The Elance Engine: Helping SMBs Fill the Skills Gap


Laurie:  Hi, this is Laurie McCabe from the SMB Group and today I’m talking to Rich Pearson who’s the Chief Marketing Officer at Elance, which is the leading online work platform. Rich, before we get in to what Elance does, can you tell me a little bit about the company; how long it’s been around, how you started, and that kind of thing?

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Rich: Sure.  The company was started in 2007 and is based in Mountain View, California.  We have 110 employees and we actually are a hybrid company in that we use about 200 freelancers every month to help us compete and fill our own talent gaps.  So we use our own service as a company to compete.

Laurie: Okay, and what was the impetus to get Elance going?  Why did you start it in the first place? 

Rich:  We felt—and we’re seeing it now—that the world of work was changing.  Freelancers and many independent professionals were looking to work from wherever they lived.  We believe, and our vision is, that talent is what really matters.  As companies get more comfortable with hiring remotely and with the communications tools and even hiring from the “cloud” if you will, we thought this would be the future of work. 

We’re probably only in the first inning of this, but from all the results that we’ve seen to date, this is definitely happening.  It’s a real phenomenon.  As an example, we’ll pay out $300 million dollars in freelancer earnings just in 2013.  So, it is a phenomenon that is accelerating quite rapidly. 

Laurie:   Well, that is good background about Elance.  Can you get into a little bit of detail about what Elance provides, how people use it, and who’s using it?

Rich: Sure.  What Elance is at its core is a way for small businesses—and over 90% of the businesses who hire on Elance are small businesses typically under ten employees—to find freelancers, hire them, and then actually pay.  So, actually do the work through our system. The way that works is a company will come in, post a job, say they need a graphic designer for a few weeks, and they’ll get proposals from freelancers who meet those criteria.  We’ll actually recommend some freelancers so you can invite them, and then the freelancers essentially bid on your work.  They can bid on a project base; a certain amount of money as a fixed fee.  Or, if you’re looking to hire somebody on an hourly basis you can also see freelancers’ rates that way.

You can see their portfolio, you can see what work they’ve done, and then can choose which freelancer you want to work with.  Then you actually do the work on our platform, they deliver it through the platform, and you pay through the platform.  So, that’s the basics on how it works.  There are some additional details that I can share later but I just wanted to start there.  

Laurie:  That’s great.  I know you guys recently did a study to get a better understanding of how small and medium businesses are using your Elance services.  What are some of the top trends that came from that?

Rich:  We did.  As a baseline there, there are 800,000 companies hiring on Elance in any given month.  We have over 2.8 million freelancers who are active on the service.  40% of those freelancers are in the US. 

So, what we do periodically is have studies, such as our Global Online Employment report, and  use our own data to see what’s happening in this phenomenon, in this emerging world of work.  Overall businesses in the last quarter, hiring increased 51% year-over-year.  In this economy you don’t necessarily see hiring numbers like that and I think just today that the numbers came out and were a little bit south of projections.  So, as usual, small businesses are leading the way with new ways of getting work done more effectively.

The biggest insight from the survey that we’ve seen over the last 12 months but is accelerating is the use of businesses that recognize they have a skill gap and are filling that with an online freelancer.  So, 70% of businesses say that they’re using Elance to fill a skill gap.  That skill gap could be someone needing a mobile app developed, a brochure designed, or just someone to help launch a website.

The number and quality of the skills that you can get online is amazing.  It takes a little bit of a change in behavior.  I know my wife has her small business and initially when she’s thinking to get some help she’ll look around locally and, here in Mountain View at least, with the scale of her business first there weren’t that many people who were available because they’re all busy because the economy is pretty strong here.  It’s also fairly expensive to hire someone in the Bay Area right now.  So, what she can do though is hire somebody outside the Bay Area, San Francisco Bay Area, and get someone who’s willing to work right away and often at a discount for what she can find locally. 

So, there’s the cost savings aspect to it, there’s a speed of getting something done, and then you don’t have to sacrifice quality.  In fact, in the survey, 87% said that the quality that they’re getting online is greater than or equal to what they’re getting locally.  So, it’s becoming a core part of their strategy in that some have gone where they’re hiring freelancers not just for project work but 50% are hiring for projects that go over six months and almost doing a staff augmentation if that makes sense.

Laurie:  Where are most of your freelancers from?  Are a lot of them from overseas?

Rich:  40% are in the US and as you look at what makes Elance distinct from say some other services that may be out there is we have a core strength in US and North American freelancers.  We do have really talented freelancers in Eastern Europe, Serbia, Romania; some of our best mobile designers and engineers we find there.  We also have a group based in the typical, that you’ve probably heard about, in India as well.  There are different strengths of each individual and you can certainly get things done cheaper and it really becomes what you’re looking for and what type of quality you’re looking for; what type of work you’re looking for.

One thing that I’ve done recently is hired a virtual assistant to help me as I’m planning my month or planning what I need to do.  So, this person is helping me personally.  I’m not great at anything; in fact at Power Point I’m not very good at all, or any type of presentations or graphic design, so I’ve hired somebody who I work with, talk on Skype or just send an email, and I’m able to make myself more effective using a freelancer.

Laurie:  Yes, I think a lot of us are trying to do so much ourselves, a lot of times that would be much more time and cost effective for sure. 

Rich:  I look at my To-Do list and there are some things that I’m good at and some things I just don’t like doing, so I’ve been able to really kind of ease the burden and focus on the things I do great and then hire quality talent and do so in a very efficient way so that I can move my business ahead.

Laurie:  Right.  We’ve used Elance here at SMB Group for a while. I think one of the big benefits from this whole platform is that it helps you to manage everything from finding the freelancer through paying the freelancer.  Can you just tell us a little bit about how that works?

Rich:  Sure.  As you said, Elance is more than just, say, a job board because you actually can find someone and then you actually work with them.  What we provide is a secure workroom.  After you’ve hired and negotiated the rate with the freelancer you’re placed in a workroom and then you’re able to communicate through that.  Everything gets documented in this workroom so you don’t have to go back to emails to look at anything.  You have one place where all your work’s been done, where files have been shared, where you can look at the latest work that has been done.

You can also set up milestones.  For example if you’re working with a freelancer on a project you can set up specific milestones that they’re working at, much as you would do at work.  On the payment side you can actually tie the payment to the milestones.  Elance has an escrow service that puts the money in an escrow and then you don’t have to, as a business, release those funds to your freelancer until you’re satisfied with the work. 

Laurie:  It is easy and convenient; definitely. 

Rich:  We’ll take care of all tax implications; we’ll file the 1099s for businesses automatically.  If it’s an hourly job you don’t have to worry about tracking work separately.  All the freelancer’s work is tracked within our service and you can actually ask the freelancer to almost audit their work so you can see what they’re doing and then you’ll get an invoice through the system, just quick to approve it, and then that freelancer will get paid automatically through our service.

Laurie:  As I’ve said, we have used Elance and have gotten a lot of benefit from it.  But, I remember being kind of leery about it before we tried it.  What would you say to somebody who hasn’t used it yet and is a little unsure?  What’s a good way for them to kind of get started?

Rich:  Great question.  In fact, my first experience with Elance was I was with a small business and didn’t have much of a staff.  There was myself and I had three engineers with me and I needed to build a website.  I had the same experience and apprehension that you did.  I guess there are a few tips.

First, you want to start with something small.  Working with a remote worker is a different experience.  It almost requires a little bit different skill sets and organization skills to really plot out what you need and make it as easy as possible for the freelancer to do what you need.  The first thing I would say, that I faced and that everyone will face, is which freelancer to choose; how do I determine which one is the right one for me. 

What we’ve done, and fortunately we’ve made this a lot easier since when I hired my first freelancer on Elance, is you have almost like as in eBay or any other service you can see the ratings from past freelancers.  So, when a freelancer gives you a proposal what we’re going to do is rank them for you based on what we think based on their skill match.  We think about how they match to you. 

So, we do a little bit of the work for you, but hiring is a personal decision so it’s really important that you spend some time looking at the freelancers that we’ve recommended.  You can look at their reputation, you can look at past comments from clients that they’ve worked with, you can see samples of their work, you can see if they’ve taken skill tests in the area that you’re looking for, and that really helps build trust in what they can do. 

Once you’ve given them a small project, just check on their communication style, make sure you’re comfortable with it.  A key decision to make when you’re hiring that I think for a new person on Elance is really the time zone of the person that you’re working with.  In a lot of cases the newer businesses hiring on Elance select someone in their same time zone.  Then, as you get more comfortable with it, it’s actually kind of empowering to hire someone outside of your time zone.  So, you give them a project, you go to bed, and the next morning they’re working on it and you see the results.  From a communication standpoint, being very clear with your freelancer after you’ve hired them to make sure that the work is appropriate.   

If there is something that goes south on you and that the job doesn’t go right, and this is a very small percentage of the time, but we have a dispute team that will come in if someone has done something that is just misrepresentative of their skills, we’ll come in and we’ll refund your money.  So, we do have payment protection for all clients. 

Laurie:   Awesome.

Rich:  Our goal is to make everyone feel that first experience and have that trusted experience because if we don’t have that trust– that’s why we are the leading online work platform.  That’s crucial to our success.

Laurie:  Thanks.  That’s a big benefit having that kind of safety net while you’re there. Based on my personal experience with Elance, I think it’s a great service.

Rich, thank you so much for your time today and for joining me today to talk about Elance.  We will post a link to with this blog and also a link to an infographic from your study so people can learn more about what you found out.

Rich:  That’s super. One thing I didn’t mention, and thanks so much for the opportunity, it’s actually free to post a job on Elance.  You don’t have to pay anything.  So, as a business, just putting up your job there’s no cost to you.  The way our pricing works is actually let’s say I posted a job for you and you thought that it was worth $1000 dollars.  What Elance does is add 8.75%.  So, I would see $1087.50.  When the job was completed I would pay the job, you’d get your $1000 and Elance would get $87.50.  So, that’s how Elance makes money. 

But, to go and try and to see what freelancers and amazing talent you can get online, all you need to do is really go to and post your job and you’ll be amazed.

Laurie:   Okay.  Rich, thank you again so much.  We appreciate your time.


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