Fiverr CEO On Raising $60 Million in Fresh Funding: “It’s a Land Grab Right Now”

This week, Fiverr, an online market for small services, announced $60 million in new financing led by Square Peg Capital. Earlier backers Bessemer Venture Partners, Accel Partners and Qumra Capital also chipped into the round, which brings the company’s total funding to a pretty significant $110 million.

We recently talked with founder and CEO Micha Kaufman about what those investors are backing exactly, how and why five-year-old Fiverr just changed its pricing structure, and whether an IPO is in its sights yet. Our chat has been edited for length.

TC: First, how big is the company at this point? Give us some stats.

MK: We have more than 200 people in five offices, including here in Tel Aviv, New York, Chicago, Miami, and San Francisco. Fiverr generates close to 1 million transactions a month, and we’re truly an e-commerce company, as opposed to a labor marketplace. It’s a catalog business.

TC: Your Chicago office came together through an acqui-hire of a small design house called Cuban Council, from which Google also did some recruiting.

MK: Yes, part of the business was acquired by Google, and we took one of their founders and a few of their team and started our own studio of gifted designers.

TC: With $60 million in the bank, are more, bigger, acquisitions on the horizon? There are a whole lot of companies catering to freelancers at this point.

MK: Doing acquisitions is one way to accelerate our growth, and there are vertical businesses that might help us gain market share in particular categories or with our core business of e-commerce and recommendation systems and so forth, so that’s definitely on our radar.

On a macro level, I do think we’ll see something similar to what’s gone on with e-commerce, where some startups break apart, then the market starts to consolidate through M&A and companies starting to wind down. But 97 percent of freelancing is still happening offline. A small minority happens online. So this is still not a very mature market where you need to aggressively compete against someone to gain market share. It’s more of a land grab right now, and the opportunity is immense.

TC: You are changing the way that your freelancers charge clients. How so and why?

MK: When we started, price negotiation was a big friction point, so we decided that everything was just $5, thinking freelancers were smart enough to slice their offers to $5 so they didn’t spend a long time on something. Then we started opening up the price structure, allowing [freelancers] the option to offer added-value services. That started stretching the price of services beyond $5, but still the basic price had to be $5, then you could upsell.

What we’ve now invented is this concept where we create language for freelancers to package their offerings, so they can structure the scope and the price of what they’re selling in a way that it’s still a binary decision for buyers. They browse, they decide on a tier, they buy. We’ve turned the labor market into an e-commerce business.

TC: And if you have, say, someone offering a package of voiceover services, do his options have to compare in any way to the offerings of other voiceover artists on the platform?

MK: No, our sellers have complete freedom to establish their own pricing.

TC: You say this shift is partly about giving more “pro sellers” tools to offer bigger services. What do you mean?

MK: Fiverr has been going upmarket over time. We started with amateurs and people who were moonlighting and we’ve since been attracting more and more professional freelancers, as well as more small and mid-size businesses as buyers. In fact, three-quarters of our buyers are companies that are turning to us for an increasing number of things. They might come first for the design logo, then they need a website, then they need people to write content, and now maybe to produce a product demo video. So it’s about helping everyone to do more.

TC: And you take how much of every transaction?

MK: We take 20 percent

TC: What’s does the highest-end job on the platform cost?

MK: It depends on the seller and how experienced he or she is, but you can find sophisticated web development jobs for $10,000, along with other high-end graphics and design and music production. It’s still probably going to be more affordable than any other option.

TC: How many freelancers are now on the platform, and how many buyers?

MK: We don’t disclose those numbers, but we’re seeing triple digit growth in our revenue [over last year]. We’ve processed more than 25 million transactions since we founded the company, and about one-third of those have happened in the last 12 months.

TC: Is it safe to assume that with this fundraise, you’ve talked about an IPO timeline?

MK: Going public is an option on the menu, but we don’t think it’s the only one. Right now, we’re just focused on growing as fast as we can [so] we’ll have lots of options.