The behemoths of the sharing economy might reside in sunny San Fran but could the UK become the movement’s natural home in years to come?
The growth of the sharing economy in recent years has been nothing short of staggering. According to JustPark, the parking-space marketplace, over half of sharing-economy companies were founded in 2013 or later, with 80% launched since the start of 2011. Meanwhile, PwC has predicted that the industry will be worth an eye-watering $335bn globally by 2025, up from $15bn today.
So how does one account for the emergence of a sector that looks like soaring for decades to come? Unsurprisingly, there’s more than one area to pinpoint. “It’s really about the coming together of a number of different macro-economic factors,” says Alex Stephany, CEO of JustPark.
The industry’s explosion has certainly been aided by a technological trend that kicked off in the early-2000s. “The falling costs of both broadband and smartphones is putting the internet in more people’s pocket than ever before,” Stephany says. However, while the sharing economy’s growth might have depended on the availability and proliferation of modern technology, the success of startups such as Airbnb and Uber owes just as much to a significant shift in people’s behaviour. “There has been a general trend towards people wanting to get as much as possible out of their existing resources and make the most of their assets,” says Tom Elvidge, general manager, London, at Uber.
It’s no coincidence that this attitude only became more prevalent during the recession, which in turn gave sharing-economy startups a healthy dose of rocket fuel. “Periods of economic distress often lead to innovations in the way that business is done and the sharing economy is a good example of that,” explains Stephany.
Indeed, companies like Airbnb may not have been met with as much enthusiasm in times of economy prosperity. However, as the downturn took hold, its business model started to appeal to hosts and holidaymakers alike. “Airbnb has made mainstream the concept that you would stay in someone’s home or have someone stay in your home,” says Debbie Wosskow, founder and CEO of Love Home Swap, the home-swapping platform, and chair of Sharing Economy UK, the trade body for the UK’s sharing economy. “When I was initially pitching for VC finance four and a half years ago, I was told by a lot of VCs that nobody would ever do that. But Airbnb has normalised the ‘can I trust a stranger?’ conversation and socialised the idea that ordinary people can make extra money in this way.”
Sharing-economy companies have gone on to attract some serious investment: while Uber and Airbnb have raised $6.6bn and $3.9bn respectively, British food-delivery startup Deliveroo has recently closed a $100m Series D round, demonstrating that it’s not all about Silicon Valley. It’s the simplicity of these services that has evidently been a major selling point to the investor community. “Uber has enjoyed pretty phenomenal growth over the past few years,” says Elvidge. “We have a service that is very efficient and, as a result of that, we have been able to add both riders and drivers to the platform at quite a rate. That has helped make it an attractive investment.”
While investor interest is now spiking, many argue that it was first stimulated by eBay, which Wosskow describes as the “grandaddy” of the sharing economy. “It was the first business to get everyone comfortable with the language of trust and peer-to-peer ratings,” she explains. “You can really track investor appetite back to that time.”
But that’s not to say investors will throw their money at any old sharing-economy startup. Especially as the sector continues to grow, new entrants need to demonstrate originality and proof of scalability to stand any chance of getting off the ground. “What helps investors get comfortable is not only showing how these marketplaces can scale in accommodation and transport but also how they can scale in food, fashion, pets or logistics,” says Wosskow. “It’s then about demonstrating how you acquire both sides of your marketplace, whether that’s guests and hosts or buyers and sellers.”
As far as Stephany is concerned, there’s still plenty of space for even further innovation in the sharing-economy space. ‘There are definitely some verticals in the sharing economy that haven’t been nailed and that someone is going to nail in the next few years,” he says.
However, in order to maintain its upward trajectory and hit the numbers put forward by PwC, the sharing economy needs the support of lawmakers. This was one of the key discussion topics at Breakers to Makers, a sharing-economy conference recently held in London, which was attended by Wosskow, Stephany and other industry leaders. As agreed by all speakers at the event, a few legislative tweaks should ensure that the sharing economy can continue to thrive in years to come. “Sharing-economy companies are often doing something that the law hasn’t anticipated, so they are existing in something of a grey area,” explains Stephany. “JustPark was doing that but now there is government guidance that says you can rent out a driveway for a secondary income. So it’s important that laws and regulations keep up with the times.”
Thankfully, this is something the British government recognises. In September 2014, it commissioned Wosskow to lead a review into how the UK can become the global centre for the sharing economy. Her review, published in March 2015, put forward over 30 recommendations and led to the creation of Sharing Economy UK, the trade body that Wosskow now chairs. Suffice to say, she’s encouraged that the government has ultimately put the future of the sector in the hands of its stakeholders. “It’s been really interesting looking at how the UK has taken a much more light-touch approach to regulation than other markets,” she says. “The government has been a lot more consultative in terms of working with the industry.”
As a result, there’s a sense of confidence that the UK can, in time, become the industry’s natural home. “We are a lot more progressive than the US in this sphere,” says Alex Depledge, co-founder and CEO of Hassle.com, the marketplace for independent cleaners. “The government is very much on board with what we are doing and definitely sees it as an area of growth.”
Nevertheless, Depledge doesn’t believe startups on this side of the pond can take on the world until Europe unifies under a digital single market. While this is something the EU is looking to implement, Depledge is eager for it happen sooner rather than later. “In every [European] country we have to abide by all the different nuances, which takes a lot of time and understanding,” she says. “Unless we get a digital single market, we’re going to struggle to get the size of market we need to build really big businesses.”
For now, the likes of JustPark, Hassle.com and Love Home Swap are proudly flying the flag for Blighty. While Hassle.com was acquired by Berlin-based Helpling for a cool €32m in July 2015, JustPark has signed major deals with Hilton and Sheraton Hotels, with BMW listed as one of its biggest investors. Stephany believes these sorts of partnerships are essential for sharing-economy startups, even if it means deviating very slightly from their initial model; JustPark started life as ParkatmyHouse, which was purely focused on letting people rent out their driveways, before rebranding in 2014. “Sharing-economy companies are professionalising and borrowing certain tips from larger companies and conversely large companies are borrowing tips and tricks from the sharing-economy handbook,” he concludes. “It’s actually a very healthy thing when the two come together.”
Like many startups, Hassle.com started its life as something slightly different. “Basically, we tried to create the eBay of local services,” explains Alex Depledge, the company’s co-founder and CEO. “It was originally called Teddle.” But it soon became clear that the startup would have to narrow its focus. “We found that one in four people were searching for a cleaner, which was ironic because we couldn’t actually find any cleaners,” Depledge says. “[But] that was the lightbulb moment: we thought there was a real opportunity to bring the cleaning world online in a safe and transparent fashion.”
Depledge also realised that independent cleaners weren’t getting a very fair deal from the agencies that hired them. That’s why it implemented a flat fee of £10 per hour for every cleaner in its network, with 15% of each transaction going to Hassle.com. “It’s actually a really good deal if you consider that in an agency, they’d get paid minimum wage, which is about £6.50, and the customer will be paying anything from £11-15 per hour,” says Depledge.
The startup has since enjoyed some serious traction: it closed a Series A round of $6m in May 2014, led by Accel Partners, one of early Facebook’s first investors. And, in July 2015, the company was acquired by German startup Helpling for $32m, with Depledge continuing to operate as CEO of the Hassle.com brand. “We had the choice of either spending the next two years going toe-to-toe with Helpling or joining together as one company and dominating Europe, which is what we have done,” says Depledge.
All in all, it’s been a pretty successful 18 months for Hassle.com. “It does feel like everything major has happened at once,” Depledge concludes.
Home sweet home
Love Home Swap
A bad experience is the inspiration for many new businesses – and the same is true of Love Home Swap. Prior to launching the company, Debbie Wosskow had been building other businesses in the digital and creative sectors, which entailed a fair bit of travelling. But things became a little more challenging when she had children. “Off the back of a particularly bad hotel-based holiday with two very small children, I thought to myself, ‘Is there not a better way to travel?’,” Wosskow explains.
Her flash of inspiration came while watching The Holiday, a film about home-swapping. “I wondered whether this existed in real life and started to look at home exchange as a category,” she says. “It had its roots in the 1950s when people produced directories but it felt massively ripe for innovation. So that’s where Love Home Swap was born.”
The benefits of the platform are clear. By listing their home on Love Home Swap and arranging exchanges with other members, people can save money that would otherwise be spent staying in hotels, but without skimping on quality. Meanwhile, the company makes revenue from subscriptions, with non-members able to list their property for free and pay to message other users. “It’s a bit like online dating for homes,” says Wosskow. Members can also accrue swap points by letting people stay in their home while they’re away. These can then be cashed in at a later date.
The recent acquisition of German competitor HomeForExchange has pushed the number of properties listed on Love Home Swap towards the 100,000 mark. But, as Wosskow says, it’s been something of a slog. “We are now the leading home swap business in the world but we need to continue to grow the category,” says Wosskow. “That stuff is hard and requires grit. It’s not for the faint-hearted.”