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Upwork Is Now A Publicly Traded Company: The World of Work Is Indeed Changing

10/03/2018 By

Upwork, the world’s largest online freelancer marketplace provider, went public today on the Nasdaq exchange. The IPO has been anticipated since Upwork announced its Form S-1 filing with the Securities and Exchange Commission (SEC) in early September.

The opening share price today was set at $15, above the price range of $12–$14 noted in last week’s amended S-1. The proceeds of the sale of 12.48 million shares were $187 million, well above the $100 million anticipated in the S-1.

After reaching a peak of nearly $23 per share at 11 a.m. ET today, the share price has been stable and trading around $21 a share. Rounding the total number of outstanding shares to 100,000,000, at a $20 price per share, Upwork’s current market cap is on the order of $2 billion, a 10X revenue multiple assuming a conservative annual revenue run-rate of $200 million.

As we noted in our recent pre-IPO analysis, the Upwork IPO constitutes a significant marker in the steadily evolving contingent workforce and services procurement and the overall human capital management space, where enterprise executives and line managers are struggling with critical skill shortages and increasing requirements for organizational and workforce flexibility, as well as a parade of new, non-traditional, technology-driven solutions to the problem of “getting the work done.”

Spend Matters has closely covered Upwork developments for several years. Most recently we evaluated and ranked the Upwork Enterprise offering, positioning it as a recommended solution within the Spend Matters SolutionMaps for Contingent Workforce and Services (CW/S) enterprise technology solutions, specifically the category of solutions that address independent contract worker (ICW) sourcing, engagement, management and payment.

What Is Upwork Thinking?

We had a chance today to speak with Rich Pearson, Upwork’s senior vice president of marketing, who was present at the bell-ringing today. When asked about what the IPO meant for Upwork in terms of the CW/S market and industry, Pearson said today “it really sends a signal that the freelancer economy is not a fad or a consumer fad. It’s a trend that’s here to stay.”

“We currently define our category as professional services that can be delivered remotely,” he continued. “And we believe that’s a $560 billion business every year. We were at $1.5 billion dollars last year, so there’s a lot of room to grow there. We will continue to attract and enable small businesses. But the majority of that $560 billion opportunity is with larger companies, and specifically enterprises.”

“We believe that [the IPO] is an opportunity for us to introduce Upwork to more businesses — specifically more enterprise businesses,” Pearson said. “We believe that we have a significant opportunity to expand existing clients, add new enterprise clients and really show the benefits Upwork — specifically the  access to quality talent, the speed of hiring, the cost savings by going direct to talent and avoiding intermediaries. It’s really the beginning of a new chapter and the biggest opportunity is clearly to go after traditional staffing model and establish Upwork as an alternative to them.”

When asked about the uses for the funds raised in the IPO, Pearson said Upwork expects “to make significant future expenditures related to the development and expansion of our business, including enhancing our Upwork Enterprise offering. It does not mean that we’re focusing exclusively on enterprise. But currently we have 30% of the Fortune 500 hiring on Upwork, and in that category, for each point we gain there we get many more freelancers jobs than with a new small business.”

Pearson largely deferred to the statements made in the Form S-1 about prospective use of funds, but he added (without giving it any priority) that Upwork “may use a portion of the proceeds for the acquisition of or an investment in technology, solutions or businesses that complement our business or allow us to get to market faster.”

What Does It All Mean?

That’s really a question that deserves and requires a more detailed analysis. And we will be publishing a PRO brief on this as early as next week to deliver a thorough answer.

As we said in our earlier analysis, the Upwork IPO may say as much about the state of the industry environment as it does about Upwork’s place in it. Over the past five years, the CW/S industry environment — including work intermediaries and demand-side businesses — has changed significantly. Online freelancer marketplaces and other types of work and services platforms have not only grown in number and diversity, they also are increasingly being acknowledged within the contingent workforce and broader human capital management industries as important, alternative labor-market enablers to access and engage skills, expertise, talent and services on an as-needed basis.

For some, the Upwork IPO (and the maturation and scale it represents) can be taken as a clear sign of changing times in the contingent workforce and broader human capital management space and, perhaps, as a justification/validation of the early leanings and actions of the pioneering early adopters. For others, it may serve as a wake-up call that the space has changed significantly in the past five years and that new sourcing channels are emerging. This is not to say that traditional sourcing and engagement channels and activities have been diminished in any way (quite the contrary), but it is saying that, unlike five years ago, non-traditional intermediaries and alternative sourcing channels and engagement models are now becoming woven into the fabric of the established, and now evolving, industry environment.

Today is no doubt a great day for Upwork and an important marker in the evolving CW/S ecosystem. However, Upwork now faces the new reality of operating under the microscope as a public company, in a very dynamic and uncertain human capital management space. What happens from here on will be of much interest, and we will be awaiting the release of the most recent quarter’s financial results. In the meantime, we’ll be back soon with more in-depth analysis of the IPO and what it means for procurement and HR professionals.