Elance is a marketplace which matches freelance design, technical, writing and other professionals with companies that need their services in a timely manner. The company was founded in 1999 by Beerud Sheth and is headquartered in Mountain View, California.
Companies who need freelancers have two ways to find the appropriate person via Elance. They can go on the site and search for professionals by category and contact them directly. The other option is to put up their project on the Elance site and professionals interested in bidding for the project will contact the company with their quotes. On completion of the project, the payment and 1099 is handled by Elance. Both options are free for the business owner. Freelancers who are looking for work register on the Elance site and build a profile and reputation over time. There are various membership plans ranging from $10 to $40 per month in subscription fees. ELance tried a Final Value Fee (FVF) business model earlier, whereby, they charged freelancers a % of the total project value. Today, however, the business is entirely Membership Fee based.
In 2002, Elance introduced the industry’s first comprehensive solution for Services and Contractor Management which helped large organizations like American Express, BP, FedEx, GE, Motorola and others to streamline and automate the process of finding and managing temporary service providers. In 2006, Click Commerce acquired this business for approximately $15 million and an estimated $7.5 million in annual recurring revenues.
Often referred to as the eBay of services, ten years after its inception, Elance is still very popular with the freelance community simply because it works. Service providers don’t mind spending the monthly subscription fee, because proactive members earn anywhere from $1000 to more than $5000 monthly. Those who aren’t very happy with the resource, complain that many of the bidders are from India, Pakistan and China and are willing to do projects for far less than their western counterparts, thus making it difficult to procure a project.
Compete.com says the visitors for March 2008 was approximately 225,000 and the monthly unique in the US alone is around 64,000 (Quantcast). Its main competitors are Odesk.com (charges no membership fee but charges a commission/FVF) and Guru.com (freelancers register as free or subscribing members while employers post their projects at no charge).
In February 2000, the company raised $12 million in its first round of funding from leading venture capital firm Kleiner Perkins Caufield & Byers. Two general partners of this VC firm, John Doerr and Joe Lacob, are on the Board of Directors at Elance. Later in 2000, Elance received its second round of funding and raised $50 million from five investors led by Pequot Private Equity Group. Kleiner Perkins also made a substantial investment in this round with Integral Capital Partners, Charter Venture Group and Citigroup.
eLance acquired CascadeWorks, a NEA company that built software used to manage spending on supplies in an all stock deal in 2003. It appears that the acquisitions did not really produce much value.
Today, Elance does about a million dollars a week and aims to make $200 million in revenues by 2009. Its revenues in 2007 was $47 million. The company’s valuation, if it were to exit today, would be around $200-$250 Million.
There are many takers – the job Boards (Monster, CareerBuilder) are the most likely ones. Joining forces with LinkedIn, however, would be the most interesting and synergistic move that would give LinkedIn an alternate revenue channel, as well as give eLance service providers augmented marketing exposure.
This segment is a part in the series : Deal Radar 2008