Originally appeared in FastCompany
It’s time for the drivers, hosts, and community members to get a piece of the companies that couldn’t exist without them.
The first wave of collaborative economy companies pioneered new ways to access talent, goods and services. Early companies like Uber, Lyft, Quirky, Airbnb, Taskrabbit, RelayRides, and 99 Designs garnered much visibility, but these companies were funded by venture capital, with an eye on big paydays for investors—and not necessarily for the drivers, hosts, creators, and sellers that make the companies viable.
There is nothing wrong with that approach. I myself have invested in several private companies over the years and have been a beneficiary of the process. That said, the time has come to make sure that the value created by these companies is shared with the people who make them viable.
On the best-known peer to peer marketplaces, much of the value is being created by individuals both on the supply and the demand side. For example, Airbnb does not own any rooms. Their inventory is our homes, while Airbnb matches guests to hosts and provides services that make booking a home stay quick and painless. But when the founders of Airbnb raised capital from VCs, the expectation was that there would be a lot of wealth created for the people that built and run the platform. And there was zero expectation that any of the people who make the platform work—the hundreds of thousands of hosts across the world—would receive anything other than their share of the booking fees.
Historically, exits (going public or being acquired), create wealth for founders, early team members and investors. We have recently seen Reddit change the rules by raising $50M while committing to share a percentage of the equity with its community. Likewise, Kickstarter has stated that even though it has raised venture funds, it won’t go public or be acquired.
Today, customers and producers are interchangeable. Producers are those individuals who generate value, reputation and income from their participation in these two-sided marketplaces. This group includes hosts on Airbnb, drivers for on demand ride platforms like Lyfy and Uber, and designers on platforms like Quirky and 99 Designs.
In a now-accepted business model used by companies like eBay and etsy, the platform receives a percentage of each transaction for efficiently connecting buyers to sellers or producers. In the case of many peer to peer marketplaces, the producers rely on the platform to create demand, competitive pricing, expectation management (which in many cases includes liability insurance), a mobile app and website, the ability to track performance, and a compensation mechanism.
Increasingly, the line between customer and producer is faint. Anyone can contribute to the growth of your company. Your company’s success might depend on the ability to attract and retain the talent, trust and attention of people who will never be employed by you.
THE QUIRKY MODEL
Quirky is a peer driven marketplace that, among other things, marries GE’s patent portfolio with crowdsourced problem solvers. That is, much of the value of the brand and platform comes from its community. In this way, Quirky is very similar to Reddit or Uber.
Dr. Garthen Leslie, a retired executive from the U.S. Department of Energy, is the unlikely inventor of Aros, a smart window air conditioner. Dr. Leslie’s invention was brought to life when he collaborated with Quirky. Dr. Leslie tapped into GE’s patent portfolio to come up with the core design principles for the Aros. But Quirky goes one step beyond access to patents. Quirky’s co-ownership model means that Quirky, GE and Dr. Leslie will all share in the proceeds from Aros.
TAKING A HINT FROM COOPERATIVES
Cooperatives have been around for a long time, and for good reason. They exist to provide real benefits for their members. Sunkist, a U.S. based cooperative of more than 6,000 citrus farmers, acts as a marketing cooperative. Members benefit from the recognized brand, lobbying power, pooled production and distribution platforms as well as collective bargaining power. This sounds a little bit like Uber, which also provides a recognized brand, marketing and distribution services and lobbying power for its drivers.
But, that’s where the similarities end. Sunkist acts on behalf of its farmer members while Uber primarily acts on behalf of its non-driver shareholders. From Uber’s point of view, their product (a ride) is a commodity to be dynamically priced to meet and drive greater demand. But from the driver’s point of view, the product is a service performed by an individual who is not an Uber employee. And here’s the rub. While cars and drivers are plentiful today, the best ones remain in high demand. Uber and Lyft are famously competing for the best drivers. Uber rents smartphones, pays drivers to join, offers discounted cars to purchase and provides insurance. But acquisition is just the beginning. Retention of skilled providers will continue to become a bigger concern as drivers seek higher ground.
Building business models that generate the dignity and incentives that accompany ownership enhance the resilience and value of a brand. A Sunkist-like cooperative model is one way forward. There are others.
THE INFLECTION POINT
Resilient brands and marketplaces understand that retaining the high performers is key to success for any business. Gett, a new “Uber-like” on-demand ride sharing service claims to cater to its drivers by paying them for every minute they are working. Gett is an on-demand, dynamic marketplace that understands that without providers, they have nothing. So the startups prioritizes drivers’ needs beginning with a compensation “floor”. Power is shifting to the hands from platforms to producers—from the few to the hand of the many.
How will new platforms be shaped by and for providers? There is no need for a one size fits approach. Cooperative models are one option, while the owner-producer-customer structure may be attractive to many. Another approach is to build ventures that put the needs of the providers first. Certainly, new twists on old models, like community ownership, are fair game. And in the case of the Aros, Dr. Garthen Leslie’s slice of the pie came in the form of a $700,000 check. Money isn’t the only currency in play, but, it’s a start.
Image credit: Lola Tsvetaeva via Shutterstock