This is part of our Collaborative Economy coverage. Read the definitive report for corporations or peruse all my posts, which go back a few pages. First, let’s define what we’re talking about. Like Craigslist or eBay, we’re seeing new marketplaces emerge with a more concentrated focus on every business. They offer features that enable sellers to offer their ware, and buyers to offer bids, exchange of information, goods, and currency in both directions. Every stock exchange is set up in this manner, allowing for efficient trade, despite location and time differences.
[Definition of a two sided online marketplace: An online exchange that allows sellers to offer their goods and services, and for buyers to obtain information, often barter, and purchase offerings using internet technologies]
These marketplaces are disrupting traditional business.
Here’s what we’re seeing at the trend level and what it means to corporations:
- The Crowd Can Get What They Want From Each Other, Bypassing Corporations. These two-sided marketplaces are actively disrupting corporations. We have seen hotel chains fund lobbyists to influence policy to fight AirBnb. We have seen cities that have lost taxi revenues pass ordinances that make tools like Lyft and Uber illegal. In perspective, most corporations aren’t fully aware of this growing groundswell arising against them.
- It’s not New. It’s Native to The Internet. Which Means it’s Unstoppable.
Craigslist was one of the first, and is often attributed as a cause of the demise of the newspaper classified business revenue. It sure has forced third-party sales teams to understand how to benefit, or be disrupted, by ecommerce. In fact, these are just examples of the broader impact of the internet, which is disintermediating traditional business flow and forcing middle men to react as monies are routed around them.
- Marketplaces Are Emerging in Your Market, Amplifying the Disruption
We’re seeing these marketplaces in every niche, vertical, and segment in the market, and now they have a few things that are different:
[Disruption to Corporations: These marketplaces enable the crowd to get what they need from each other –bypassing corporations]
Nine Examples of Two-Sided Marketplaces Disrupting Traditional Corporations
To bring this to life, I want to list examples of those these marketplaces (beyond simple Craigslist) are emerging in nine distinct verticals:
||The industry to be impacted the most has been the mobility and transportation space. From Uber, Lyft, RelayRide, Sidecar, and many others, these tools enable on demand access to cars or a ride as a service.
||Traditional taxi corporations and companies have cried foul, taxable revenue to airports and cities, and rental car companies who haven’t acquired or adopted these services
||New startups have emerged that enable the crowd to host people in local experienecs at their guest house or individual couches or rooms, these players include original player Couchsurfing, AirBnb, and OneFineStay for luxury rentals. Even hotel room sharing has emerged, I just learned of EasyNext.
||The hotel industry has been disrupted. As a result, they’ve funded lobbyists to help protect their business model, public and consumer safety to educate and combat this growing trend.
||A new class of startups is emerging that enable to people to turn their own kitchens into ‘restaurants’ for friends and strangers at a cost. EatFeastly enables the crowd to host dinner parties for inspiring or off work chefs, and make a profit.
||While nascent, this will start to impact restaurants if people are able to self organize food events around each other at homes, parks, or offices, bypassing traditional restaurants.
|Staffing and Talent:
||One of the early models we saw emerge was online marketplaces of staffing tapping into remote workers from opportunity markets to developed markets. This includes eLance, Odesk, and even TaskRabbit and RedBeacon at a local level. For higher level skills PopExperts enables specific experts to find buyers.
||Traditional business process outsourcing, consulting firms and staffing firms like Kelly Services, Manpower, and Robert Half agencies. At the local level, the Yellow pages or local listing sites like Craigslist are impacted
||Companies with excess office space, but are locked into long leases can now offer their desks, rooms, or offices on demand, generating new contacts and revenues. Players include Sharedesk, LiquidSpace, Pivotdesk, and more.
||Traditional property management firms are impacted, real estate agents, hotel services for meeting rooms, and even the local coffee shop are disrupted as the crowd gets what they need from each other.
||Graphic and web designers can now tap into a marketplace of buyers using websites like CrowdSpring and 99Designs that enable a marketplace to connect to each other.
||I was covering this contraversial market a few years ago, and even participated on a panel at SXSW where long term formal designs cried foul, and even involved industry groups to comment, my coverage is here.
|Consumer Packaged Goods:
||Rather than buy products from a store, a neighborhood can now share goods and products with each other, rather than buy. Websites like Yerdle (who are founded by an ex-Walmart executive) and NextDoor which empowers neighborhood online discussions enable people to share and gift, rather than buy
||Retailers are impacted as people learn to share among themselves –rather than buy. Season goods, sporting goods, transportation goods, kichen appliances, landscaping equipment and even cars are items likely to be shared rather than purchased.
||Rather than go to a traditional bank to obtain money, the crowd can tap into each other to get money, websites like LendingClub, Propser, and even micro loans like Kiva enable the crowd to loan each other money, eToro is an online community of traders that enables peer to peer advice to emerge after analyzing top traders in the crowd. On the startups side, Kickstarter disrupts traditional early funding models.
||Traditional banks, and finanicial advisors are impacted as the crowd seeks to get what they need from each other. This has radical implications across every vertical that requires funding or loans including real estate, cars, colleges, and more.
||The newest startup on my radar is AirPR, which is like Angie’s List for PR professionals. This site enables the clients of PR consultants to identify who the top 1% of PR professionals are for starutps and midsized companies.
||I’ve hosted an in-depth conversation on AirPR as this new market disrupts traditional business models in the PR space, enables some PR professionals and those that don’t make the listing are impacted.
|Many more Industries:
||Here’s a list of over 200 startups in the collaborative economy, across dozens of industries. With the rise in VC funding on this space, expect more to emerge
||Nearly every industry, niche, and vertical is being disrupted.
The Six Strategies Corporations Can Take to Address the Collaborative Economy
Right now, I’m seeing companies react in a few different ways, each with different levels of investment and outcome. Here are the scenarios, are far as I can see:
- Ignore it, and hope it goes away. An easy solution is to avoid it or don’t look at it. The concept is that not paying attention to this market will, hopefully, result in it going away. The risks are that, if it doesn’t go away, then your company will be behind those that have already adopted this.
- Fight it with policy, lobbying, or marketing. A common reaction is business model protection, and using lawyers, lobbyists or aggressive marketing and sales to counter this movement. While the costs of this effort are high, it’s hard to stop a movement that’s pinned off the internet. It’s an unstoppable force.
- Sponsor the startups. Some companies have sponsored these startups. For example we’ve seen Barclays Card sponsor London bike sharing, Citibank, and NBC in New York sponsor Yerdle. Brands can harness this movement for marketing and recognition, not to mention profit.
- Acquire the startups. To date, we’ve seen smart companies like Avis (Zipcar) and Enterprise making acquisitions, showing the value of getting into this market at an early stage. The downside is that companies, like AirBnb, have been able to raise over $120 million in venture capitalist funding, increasing their value, making them an expensive purchase.
- Integrate your business model. Corporations can work with startups by enabling their own products to be shared and passed along in these new marketplaces. Patagonia has partnered with eBay to encourage consumers to buy used goods, and Scottevest apparel has done the same, promoting the growing eBay community from their own corporate webpage.
- Build your own marketplace. In the most advanced model, I expect a new class of corporations to host their own communities that enable customers to trade, rent and resell their goods and services in a brand hosted community, enabling new value for the brand, and offering new ways to extract value from the brand.
So there you have it friends. We’ve gone through a definition, reasons why this is important, examples of marketplaces disrupting corporations, and a six-stage maturity model demonstrating what corporations can and will do.
Image by Dez Creates, used with creative commons
Update: The sample for the 200 startups was collected in February 2013, and does not, therefore, include a few startups that have since been launched. I’ve added a fourth graph at end of the article showing some additional Angel investors who have supports startups not in the original sampling.
As part of my ongoing research as an Industry Analyst on the Collaborative Economy (read all the posts), I have talked about market drivers, the market challenges, corporations who have jumped in, provided a list of startups, and published a definitive report called The Collaborative Economy. I will now help you to better understand the funding aspect of this growing movement. We obtained a list of 200 startups (appropriately using a Taskrabbit, I might add) in order to get our initial sample. I recently published an infographic helping to reveal the patterns in this sample. Now I want to expose some additional data about the force that funds this space.
Key Findings from the Collaborative Economy Funding:
- Heavy Funding Has Spurred this Market Forward. Across the 200 startups, I have found that 37% had been funded, with startups receiving an average of $29 million in funding. The 200 had received over $2 billion in total funding, which is a very high amount for a largely undeveloped, pioneer market. Interviews with several of the Venture Capitalists in this space indicated that they favor two-sided marketplaces which scale and have low inventory costs. They are basically transaction machines akin to eBay or Netflix.
- A Few Startups Received Exceptionally Large Funding Amounts. Not all startups are equal. Some have received far more funding than others. These giants include players like AirBnb which received about $120 million; Lyft, which recently raised around $60 million; and Uber, securing over $57 million. Most startups have not yet obtained such large funding amounts, although, as this market heats up, it will find additional funding opportunities.
- SV Angel and Benchmark Funded Most Frequently. San Francisco and Silicon Valley-based firms funded these firms most frequently, which coincides with the high concentration of Collaborative Economy startups in the SOMA district of the city. In particular, SV Angel and Benchmark were the highest frequency funders, followed by Incubator/Accelerator 500 startups Andressen and Floodgate, which are located in the Silicon Valley and San Francisco area.
- Market Has Received Early Stage Funding. Of the total funding of the nearly 80 startups, most are in an early stage, with the most dominant being Seed round, followed by ‘A’ round. The other category includes non-disclosed personal loans, bootstrapped self loans, and the ambiguously termed ‘Venture Round,’ which could be construed to mean a variety of things. This early market funding, which started to emerge about 3 years ago, matches the funding levels being shown.
- Individual Investors Include Hollywood Stars and Internet Veterans. Early stage funding often includes celebrity investors who want to get in on the action, angel investors, and a “friends and family” round of other successful entrepreneurs. Ashton Kutcher has invested in 5 startups in this market, and seasoned internet exec, Keith Rabois, is reported to have individual investments in many startups in this market. We should assume there are other personal loans and investments made that were not apparent in our public searches.
Graphics: Key Investors in the Collaborative Economy:
After segmenting the data, we comprised these graphs, based off frequency patterns per startup.
Above: Individual investors are based off an updated sample size in Feb 2013, while data is accurate, it did not include new startups that were added to this market.
Above, On July 14th, I’ve added the following graph, which includes new investors not in the original sample size, collected in Feb. In all cases these graphs are correct, but they represent different sample sizes. New investors include Mike Walsh and Shervin Pishevar, who take the lead, in terms of frequency.
Methodology and Data Notations
See the full data sample was from 200 startups in the Collaborative Economy. Read the infographic to obtain a summary. Special thanks to the Collaborative Consumption crew, as many of the names were obtained from their site. Of the 37% who’d been funded, we mined public records ranging from Crunchbase, startup website, investor website, Wikipedia, news sources, and press releases to obtain data. We don’t believe this list is complete, but it is a representative sample of funding from easily obtained public sources.
We included the term “venture round” is an ambiguous term which can be used in a variety of ways, in the ‘other’ category, as it’s used both in early stage and later stage funding rounds. Obtaining the exact amount of how much each firm or individual invested is next to impossible, so obtaining frequency, and estimating per round helps to determine a relatively reliable figure. Compounding this complexity, multiple investors are often involved in each round, making specific dollar amounts even more difficult to determine. This information should not be used for official financial advice or guidance, but only for entertainment purposes only.
If you liked this post, see all my coverage and data on the VC market. Photos used under Creative Commons, by Philip Taylor.
Above Image: The orange Wikispeed SGT01 Roadster: crowd-funded, crowd-designed, crowd-produced, hitting the streets in small batches now for $25k, oh, and it gets 100 miles per gallon.
What if I told you the next affordable, long range, fuel efficient vehicle might be assembled in your garage or built by your neighbors? That’s what I was surprised to hear, when I learned about the Wikispeed auto project.
Wikispeed is a business that crowd sourced designs, production, development, and has created a SAE registered, road legal approved car the Wikispeed SGT01 Car, now on sale in limited quantities. This case example is part of my ongoing coverage of the collaborative economy, on how the crowd becomes a company.
I had the opportunity to meet Joe Justice (pic) of Wikispeed at the Aspen Institute, a center dedicated to the advancement of thinking, our roundtable has been focused on how institutions must innovate in the rapidly changing environment. I’ve shared elements of the Collaborative Economy research, which has been one of the under current themes at the event.
Above: Wikispeed cars boast modularity, where individual components are assembled by crowd and shipped to a buyer’s garage to assemble. A car can quickly become a truck, by removing and replacing body.
What’s Wikispeed, it’s a project that taps into the crowd to design, create, manufacture, produce, and bring to market products. Their most notable project is producing a 100 mpg vehicle made of modular, interchangeable parts. Some findings of note about the Wikispeed project:
- Like Wikipedia, a global set of experts are People are participating, in various levels of commitment.
- They competed in XPrize challenge, against Tesla, Tata, and others
- They’ve crash tested front and side impact tests, and created a suite of impact test simulations to test rapidly.
- Design was crowdsourced, using Dropbox and Google apps like Groups, Hangout, Talk, Cal, Drive, and more.
- Specifications are modular allowing interchangeable and fast assembly
- Production Methodology is “Extreme Manufacturing”, bringing a new iteration of product every week. Like the agile software method deployed by many tech companies, a similar mindset of rapid iteration rather than long term planning has emerged at WikiSpeed.
- Assembly of vehicles can happen anywhere, including in Joe’s Garage in Seattle
- Car Specs: 100MPG, maximum speed is 149 MPH. For safety, they’ve built for NHTSA and IIHS specifications and await official rankings
- Features: Airconditioning, Radio (but no cup holder), using a Honda engine, but they’ve built the housing so other engines could be used, as a modular component.
- The car body can be quickly interchanged with a pickup truck body, allowing instant versatility.
- Multiple forms of currency are accepted, including crowd created Bitcoins
Corporations at Risk as Crowd Becomes Empowered
From my perspective, the disruptions are coming at an accelerated pace, sharing, markers movement, augmented reality are quickly emerging. Companies who don’t adopt the Collaborative Economy are at risk to being disrupted as their own customers start to develop their own products, build new services. A natural reaction of most corporations is to battle these trends with legal, policy, and competitive measures such as deploying fear uncertainty and doubt, or combative marketing and sales measures.
Corporations and Crowd Have Complementary Resources
As the crowd starts to become like a company, it offers risks and opportunities for all corporations, although I prefer to focus in on opportunities. In a broad stroke, corporations lack flexibility, the ability to customize for individual needs, and struggle at constant innovation. In general terms, the crowd lacks a trusted brand, mass production, an army of customers, resources, and mass distribution. Together, they can create a new resilient organization that negates these weaknesses and that taps best of corporations and the crowd.
Together, Startups and Corporations must adopt Collaborative Economy Value Chain
Companies who want to avoid disruption and benefit from opportunity must follow the Collaborative Economy Value Chain (read the full report), which taps into new models of Company-as-a Service on demand offerings, motivating a marketplace for resell of goods and services, and provide a platform to allow customers to augment and enhance every business function in your company.
This was initially posted on Huffington Post, I cross-posted here.
Above Image: Bamboo is resilient by being both rigid in maintaining its structure, while also being flexible enough to bend during a variety of weather patterns.
Most of the coverage of the collaborative economy has focused on what it means for consumers (Airbnb, Lyft, Uber) but what does it mean to corporations? This post will answer that question. Companies that tap into the crowd for instant workers (oDesk or Taskrabbit for business), or to unlock their idle inventory to it into cash (Liquidspace, Shardesk), or to tap into the crowd for new services (Crowdspring, Uservoice), can benefit significantly from reduced costs, unlocking new business potential.
[Corporations that tap into the crowd benefit from new product offerings, unlocked idle inventory, and reduced risks]
Over the past few months, I’ve been focused on the Collaborative Economy, the next phase of social business that involves the sharing of goods and services. In prior posts, I’ve discussed how it has impacted the luxury vertical, and even goods and products. Now let’s explore how it impacts a corporation’s workforce, talent, and resources. To describe the movement, which we call the Collaborative Economy, I define it as: “An economic model that is characterized by shared ownership and access between corporations and the crowd.”
Here are five examples of how companies can tap the crowd in many business functions:
- A company can tap into an on-demand workforce using Taskrabbit for business, or oDesk for coding, office admin, writing, and pretty much any other service.
- A company can instant-lease their unused desks to travelers or other companies who need meeting and workspaces furnishings, using Sharedesk, Liquidspace, Pivotdesk and others.
- An executive who needs a quick, clean, place to work in New York can quickly access meeting rooms on demand at Breather room or access an Uber to get to a key meeting.
- Marketers who want to infuse consumer-created content that’s trusted and cheap can use Mass Relevance, LiveFyre, or About Echo to integrate social content into their digital marketing on demand .
- Research & Development teams can tap into the crowd to generate new ideas for products using Uservoice, Salesforce Ideas, or listening to their communities in Communispace, Passenger or Vision Critical.
Four Impacts to Corporations as they join the Collaborative Economy
I see at least four major benefits that traditional organizations will gain by joining the Collaborative Economy.
- Quickly expand or contract workforces. Popup companies mean corporations can assemble a team on-the-fly, at low cost and lower risk. For most companies, staffing is the highest cost of operating. Companies who properly tap into this on-demand workforce can always stay ‘right sized” by adding staff on demand as needed. Expect new forms of contract groups to emerge that work well in tightly-collaborative teams, akin to virtual agencies. Expect the future of work to continue to move towards “individual enablement.” Future workers can serve many masters as they offer specific niche skills. Expect that knowledge management, core institutional knowledge, and a permanent team that drives company strategy to still be key in-house resources.
- Activate unused resources to generate incremental revenue. Companies can generate new revenue by activating unused inventory and assets such as unused real estate. They could also outsource idle workers into workplace marketers, serving other partners and corporations. Instead of laying-off skilled people, why not loan or lease them to other companies until you need them again? Often, physical locations are the second-highest cost to corporations. These can be utilized as crowd resources by turning them into rent on-demand to other partners and corporations. It works in reverse as well with companies renting from others, reducing overhead and the liabilities associated with managing multiple properties. Expect the Regus model to eventually be extended to management consulting firms, companies with seasonal businesses or companies that have many locations, like retail.
- Reach new markets through new business models. Corporations that have idle resources, inventory or products, can activate these resources and rent to new markets on demand. For example, Bloomingdales, Nordstrom, and other high end retailers can benefit from replicating the business model of Bag Borrow and Steal, which makes high-end purses available to a whole new class of on-demand consumers. Don’t sell a product once, sell it a hundred times. I’ve listed many new models emerging just for the luxury market. Corporations that have idle, consumable inventory, such as food, can shift to Eat Feastly, a growing consortium of local chefs at home. Unsold cars sitting on dealership lots can be put to rent like Toyota Rent a Car or BMW’s version.
- Tap the crowd for new innovation of goods and services. Finding, hiring and retaining creative people are difficult things to do. Instead, seek new models that enable desk-sharing that brings “creatives” together to work when they are available, at your office, spreading some of their ideas and energy to those around them. Pepsi, which used Mass Relevance, was documented tapping into the broader crowd by aggregating their messages to improve digital and real-world marketing. Take, for instance, models like Kickstarter or Quirky that tap into the crowd to fund and source new ideas. This is the next form of innovation. Software providers like Spigit, Crowdtap, BrightIdea, also enable corporations to glean these opportunities on their own branded platforms.
The Future: The Crowd Becomes the Company
I see three distinct phases as corporations take to the collaborative economy. While they all warrant posts and research of their own accord, here’s a sneak peek:
- Phase 1: The sharing startups will unveil APIs for new growth. Like oDesk, expect new APIs to be available from Airbnb, Lyft, Taskrabbit, Liquidspace and others that connect social media management systems like Sprinklr, Expion, Spredfast, Hearsay, Adobe, Oracle, Lithium, and Salesforce. Together they will enable corporations to manage inputs and outputs of the collaborative economy. For example, last week I was briefed by oDesk, which has a number of APIs that enable their customers to manage large batches of tasks of their vast supply of on-demand workers. oDesk shared with me that they see opportunities for even more developers to engage, expanding their market share with new applications, unlocking new value propositions that traditional corporations have yet to realize. I expect that, as the sharing startups mature, they’ll unleash these APIs, just like Facebook, LinkedIn, Microsoft and Google have done.
- Phase 2: A new era of Collaborative Economy Enterprise Software will emerge. Don’t expect these startups and social media management systems to be the only game in town. There’s already a broad range of enterprise software, such as Uservoice, Get Satisfaction, Oracle, Salesforce, Lithium, and Adobe, that offers enterprise-level collaboration of media and ideas. I expect a new class of software to emerge that enables branded marketplaces (like Airbnb) for corporations to manage their own two-sided marketplaces of buyers and sellers so as not to have to rely on the sharing startups. I wrote a post, putting out a call to the market, identifying this “blue ocean market,” but no providers having emerged as yet.
- Phase 3: Corporations will tap into the crowd for non-crucial goods and services. In a not-so-radical vision of the future, expect that the most resilient corporations will start to engage the crowd for non-essential business functions in their attempts to reduce their overhead. In this scenario, it will be difficult to tell the difference between customers and employees. Companies that tap the crowd for most of their business functions will reduce costs, maximize productivity on demand, and might end up with the only remaining long-term assets being an ecommerce system and a brand, which should directly translate to more profits for shareholders. In the future, the on-demand, creative, and resilient crowd actually becomes the company, reducing risks and costs while providing the opportunity to increase profits.
Closing Thoughts: The Collaborative Economy Can Make Corporations Resilient.
Corporations have an opportunity to tap into the same sharing behaviors we are seeing in the consumer market. I’ve given you a definition, clear examples, insights, and a roadmap for future phases. Companies who tap into the crowd will reduce costs, some forms of liability, and can generate new revenues by activating existing resources and collaborating for new value creation. The crowd makes corporations resilient.
Image by Jeff Garris, used under Creative Commons