📶 the gig is up

Nobody wants to hire remote workers anymore, another brand-name fund has cutbacks, plus General Atlantic is looking at a continuation fund

October 09, 2024 • Estimated Reading Time: 7 minutes

Today’s sponsor

Good morning 👋

Pray for the west coast of Florida.

Many cities have already evacuated for the hurricane, and it looks like the storm is going to hit today.

In completely unrelated news, the gig economy has hit a rough patch. We break down why in today’s piece.

P.S. 💰 Are you a full-time investor AND do you want to get paid more?

TL;DR:

TOP
RIP gig economy 💀

Freelance platforms like Fiverr and Upwork are tightening their grip on the gig economy, but their strategies are starting to wear thin.

Fiverr's take rate is a hefty 33%, while Upwork follows at 18%. To boost revenues, both platforms have leaned heavily into paid services and premium listings—pushing gig workers to spend more just to stay competitive. But in the broader landscape, things are not looking great.

Venture capital funding for the online gig space has tanked since its peak in 2021, dropping by 69% in 2023 from $5.99 billion to $1.84 billion. That’s paired with a sharp decline in deal volume, falling from 610 deals in 2022 to just 386 in 2023.

Investors are pulling back hard from a sector that tripled in value between 2020 and 2021.

Why it matters: The gig economy opened the genie in the bottle of flexible work, and it is still essential to millions, but the combination of tightened funding and dwindling enthusiasm from VCs suggests that the best days of gig work might be behind us.

Platforms are extracting more from freelancers at a time when investor confidence is waning—a recipe for discontent. The balance of power is shifting, and gig workers could be the ones feeling the pinch first.

What happens next: We think most skilled freelancers will shift their focus toward niche services.

Niche down to stand out.

This trend will naturally raise the overall quality bar, rewarding the best freelancers with premium rates and more selective opportunities.

For these top performers, platforms like Fiverr and Upwork may become less about long-term client management and more about discovery. Freelancers will use these platforms to gain initial visibility and credibility, but the goal will shift toward establishing 1-to-1 relationships with clients outside of the platforms. This allows them to avoid high fees, control pricing, and set more favorable terms.

As this happens, freelance platforms will struggle to retain their best talent. If the most sought-after freelancers are using the platform as a stepping stone rather than a business hub, it results in a brain drain of the top talent.

Gig platforms will cater more heavily to new or lower-rated freelancers who still need the structure and discovery tools to build their client base. The best freelancers will find greater independence and will prioritize building direct, off-platform relationships with clients who value their specialized services.

The shift could also pressure platforms to rethink their fee structures or offer better perks to keep high-value freelancers on board. But unless these platforms innovate, freelancers may increasingly view them as necessary evils—a place to find work but not where they want to stay.

In the long run, these dynamics could reshape the gig economy, with fewer freelancers relying on platforms and more building sustainable, direct relationships with clients. For the top talent, it’s a win. For the platforms, the challenge is just beginning.

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TWEET

HEADLINES
What else we’re reading 👀

  • VC firm NFX laid off 4 employees and plans to hire more investors (TechCrunch)

  • General Catalyst is working on a ‘continuation’ fund worth up to $1B, sources say (TechCrunch)

  • Emerging Unicorn Board (Crunchbase)

  • Amazon Develops AI ‘Coach’ For Its Employees (The Information)

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RESULTS

Here are the results from our poll question in yesterday’s piece:

After reading today's tweet, what are your thoughts on diversification?

 

🟩🟩🟩🟩🟩🟩 Diversification is good (8)

🟨🟨🟨🟨⬜️⬜️ Diversification is bad (6)

🟨🟨🟨🟨⬜️⬜️ Diversification is bad but needed in most things (6)

🟨🟨🟨🟨⬜️⬜️ Just show results (6)

26 Votes

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