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CoVenture Thesis on the Staffing Industry
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Staffing Industry
2
CoVenture Thesis
1Increasing costs of employing full-time workers, due to rising costs of benefits and overhead,
has led to a huge marketplace for part-time and independent contracted work
3Technology has enabled this mass supply of part-time workers to find a demand commoditized
services such as driving
The mass retirement of baby boomers will lead to a large influx in part-time workers who are
trying to supplement their retirement income by working a few hours a week2
4Establishing a trustworthy brand is essential for ensuring scalability for service-oriented
businesses, particularly in verticals such as child or elderly care
1 | Staffing Industry
Source: IBISWorld, team analysis
Industry Overview
$119,666$115,265
$94,865
$109,609
$122,773$127,238 $130,260
$134,039
2007 2008 2009 2010 2011 2012 2013 2014
The staffing industry supplies businesses
with part-time and contractual workers for
limited periods of time. Traditionally,
staffing was mainly limited to office
workers and part-time specialist roles
such as in accounting, industrial and
factory, and information technology.
Today, staffing is an ever-growing market
with more exposure to different verticals
than ever before. Technology has
enabled this market to keep growing with
companies such as Uber.
As a testament to its recent growth, the
staffing industry has grown by 7.2% per
year between 2009 and 2014.
Analysis
US Staffing Industry Revenue
Millions of USD
+c7.2%
US Elderly Population (65+)
Source: Expert interview, Bureau of Industry and Security, Bureau of Labor Statistics, IBISWorld, team analysis
Key Industry Drivers
Cost of Benefits
Number of Part-Time Workers in the US
19.5 19.820.2
20.621.1
21.922.5
23.2
2013 2015 2017 2019
Millions of People
Millions of People
68.7% 69.8% 64.0%
31.3% 30.2% 36.0%
CivilianWorkers
PrivateIndustry
State andLocal
Government
Percent of Total Salary Expense
Increasing elderly
population will
greatly increase
the supply of part-
time worker
As cost of benefits
increase for full-
time workers, more
companies look to
employ workers
part time
Part-time workers increased substantially during
the recession, and has maintained high levels due
to cost of benefits and growing elderly population
24.925.4
27.5 27.4 27.5 27.7 27.8 27.7
2007 2009 2011 2013
+c3.4%
Wages Benefits
Source: Bureau of Labor Statistics, Department of Labor
Increased Supply of Part-Time Workers due to
Aging Population
The labor participation rate for the US
population 65 years and older has
increased substantially from 1994 to
2014. with a major jump over the last ten
years.
The decreasing prevalence of pension
plans, coupled with an aging US
population and growing life expectancy,
will lead elderly people to search for
ways to help supplement traditional
retirement income (social security, 401K,
etc.).
Rapidly improving technology will provide
a greater demand for part-time work and
facilitate the means for acquiring such
positions.
Analysis
Labor Force Participation Rate (for age 65+)
Percentage
13.2% 14.0%
19.7%
41.4%
1994 2004 2014 2024
+110%
Source: US Bureau of the Census
Workers forced to remain in the labor force due
to changes in economy and Social Security Reliance on Social Security
65.350.5 46 39.6
19.2
26.9 27.729.1
6.68.2 11.2 14
8.9 14.5 15.1 17.4
65 to 69 70 to 74 75 to 79 80 and over
Percent of Population
National Retirement Risk Index
Percentage
90 to 99%
100%
Less than 50%
50 to 89%
38%
45% 44%
53%
2001 2004 2007 2010
Social Security has been shown to be a primary source of income for workers 65 and over, and reliance increases steadily
with age. Further, older workers are increasingly at-risk of not being able to maintain a standard of living compared to pre-
retirement. Both of these trends are driving a heightened push towards more part-time employment opportunities.
Analysis
Source: USA Today, team analysis
Increasing Cost of Benefits for Full-Time
Employment
Job creators with over 50 full-time
employees must pay a penalty for not
insuring workers.
The requirement for employers to pay
more health care costs and provide
insurance will increase operation costs.
Franchise owners and large corporations
are being forced to cut hours as a result
of not being able to pay either insurance
or the punitive fines that follow.
Analysis
Health Costs for Employers
Thousands of Dollars
$6.6
$7.0
$7.5
$8.0
$8.5
$8.9
2007
2008
2009
2010
2011
2012
Note: Full-Time Equivalent Employees = number of full-time employee + (total part-time hours worked/30)
Obamacare Provides Incentives for Businesses
to Employ More Part-Time Workers
The annual employer mandate fee (Employer Shared
Responsibility Payment) is a per employee fee for
employers with over 50 FTE employees who don’t offer
health coverage to full-time employees.
The annual fee is $2,000 per employee if insurance isn’t
offered (the first 30 full-time employees are exempt).
The fee is based on whether or not the business offers
health insurance that provides at least 60% total costs of
covered services.
Businesses with >50 Full-Time Equivalent (FTE)
Employees
Small businesses with 25 or less full-time employees can
apply for tax breaks of up to 50% (35% for non-profits) of
their contribution of their employees premiums starting in
2014.
To qualify businesses must pay for at least 50 percent of
their employees premiums and their workers average
annual wages can’t be more than $50,000 and the
insurance must be purchased on the Affordable Insurance
Exchange for at least two years.
Businesses with <25 Full-Time Equivalent (FTE)
Employees
Businesses with >50 FTE employees that do not offer insurance have incentive to restructure their workforce
away from full-time workers towards part time to capitalize on the 30 full-time employees exemption.
Similarly, businesses with <25 FTE employees have incentive to reduce hours worked to apply for tax credits.
One way to do this is to reduce full-time positions to part-time
Source: Work Place Flexibility study, team analysis
Fractionalization of work will lead to improved
flexibility
The fractionalization of work (part-
time work) will lead to more flexible
work hours.
The 40 hour work week is a false
paradigm at this point as most
people either work much more or
much less depending on job
intensity and type.
Rather than driving 7am – 6pm
everyday for a car service company,
drivers for companies like Uber and
Lyft can create their own schedule,
allowing them to spend more time at
home when their family is there or
schedule hours around another part-
time job.
More flexibility also leads to greater
employee satisfaction and
happiness.
Overview Benefits from Studies
Marriott found that the implementation of workplace flexibility
resulted in greater productivity. The result: Marriott discovered that
with workplace flexibility, "low-value work had dropped to 6.8 hours
per week" compared to 11.7 hours without it.
- Study 1
Controlling for a worker’s income bracket and work hours duration,
having work schedule flexibility in the form of an ability to take time
off during the work day and, to a somewhat lesser extent, to vary
starting and quitting times daily, are both associated with greater
happiness.
- Study 2
2 | Existing Ventures
Ventures in the Staffing Industry
Company Funding Business Focus Highlights
Uber $1.5 billion • Transportation
• A proven, rapidly growing employer of part-time
work
• Completely disrupted the traditional staffing
paradigm
1
Work Pop $7.9 million • Hourly staffing• Relatively new venture, looking to increase
prevalence
• Seeking to pair employers with employees using
technology-based profiles
2
Task Rabbit $37.7 million • On-demand
services
• Overextended itself, sought growth tactics faster
than it could sustain
• Now offers small range of services
3
Enriched Unknown • Education• Matches schools with substitute teachers through
an online platform
• Provides auxiliary support for schools and
teachers
4
Fiverr $50.0 million • Guest service
technology
• Micro-freelancing website providing a range of
creative-based services
• Focuses on quality over pricing
5
Source: Uber
Case Study: Uber
Location and
HQUnited States; Headquartered San
Francisco, California
Funding $1.5 billion; Stage: Late
Investors
Massive fundraising with institutional investment from
major equity funds and prominent angle investors
Products United States; Headquartered San
Francisco, California
Description
App-powered on-demand car service provider. Available is over
50 countries and throughout all major cities in the United States.
Features
Easy-to-use-app with quality user interface
Able to review and provide feedback on every driver
Cashless and convenient paying feature within app
Flexible demand-driven pricing to match market forces
Double-sided referral program to increase ridership
Disrupting mature market with tight focus on image and
customer satisfaction
Management Team
Past Experience
Travis Kalanick
Founder/CEO
• Co-founder of P2P file sharing business
Red Swoosh
• Co-founder of Scour, a search engine
Thuan Pham
CTO
• VP of Engineering at VMWare, Westbridge
and Doubleclick
• B.S. in Computer Science from MIT
Ryan Graves
Head of Global
Operations
• Business development for Foursquare and
SocialDreamium
• Enterprise resource planning at GE
Business Description
uberX– low cost, drivers not licensed. Can’t pick up street
hails
Uber TAXI– licensed taxi cab. Can pick up street hails
Uber BLACK– higher cost for premium service, licensed
drivers
Uber SUV– Large cars provide extra room, fits up to 6
Uber LUX – Best cars and service, target wealthy and high
classWide range of product offerings to appeal to many
market segments
Source: Work Pop, Task Rabbit
Case Study: Work Pop and Task RabbitBackground Information
Location and
HQUnited States; Headquartered in Los
Angeles, California
Funding $7.9 million Stage: A
Investors
New, local start-up with primarily angel investors
Business Model
Description
Operates an online platform that enables employers to hire
employees on a temporary basis
Features
Set up job personalized job postings for employers
Robust tools for hiring and implementation
Candidates can submit online applications
Feedback and data help job seekers improve
Unproven business model with no industry focus
Background Information
Location and
HQUnited States; Headquartered in the Bay
Area
Funding $37,675,000 Stage:C
Investors
New, local model funded by angel investors
Business Model
Description
A website and mobile app that allows users to outsource small
jobs and tasks to people in their neighborhood
Features
Users post tasks on site and declare max amount to pay
TaskRabbits complete assignments after bidding process
Candidates are subjected to extensive background searches
Feedback is measured via a points system
Considered “eBay for real-world labor”
Source: Enriched, Fiverr
Case Study: Enriched and Fiverr
Business Model
Description
Operates an online platform that enables schools to find
substitute teachers in their area
Features
School districts sign-up for access to the database of educators
Educators sign-up and are contacted on a per need basis
Enriched handles payroll, vetting and support for schools
Offers other services such as tutoring and guest speakers
Early success, with growing revenues and clients
Description
Micro-lancing platform allows individuals and businesses to sell
services ranging from coding to consulting starting at five
dollars.Features
Set up detailed and personalized “gig” listing
Customize price points and offerings with “gig extras”
3,000,000 services and 4,000 added daily (as of April 2014)
Revenue: 20% of every successful transaction
31,000,000 est. monthly unique visitors (mattermark.com)
Business Model
Rapid growth with tight focus on quality over pricing of
services offered
Background Information
Location and
HQUnited States; Headquartered in New
Orleans, Louisiana
Funding Unknown Stage: Seed
Investors
Location and
HQUnited States; Headquartered New York
City, New York
Funding $50 million; Stage C
Investors
Background Information
Growing education/social impact start-upMicro-freelancing start-up with institutional investment
from major equity funds
3 | Future Opportunities
Source: Prophet, Brand Frame, team analysis
Importance of Branding
Customer Focus
Financial performance
Organizational performance
Global reach
In order to successfully achieve scale, a company needs to focus
on brand management to gain the trust of customers at-large
Regarding cost, services are seen as commodities by consumers,
altering perception compared to products
Strong emphasis placed on measurement and reward systems that
allow brand enhancement as customer transparency increases
Focus on globalization in brand management has defined
successful companies in this space
Source: KungFu.co, Seniors Helping Seniors, team analysis
Part-time elderly employment and pooled
benefits
With the increasing supply of elderly people looking for
part-time work, demand for their services will be essential
for creating a healthy marketplace.
Elderly people will be looking for work that is not physically
demanding and allows for flexible scheduling, rather than a
traditional 40 hour work week. A few companies have
targeted this population for part-time work, such as Wal-
Mart, who employs many seniors as greeters. Insurance
companies often hire retired physicians to review
insurance cases for fraud.
One interesting company that tackles both supply and
demand for elderly people is Seniors Helping Seniors,
which matches elderly people who require assistance with
a semi-retired person in their 50s, 60s or early 70s.
Part-Time Opportunities for Elderly People
As more workers move from full-time to part-time,
traditional benefits that full-time jobs often provide will be
sought for at an individual level.
The workers in the “on-demand” economy will be looking
for benefits that are often received through corporate
discounts or through health insurance plans, yet may not
be able to do so on their own.
One way for these workers to enjoy the same benefits as
full-time workers, without paying a premium, could be by
joining a platform that allows these part-time workers to
pool together benefits. Kung Fu is a start-up with that
thesis and is looking into increasing access for part-time
workers to benefits.
Pooled Benefits Platform
4 | Risks and Uncertainties
Source: Expert interview, team analysis
Concerns relating to new staffing technology
• The advent of new technology and staffing
procedures opens up potential legal
liabilities as certain industry have high
levels of regulations
• Case in point: Uber was banned in Berlin
because the service was believed to violate
the Public Transport Act
• Similarly, as Uber and Lyft have faced legal
action in the United States four other legal
ramifications that have been faced by
companies such as Uber and others of the
like (Lyft)
Legal Action
• New technology has created significant
kick back from sectors with strong
unionization resistance
• This can be seen from the taxi-cab strikes
in response to Uber and Lyft
• While there hasn’t been pushback in other
industries, the increased prevalence of
part-time workers being sourced by similar
technology threatens the power of unions
and will likely stir similar backlash as
experienced by Uber and Lyft
Union Resistance
Source: National Conference of State Legislatures, Expert Interview
Lack of International Opportunity
At-will employment only exists in the United States
and Canada and is required to allow firms to
temporarily staff employees
Much more difficult to fire an employee in Europe
and most of Asia
Independent contracting is thus only viable in
select parts of North America
Ali Hamed
ali @ coventure.us | 818 307 7964 | @alibhamedBrian Harwitt | [email protected]
Clark Zhang | [email protected]
Zach Benfanti | [email protected]
Tanner Stults | [email protected]
