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Freewheeling

by Editor ISSUE 52 — MAY/JUN 2012

The seller was a Swedish man living on a fish farm in Vanuatu. The product was a fledgling website. The buyer was Matt Barrie

Freewheeling

Matt Barrie, chief executive Freelancer.com

Although he now heads up one of the most dynamic companies in Australia, Matt Barrie wasn’t always involved in fast-paced business.

He used to run a company producing semi-conductors – an industry with long lead times developing chips to use in network security devices.

“It is a very capital intensive industry where the sale cycle is two years between coming up with a new product and after the deal is done you then have to start manufacturing it and marketing it and firing up the distribution channels – it is a very long path before you generate any returns,” Barrie recalled.

“I was looking for the next thing to do while I had a year off (after selling the company) and I was doing a few side projects. I wanted to get some data entry done for an online directory and I expected to pay about $2 an entry – all up it would have been maybe a couple of thousand dollars worth of work. I was trying to get little brothers and sisters of friends to do it, it was really boring work. In frustration I went to the internet. I knew about online outsourcing but I suppose, like any technical person, you might be a little dismissive of it, thinking about what was going overseas and what the quality level would be like.

“I actually used one of the sites, posted a job and came back three hours later to find 70 unread messages in my inbox. There were bids for everything from $1000 to $700 to $100. I picked one where it cost $100, which was done by a team in Vietnam. It took three days, it was perfect and I didn’t have to pay until the job was done. I thought to myself, “Oh my god this is absolutely game changing”.”

After looking at building a site in the space, Barrie put together a business plan, including financial modelling, which showed that two competitors, both based in the US, had raised $100 million over 10 years and $60 million over six years.

“I thought to myself that starting from scratch would be tough because by the time it got going they would be a lot further down the track. But I could buy rather than build. So I did a survey and contacted several different sites – I found the site was already in negotiation with a number of buyers doing due diligence and I managed to get in earlier than any of them.”

Originally, Barrie purchased the domain getafreelancer.com.

“It was run by a Swedish gentleman who – and this is an interesting story – was living on a fish farm in Vanuatu. He had no employees, half a million users on the site, processing somewhere around 60,000 PayPal transactions a month and he had one person in the Philipines doing customer support on contract and three people doing code in the Ukraine.

“I purchased that site and since then I have purchased 10 other marketplaces, mainly original ones. There have been sites based in Singapore, Hong Kong, Germany, the UK and one in New York.

“We’ve built the resources up so now there is a hundred seat facility in Manila as a support unit. We now have 2.3 million users, we are in every country in the world – even people in Antarctica and the Vatican use our website. Last week we peaked at 245 on the list of biggest websites in the world and we are easily the biggest Australian company.”

Barrie credits some of the sites success what he calls a “tectonic shift” in society’s use of the internet.

“The fact is that there are 6.8 billion people in the world. The United Nations reported last month that there are 2.8 billion currently online. That leaves
4 billion that are not connected but are rapidly signing up at double-digit and triple-digit rates,” he said.

“This is going to change absolutely everything because they are poor, they’re hungry, they’re driven, they’re skilling and they’re on an income of $10 a day or less. The first thing they are doing when they go online is looking to improve their income and this is effectively what freelancer.com does – we connect western businesses with developing world labour force.

“It works for both sides though. We can deliver services in just about anything you can think of to a small business – build me a website, create an iPhone app for me, find me a manufacturer in China – for about one-tenth of what you would pay in the west. At the same time you are delivering technical jobs where they desperately need them in the developing world at fantastic rates of pay above what they would normally receive.”

The proof has been in the pudding with the company clocking up its one millionth project in March.

“There are 2.3 million users on the site and we are in the top 250 sites in the world. In Bangladesh we are number 20 – we’re bigger than Microsoft, Bing, Amazon, Apple or Digg. In some developing parts of the world we are a household name and in the top 100 and top 50. This creates a huge amount of traffic to the site.

“The average job on the site is $200 or less, so it is really high volume with a lot of small projects. For that $200 you generally get around $2000 worth of work – if a designer in Australia says you could get a website for $5000 you could probably get it for $500 or so.

“We take a commission of the funds that go through our site. For employers it’s $5 to pick a project, which we refund to you when you pick someone. The first time you use the site is free and then as the workers come along it is free for them to sign in and start bidding but as the project comes along we take a commission from that.

“We have outsourced to date more than $80 million worth of work, and what is remarkable about that is that it is one-tenth of what you would normally pay. We think we have saved businesses anywhere between half a billion and a billion worth of costs.”

Barrie said the main challenges in getting the project off the ground were financing and technical.

There was a huge challenge in the beginning to get the financing together to go and buy the business,” he said.

“That’s not easy, especially when it is a management buy in to a certain extent, where you are trying to buy an asset and convince people that you can make it big. Especially at the time there were a lot of problems with the site – it looked horrible and clunky and trying to convince people it was a diamond in the rough was very difficult. Also trying to raise money during the GFC to buy a site from a guy who lives in a fish farm in Vanuatu was difficult.

“The technical challenges have been how to scale a site to deal with millions of users. You can use traditional architecture when you are going up to one million users, but once you go from one million to 10 million things become less trivial – it is all about how you access data and how you get things working 24 by seven by 365. People rely on us to feed their families. There are a lot of people who have been destitute and on the streets of Bangladesh who found our site and now they have their own business with people working for them and money in the bank. If our site goes down, people stop eating.

“We are constantly on the lookout for really talented engineers or people who understand internet marketing.”

“That’s going to be one of the major challenges. At the moment we have 75 people in the company, but when you get to wanting to hire 100 people at a time it becomes really challenging to find really good high quality talent.

“When you are the size of Google and you start hiring thousands of people at a time then you don’t keep your standards high and you start flooding your company with lesser-quality staff, which demoralises the good guys and the good guys start leaving.”

What has been the most important lesson along the way? The value of determination and persistence.

“I was a founding ‘team’ of one and let me tell you that is not an easy experience,” he said.

“You get up in the morning and constantly get rejections from investors and talking to your friends about it who are telling you are mad. To get out of bed and push it and just keep going with a determination to get it through is really challenging. There were times when I thought things were going to collapse and it takes a terrible toll on your health and so on. Lawyers are involved and the clocks are ticking on the fees – it gets quite stressful when you have $100,000 in legal bills and you haven’t even closed the deal yet.”

Then there are the tipping points, which accelerated the company’s development, such as the change from getafreelancer.com to freelancer.com.

“I bought all the freelancer domain names, so getafreelancer.com became freelancer.com, much like The Facebook dropped the “the” to become simply Facebook,” he explained.

“It was fantastic for us because we really leapfrogged into a premium brand.  It was a bit of a dinky name before. The guy who had freelancer.com was a leftover from a computer magazine and I thought there was no way I was going to get it. He told me I was so determined to buy it that eventually he just had to sell it to me.

“That transformed us from being a second-tier player to becoming a major player. That was the foundation on which we could really push the marketing, really push the SEO and really push the company. It’s the best name in the entire space. I suppose sometimes you just have to keep pushing.” 

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