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Going Freelancer.com

Tuesday, 4 October 2011 | By Oliver Milman

Matt Barrie, Freelancer.comPerhaps ironically for someone whose business relies on outsourcing tasks Matt Barrie has a very do-it-yourself approach to entrepreneurship.


Barrie is CEO of Freelancer.com, the online outsourcing service that lets users post jobs in more than 400 different categories, mostly in the design and IT space.


An army of nearly three million workers bid to be given the task in return for an agreed fee and so far more than 1.1 million jobs have been completed, earning freelancers more than $100 million.


For his trouble Barrie takes a $3 or 3% cut for employers and $5 or 10% for employees. He says the biggest beneficiaries are Western businesses that have slashed costs by outsourcing, say, design work to India for a fraction of the cost of a local contractor.


A new funding game


But when it comes to starting a business Barrie insists that the trend is moving away from a heavy reliance on others, especially investors.


“The whole funding area has changed, you can now do in off the back of a credit card,” he says.


“Before you had to raise two, three or four million dollars in the first round but now the cost base has dropped so you can get four guys in a room, feed them noodles and get them to make your software for $20,000.”


Barrie says that success of Australian start-ups in raising money, such as 99designs and Atlassian, has put the country on the radar for US investors, but primarily credits the founders of such businesses.


“Australian venture capitalists seem to have died off, they are risk adverse and I think they’ve made all of their investments,” he says.


“If you look at tech companies it’s all being driven by entrepreneurs. Startmate, PushStart, all of those, that’s where the action is. It’s the entrepreneurs who are driving the activity not the top end of town.


“I’m optimistic over how things are heading. It’s good that it is being driven by entrepreneurs.


“Before you wouldn’t get funded if you didn’t have the ideal structure and have a real value add. Now you can start-up in a weekend. You don’t need much money because it doesn’t cost much to get a domain and get up and running.”


On-campus inspiration


Despite Barrie’s enthusiastic backing of going it alone on a shoestring he is well versed in being able to lure money from investors.


Over the course of his career he has raised more than $40 million, starting with $4 million from a hardware company off the back of a PowerPoint presentation.


The entrepreneurial bug bit early, while doing a Masters at Stanford after departing Sydney in 1997.


While he was on campus Google was launched and someone in his class started PayPal. It was clear to Barrie that the tech space provided plenty of opportunity.


His first foray, with online security firm Securify, didn’t go quite to plan and when the dot com bubble burst he returned to Australia and started work for a venture capital company.


Although the experience gave Barrie a good understanding of how the funding system works it didn’t satisfy his inner business builder.


“You read 200 business plans a day and fund two businesses a year,” he says. “I’d spend the entire day there frustrated.


“I did the job as it was the closest I could get to the industry at the time, after the dot com bubble burst. There wasn’t much of a start-up scene.”

The role provided some invaluable insights into how entrepreneurs went about securing the funds they needed.


“You got to see what went through an entrepreneur’s and investor’s mind,” he says. “I realised that the fastest way to raise the valuation of a business was to ask for more money.


“VCs have a large amount of money to put to work. If you ask for $2 million or $4 million it’s not really worth their time. Ask for $10 million and they are more interested.


“You need to be very optimistic as an entrepreneur but you can’t get too carried away. You need a healthy dose of realism and you need to know how to work with your resources – never write code unless you need it and make sure you get more than $100 in value for $100 of your time.


“Investors will poke holes in your business. You can’t be naive about it.”


Searching for the right idea


In 2007 Barrie started scanning the market for inspiration for his own start-up.


“I was looking for businesses that were credible,” he says. “The first $1 million is the hardest to make. Once you get a business that is doing that you’ve jumped four years ahead of yourself.”


While doing some very boring”data entry work worth $2000, Barrie, in his frustration, posted the job on a little-known website that enabled it to be outsourced. It was completed within three days, inadvertently giving Barrie the business model he was seeking.


But he had to hurry. A rival had just raised $60 million in funding and had a considerable head start.


Barrie bought the website from a Swedish man who was overwhelmed by running 200 sites, renamed it Freelancer.com and started running the fledgling business from his garage with one employee.


With a few tweaks the site was pulling in so much traffic that it was crashing almost every day.


Barrie had to re-write the code after six months and the website was able to grow globally, with 40% of outsourced jobs now coming from the US compared to 5% from Australia.


Going global


“I realised that the online world was going to be teeming with this kind of activity – only one billion people in the world were online and a lot more people were connecting, more cheaply than in the West,” he says.


“The global labour markets are disrupting. If you make $10 a day you can make far more than that with outsourced work. We haven’t created this market, it’s the internet.


“We’ve just solved the problem for the entrepreneur in the west who needs a web designer and can get it for $1000, rather than pay $30,000. It’s very powerful for small businesses.”


Barrie dismisses the suggestion, occasionally aired by disgruntled designers, that Freelancer has commoditised good online work and driven down its value.


“We’ve actually created work so it’s a win-win on both sides,” he says.


“If you punch out a logo for $500 a time, well, those days are over. There are more than five billion people who can do the same as you. You can’t sell ice in the age of refrigerators. This is disrupting everything, from books to music. Everything.


“The global labour market has only just started to change. Seven years ago the cloud was in the sky and a tweet was something a bird did. We are all minnows in the space still.”


Matt Barrie’s top tips for start-ups


Be credible – “If you can’t get revenue, get customers. If you can’t get customers, speak to them and find out what they need.”


Be a pain killer and not a vitamin – “People won’t take a vitamin every day, but they will take a pain killer for their pain. Find something that solves a real problem for people.”


Practice your pitch – “Go to an investor that you don’t want anything from and ask them lots of questions. Refine your pitch and then, when you finally speak to the right investor, you’ll know what to say.”


Get connected – “Read industry websites. Go to networking events. Talk to other entrepreneurs. Know what’s going on.”