Why Every Freelance Marketplace That Goes Public Becomes aStartup Titanic?
By: Nebojsa Todorovic
Tags: IPO, Startup, Tech, Fiverr, Freelancing

Photo by K. Mitch Hodge

Fiverr just went public. Another freelance marketplace will bite the dust.

Why So Serious — Why So Pessimistic?

All mega-size freelance platforms are public companies, now. Freelancer dot com is a “veteran” in this field. Upwork will have to wait for a few more months to light its first public birthday candle. Fiverr didn’t even have the time to clean up after their NYSE party.

And, there you have it, the “Freelance Triumvirate” went public, with no exceptions. That’s not a coincidence. Actually, I think I see a clear pattern.

Every freelance marketplace’s public journey has to go through these five phases.

The First Enthusiastic Phase

The enthusiasm of freelance platforms at their stock market debuts is simply overwhelming. I dare to say, it can be quite contagious. All you can see is the confetti rain, but you can’t hear a thing. The ringing of the stock market bells can be deafening. Some of these bells became the victims of this enthusiasm.

By default, the initial share prices jump sky-high during the first 24 hours after the stock market debut. Upwork had the most “modest” debut with “just” 50%, give it or take. Fiverr hit almost the 100% increase compared with the initial IPO price. Freelancer dot com is still the absolute record-breaker because

What’s happening after the first phase is over?

The Second Stock Market Roller Coaster Phase

In this phase, the IPO honeymoon is far from over. You go up. You go down. That’s a completely normal thing. That’s why nobody doesn’t bother to panic.

When you look at the stock market graphs, they all look the same, don’t they?

ASX: FLN

NASDAQ: UPWK

NYSE: FVRR

How long does this up and down phase last? Well, I give it a year.

The Third Phase — The First Taste of Bitter Reality

After the first year as a public company, every freelance marketplace gets the wake-up call. The trouble is that this call is hidden in the financial reports.

The serious investors know all too well that the numbers never lie. You just have to make sure you’re looking at the right numbers.

Let’s take Upwork’s report for the first quarter of 2019.

Source: Upwork

If you compare Upwork’s revenues for the first three months in 2018 and 2019, then you can cheer up. There are positive changes of 16.4% for the total revenue and 20.7% for the gross profit. Absolutely nothing to worry about. On the contrary, you can still ride the optimistic wave.

However, if you dig a little deeper, you can’t avoid a nasty surprise.

Source: Upwork

The total operating expenses have increased by 13.3%. If you leave out the provision for transactions losses you get the increase of almost 15%. The most troubling part is that the general and administrative costs have jumped to 28.7%. There’s no happy end here, make no mistake about it.

The Fourth Phase — The Real Stock Price Cold As Ice

Your stock market roller coaster ride eventually has to come to its end. Once your stock prices stop going up what you get is the real value. Look at the attached graphs.

Lassie is coming home. The initial IPO price you began your public journey with will be the last and the only price of your shares. The trouble is the moment when you can’t even get this initial price.

If you can sell your shares as long as they’re worth something, then your investment adventure into the freelance universe may not leave you in tears.

So, which phase our public freelance marketplaces are currently in? Well, Freelancer dot com is deep into the fourth phase. Upwork is in the second phase. And, of course, Fiverr just got the sweet taste of the first phase.

The Fifth Phase — The End of Freelance Days

Can the stock market of the freelance platforms collapse? There’s as ominous symbolism between the years 1929 and 2029. I sure hope for the sake of all freelancers that the history won’t repeat itself. However, all of these graphs aren’t encouraging.

Why did the most popular and powerful freelance marketplace decide to go public in the first place? Well, I’m not a Wall Street guru, but I know that there’s one reason and one reason only for any company to go public. Then need the money. Is this their last and the best option? If so, then the freelance industry, as we know it, is doomed.

Is The IPO Way — The Only Way for Freelance Platforms?

If you don’t remember Guru, then you know nothing about the freelance history. This is arguably the oldest freelance platform. They have been around for almost twenty years. Hey, that’s really something. This freelance marketplace has had more ownership shifts than you can count, but they have never filed for IPO (to the best of my knowledge).

If you have never heard about goLance, then you will never learn about the future of freelancing. They won two American Business Awards and the People’s Choice Award. For a relatively small privately-owned freelance marketplace, that’s really something. What’s even more important, their CEO Michael Brooks strikes me as an entrepreneur who doesn’t build to sell.

What’s Going To Happen When We Come to the End of Our Freelance Road?

One day, Freelancer dot com, Upwork, and Fiverr will find themselves together in the fifth phase. I sure hope, I would be a retired freelancer by then. I also hope, I wouldn’t have to say — I told you so!