CoVenture Thesis on the Staffing Industry

1. Staffing Industry

2. 2
CoVentureThesis
1
Increasing 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
3
Technology 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 week
2
4
Establishing a trustworthy brand is essential for ensuring scalability for service-oriented businesses, particularly in verticals such as child or elderly care

3. 1 | Staffing Industry

4. 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%

5. 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
19.8
20.2
20.6
21.1
21.9
22.5
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 andLocalGovernment
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 workerspart time
Part-time workers increased substantially during the recession, and has maintained high levels due to cost of benefits and growing elderly population
24.9
25.4
27.5
27.4
27.5
27.7
27.8
27.7
2007
2009
2011
2013
+c3.4%
Wages
Benefits

6. 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%

7. 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
65.3
50.5
46
39.6
19.2
26.9
27.7
29.1
6.6
8.2
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

8. 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

9. 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

10. 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 Uberand Lyftcan 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

11. 2 | Existing Ventures

12. 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

13. Source: Uber
Case Study: Uber
Location and HQ
United 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
ThuanPham
CTO
•VP of Engineering at VMWare, Westbridgeand 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 class
Wide range of product offerings to appeal to many market segments

14. Source: Work Pop, Task Rabbit
Case Study: Work Pop and Task Rabbit
Background Information
Location and HQ
United 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 HQ
United 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
TaskRabbitscomplete assignments after bidding process
Candidates are subjected to extensive background searches
Feedback is measured via a points system
Considered “eBay for real-world labor”

15. 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 HQ
United States; Headquartered in New Orleans, Louisiana
Funding
Unknown Stage: Seed
Investors
Location and HQ
United States; Headquartered New York City, New York
Funding
$50 million; Stage C
Investors
Background Information
Growing education/social impact start-up
Micro-freelancing start-up with institutional investment from major equity funds

16. 3 | Future Opportunities

17. 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

18. 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

19. 4 | Risks and Uncertainties

20. 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: Uberwas banned in Berlin because the service was believed to violate the Public Transport Act
•Similarly, as Uberand Lyfthave faced legal action in the United States four other legal ramifications that have been faced by companies such as Uberand 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 Uberand 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 Uberand Lyft
Union Resistance

21. 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

22. Ali Hamed
ali@ coventure.us | 818 307 7964 | @alibhamed
Brian Harwitt| blh74@cornell.eduClark Zhang | cz254@cornell.edu
Zach Benfanti| zdb4@cornell.edu
Tanner Stults| jts274@cornell.edu