Israeli startup Fiverr sees Amazon as model for growth
The freelance hub has provided over 10 million online services in 150+ categories, and adds some 6000 new offerings each day
Micha Kaufman, the 46-year-old co-founder and chief executive of Fiverr, an Israeli startup that has become a global leader for online freelance services, often compares his firm to Amazon and eBay, the e-commerce giants.
“The idea of Fiverr is simple,” he said in an interview with The Times of Israel from the startup’s snazzy new offices in a refurbished historic building in the heart of Tel Aviv. “We asked ourselves, can we actually make the purchasing of a service online as easy as buying a product on Amazon? Which means, you just click a button and it is done.”
And also: “We believe we are going to be the Amazon of services.”
That is actually what he is aiming for, he said, without an inch of modesty, convinced of his mission and its potential.
“We have a market that is practically a blue ocean in size,” he said. “Nobody owns it. We plan to own it, we plan to lead it, we are leading it anyway. And our unique approach to it, which is creating an e-commerce experience in the services space, has proven itself to scale massively.”
So let’s take a step back, to where it all began.
Kaufman, who studied and practiced law before deciding to become an entrepreneur, set up Fiverr in 2010 with his partner Shai Wininger. It is his fourth company and his “largest and most successful,” he said. His previous enterprises were in a wide spectrum of businesses, from software to medical devices and Internet.
In tech, he said, “most of the things we do fail. This is how you grow. We fail, we break stuff, we make mistakes. And if you are smart enough not to make them twice, you progress. And this is how you grow. ”
On the back of those companies came Fiverr. “The good thing about the previous startups is that they established the foundation for building a company in the way that we built Fiverr,” Kaufman said. “We started it the right way, we chose the right partners, we have invested and built a beautiful culture and these are things that are harder to do as a first-time entrepreneur. That is the benefit of having a little bit of grey hair and scars. ”
The idea for Fiverr came at a time when Kaufman was winding down a previous startup. While discussing various ideas with friends, he came to the realization of two key insights: the pool of freelancers globally was growing, and the offering and buying of their services was still all done offline. That was his “epiphany,” he said.
A 2015 study by the US’ Freelancers Union and Upwork, also a freelance talent market place, showed that one in three US workers, or some 54 million people, were freelancing. And technology — with the so-called online marketplaces — was making it easier for them to get work. Millennials, those born in the period between the early ’80s to early 2000s, are also the second most likely generation to start freelancing by choice, topped only by baby boomers, the research showed. By 2020, more than 40 percent of the US workforce will be freelancers, according to a 2010 study by software firm Intuit.
“Freelancing is growing as a percentage of the workforce pie,” said Kaufman. Part of the reason, he believes, is that just as the millennials started joining the workforce, the 2008 economic crisis hit.
“It was a sort of a wake-up call,” he said. “The same millennials saw their parents working in ‘safe jobs’ losing their safe jobs. And for them came the understanding that nothing is safe.”
Millennials are also born into the Internet, into a world that is always connected and full of options. They want to do things “on their own terms, place, time. And all of that was driving a shift and made freelancing a lot more popular.”
In addition, in 2010, almost all of the freelance transactions were done offline. The interested parties met over a coffee, discussed the deal, and the deal was clinched, or not. It was “old fashioned, old school, offline play,” said Kaufman. “And that was crazy,” because e-commerce had already taken off, with companies like Amazon and eBay and China’s Alibaba growing their online sales significantly. “So this (freelance) market was not following a trend, and for me that was a huge opportunity.”
So, the three entrepreneurs set up Fiverr — a platform in which freelancers can offer their services in a wide variety of categories, starting from $5. The real challenge, explained Kaufman, was to turn the service into a product that you can purchase online at the click of the button.
Today, Fiverr offers a catalogue of digital services in over 150 categories, with more than 10 million services online from 150 countries, according to data provided by the company. And some 6000 new services are added every day. The company employs some 280 workers, 180 of them in Israel and the rest in the US.
Here’s how Fiverr works
The freelancers — or the sellers — offer their services on the site. These are called gigs. Fiverr employees guide the gig providers through an online process that allows them to define exactly what they are offering. They show them how to provide samples of their previous work and what information is needed: for example, the time frame for delivery and how to set the price. The service then becomes an item in the catalogue.
Customers, typically small businesses that need the services of freelancers, go to the site and search for what they want among a selection of professionals. “Much like they see an item on Amazon,” said Kaufman, they see the profile of the seller, the information about the service, the price. Customers can also rate the service received, which provides an indication to other users about the quality of the service provided. Fiverr also provides the entire suite of tools that both sides need to do the transaction: the communication platform, the safe transfer of files, the collection of comments and payment, confidentiality agreements.
“Then you click on the order and it is done,” said Kaufman. “The similarity with Amazon is not coincidental. It is an e-commerce platform. So, everything that you might find at an e-commerce platform you will find in Fiverr.”
Kaufman and his team developed the algorithms behind the listings and the recommendations, and use machine learning to personalize the experience. All the transactions go through Fiverr and the firm gets a 25% cut of each deal.
Because the freelancers don’t need to waste time looking for work from various sources, they can offer their services on Fiverr at far lower rates than in the regular marketplace, Kaufman said. In June, the firm introduced the Fiverr Pro service, bringing high-end professional freelancers — at higher prices — into its fold, after the firm acquired Veed.me, a marketplace for high-end video and animation professional freelancers, who work with clients such as Facebook and Google.
“The paying user base of Fiverr’s offering is growing steadily,” Zirra.com, a Tel Aviv-based research firm that analyzes private companies using artificial intelligence, said in a report. Because there are “many existing companies” already in the market space, however, “Fiverr must display a strong differentiating factor in order to surpass the clutter.” At the end of 2016, Zirra.com estimated the valuation of Fiverr at $351 million.
Direct competitors to Fiverr are Upwork, also a global freelancing platform, Freelancer.com, a crowdsourcing marketplace for freelancers and employers, and Shiftgig, which connects hourly workers and businesses via a mobile app, the Zirra.com report said.
The huge variety of services offered on Fiverr makes the firm unique, Kaufman said. Either way, he said, the market is so big, that there is probably space for more than one company. “Much like e-commerce has several giant multi-billion-dollar businesses, here it is going to be the same,” he said.
The seven-year old company has raised to date a total of $110 million from investors, including Bessemer Venture Partners and Accel.
Kaufman declined to comment about a possible initial public offering of the firm, or even comment about valuations or reveal revenue figures. In July, a Channel 2 TV program on the firm estimated it is worth some $1 billion.
“Building a marketplace in a new market takes time,” Kaufman said. “It took over a decade to build Amazon to growth.”
In five years, he said, he believes Fiverr will be even more global and will grow also through additional acquisitions. “Right now, the company is growing very fast. It is just accelerating,” he said. “We are riding a good wave.”
(This updated version of the story corrects the amount of new services offered everyday to 6000).
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