In the mid-90s, when the internet was just getting started and kids were jamming to the new NSYNC album on their Discmans, Beerud Sheth was envisioning his future self. Something dramatic was happening to the business world and he didn’t want to look back in a few decades and realize that he had sat on the sidelines.
So Sheth and two of his roommates, Sanjay Noronha and Srini Anumolu, combined their skills, passion, and business experience to create the world’s first online freelance marketplace called “Elance” in 1998. Never heard of it? That’s because in 2013, the company merged with another freelance site known as oDesk to evolve into the world’s largest platform for freelancers.
Upwork is currently valued at $1.06 billion and was named in TIME magazine’s list of 100 top influential companies of 2022. It has about 5 million clients, and of those, 145,400 spend around $5,000 each year tapping into its pool of 12 million registered freelancers. The company’s mission is “to create economic opportunities, so people have better lives.”
The Roots of Upwork
Elance was born from Sheth’s desire to get involved with the growth of the internet and he noticed three three factors that could be combined: A global talent pool, a medium to connect individuals previously out of reach, and a marketplace to facilitate transactions.
“Coming from India, I knew that there were so many talented people all over the world,” says Sheth, a Wall Street veteran at that time. “[Y]ou could see all the technical and social transformation that the internet was driving. Namely in connecting people in places who could previously not communicate with each other. And it was my Wall Street experience that made me realize you could create a marketplace for any kind of item.”
The first Elance office was launched in a two-bedroom apartment and he says there was a lot of trial and error as the founders looked for the right “product market fit.” In order to test demand, Sheth asked students on their summer internships to provide services in New York. The feedback from both suppliers and buyers was positive. “You know it’s real because it wasn’t stage-managed,” Sheth told the Wealth Standard podcast. “You know that there are thousands or maybe millions more people like that. That was the big a-ha. Once we got funding, we scaled it up.”
O-desk (short for “no desk”), meanwhile, was originally intended to be a staffing platform using hourly rates. As both companies grew, their founders eventually realized they would be stronger together.
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The Right Time, Right Place
While only 6% of the U.S. workforce worked remotely before the pandemic, a quarter of all professionals are expected to work remotely by the end of 2023. McKinsey called it a “seismic shift in how Americans work.”
In the U.S., the number of freelance workers sat at 59.7 million in 2018, increased to 73.3 million this year, and is expected to reach over 90 million by 2028. When the vision for Upwork was first brewing, the idea of an internet marketplace was still a novelty. Today, the gig economy is worth $5.4 trillion globally and Upwork’s main competition is Fiverr and Freelancer.
Businesses or individuals looking for talent can post a specific job listing and budget to Upwork, and freelancers can submit proposals. Upwork uses both pricing models from Elance and Odesk, allowing clients to either set a fixed or hourly budget. The freelancer can also set their own desired rate. The convenience of having all the communication and tracking of a project on one platform makes Upwork a popular and secure place for freelancers to find work.
The Gig Economy
On Fiverr, freelancers offer specific “gigs” for set prices, while Freelancer has a similar model to Upwork, with clients listing projects that freelancers can bid on. Each platform requires freelancers to promote themselves and demonstrate why they are the best fit for any given project. This creates a lot of competition and a large talent pool. However, it has also attracted criticism that the bidding process makes it a race to the bottom.
The counter-argument is that for freelancers, the right mentality, judiciously selecting clients, and working hard to establish a good reputation will give them plenty of opportunities for stable and fair income.
In May, Upwork changed its fee structure for freelancers from a sliding scale of 5%-20% of the project payment to a flat fee of 10%. Speculation on the rationale for the change has been around the issues of transparency, simplicity, and inflation. The move will also lower the barrier to entry for beginning freelancers as the market continues to grow. Fiverr, by contrast, charges a flat 20% fee on all earnings.
On the client side, Upwork charges a 5% fee on all payments to freelancers for fixed-price and hourly jobs, alongside a one-time contract initiation fee of up to $4.95. Though competition is growing, the $618.3 million in revenue Upwork posted in 2022 dwarfs the figures posted by both Fiverr (337.4 million) and Freelancer ($37.9 million).
Make Way for Generative AI
With ChatGPT taking the world by storm, many freelancers, especially writers, have been panicked that they may increasingly be made redundant. Others have insisted that critical thinking and creativity will only become more valuable to discerning clients.
While Bill Gates considers artificial intelligence to be “as revolutionary as mobile phones and the internet,” it’s worth noting that historically when new technology has been introduced, freelance work only grew. Upwork’s Tony Buffum says freelancers upskill and reskill 50% more than traditional workers, making them faster to adapt to the rise of AI and leverage that as a marketable skill. Sheth concedes there will be winners and losers, but AI will level the playing field for non-native English-speaking copywriters.
This space, of course, is evolving at breakneck speed. The opportunity Sheth saw 30 years ago when the internet was gaining popularity is one that is thriving today. Sheth has since followed his entrepreneurial spirit to move on to other innovations such as co-founding the smart messaging platform, Gupshup, where he is currently CEO. “The fact that you have portfolios, profiles, feedback and reputation [on Upwork] makes it a lot easier to be able to do these services,” says Sheth. “At this point, you have to be crazy not to use this because anything else would be far more complex and far more complicated.”