The future of talent marketplaces – our investment in Pickr
One of our recent investments was in Pickr, a talent marketplace for sourcing, contracting, managing and increasing the productivity of skilled workers, initially in telecoms and infrastructure, but with plans to expand into construction, logistics, and manufacturing.
Pickr’s insight is straightforward: industrial businesses win and lose contracts based on the speed at which they can scale their workforce, and all companies supplying workers in industrial businesses flex their labour force using recruitment agencies. Industrial businesses win repeat contracts based on the quality and productivity of the workers they deploy.
The recruitment agency business is low tech, expensive for what it offers and fragmented and does not help workers beyond placing them in a role – i.e. it does not offer any way for workers to increase their productivity.
Pickr is building a technology led recruitment and worker-management platform specifically for this large and complex market.
And here’s a customer testimonial that gives a brief overview
A Brief history of talent marketplaces:
What makes a successful (vertically-focused) talent marketplace?
Benchmark Capital in the US has successfully invested in product & talent marketplaces over the 3 eras described above (such as eBay, OpenTable, Yelp, Zillow, oDesk, GrubHub, 1stdibs, UShip, and Uber). Bill Gurley, a founder of Benchmark, defined 10 characteristics of successful marketplaces. Of the 10, I believe Pickr will excel in at least 6 of these and is clearly strong in 3 more – a 9 out of 10. Number 10, “network effects” are less applicable to Pickr.
Bill’s top 10:
- New Experience vs. the Status Quo.
- A marketplace cannot simply aggregate supply & demand, it must provide additional value to both sides. Pickr does this in many ways – some of which are described in the below characteristics. One of their innovations is to push the best suited workers to industrial companies before those companies have actually asked for a worker. Pickr already knows the kinds of workers that their customers have the best experiences with and gives them the chance of contracting with these workers before even sending a request leading to material time saving. An entirely new approach to the agency model.
- An example from Benchmark: “OpenTable enables the consumer to search reservation availability across hundreds and hundreds of restaurants in a matter of seconds. That capability never existed before, and as a result the delta of the new experience vs. the incumbent experience (dialling restaurants one by one) is extremely high.”
- Economic Advantages vs. the Status Quo.
- Pickr’s data rich approach to matching workers to jobs allows it to place workers on average in 15 hours vs the market average 12 days, and through simple behavioural science techniques reduces 1st day no-shows from a 47% average to 9%. The implications of these improvements in this particular market are profound – the demand for workers needs to be filled fast for industrial businesses in the space to win lucrative contracts which come and go extremely quickly. Specific knowledge of these vertical markets and a solution designed specificially for them is necessary. Generalist talent marketplaces will not work here.
- An example from Benchmark on AirBnB: “For the property owner, the income is “found money” that simply didn’t exist prior to the marketplace. And in many cases the consumer receives a better price as well.”
- Opportunity for Technology to Add Value.
- Over time Pickr will gather data on successful and unsuccessful matches, build richer profiles of workers and the industrial companies, leading to better and better matching. Customers of Pickr (on the company side) are already asking if they can use Pickr’s productivity tools for their full-time workforce. Pickr can also help create “gangs” (the term for teams of workers in the telecoms industry) selecting the best mix of individuals for a particular job from amongst their huge database of workers who would not know each other and thus not be able to form a gang of the same quality. This is a big deal for gang leaders who often struggle to find workers in order to win a job.
- An example from Benchmark: “At Uber, the system has “perfect” information in an industry where just two years ago there was a complete lack of visibility (on both sides of the network) that led to enormous waste of resources. Uber’s system enables higher car utilization, more fares per hour for the driver, and faster and faster pickup times for the consumer”
- High Fragmentation. High buyer and supplier fragmentation is a huge positive for an online marketplace.
- The worker side of Pickr’s marketplace is highly fragmented as it is made up of individual workers and the occasional gang. On the buyer side, the market is also fairly fragmented. Although BT Openreach or Virgin for example will be the head contract holder (called a Statutory Undertaker in the industry) for fibre laying across the UK, there are multiple layers of suppliers to the statutory undertaker, leading to a fragmented bottom layer of contracting firms doing the work.
- An example from Benchmark: “The large airlines have all but obliterated the economics of online ticketing marketplaces, leading all the online players to focus on hotels where the fragmentation and therefore the economics are higher.”
- Friction of Supplier Sign-Up.
- Sign-up friction in any digital business is to be avoided, given how used to extremely easy user experiences as individuals and professionals we have become. If it’s hard, people will look elsewhere as there is bound to be an easier alternative out there, given how competitive most markets have become in the digital world. Pickr allows workers to sign up and join their marketplace with very little data up front and only 6 clicks. Over time they gather more data about the worker, including a verified ID document, but the process has been designed to minimise friction.
- An example from Benchmark: “At companies such as Yelp, Uber, and GrubHub, new city launches are relatively quick after a process model had been established for how to launch those cities. The opposite was true for OpenTable where the installation of a personal computer and internet connectivity were part of the early roll-out requirements.”
- Size of the Market Opportunity.
- Always a key focus of ours at Episode 1 for obvious reasons. Large companies cannot be created in small markets. As I often remind myself, an entrepreneur may have found a gap in a market, but is there a (big enough) market in that gap. In Pickr’s case, yes. A £2.5B sized gap. That is the current scale of industrial spend on recruitment fees through traditional recruitment agencies. All is addressable by Pickr.
- An example from Benchmark: “An interesting example is healthcare, which is unquestionably a very large market. However, the oligopoly of large players in this market controls a massive percentage of market and is unlikely to support a new alternative. You can also miss-analyze TAM in the other direction. In the case of OpenTable many investors missed the opportunity by mistakenly assuming the TAM was too low. In this case, they underestimated the percentage of the market that OpenTable could penetrate. OpenTable recently passed 10 million diners a month with less than 20% of transactions in North America currently online. You must combine a TAM analysis with the likelihood of marketplace success and penetration.”
- Expand the Market.
- Can Pickr expand the market? Almost certainly, given the high quality of service they provide, industrial companies will become more confident to use flexible staff and thus increase the %| of the workforce that is flexible.
- An example from Benchmark: “oDesk’s presence increases the number of first time software outsourcers. Uber’s ease of use and simplicity have led many of its users to greatly increase the number of times they use an alternative car service. Some customers now use it as a second car alternative. As such, the company is meaningfully expands the market for black car services, which is in turn a huge boon to the suppliers that share in the economic expansion.”
- Pickr operates in a market that is constantly in flux. It’s not entirely clear to me yet why this is. You would have thought that a long-term government plan to lay high speed fibre, for example, would lead to easy to define plans. But that is not the case. The jobs spread down from the statutory undertaker (e.g. OpenReach) via layers of suppliers until the actual workers are contracted by the penultimate layer. Our other portfolio company IAND tackles this complexity of large infrastructure projects, so it’s a situation we know well. Workers and gangs are used for specific jobs and then released to find other work in almost weekly cycles, which is a boon for Pickr.
- An example from Benchmark: “Many failed marketplaces attack purchasing cycles that are simply way too infrequent, which makes it much more difficult to build brand awareness and word-of-mouth customer growth. Another repeated mistake is attacking verticals where a satisfactory supplier “match” end’s the customer’s need to re-enter the market in search of an alternative. This second point negatively impacts many vertical service provider markets (such as pediatricians) where customers are actually prefer a monogamous relationship.”
- Payment Flow.
- Being in control of the money (i.e. handling the flow from the demand through to the supply and extracting your commission in the mean time as opposed to allowing the supply to pay the demand an invoicing post-fact) is always superior, despite technical challenges that can arise from being so. In Pickr’s case they do handle the flow of payments but in today’s regulatory environment where short-term workers’ rights are (quite rightly) being looked at carefully, handling the cash and actually paying the labour can lead to additional responsibilities falling upon the intermediary, even though they probably should not. It’s an area we are looking at carefully with Pickr as the laws evolve in real-time as the business grows.
- Network Effects.
- This is the one characteristic that is less applicable to Pickr, though I’m sure the company could make an argument for it! CEO’s always can…. There are clearly benefits from having more workers for the industrial companies that need it – faster and faster and better and better matches, + all the data science opportunities that will flow from larger volumes of data. In my opinion, this is less true for Pickr than for other marketplaces, however.
- An example from Benchmark: “In the early days of OpenTable we noticed that the reservations per restaurant in a given city were correlated to market penetration. Clearly, the more restaurants that were on the network, the better the value proposition was for the consumer. Something similar occurs with Uber. As the company grows, they are able to facilitate more cars on the road, and along with their investment in route and load optimization, this allows for shorter and shorter pickup times. The experience gets better and better the longer they are in the market.”
Talent marketplaces powered by the internet could add $2.7 trillion (or 2%) to global GDP according to Mckinsey. Pickr is playing its own small (but growing) part in that process and we are excited to help the company expand aggressively across the UK and beyond telecoms into more industrial verticals.