How Does the Sharing Economy Motivate Technology Startups? | Innovation Management
By: Ellie Richards
Technology startups can get motivated by offering solutions to the sharing economy companies and utilising the services offered by them.
The sharing economy is redefining the way in which millions of people around the world do their jobs. Professionals can now work from the comfort of their homes and earn a higher income. They also have the opportunity to set up their own firms by recruiting freelancers from around the world. Additionally, the sharing economy motivates technology startups by opening new avenues for growth. A number of these companies have already built their business models by providing platforms for professionals to offer their services online and accept payments for them.
This article discusses the ways in which the sharing economy motivates technology startups.
The Rise of the Sharing Economy
The growth of the internet and the declining costs of technology have facilitated the growth of the sharing economy over the past two decades. Freelancers used to offer services to local companies and grow their incomes through establishing personal contacts. The internet made it possible for these specialists to reach a wider customer base by accepting payments from remote customers electronically via their own websites. Online platforms such as o-Desk (now part of Upwork) took the process a step forward by connecting multiple freelancers and companies on a single platform.
The rise of sharing economy platforms made the life of freelancers looking to sell their services online easier. These companies provide services to both freelancers and the companies that hire them. By being part of sharing economy’s networks, professionals can expect guaranteed payments and escrow accounts. Similarly, companies can check the ratings of freelancers provided by their former clients before recruiting service providers. As a result, organisations can easily hire temporary workers ranging from office assistants to commercial photographers for a fraction of the cost.
Technology startups such as Airbnb and Uber have contributed to the further growth of the sharing economy by creating platforms for the owners of houses and cars to rent them out when they are of no use to them. Thousands of homeowners now provide their apartments to tenants and directly compete with hotel chains. The sharing economy also extended its reach to other spheres such as delivery services (TaskRabbit) and dog care services (DogVacay). According to the leading consulting firm PricewaterhouseCoopers, the revenues generated by the sharing economy companies would reach $335 billion by the year 2025.
Ways in which Technology Startups can Help the Sharing Economy
The emergence of new technologies made it possible for technology startups to aid the sharing economy and build new business models:
Payments Processing
Sharing economy players need to receive payments from their clients all over the world by paying a low transfer fee. Technology startups can aid them by offering new solutions in this sphere. New technology startups such as TransferWise facilitate an almost immediate transfer of funds between companies and individuals for a fraction of what it used to cost earlier. Some new companies in the financial services industry are already exploring the possibility of using emerging technologies such as blockchain to further bring down the costs of cross-border money transfers.
Guaranteed Payments
Since the players of the sharing economy work across the borders, the guaranteed receipt of payments from clients is a major concern. Unfortunately, many unsuspecting freelancers end up getting defrauded by dishonourable clients. Technology startups such as Upwork offer escrow account services for a small fee. Companies can deposit future payments in the escrow accounts offered by these companies that will be received once the job is done by freelancers.
Access to Seed Funding and Capital
Companies in the sharing economy frequently need external investments to bring their products to the market. However, individual freelancers and companies with unconventional business models find it hard to get funding from the formal financial sector. Technology startups such as Lending Club make it possible for these players to obtain investments from other sources for a slightly higher rate of interest. For example, peer-to-peer business lending is creating wonders in China whereas the financial sector is dominated by government-owned banks making it difficult for small businesses to get funding from them.
Connecting Clients with Freelancers
Players in the sharing economy need to be connected with their clients as and when there is a need for their services. Technology startups such as Uber connect service providers by matching the demand with supply. These startups also help sharing economy players maximise their revenues by connecting them with the clients willing to pay more through sophisticated algorithms.
Technology Startups Benefiting from Sharing Economy
The sharing economy also motivates technology startups by providing cheaper services and working spaces. In this self-sustaining scheme, these companies actually benefit from assisting the development of their peers. For example, a number of technology startups launched their operations in shared working spaces offered by the sharing economy players such as WeWork. Many of these organisations also rely on the services of professional photographers, copywriters, and office assistants employed via the platforms developed by them or their competitors. Finally, peer-to-peer money lending services are used by all kinds of startups including technology startups to set up their operations and support further business development. Moreover, this opportunity is available to new companies that are still refining their ideas before launching them in the market.
The future holds enormous promise for the sharing economy. Governments are changing the regulations to make it easier for such businesses to prosper. New technologies including 5G mobile networks may support the remote delivery of various services such as education and even surgery. Additionally, professionals can now offer their expertise to clients located in remote locations during their spare time. Technology startups have a lot of opportunities to build sustainable platforms that could be used by more skilled specialists. Innovative business models by aspiring startups have the potential to completely redefine the business scene in the near future.