At Episode 1 we think of ourselves as stage specialists, investing in amazing founders with compelling insight into important problems. We try to be the best partner in leading them on the journey from Seed to Series A, and we invest opportunistically with no overarching thesis.
However, we do research ideas we like and develop patterns we see in the market, and we wanted to share some of our thoughts in this multi-post blog.
Theme 4: The Way We Work Now
So this one is obvious – work is changing and all the plumbing related to it needs to change as well. But it is an enormous transformation that is really still just getting underway – governments, corporation and individuals are still waking up to the new realities. We need the great thinkers, entrepreneurs and legislators to create nothing less than the post-industrial social and economic contract.
Now I wont win any prizes for telling anyone that the idea of the company man is dead. You remember the company man – join a firm, let them train you, take care of you and in return you dedicate your career to them, they throw you a retirement party where management says nice things about you and everyone stands around eating cake. Made sense in the industrial era, not like that in the age of information – and you can use whatever label you want for there are many. For starters we have – “The knowledge economy”, “the gig workforce”, “startup nation”, “the portfolio career”, “the contingent workforce” or my current favorite – “boomerang employees”. Judging by buzzword bingo alone, our relationship with work has fundamentally changed.
“Judging by buzzword bingo alone, our relationship with work has fundamentally changed.”
Look inside any large corporate and you will find lots of corroborative evidence – reported headcount numbers hide a huge contracted workforce that can be of the same order of magnitude as those employed. It’s not unusual to find large companies spending billions of dollars on outside services – whole layers of knowledge work have been spun off and are being delivered by outside specialists. Whether it’s tax experts, advertising and design specialists, HR and recruiting agencies or any of the 100 flavors of IT we find necessary these days, corporations have decided you get better skills in a more cost effective fashion on the external market. Meanwhile, at the other end of the spectrum, people are building micro-enterprises around their passions, or setting themselves up to offer unique experiences to niche audiences. They are merging lifestyle and vocation as never before, funding career breaks or travel plans with part time gigs, paying their way through an education or retraining and combining part time work and lifestyle in ways that suit their personal goals.
In short the whole traditional model of the enterprise has been deconstructed and the ties that bind employees to firms are weaker than they have ever been. Powerful social and economic trends are driving this, but it is enabled by technology – we have already seen what a powerful impact a really successful platform like Uber can have on a workforce, or the opportunities that exist to create a great business like Xero by providing simplified intuitive professional services to the SMB marketplace. But we think this trend is just getting underway.
“…ties that bind employees to firms are weaker than they have ever been.”
There are lots of places to go fish. The relationship between an enterprise and its employees is fundamentally a contract to provide labor or services in return for payment. Now that many of those services are found outside the company, those inside need all sorts of discovery and management tools to become good virtual hirers, find the best performers and distribute best practice. They need to be able to share and manage documents and IP, to provide controlled access to workplaces, and to share successes and enforce standards. In my experience most companies are hardly out of the starting blocks here – many typically don’t even know how much they spend on who to achieve what, or how successful they are at doing it.
But the corporation historically also did much more than just provide work – it created structure, provided tools to perform that work, offered career development, training, travel opportunities – and of course a social environment. All these functions need to be recreated for the long tail workforce – there is a need for flexible and configurable office space (physical as well as software tools), for access to professional training and certification, for peer communities, and for compliance, financial planning and HR services that are designed for the individual and that can be consumed in an intuitive and affordable way. In addition there is a substantial role for legislators to figure out where the private sector stops and the public sector starts in this new reality. As much as the new ways of working create freedom and flexibility, they remove a safety net and access to the kind of expertise that put together healthcare and pension planning services for large corporations. The need for this hasn’t gone away, and alliances of government and employer and provider need to figure out the new model.
“Corporation historically also did much more than just provide work…All these functions need to be recreated for the long tail workforce.”
To pull this off, we will need better shared, secure, and auditable virtual workplaces. Teams coming together to solve project-related problems need shared communication environments, an ability to co-develop designs and documents, and for ownership and rights to be carefully managed as the project evolves. Invoicing and procurement processes at large companies are often at complete odds to the needs of small businesses and individuals, and will need to be rebuilt. In fact pretty much everything that was handled historically by being inside the company walls now needs to be rebuilt – a whole next generation of virtual economic plumbing will be needed to construct the post industrial workplace.
“A whole next generation of virtual economic plumbing will be needed to construct the post industrial workplace.”
For example, think of the following illustrative problems. How will you ensure client confidentiality when 5, 10 or more enterprises may have worked together to define a proposal? How will you guarantee contractual or regulatory compliance when most of your workers are not employed directly? How can you innovate when the most creative part of the work you do is delivered by a series of small agencies? And how will you build teams when individuals are distributed across the globe and may never actually meet in person? These are big challenges – and many are yet to be resolved.
When talking to entrepreneurs working in this area we are looking for teams who have deep insight into whatever aspect of this evolving sector they are addressing. Lot’s of people have identified problems; fewer have insight into how to drive adoption of change customer behaviour. One particular challenge is that there are all sorts of business models in play here. Some behave like consumer startups where the idea is viral, replicable and very sticky – it’s all about execution and funding, which is mostly about the quality and experience of the team at the stage we invest at. Some have more marketplace or network characteristics, and may start by needing slower enterprise sales, adoption across an ecosystem or need a significant investment in technology development.
Lot’s of people have identified problems; fewer have insight into how to drive adoption of change customer behaviour.”
We like to see teams target large problems and that have a clear understanding of the market they are addressing and its likely evolution. We want you to demonstrate you know where the economic value someone will pay for is and what the likely business model will be, and we want a strong team, with relevant experience and probably pretty good bench depth in multiple departments – CEO, operations, sales, CTO e.g. These are often tough plays, but with very high scale potential so talent needs to be strong and broad – and despite the temptation not something you should buy-in at this stage!
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