With New Funding, Fiverr Seeks to Shape Freelance Market

CEO Micha Kaufman reveals how his site, which allows clients to hire freelancers, will be the Amazon of the sharing economy.

Fiverr CEO and founder Micha Kaufman sits, surrounded by artifacts and a poster of The Incredible Hulk.
Eyal Toueg

“I have no doubt we’ll be a billion-dollar company,” says Micha Kaufman, CEO and founder of Fiverr, after his company announced last week it had completed another round of financing, this time for $60 million.

Fiverr began in 2009 as a website matching service providers and clients for $5. Last week, however, the company lifted that limit with a new tier system, in a bid to allow freelancers worldwide to use Fiverr as their main venue for reaching clients.

Kaufman says the company has grown quickly, experiencing triple-digit revenue growth since its last round of financing in August 2014. “In practice, we more than doubled all our activity in one year, and the pace is only picking up,” he says. “We will continue to invest in rapid growth.”

Fiverr belongs to what has become known as the gig economy. Kaufman says people were a bit skeptical about the idea of such a sharing economy, but believes that skepticism has evaporated in the wake of successes like Uber and Kickstarter. He says 30% of the American labor market is comprised of freelancers.

“By 2020, it will be 40% of the labor market,” he projects. “This market was worth $730 billion last year, from sales of all kinds of services – physical and digital. By 2020, it will be worth $1 trillion,” he adds.

Kaufman says 97% of freelancing is done offline, offering the greatest opportunity since e-commerce was invented 20 years ago. “Online commerce is about 11% of the market,” he says. “It may not sound like much, but it includes players like eBay and Alibaba – huge markets that have room for more than one very big company.”

He says his company does not have any major competition since no one else is doing something similar. He says there may be other players for certain categories that Fiverr deals with, such as translation or design, but his company deals with a much broader market, comparable to Amazon or Alibaba.

“Fiverr is like Kickstarter or Uber – because it succeeded in bringing many activities from offline to online, and to expand the market,” he notes. “Uber is a fantastic example. When it started in 2011 in San Francisco, the ride market in the city was $120 million because there were few taxis on the road. Last year, Uber’s San Francisco market share alone was $500 million. How could it be greater than the entire market? Because Uber provided a solution and made more people order taxis and cars. Airbnb did the same thing with hosting. Now it is the size of the two largest hotel chains in the world, and they still didn’t shrink. It is a market in which the players who will be the most aggressive in grabbing market share will be the next Alibabas or Amazons. So we are making sure the company will have enough fuel in its reserves to keep flying at Mach 2 for a very long time. You have to keep working hard, aggressively and quickly.”

Kaufman says his company has added two million services to its catalog in the past year. He adds that there have been 25 million transactions on the site during its six years, but a third of them were in the last year.

As for the newly raised funds, he explains that they will go into product development, marketing and penetrating geographic areas where Fiverr has been less active.

“The company could make some acquisitions,” he notes. “I think that as the market matures, it will begin to consolidate. The biggest companies will be the ones worth billions of dollars. We are not far from there. I have no doubt we will be one of them.”

Kaufman declined to reveal the current value of the company, which employs just over 200 people – 140 of them in Israel.

He did reveal that the United States is the biggest country in terms of clients and service providers on the platform. He added that people might expect developing countries to be on the service provider side and Western countries on the buying side, but that is not the case with his company – and can even be the opposite.

“A business sitting in India receives graphic design services from an American designer. We have turned it upside down,” Kaufman says. “The talent is all over the world, and so is demand for talent. Our goal is to connect the two. The United States, which is a third of the world economy, is also bigger with us. We serve 190 countries. Besides the United States, we have a major presence in Britain and Australia. Europe is about 20% of our market.”

He says about 85% of Fiverr’s clients are small- and medium-sized businesses, noting that businesses everywhere need services, not just in America.

At the push of a button

Kaufman says his vision is simple. “We want to allow people to buy all their digital services at the push of a button. But Fiverr is also changing the way people make a living. The idea of a 9-to-5 job is dwindling because the secure feeling that steady jobs give is declining. The under-35 generation is rethinking work. They want to work on their own time, from their place, on things that interest them. They constantly change jobs and look for a job they are passionate about.”

He says Fiverr is a place that creates a large community of such people. “In this regard, we also have a very big responsibility. I think we are redefining the way in which people work in this decade, and it is exciting to be a part of this phenomenon. We are becoming a very central hub for the sharing economy.”

In the latest round of funding, Fiverr went with Square Peg Capital, an Australian venture capitalist – with geography playing an important factor in the decision (this funding, for growth, is referred to as late stage). “We spoke with investors who know how to do this,” Kaufman explains. “It’s good to bring in someone who will give us connections beyond the United States and Europe.”

Fiverr could go public down the road, but Kaufman says he does not know if they will choose to do so. “It depends on the market,” he says. “Meanwhile, big companies in the United States remain private, like Airbnb and Uber. It’s a pendulum. The private market is at a maximal value, and it provides fewer incentives to go public.”

The company already generates revenue from its fees for selling services. It might seem, then, that Fiverr does not need another investor to dilute the holdings of its owners and investors, but Kaufman counters this. “When our goal is a billion dollars, we don’t build a company with $30 million or $40 million. It just doesn’t happen,” he says. He believes it is worth bringing in more investors, which he does when his feelings about the business are strong.

“I understand that the next goal is achievable, so I get the confidence to bring more resources into the company to give it the ability to carry out its plans,” he says. “We are here to build a very big company. We have already done something that is rarely seen in Israel and in general in the world. It’s important to us to continue leading from the front in innovation and solution-producing technology. There are imitators – but that is the nature of good things.”

Kaufman says the biggest challenge is always competition. “Our market is still in diapers, so the challenge is the ability to implement the company’s vision, the ability to build a billion-dollar business, and that’s not simple,” he says. “There are a few Israeli companies that have accomplished this – Wix, Outbrain – and we are breaking into their club.”

According to the CEO, Israel is a power in many areas but not the consumer Internet. “We’re basically building the next Amazon for services and not products,” he says. “There is no Amazon in Israel. It’s impossible to bring in workers with knowledge and experience from Amazon. For many things, you need to create the knowledge on the inside. We are creating a field of knowledge that doesn’t exist in Israel.”