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Outsourcing: Fabio Rosati, CEO of Elance (Part 1)

Posted on Monday, Dec 12th 2011

Followers of this blog may recall that Elance was featured on Deal Radar in 2008. Founded in 1999, the Mountain View, California–based company continues to give outsourcing competitors like oDesk and a run for their money.

Sramana Mitra: Hi, Fabio. Would you give me some background about you and also about Elance. I know you’re not a founder, but give us a bit of the genesis of the Elance story.

Fabio Rosati: Sure. Let’s start with how I came in the picture. Elance was started out of an HBR (Harvard Business Review) article that was published by professor Tom Malone in 1998 or 1999. It was called The Dawn of the Elance Economy. In this paper, he basically said that one day the Internet is going to change more than e-commerce. It’s also going to change the world of work, and envisioned a world where businesses will want individuals, would be able to operate, aggregate, and disaggregate through the Web. So, he was the original visionary behind the concept of the Internet [and how it] changed the way people work.

Enter Beerud [Sheth], who was going to MIT at the time. [He] put together a business plan, got some funding, pitched it to Kleiner, Perkins [Kleiner, Perkins, Caulfield & Byers]. He successful in securing a round of financing from angel investor Ram Charan and then John Doerr from Kleiner, Perkins. The company was launched in 1999. It was originally launched under the vision of an eBay for services, which at the time seemed to make a lot of sense. [It] was close to a successful parallel of the model. But by the time the market changed and the bubble burst in 2001, it was very clear that the idea was too early, too soon, not really viable. [It was] very expensive to build all of the infrastructure. Imagine, at the time, Skype didn’t exist. PayPal didn’t exist. Online profiles didn’t exist. Most people had horrible Internet access. It was very hard to deliver a really good user experience. It was also very, very hard to deliver a good outcome, almost impossible. So, it was hit or miss.

The business was struggling to deliver scale. At the same time, the board was looking at what was going on in Silicon Valley. They decided together – the founder and the rest of the board – to change direction, to basically apply all of the talent that was available in the company to see if Elance could solve a different type of problem, which is an enterprise problem: How does the enterprise manage contractors? Can the company pivot into a software company? I came in at the time.

I had grown up in Italy. I grew up in a family of serial entrepreneurs. I have entrepreneurs on every side, every relative, everybody.

SM: Where in Italy?

FR: Florence, Italy. It’s a beautiful city, gorgeous, the cradle of the Renaissance. I had the opportunity to study in the U.S. I had originally come to study in the U.S. with the idea of going back home and becoming an American-educated Italian entrepreneur. But I didn’t because my family lost their business. They had a complete turn in fortunes and lost everything. So, about halfway through college, I had my first career pivot – if you like – lifetime pivot, change of plans. I was no longer going to go back to Italy and be an entrepreneur. I was completely on my own, had to start on my own.

SM: Where were you in college?

FR: I was in Georgetown, in Washington, D.C. When I connected with Kleiner to look at Elance, I was in the management consulting business. I had been in consulting for 10 years. I was running a strategy practice globally for Capgemini, which had just acquired Ernst & Young Consulting. My background was actually a strategy company called Gemini Consulting, which Cap had bought years earlier. So, I went from Gemini to Capgemini’s huge group. I spent a lot of time in Europe. I lived in London. I lived in Paris. I was the CO of a company’s operations in Italy, came back to the U.S. in 1999, and then the merger between all these different parties, Ernst & Young Consulting, Capgemini and Gemini, created a new organization and created the opportunity for me to ask myself what I was doing and leave the world of consulting.

I was incredibly interested in coming to work in Silicon Valley. I had the entrepreneurial gene. I knew this was the place to be, even though my timing was off by quite a bit. But I started at Elance at the end of 2001. Task one was to stabilize the business. Task two was to immediately develop an enterprise software product, go out and sell it … find customers willing to buy it and build a software company. We did exactly that.

By the summer of 2002, after hundreds of sales meetings to enterprises that loved the vision [but] did not want to be the first companies to implement the product that we had developed, we finally got one that said, “Actually, we would love to be the first.” It was FedEx. FedEx was the first customer. It was a huge success, a really successful rollout and deployment that became a great reference for us. And then we added GE, American Express, and Motorola. We were just doing enterprise sales, and by 2005, our technology was being used to manage billions of dollars in contracted spending. At the same time, I felt that what we were doing was not going to create a huge business. In many ways, I felt that our product was a little bit like a spell checker inside word processing.

This segment is part 1 in the series : Outsourcing: Fabio Rosati, CEO of Elance
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