It would be hard for anyone to not have heard of the sharing economy at this point. Success stories such as that demonstrated by companies like AirBnb have showed how people enjoy the opportunity to share what extra they have, or what they do not themselves need all of the time and make a little extra cash in the process. However, the big news is that the sharing economy has so far created no fewer than 17 billion dollar companies according to John Koetsier (2015) writing for VentureBeat. As Koetsier explains:
“There are now 17 billion-dollar companies with 60,000 employees and $15 billion in funding in the sharing or collaborative economy.”
The giants of the sharing economy include eBay, Etsy, AirBnb of course, Chegg, WeWork and the taxi company Uber. Some of the organisations have been going for a while (eBay, among others) and some have only been around for a short while. Of the sharing economy success stories, four of them are in the money business (LendingClub, Prosper, TransferWise and Funding Circle), four in transportation (Uber, Ola, Lift and Chinese firm Kuaidi Dache), three in space (AirBnb, HomeAway and WeWork), three in goods (eBay, trademe and Etsy), and three in other areas (freelancer.com, Chegg and Instacart).
Of particular note, it is reported that 8 of the 17 companies that have become billion dollar enterprises are headquartered in California, and 12 of them are based in the USA. It is unclear whether the North American focus will remain in the medium term, but for now the US has the lead in this market. While many of these organisations were set up in the USA, and more specifically San Francisco, like Uber and AirBnb, these organizations have already spread to provide services in markets worldwide.
Interestingly many of these companies became billion dollar companies in fewer than four years. This illustrates the massive potential that is present in this industry, particularly when bearing in mind that many of these companies were spawned in the global recession. Instead of getting traditional funding, many of these enterprises got going with money from family or friends, built a market first and then were able to go after investment later when they were proven to be likely to succeed.
To date, the sharing economy is reported to have received $15 billion in funding. This far surpasses the level of funding that social media colossuses such as Facebook and Twitter, among other received. If social media is considered to be a fairly established type of industry these days, it is believed that the sharing or collaborative economy is still very much in its earlier days.
Ten of the companies from the 17 billion dollar sharing economy companies are considered to be “unicorns”, namely they are still private organisations. These are Prosper ($1.7 billion), Ola ($1 billion), Uber ($40 billion), Instacart ($2 billion), Lyft ($2.5 billion), WeWork ($5 billion), TransferWise ($1 billion), AirBnb ($10 billion), FundingCircle ($1billion) and Kuaidi Dache (8.8 billion).
Despite the massive growth in the sharing economy it is believed by analysts to be unlikely that these collaborative start-ups that go against traditional culture will actually completely change the capitalist economy. It is likely that lots of people will still want to carry on booking hotels the traditional way, and calling for a cab, and finding work through a traditional employer, and so on.
One of the challenges has been that initially it was thought that people shared for altruistic or caring reasons. Recently it has become more apparent that this is not necessarily the case, and much of the sharing that goes on in the “sharing economy” is opportunistic money making on the part of the person with something to share, as well as the organization providing the access to the collaboration. Indeed, it is reported that the “sharing” start-ups are very much still owned by a wealthy one per cent. This means it is not now considered to be idealistic. Nonetheless it is changing the way things are done and many of these companies are already having a profound effect in challenging some of these industries by providing more effective, fairer goods and services to the population.
Additional resource: Sharing Economy, Infographic done by Parag Jain.Image source: Juggernaut
Paula Newton is a business writer, editor and management consultant with extensive experience writing and consulting for both start-ups and long established companies. She has ten years management and leadership experience gained at BSkyB in London and Viva Travel Guides in Quito, Ecuador, giving her a depth of insight into innovation in international business. With an MBA from the University of Hull and many years of experience running her own business consultancy, Paula’s background allows her to connect with a diverse range of clients, including cutting edge technology and web-based start-ups but also multinationals in need of assistance. Paula has played a defining role in shaping organizational strategy for a wide range of different organizations, including for-profit, NGOs and charities. Paula has also served on the Board of Directors for the South American Explorers Club in Quito, Ecuador.