artisans to sell their wares is now a ticker symbol listed next to companies like Walmart, Exxon, Coke, and Ford.

Etsy’s B Corporation status signifies the organization is aimed at doing social good—not just creating profits for investors at all costs. B Corporations are expected to focus on the fair treatment of workers and partners, and be responsible stewards of the environment, all while providing economic returns to the company investors.

According to the B Corporation website, Etsy has a rating of 105 out of 200 points. The average B Corporation ranks 80 points, which would likely be higher than the average Wall Street traded company that may be primarily focused on investor returns. While there are questions about the profitability of Etsy, the market appears to be responding positively to the IPO, and it is now valued at a market cap of $2.4 billion dollars.

So how will Etsy able to balance out the needs of investors while serving its social good mission?

One way is by offering creatives and partners the opportunity to purchase equity in the company before the IPO. Etsy reserved 5% of its shares for these providers. This was a smart move for the company, as it fosters one of the highest form of loyalty with its community: shared destiny. As Etsy performs well in the market, creators who purchased the shares benefit as well. Those creatives have already seen a 39% increase in the value of those shares since the IPO.

Etsy isn’t the only company to share the rewards with their community. Other large companies are also following a similar path:

  • U-Haul launched the U-Haul Investors Club to enable the market to invest in its trucks, which offer a share of the dividends of vehicle performance
  • Hasbro partnered with 3D printing maker community Shapeways to offer up the IP of toys and let makers glean revenue from every created product
  • Barclay’s Card created the Barclays Ring, which enables communities of committed customers to design and use the credit card as well as distribute profits to the their favorite non-profits.
  • GE partners with Quirky, where inventors who submit new product ideas share in the financial rewards.

As we go forward, companies that care about longevity of their relationship with their customers will share the rewards with community, fostering long term loyalty, deeper engagement, and advocacy from customers and partners. As companies like Uber and Airbnb prepare for their material events, they might consider sharing the rewards with their own community. In the end, companies that share the ongoing wealth with their community are more likely to survive, since the interests of all parties are aligned for the long-term.

Disclosure: Barclay’s Card is a customer of Crowd Companies, founded by Jeremiah Owyang. 

[Illustrations: Petr Vaclavek via Shutterstock]

How the Collaborative Economy is impacting the Energy Sector

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If you’re reading this, you already know how important energy is to us. It powers our transportation, logistics, industry, agriculture, homes, and the very digital device you’re using now.

What’s the Collaborative Economy? An economic model where technologies enable people to get what they need from each other –rather than from centralized institutions. This has impacted cars, hotels, banks, retailers, manufactures, and more.

How is the Energy Sector being impacted by the Collaborative Economy? You might be amazed to learn that P2P lending, Makers, and sharing are causing some changes. This week, I keynoted the North West Energy Conference, Efficiency Exchange, present were 500 energy professionals from utility companies, manufactures, and consultants were in attendance. I shared with them a few examples of how we’re seeing bottom-up, democratized startups enabling people to collaborate among themselves for energy creation, storage, and sharing.

Here are some of the examples I cited:


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Crowdfunded Solar Enables the Maker Movement of Energy
What’s a maker in the energy sector? Anyone who’s creating their own energy, and, perhaps, sharing it with others. Solar Mosaicenables thousands of people to have access to affordable solar loans, gives investors opportunities to fund renewable power, and allows clean energy supporters the power to spread the wealth of energy from the sun throughout their communities. Respected industry leader, Lisa Gansky​,​ is on the board.


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Yeloha Connects a Marketplace of Solar Energy “Makers”
Yeloha is a new company that launched last week. They’re a network that allows for the sharing of solar energy between “sun hosts” and “sun partners.” For the 80% of Americans who would like to install solar panels on their roofs can’t afford to, Yeloha provides them with access to purchase solar energy generated by their neighbors.


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Tesla to Provide Home Energy Storage, Enabling Local Resiliency
Tesla is now offering a home battery storage system for residences. The target market for these batteries are homeowners interested in backup storage from their solar panels in case of an outage, or for those living off the grid. This makes local neighborhoods more resilient and, combined with solar, potentially more independent.


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Dutch startup enable P2P sharing of power credits
Vandebron arranges for consumers to buy electricity from independent producers. Based in the Netherlands, Vandebron, currently has 12 producers providing enough energy for 20,000 households. Customers receive their sustainable energy through the national grid, but from sources (typically farmers) and methodologies (wind, solar) selected by each individual customer. The company’s revenue stream is from subscriptions, which keeps them at arm’s length from promoting consumption.


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Cities and contractors are sharing large equipment, increasing efficiency
MuniRent enables public agencies to easily share heavy duty equipment internally and with other agencies. Yard Club benefits both contractors who own equipment and those looking to rent. The owners get to make some money on their equipment, while the renters save money compared to what they would pay traditional equipment rental companies. This, of course, begs the question: How else might cities and the companies who work with them become more energy and resource efficient?


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Other Collaborative Economy startups enable efficiency in transportation and goods
Ride sharing apps like Sidecar, Lyft Line, Europe’s BlaBlaCar and Uber Pool aim to maximize the number of passengers in a car, increasing efficiency of time, energy used, and traffic. Auto and Boat sharing apps like Getaround, RelayRides, Zipcar, BMW DriveNow, and Boatbound increase utilization of vehicles by allowing them to be shared. It goes without mention that Yerdle, Craigslist, Tool Sharing spots enable local communities to increase utilization of un-used goods, reducing global shipping and manufacturing.



We’re in the Early Days of the Collaborative Economy, As it Begins to Permeate Society.
These examples are on the horizon. There are just a few. Some of them have just birthed or have not yet been widely available, but there’s enough evidence to see how sharing and crowdfunding people are enabling to “make” and share energy independently, which could literally create shifts in the balance of economic power. In December 2014, we launched the Collaborative Economy Honeycomb 2.0, featuring a Utilities hexagon which is broken down by Telecom and Energy. Some of the previously mentioned startups were not yet operating. We’ll include them in the next iteration of the graphic. This market is changing rapidly.


Collaborative Economy Honeycomb 2.0 (Dec 2014)
Above: This Collaborative Economy Honeycomb maps out how
P2P Commerce is impacting all areas of society,
including Energy (Purple hex, bottom left)

Leaders in the Energy Sector Will Shift Ecosystem Roles, Providing More Value
In my presentation, I provided the business leaders of the Energy Sectors examples of how other large companies in other industries are adapting (see timeline, or detailed database), by creating and enabling P2P marketplaces around their companies or by providing a platform for others to co-create with them. In the case of the energy sector, large utilities could first enable solar on homes, take a revenue cut of the excess energy created, and provide marketplaces that enable the distribution of that excess energy within in a region. The role could shift to facilitator or enabler as the crowd continues to buy in.

To learn more about my vision about how large companies can participate, here’s my full body of work.

Update: Here’s a video interview of me, at the conference, discussing the energy opportunities in the Collaborative Economy.