Who says there’s no money in sharing?
Data shows adoption rates by people will double in next year
My recent post in the WSJ Accelerator series stated that adoption of the Collaborative Economy is going to double, according to 90,000 people surveyed from the general population from the US, the UK, and Canada. Also, Bazzarvoice’s CMO, Lisa Pearson, points out that the peer-to-peer commerce movement is growing as people are now able to get goods, services, space, transportation, and money from each other. All of this information is well-known to VCs already. Their access to the startups they invest in allows them to see raw growth numbers from the startups themselves. Over the past year I’ve chronicled funding in this space, analyzed the investors, and broken down average funding amounts, but I was amazed by the funding in this one, single month of April.
Collaborative Economy funding in April 2014:
- P2P hospitality brand Airbnb, valued at $10 billion, raised $450 million, April 8th, with a cheeky “eff Hotels” footnote.
- P2P transportation startup, Lyft, raised $250 million and expanded to over 60 cities.
- P2P financial service, LendingClub, raised $115 million in debt financing and made a strategic acquisitions today, April 29
- P2P crowdfunding platform, OurCrowd, raised $25 million series B.
- P2P Airbnb for retail, called Storefront, raised $7.3 million
- P2P gift economy startup, Yerdle, raised $ 5 million
- P2P boat lending startup, Boatbound raises 2.5 million
- Total April Funding: $854,500,000 or averaged as $28m a day, or about $2m an hour.
Bubble or Bull Market?
For context, publicly-traded Twitter has raised a total of 1.2 billion over its eight year lifetime while Facebook has raised $2.4 billion over the ten years of its lifetime. Not everyone agrees that this growth is for the best. Forbes magazine took me to task for my Tweets, suggesting that the tech space is getting inflated and that we are in the midst of a bubble. There’s no question that this new market has many downsides, as pointed out by my recent post on the dark side of this burgeoning people economy. The big question, that folks like Neal Gorenflo at Shareable will tackle, is: “What happens when the startup and VC investors become billionaires while homeowners still struggle to maintain mortgage payments?” So, why are investors betting big on the Collaborative Economy? These scalable business models run on top of highly adopted social and mobile technologies; these startups offer high -requency of transactions, with low operating costs.
In summary: Investors expect these startups to be highly profitable.
Photo used within Creative Commons license by Tracy Olson
Airbnb valued at $10b –without owning a single bed, room, or building
Airbnb, worth over $10 billion after only six short years, is one of the fastest growing hospitality brands in the world – yet they don’t own a single hotel room. This two-sided marketplace of guests and hosts, has built an entire economy out of idle rooms and homes, tapping into social trends of going more local, global recession, and enabling technology like mobile, social and cloud services.
An ecosystem of startups emerges in orbit
Like Apple’s iTunes, Facebook’s app platform, and Salesforce’s AppExchange launched developer programs that blossomed into entire ecosystems, Airbnb has unintentionally crafted a blossoming ecosystem of value-added service providers throughout their growing marketplace. The SF Gate lists out many of these new services surrounding Airbnb, titled “Airbnb spawns array of companies to aid hosts” most of which, are in the SF area.
Startups offer value added to the Airbnb community
One of the early investors in this space, Mike Walsh of Structure VC, told the Wall Street Journal that this market is growing quickly due to low capital expenditures and low market friction. Mike’s firm has invested in Airenvy and BeyondStays. I asked Mike why this new ecosystem is blossoming, to which he responded, “These startups remove the hassle for hosts and guests while providing a consistent brand experience for both host and guest.”
Index of Airbnb Ecosystem Startups:
While these starrtups are not formally related financially or through partnerships to Airbnb, guests and hosts may often interact with them to foster a better experience.
Accommodation and Recreation Services by Locals
- Localeur is a curated community of local insiders who want to help you experience what the locals know are the best places to stay and play. It’s proving to be more reliable that tourist reviews.
- Vayable not only reveals great destinations and experiences recommended by locals, they book entire experiences for you.
Airbnb Property Management Services
- Airenvy takes some of the work out of renting your space by handling the business side of the rental process by taking care of listing, check-in, cleaning, linens and supplies. The company is an adjunct service to Airbnb, VRBO, HomeAway and FlipKey.
- Urban Bellhop is dedicated to helping vacation rental hosts (like Airbnb and VRBO) maximize their rental opportunities and to helping guests by make all arrangements to meet you at the house to get you settled in. They can even have all of your favorite food items waiting for you in the fridge when you arrive.
- Beyond Stays claims that their service will help Airbnb hosts make 30% more through their booking, cleaning, maintenance, and concierge services.
- Guesthop provides additional services such as local excursion planning, babysitting and meal delivery in addition to traditional property management.
- Super Host advertises itself as “the easiest way to manage your Airbnb listing.”
- Keycafe provides a convenient storage location and pickup point for your guests to pick up the keys to your Airbnb rental when you are out of town. Alternatively, Keycafe offers a remote, mobile app for access to your rental.
- Not to be overlooked, Pad Pipers advertises that “While you travel, we toil,” and offers a plethora of services, including property assessment, guest screening, restocking of supplies, insurance and calendar management.
- A series of home cleaning services have emerged such as HomeJoy, Care.com, Handybook, MerryMaids to keep that rental spic and span.
Cooperating Food Services
- Feastly service provide exquisite, in-home dining experiences ideal for guests staying in Airbnb spaces, enhancing the romance of a special night or two away from the ordinary. I contacted CEO Noah Karesh who replied “We have cooks who are hosts on Airbnb and have allowed their Airbnb guests to join in Feastly meals. We have also had Airbnb hosts reach out to us about posting menus on Feastly for their Airbnb guests as an added service.”
- Cookening offers a slightly different twist with a host cooking and sharing a meal with you at their nearby home or shop. It’s a hosted, gourmet night out in peaceful surroundings. Cedric, the founder of Cookening, started the idea as an Airbnb host.
- With Shareyourmeal, you can find locals who are willing to share the meals they are already preparing, or you can advertise to do the same with visitors to your area.
- For those that want to swap homes, see HomeExchange and skip Airbnb all together.
- Don’t worry about Rover when you go out of town, use DogVacay and skip the kennel.
- Naturally, the entire ride and car sharing world is part of this ecosystem, but that warrants a complete post on its own.
Airbnb intends to grow into other hospitality services.
This is just the beginning. Brian Chesky, the CEO of Airbnb, has indicated that he’ll be moving the company into a variety of verticals related to hospitality – beyond just rooms. Expect them to launch their own marketplace, either partnering with the startups listed above or directly competing by creating sub-marketplaces that replicate what these startups are doing. This could spell partnership opportunities for the above listed startups –or potential competition as Airbnb launches their own services.
Expect Airbnb to launch a developer partner platform.
Just as eBay, Apple, Facebook, Twitter, Google, Microsoft, IBM, and many other tech companies have developer programs, expect Airbnb to open up select APIs for partners, build a larger platform for developers and enable this ecosystem of startups to centralize reputation, payments, data, profiles, and services. Virtually every tech company heads this route for broader scale, and Wall Street will expect Airbnb to have multiple revenue streams before an exit.
Traditional hotels can join this market and use as an opportunity.
Boston University recently studied and found that hotel revenues decrease as Airbnb grows. Hotel companies must heed this market trend, and tap the crowd as a partner. We’ve already seen several hotels shift their business model to rent goods, partner with Uber, and more. In the end, hotels have six scenarios to address the collaborative economy. I made a prediction on NBC that we’ll see a hotel company launch their own version of Airbnb. Regardless of the outcome, the trend is obvious: the crowd is becoming a hospitality company.
(Image used within creative commons license, by Osanpo)
Is life-as-a-service efficient or lazy? I say yes.
Life delivered, or rented, on-demand.
What does “life as a service” mean? It means one’s lifestyle needs are obtained on-demand, or as a subscription service, rather than having to purchase or acquire them through traditional commerce models. To best understand the collaborative economy market, I’m trying to live it within my own personal life as well as my business life. This means that I can rent or borrow goods rather than own them. It also means the things that I want can be delivered to me without me having to visit traditional retail stores.
I keep a “purchase log” to be mindful of consumption of goods
I’ve reduced my consumption of durable goods. In fact, I keep a “purchase log” of all the durable goods I’ve bought since June 2013. It’s fewer than 54 discrete transitions, and some of those transactions included multiple items. It includes a few clothes, batteries, electronics and gifts for others. It does not include travel, food or personal health products. What’s key is that I’m conscious about my consumption and trying to use what I have, before obtaining in other ways. I have enough stuff. Really.
Not for every region – yet
A few caveats. A great deal of these services are located in Silicon Valley, where most of these startups have originated. Just as people said in 2006, “social media is just for early adopters in Silicon Valley,” we soon learned it spread internationally wherever the internet is present. Some of these services are currently limited to areas with access to advanced technology. As I write this, I’m in rural Southeast Asia, where you won’t spot any Lyft mustaches. With that said, these new opportunities will open up, first in tech laden cultures with high population density, then spread just as social media has over the last decade.
Here’s some of the “Life as a Service” services that I already use:
- Clothes: Trunk Club sends me clothes every few months. I do not see these clothes in advance. They are selected by a wardrobe coordinator assigned specially to me. Once they understand my profile, I determine how often I would like to add to my wardrobe. A “trunk” of clothing is sent to me on a predetermined schedule. I get 10 days to try the clothes, keep what I want, and return the rest. I pay only for what I keep. It’s like having my own personal valet and stylist. The longer I do business with them, the better they understand my tastes and are able to deliver exactly what I like.
- Assistants: Zirtual, billed as “the secret weapon of successful people,” is like my own personal executive assistant. My days and weeks are scheduled and coordinated by my own personal assistant, saving me time. Zirtual is a 24/7 go-to that will book travel, handle my emails, obtain event tickets, arrange transportation, pay my bills (unfortunately, with my money – not theirs), remind me of important dates, conduct research and even order my lunch!
- Food: Eat24 delivers complete daily meals ordered from a mobile app. From sushi to sauerkraut, Eat24 literally delivers over a million different dishes from thousands of restaurants in the U.S. We use Eat24 to get entire family meals, on demand, sent to our house from local restaurants, with just a few clicks.
- Transportation: Uber gets me quickly to my destinations. When I need to move about town, I simply contact Uber through the app on my smartphone and they deliver me to any place I desire, in the style of my choosing, using their vehicle and their driver. Those of you who know me, also know that I am not that hung up on style (which is why it is so easy for Trunk Club to outfit me), so I usually choose the uberX option, which is a smaller car that gets me where I am going just as effectively as a luxury model. The beauty of Uber is that I can choose the luxury option or any of the other options in between. I take the Caltrain as well.
- Office space: at co-working locations. Impact HUB is cropping up all over the world, with locations currently in over 40 major cities, including San Francisco and Berkeley. I don’t need to own an office, because I can work out of a local Impact HUB that is a shared workspace, designed to promote the principles of the Collaborative Economy. It’s more than just shared space. I’m also experimenting with other co-working locations.
- Shopping: Google Shopping Express delivers nearly everything from staples to sparkling water and from shaving cream to salted nuts, within hours, from major retailers like Target, Walmart, or Office Depot. I’ve been using Google Shopping Express for quickly-needed items, such as durable goods, electronics, personal care, and even water by the gallon that I didn’t want to lug around in my car. I question if this service is truly sustainable, as there’s no minimum on how small an item could be delivered.
- Toys: Pley is the service I wish we had when I was a kid. It’s a Lego rental service. You can rent a set, then return it when your children are done with it. You can even exchange it for a different set. The real beauty is that you don’t end up owning a Lego set stored in a box in your attic once your children have outgrown it. My child will be graduating from Duplos, and we really don’t want to own a product with such a short useful life span.
- Smart phone. Apple recently bought back my iPhone 4S when I purchased a new iPhone 5. So, in a way, I rented that phone, making the device usage nearly circular and helping to protect the environment so that my old phone doesn’t end up in a landfill or in the back of one of my desk drawers.
- Munchery deliveries our fresh, healthy dinners. Munchery is quite an amazing business model. You pre-program when you want your food delivered, and it’s at your doorstep on time for dinner in a cooler, ready to be heated. In this shared business model (thanks Shervin Pishevar for the intro), professional, high-end chefs share supply chain, kitchen, delivery, marketing and more. Fresh, local, healthy food is shipping quickly for about $13 a meal.
- A purse (rental) for my wife via Bag, Borrow or Steal. In addition to buying her fantastic purses to own, I also, on a whim, purchased her a small gift certificate to this high end purse rental business. Want a $5,000 Coach bag for a fraction of the time and fraction of the price? That’s now possible. This raises questions about what gifts of love can be. Are they physical goods (a diamond is forever), or experiences on demand (a trip to Phi Phi island)?
- Many others. I’m sure I’m forgetting some, so I will add a few notable examples as I try new services.
Closing thoughts: some drawbacks, but an overall net gain.
You can live the good life in the Collaborative Economy. Life as a Service is possible. I’d guess that there’s a typical upcharge of about 10-15% on goods as they become services. But, if the time saved can be reclaimed to be more productive, or to enjoy quality time with the family, it should be regarded as a net gain in a busy lifestyle. With that said, there are always drawbacks. One can become over-dependent on the network and ecosystem. Interdependency can increase and formerly self-sufficient individuals can tend to get focused on the few skills they are really good at. I hope that these experiences help me to better conduct research on this market, as well as help our Crowd Companies council members.
In a future post, I’ll do a rundown how we’ve tapped the crowd for our company, Crowd Companies, (naturally).
Edit: A discussion on my Facebook feed is brewing from this post.
(Creative Commons usage of image, “Fast Man” by Nikos Koutoulas)
Confused about how crowdfunding, maker movement and sharing fit into the larger Collaborative Economy? This diagram brings all of these trends together into one so you can see how the crowd is getting what they need from each other – rather than buying from traditional corporations. Find out why more than 40,000 people have viewed the full report “Sharing is the new buying” for the complete study.
Above Graphic: This image distills this large movement of over 9000 startups into a single diagram by five families, eleven classes, and a sample of district startups.
Working closely with Dr. Alexandra Samuel of Vision Critical, I’m pleased to present a working taxonomy, outlining the ecosystem of the Collaborative Economy. Our goal was to segment this market, then survey over 90,000 people in the general population across Canada, the UK, and the USA to find out their adoption rates. Here’s how the taxonomy breaks down:
- Working from left to right on the chart, there are five distinct families, categorized by goods, services, space, transportation, and money. People created, funded, or shared across these major families. For the most part, this accordantly represents the physical world. It’s assumed each of these five families are dependent on the first phase, social media.
- Eleven unique classes breakdown into more specific use cases. The second column indicates specific use cases of company types in this vast market. For example, within services, we broke out professional services and personal services, as we see two distinct phyla of company types.
- Next, thousands of individual species have emerged. Respected authority, Lisa Gansky is tracking a whopping 9000+ startups in this space around the globe. The startups we selected are just examples, ones that we felt would best be understood by the audience, but certainly cannot represent the full scope of the thousands in existence.
Matrix: Large companies are tapping this movement
To tie this back into how businesses can participate in this new economy, we’ve also created this matrix that features six examples: Patagonia, GE, Walgreens, BMW, W Hotels, and U-Haul. This is only a sample of six instances of companies. Our larger Timeline of the Collaborative Economy shows 80 distinct examples.
This fast moving space is difficult to document.
I’ll be the first disclaim this taxonomy will be valid for a short period of time only. New services, startups and technologies are emerging at a fast pace. Other industry experts have also tried to categorize this market. For example, the crowd has quickly funded their own 3D printer at a low price, showing the zero marginal cost economy coming to life. Furthermore, this taxonomy, while a strong overview, doesn’t include the heavily-discussed Bitcoin or other crypto-currencies. I’m being briefed on new and unique business models on a weekly basis. For example, Upshift cars is a new business model that can enable a co-ownership of a fleet of cars, something new that doesn’t quite cleanly fit into the other categories listed.
Respondents in the largest study in the new peer-to-peer economy reported that they plan to double usage in next 12 months. Brands must develop a strategy in this new market and avoid being bypassed from peer-to-peer economic models.
Above Graphic: Dark colored bars indicate adoption in last 12 months, light colored bars indicate adoption in next 12 months; this nascent market is quickly growing.
Read the full report which surveyed over 90,000 people: Sharing is the New Buying
This post is a section of a March 2013 report on the collaborative economy, in which I partnered with Vision Critical, titled, “Sharing is the new buying.” You can download the whole report and read the coverage by Fast Company: “The Collaborative Economy Is Exploding, and Brands That Ignore It Are Out of Luck.” We asked thousands of respondents about their past usage (the dark colored bars) and their intent to use over the next 12 months (the light colored bars), helping us to forecast growth. The purpose of this post is to drive deeper into one of the key findings, the forecast, here’s what we found:
- Even in new markets, adoption is doubling in most categories. For sharing of goods (sites like eBay and Craigslist), we found there’s significant growth in the sharing of used goods (up to 46%), but the overall growth rate is slowing. In nearly every category, at least as many people intend to try sharing in the next 12 months as have tried it in the past 12 months. There is no runaway category for prospective growth. Nearly every category of neo-sharing enjoys similar levels of interest from prospective users: 4% to 9% intend to try it in the next 12 months. With that said, there’s greater interest in custom products (the Maker Movement), personal services (PopExpert, TaskRabbit), places to stay (Airbnb, VRBO, HomeAway), and crowd-funding (Kickstarter and Indiegogo) indicate they may enjoy double-digit adoption rates.
- Anticipate that much of growth will be driven by Neo-Sharers. This persona type is an individual who shares much of their life across goods, services, transportation, space and money – I’m trying to incorporate much of it into my work and lifestyle to better understand it. Neo-sharing could double in the next 12 months. In all the neo-sharing categories, there are roughly equal numbers of recent and prospective users, and there are more of them every day. In most categories of sharing, 12 to 15% of neo-sharers who haven’t tried that type of sharing say they will in the next 12 months. (For custom products, it’s even higher: 17%. For office space, it’s a little lower: 10%.) This means that much of the growth of sharing will come from existing neo-sharers who are broadening the range of neo-sharing services they use.
- Maker Movement showing solid growth, via Crowd-funding and Custom Goods. I’ve watched with great interest at how the Kickstarter community was able to produce a digital watch (Touch Time and Pebble) before large consumer electronics companies could get to market. Custom products, which is also referred to as the Maker Movement, are the type of neo-sharing that interests the most prospective users. In the past 12 months, 9% of the population has shared custom products and another 9% intend to try it in the next 12. But that’s only a narrow advantage over other categories of neo-sharing. For corporations tapping co-innovation initiatives this is an excellent opportunity to partner with the crowd to co-fund, co-design, co-build, products alongside the crowd.
Peer to peer threaten traditional corporations as people share or build –rather than buy. This means that people want new business models to get goods that they seek by using an access model, rather than traditional ownership models. The logic suggests that they will tap crowd services like oDesk rather than traditional consulting firms, stay at Airbnbs as opposed to hotels, take Lyft rather than traditional taxis, and borrow and lend money in Lending Club instead of using traditional banks. It also means that people will their own Makers as they fund, build, and buy custom made goods from their fellow peers – rather than from traditional corporations.
New market opportunities for innovative companies that move now in the early phases of market. The Collaborative Economy is a generally new market where the majority of tech startups have been around less than five years. This provides unique opportunities for brands that want to leverage the movement to their benefit and that of those participating. Get ready, as the economy starts to shift to crowd-based business models. You can alter your business model to leverage this movement (see this storyboard on the business model shift required, see this timeline of brand examples, peruse the body of knowledge on this topic). If you’re a large company, contact me to discover how Crowd Companies council can help you to learn more, then move to action.
Large companies seek signals from market leaders on future trends –so they can align their plans in the right direction. One clear signal that rings loud and clear is the United States White House’s commitment to innovation in the Maker Movement.
The Maker Movement, which we consider part of the larger Collaborative Economy, empowers people to build their own goods in their community and offering it to others in a global marketplace. They use simple wood working tools, create new types of food, or tap advanced technologies like 3D printing.
Crowd Companies was honored to host the White House on a members concall to learn about their vision and commitment towards the Maker Movement.
Now the Maker Movement is gaining significantly more traction as it has been embraced by the executive branch of the federal government with the announcement that the White House will host a Maker Faire later in 2014. This Faire is intended to highlight the role that Making can play in (1) inspiring more young people to excel in science, technology, engineering and math (STEM) education; and (2) fostering innovation and entrepreneurship in the manufacturing sector.
Tom Kalil, Deputy Director for Technology and Innovation at the White House Office of Science and Technology Policy recently visited Crowd Companies Council to share the vision of the Maker Faire with our Council. He has described the Maker Faire as an “all-hands-on-deck effort to provide even more students and entrepreneurs access to the tools, spaces, and mentors needed to Make. There are many ways in which, in addition to the contributions of thousands of individual Makers, companies, universities, mayors and communities, and foundations, and philanthropists can get involved. For example:
- Companies could support Maker-spaces in schools and after-school programs, provide their employees with time off to serve as mentors, be “anchor tenants” for makerspaces like Ford’s partnership with TechShop, or, for multi-channel retailers, provide access to consumers for innovative Maker start-ups.
- Universities could add a “Maker Portfolio” option as part of their admissions process, create more Maker spaces on campus for students and the community, and support research in advancing the development of better hardware and software tools at national, regional, and local levels, such as the equipment in MIT’s FabLabs.
- Municipalities could pursue initiatives like design/ production districts that allow entrepreneurs to create more jobs or that expand access to Marker spaces, mentorship, and educational opportunities through their schools, libraries, museums and community organizations.
- Foundations and philanthropists could provide matching grants to communities that are interested in embracing Making, in the spirit of Andrew Carnegie’s support for public libraries. In particular, the Administration has called for special efforts to ensure that girls and under-represented minorities are included in such STEM opportunities.”
We are proud to be a small part of the White House initiatives for stimulating startups in the sharing economy. Many of those initiatives, including Startup America, Educate to Innovate and Change the Equation deserve more attention and private sector support.
If you would like more information about the White House Maker Faire and learn how you can be a participant alongside companies like GE, Ford, Autodesk, GM, Nordstrom, Intel, Nokia, Home Depot, Lowe’s and Radio Shack, visit the Maker Faire blog post or request a Maker Faire Interest form.