Everything is bad: Why Upwork freelance-exchange valuation may soon become zero

Following the companies Theranos , uBeam and Lending Club , another member of the unicorns club (startups with a $ 1 billion valuation) got into the scandalous story - Upwork freelancers platform, the website zerohedge.com writes . The latest quarterly report brought down the value of the company. Upwork is now in free fall: the initial investment of $ 15.8 million made in 2012-2014 is now estimated at about $ 7.3 million.

At the same time, the third in the last two years, the CEO has increased the commission for users of the service more than twice. In fact, they canceled a fixed rate of 10% and tied it to earnings. Now the contractor, who receives less than $ 500 for a one-time order, will give the service 20% of its value (plus a transaction fee).
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In March 2014, the two largest freelance exchanges - Odesk and Elance - teamed up to counter the pressure of competitors and solve the problem with the outflow of users from Elance. A new platform called Upwork. According to information for March 2014, 15 out of 100 categories on the Elance website showed negative trends and user outflows. At the same time, investors from the T. Rowe Price New Horizons fund, judging by their reports, clearly lost interest in Odesk and reduced investment in the company during 2012-2014.

In August 2014, the combined company managed to attract a total of $ 30 million from Benchmark, FirstMark, Sigma West, NEA, Stripes Group and T. Rowe Price. In the annual report of T. Rowe Price New Horizons of December 12, 2015, the Upwork estimate at the beginning of its existence exceeded $ 1 billion.





Experience has shown that the merger of the two exchanges was a serious mistake. Prior to this, the Elance list had 78,000 orders, Odesk, without registration, showed approximately 48,000 orders available. As of May 20, 2016, the united Upwork issues 85,579. The more powerful and more professional community of Elance has been forced to cooperate with the less prestigious Odesk community. This led to the loss of 1/3 of orders placed on the platform. The union itself was made so clumsy that in fact the whole community did not survive this meat grinder and “merged”.

In fact, even the number 85,579 is not what it seems at first glance. A huge number of ads displayed in the list, overdue, were loaded weeks, months or even a year ago. The service tries to hide this fact, allowing users to search only by the latest offers, and not by their entire list.

In his “strange” interview, CEO Stefan Kasril explained the decline in the number of jobs on the resource: “Historically, we had a fixed rate for work performed. But honestly, this was not the perfect solution. For short-term projects on the site, we incurred serious costs, and in the traditional settlement system they were not profitable for us. Therefore, it does not make sense for us to continue supporting short-term projects and increasing their presence on the platform. ”

The company was attacked by criticism after Fabio Rosetti, CEO of Elance, Gen. Odesk Harry Svorth, and a large number of senior managers left it.

At the same time, T. Rowe Price continues to cut investment in its assets: the initial $ 15.8 million turned into $ 10.296 million by 2015. In January 2016, Elance platform was completely disconnected from injections.

At the beginning of this year, rumors were spreading that CEO Kaslar was trying his best to reduce the company's costs. He fired the entire international development team. Upwork also tried to get rid of low-income freelancers by restricting access to orders. Freelancers from poor countries like Bangladesh are on the list of refusers.

All these movements did not help to increase the financial turnover of the service. This led to the fact that in the first quarter of 2016, T. Rowe Price was forced to reduce the company's value by 10% for each month. The value of their investments fell to $ 7.3 million, according to a quarterly report.

If the shares fall at the same pace, then by the end of 2016 Upwork will not be worth anything.



Raising the reward twice looks like a gesture of despair to save the sinking ship. The choice of a new long-term strategy for working with individual clients to increase revenues, instead of a bet on order volumes, may be erroneous. New pricing is presented in the picture (on Habré, posts dissatisfied with the new scheme of users of the exchange were already published ):



Among other things, Kasril introduced a new calculation of fees for money transfers between customers (2.75%) to compensate for the growing costs of payment services. That is, the total amount of commission for clients of the platform working with projects from $ 500 or less will now be 22.75%. This makes Upwork the platform with the highest tax for low-income workers in the world.

All these steps received a negative assessment of the users themselves. According to a private opinion poll covering 2,000 people:

• 84% of respondents are very unhappy with the new pricing policy on the platform;
• 79% are going to leave the platform in the next 6 months (51% of them set a period of two months);
• 92% plan to simultaneously look for customers / performers outside the platform.

As a final touch to the picture: Kasril recently gave an interview to the Harward Business Review , in which he compared himself with Gates, Larry Page and Mark Zuckerberg.

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