Recent news out of California sets precedent for the relationship between industry giants like Uber and Instacart, and the workers that make their business models possible. Read on to see how this impacts the startups you invest in.
The gig economy is booming and it doesn’t just affect the food (DoorDash) and groceries (Instacart) being delivered to your door or your ability to get around more freely (Uber, Lyft)…
It affects the startups you invest in.
You see, many startups rely on this alternative workforce of freelance workers to take on projects or “gigs.”
Anything from website design and development to advisors and tech support.
But they don’t just rely on them to get work done, many of them build their entire business model around the speed and scalability offered by freelance workers.
Today we’re taking a look at Proposition 22 in California and what it means for the startup community.
What is the Gig Economy?
There is a new economy that grew outside of long-term contracts and nine-to-five work hours.
With employers and workers connecting from across the world instantly, opportunities have opened up for all. The days of finding a job in your neighborhood are gone, and the global gig economy is taking over.
Freelancers, consultants, and independent contractors are what we call “gig workers”.
Legally, these workers are entrepreneurs. They are their own bosses, make their own hours, and often follow careers that align with their passions.
Startups now live on the gig economy. They can tap into an ocean of candidates to hire talent and spend less doing it than ever before.
What was just something for struggling creatives and side-hustlers a few years ago is today a trillion-dollar industry.
Data Says That the Gig Economy Is Here to Stay
If we just turn to the data, we can see that the gig economy is growing rapidly. It has a strong claim on the future workforce.
Today in the U.S., two-thirds of major companies use freelance contractors. Even bigger, around 36% of adults do some kind of gig work. And 44% of them make their primary income via gig work.
Freelancer marketplace Upwork estimates that by 2027 there will be 86.5 million freelancers.
But is this a choice or are gig workers forced into this?
Seeing as around 78% of them say they wouldn’t quit their gigs for a full-time job, I’d say it’s pretty obvious.
And it seems as though there is some gig-envy: one-out-of-six traditional workers report a desire to become primary independent earners, aka full-time gig workers.
Proposition 22 Changes the Game
Proposition 22 in California was possibly the most important piece of legislation for the gig economy ever.
In the most populous state, voters took to the booths to decide whether gig workers who drive for rideshares or delivery would be considered employees or independent contractors.
So what’s the big deal?
If enough people voted “no” companies like Uber would’ve had to classify their drivers as traditional employees and give them full benefits.
This would drive the costs through the roof, increase competition for drivers, and all-around demolish the business model that made them so successful.
Fortunately for them, voters chose to define these workers as independent contractors. This keeps costs low for the businesses and maintains the job freedom and flexibility that many gig workers love.
Big companies like Uber, DoorDash, Lyft, InstaCart, and Postmates donated huge sums to swing the “yes” vote. Together, the gig economy giants funded $202.97 million, the most any initiative campaign in California’s history.
This move sent a stern message that these gig-fueled companies will use their deep pockets to fight other initiatives that could kill their model in other states.
Startups Get Huge Benefits From Gig Workers
You can probably tell by the mountain of cash those startups paid that gig workers are incredibly important to them. This gig model has many unique advantages.
First of all, it’s easy to find, onboard, and pay a freelancer. There are huge pools of potential out there, and without all of the contracts and red tape, workers can get working and get paid almost instantly.
Next, freelancers don’t need office space, reimbursements for business expenses, insurance, or retirement plans. By keeping a lean and flexible workforce, startups win big.
And we all know how important a startup’s talent is. The team is everything. Now, startups aren’t region-locked. They don’t need to hire only from their city or expect employees to move cross country. They now have access to the entire global pool of independent contractors.
With software and tools for startups, managing a gig-based workforce has never been easier. An entire HR department can be replaced with a single application.
Startups Aren’t Backing Down From the Gig Model
Innovation and investment into the gig space show huge confidence in its future.
We already know about the COVID-19-fueled rocket ride of delivery startups like DoorDash and InstaCart. These companies have won big during the cultural shift, but have entrenched themselves deeply enough to keep crushing it in the future.
Team management apps like Asana, Trello, and Slack are made specifically with the gig economy in mind. They allow teams to connect and collaborate remotely, digitalizing the traditional office.
And of course, sharing economy giants like Uber, Lyft, and Airbnb (yes, sharing landlords are considered gig workers too!) have flipped the economy on its head.
The huge investment into these companies, and their continued success, point toward nothing less than a permanent shift in the way people are hired, work, and get paid.
Predictions For the Future of the Gig Economy
As things continue to progress, the gig economy we know and love will evolve into a mature and all-encompassing institution.
Here are the top trends to look out for:
- Regulation will catch up.
Just like Prop 22 recognized and upheld the workings of the gig economy, so will many future initiatives.
While it’s clear gig workers won’t be considered employees with all the fixings, more work will be done to give them protection and benefits.
After all, the better things are for gig workers, the better they are for businesses. And those businesses are willing to throw their weight around to protect the gig economy.
- High-ranking workers will join the party.
Right now, when you say “gig worker,” most people think of rideshare drivers, consultants, and freelance writers.
In reality, the gig world is opening up to include more experienced, specialized, and senior employees.
The remote working puzzle is now solved and companies have proven to themselves that teams can be led by totally remote leaders.
The next step, and something I believe we will see in the 2020s, are more managers and leaders taking an independent role in companies as a side hustle or even a full-time job.
- Opinions will change.
The idea that long-term employee work is superior to freelance is going away fast.
Many workers value the freedom and flexibility that only independent work gives. People quit their jobs and work for themselves for these very advantages.
Moving forward, I think gig working will become more of a badge of honor. Something that shows that you are a self-motivated worker and someone who knows what they want.
Want To Learn How To Invest In Startups?
Listen, I believe right now is the time to learn how to invest in startups. This is one wave I do not want to miss out on — which is why my sole focus lies in looking for some of the fastest-growing companies out there that haven’t gone public yet.
This is one unique opportunity in history, and I think you’re doing yourself a disservice if you’re not at least learning how to trade.
How can you join in on the action?
I put together this short video about one startup The Boardroom is invested in. Inside, you’ll learn a bit of Angel Investing…
After you watch, there will be a special offer. To be quite honest with you, once people start to catch wind of this, I may be forced to take it down.