The Contingent Workforce and Services (CW/S) Insider’s Hot List: June 2020

Welcome to the June 2020 edition of Spend Matters Insider’s Hot List, a monthly look at the contingent workforce and services (CW/S) space that’s available to our PLUS and PRO subscribers. For those new to the Hot List, each edition covers the prior month’s important or interesting technology and innovation developments in the CW/S space.

In the last Hot List, we covered key events and developments that took place in April. Among those were Fiverr’s earnings report and its remarkable share price increase; how crowdsourcing is being used in the COVID-19 environment; how WorkMarket partnered to enable Volunteer Surge (COVID-19 related). Other companies covered included Alexander Mann, Appen, Eqip, HeroX, Kelly, Medallia, Qwil, Shiftgig, VNDLY and WillHire. While businesses were starting to shake off the first shock of the COVID-19 pandemic, new developments in the CW/S space seemed to continue at a pre-crisis pace.

May, however, seems to have been a slower month in terms of new technology and innovation developments, with the exception of — perhaps not surprisingly — the freelancer/SMB neo-bank area. One possible explanation of this shift in attention of CW/S solution providers from expansion and innovation is that the coronavirus crisis has them focusing on customers and remaining a going concern. In any event, the June Hot List will cover the key developments that came across our radar last month.

What’s the damage report?

Based on its massive database, Brightfield Strategies recently published an index representing the number of temp staffing requisitions/orders being placed each week through the first week in April. Orders started dropping off by the first week of February (index = 131), orders shortly began to fall steadily from the third week in February (index = 130) through the first week of April (index = 11). A 90%+ decrease means orders practically stopped.

(click images to enlarge)

The decline in the dropoff in the Brightfield weekly orders index above seems to correlate, with a few weeks of lag, with the American Staffing Association’s (ASA’s) weekly index, representing employment among U.S. temp staffing workers. The ASA index declined from 86.2 (weekend ending March 1) to a low point of 59.6 (week ending April 26) — a drop of 31%. Note: BLS employment statistics confirm that 842,000 temp staffing workers became unemployed in April (roughly 25% of those temps typically employed in an average month in 2019)

Returning to the ASA index, there were three straight weeks of small gains with the index rising 60.8 for the week ending May 17. This could indicate a bottoming out and possibly the start of some recovery in temp employment. But we’ll have to watch the numbers — and, of course, the COVID-19 stats.

Look for more analysis of this topic on Spend Matters PRO later in the month.

What about the online world?

While the major reductions in core staff augmentation may have bottomed out during Q2 2020, what has been happening in the world of B2B online work/services platforms? Did they behave differently from the rest of the industry?

The Online Labour Index (OLI)

The Online Labour Index, a global measure (here a 28-day moving average) of work activity on a number of large online platforms, looked like this:

For the week ended March 3, the index stood at 150.8. For the week ended April 9, the index was at 130.1, but it increased to an all-time high of 172.6 for the week of May 20 (a 15% increase from the previous high of 150.8 over a matter of two months). The top two work categories that drove this uptick were Software and “Creative and Media.”

From May 20 to 26, the moving average index has declined slightly. We’ll have to watch this over the next few months to see if there is an upward trend at work here.

Upwork

As reported by us this month, Upwork, the online freelancer marketplace and managed solution provider, reported its Q1 2020 financial results. The report comes amid the coronavirus crisis, including in March when the economy was in free fall. So even with what was most likely a depressed March for Upwork, the numbers for Q1 were quite good.

• Gross services volume (GSV) grew to $559.5 million, a 15% increase year-over-year from 2019.
• Revenue grew to $83.2 million, a 21% increase over Q1 2019.
• Operating expenses grew by 30%, and marketing expenses rose by 50% inclusive.
• Net loss was $10.0 million, or $(0.09) per share, compared to a net loss of $5.2 million, or $(0.05) per share, in the first quarter of 2019.
• Adjusted EBITDA was negative $1 million compared to $0.8 million in the first quarter of 2019.

Investor expectations were reset, conservatively in our opinion, with a Q2 2020 revenue outlook presented at $79 million to $81 million.

On May 11, Upwork announced new offerings related to the COVID-19 crisis. The first, the Enterprise “Bring Your Own Talent” offering, which enables companies to onboard existing non-Upwork contingent workers for centralized remote workforce management, including payroll, collaboration, cost management and customized reporting. In addition, Upwork Enterprise has added Work Protection, somewhat loosely defined as: “clients can count on great work, and if they are not satisfied Upwork will help make it right.”

Upwork’s shares are trading at $12.44 per share (late on Friday 5/29), bouncing back from a low of $5.40 on April 3. According to Yahoo Finance, Upwork’s market cap is $1.34 billion.

Because it is a publicly traded company, we probably won’t know much more about Upwork until the next quarterly earnings report.

Fiverr

On May 26, amid the COVID-19 crisis, Fiverr announced a “follow-on” public offering of $100 million of ordinary shares. The underwriters will have a 30-day option to purchase up to an additional 300,000 ordinary shares at the public offering price, less underwriting commissions. On May 28, the company announced the pricing of an underwritten public offering of 2 million ordinary shares at a public offering price of $60 per share. The offering is expected to close on Tuesday, June 2, subject to customary closing conditions.

Hot List has noted that Fiverr’s shares were selling at $33.71 per share on Feb. 21. The share price dropped to $21.69 on March 20, and by April 28 the share price had climbed to $39.19. Fiverr’s shares are currently selling just below $61 per share (as of May 29), representing a one-month increase of 50%. According to Yahoo Finance, Fiverr’s market cap is just shy of $2B.

For more info, the preliminary perspective is available on EDGAR here.

Other Developments

In other news, Applause expanded its crowdsourced testing suite to include functional testing. The announcement said that “Applause is the first and only testing services company to offer this coordinated solution, as well as a single dashboard to view all results.”

Clickworker, the veteran microtask crowdsourcing platform, announced it had “passed the 2 million registered crowd member mark,” and “more than doubled its crowd in the last two and a half years.”

And then there were the several johnny-come-latelies in the online freelancer platform space: Riverflex, 30 Hours, and (yes, you heard this right) Giggrabbers. Could there be a future unicorn among them? I suppose one never knows (an old, jaded analyst says cynically).

VNDLY gets a top-off

VNDLY, a leading cloud-based VMS and workforce management systems provider, announced a Series B-1 funding round of $8.5 million led by Madrona Venture Group. As we know, this brings the company’s external funding total to $57.5 million, with the previous Series B investments totaling $35 million in 2019.

According to the announcement, “the company, which already has many Fortune 500 clients, will use the most recent investment to continue its industry-changing innovation, global expansion, and product development that includes building out new software modules.” VNDLY announced the start of its international expansion earlier this year.

The announcement also reported a new highly qualified board member, Steve Singh. Prior to joining Madrona as managing director, Singh had been the former CEO and co-founder of Concur, which was acquired by SAP in 2014 for $8.3 billion. Singh currently serves as the chairman of Talend and is on the boards of DocuSign and WaFd Bank. “As the contract workforce grows,” Singh is quoted as saying, “VNDLY’s cloud-native vendor management solution gives employers and contractors an AI-based platform that adapts to the changing needs of both groups. I am looking forward to working with … the VNDLY team to build the market-leading workforce management company.”

Fintech for freelancers remains active

As we noted in the last Hot List, the freelancer/SMB banking (neo-banks, challenger banks) and payments remains a dynamic market segment, where the COVID-19 crisis is putting pressure on some of the players, but may be opening a new pathway for others. Here are the developments that caught our eye:

Monzo on the ropes

A May 15 Finextra article (citing the Financial Times) reported that “UK neobank Monzo is seeking fresh funding at a reported 40% discount on its previous valuation.” The article said “the bank is close to agreeing to a deal that will value it at around £1.25bn ($1.5 billion), compared with the more than £2bn ($2.5 billion) valuation secured at its most recent funding round last June, says the paper, citing several people familiar with the negotiations.” Monzo is one of the first and largest neobanks catering to small businesses.

Citing FT, Finextra reported that “Monzo plans to raise between ($86.1 million) and ($98.4 million) to see it through the coronavirus disruption. This would secure its cash position into the second half of 2021.” If the deal goes through, Monzo “would be valued at roughly ($1.5 billion), a steep drop from its ($2.5 billion) valuation in June 2019.”

Also reported is that a “source involved with the talks told FT that the deal could close in 30 days, but the final numbers for funding or valuation are not confirmed.” The bank has already raised $394.1 million across 14 funding rounds.

In 30 days, we should know if Monzo is going to be a survivor of the COVID-driven economic crisis — or not. In the meantime, we can see that there is more than just struggles in the segment.

Penta going gig

In May, the neobank Penta announced it was offering its product and services to solo self-employed people. Penta allows small businesses — and now self-employed workers — to apply for a business account within minutes and receive a German IBAN, debit cards for expense management and other financial services. The company is headquartered in Berlin, with offices in Milan and Belgrade.

According to the announcement, “up until now, Penta’s 20,000 customers have mainly been small and medium-sized enterprises with 2 to 50 employees, as well as founders. As a first step in December 2019, Penta also started onboarding freelancers with at least one employee such as doctors, notaries, lawyers and sole proprietors such as craft businesses in its range of services for the first time.”

Penta’s press release states that “just like small and medium-sized businesses, freelancers and self-employed professionals can now benefit from Penta’s full banking service, which includes features such as multi-user access for the accountant, integrated accounting software or multi-account aggregation. Future services such as cash flow forecast and the possibility to open sub-accounts with your own IBAN are also important for the self-employed as well as for entrepreneurs in order to manage their business in the best possible way.”

Marko Wenthin, Penta’s CEO, said: “With the broader positioning and expansion of our target and customer audience, Penta becomes the platform for all entrepreneurs, whether with or without employees, in foundation or already active on the market for years, whether doctor, pharmacist, online shop, translator or carpenter. Anyone who wants to manage their finances quickly, easily and digitally and who is looking for a direct interface to accounting or for their own tax adviser can benefit from our platform.”

Oxygen is breathing fine

In mid-May, the U.S.-based neobank Oxygen announced its “launch of a new digital banking solution specifically designed to meet the unique needs of freelancers and digital natives.”

According to the press release, “Oxygen has built a platform from the ground up to provide flexible banking solutions to the millions of U.S. professionals who thrive on multiple income streams, contract work and freelance gigs.”

The company, founded in early 2018, also announced its participation in Visa’s Fast Track program and its use of Visa Direct, Visa’s real-time push payment solution, to ensure its freelancer customers can be paid quickly.

“Oxygen is an all-in-one banking platform that can intelligently manage both the personal and business sides of its users’ financial lives,” said Andre Bliznyuck, general partner of Runa Capital, an Oxygen investor. “That is critical for gig economy workers, who often don’t distinguish between their personal and business lives.”

Oxygen offers access to a consumer and small business account with zero monthly fees

The new Oxygen mobile app is available nationwide for iOS and Android devices. According to the press release, users of the Oxygen app gain access to other features like cashback for everyday expenses.

Other developments

In May, according to the EU Startup website ABH Holdings SA (ABHH), a Luxembourg-based multinational banking group offering a range of banking and financial services, is taking a majority stake and investing over €19.7 million into ANNA, a Wales-based neobank founded in 2017. According to the announcement, ANNA, which “stands for ‘Absolutely No-Nonsense Admin’ will continue as an independent brand, but with more resources behind them to invest into new products and grow the businesses.”

It seems May was a very busy month for ANNA. According to the Fintech Times website, global payment solution provider Payoneer and the UK-based neobank ANNA are partnering to provide “easy, secure international payments for small businesses and freelancers.” ANNA’s SMB and freelancer customers will be able to receive international payments in U.S. dollars or euros into their ANNA accounts.

When you’re hot you’re hot …

So that brings the June 2020 installment of the Contingent Workforce Insider’s Hot List to a close. We plan to be back with more next month. In the meantime, stay safe, stay the course and all the best.