“We are disrupting,” says Daniel Macklin, co-founder of SoFi, the marketplace lender that has funded about $6 billion worth of student loans and is taking on the banks. “Banks are not people’s best friends,” he says.
The Stanford Graduate School of Business alum launched the Silicon Valley start-up in 2011. Since then it has raised around $1.4 billion, giving it a valuation of $4 billion.
Daniel is not alone. A 2016 BusinessBecause survey of MBA students found that 94% are willing to work in the sharing economy.
This revolution has empowered us to share services, goods, knowledge and even money at an unprecedented scale. The concept has the potential to match supply and demand more efficiently, and reduce the transaction costs, time and distance involved in acquiring services or goods.
“It saves people time and money — making our daily lives easy,” says Vilaiporn Taweelappontong, a partner at PwC Consulting. “Matching customer demand and supply is now easier than ever.”
PwC believes the five main sharing economy sectors — peer-to-peer lending, accommodation, online staffing, car sharing and media streaming — could be worth $335 billion by 2025.
It has given rise to a feast of opportunities for entrepreneurs to take on incumbent giants in areas such as hospitality, food delivery and taxi-hailing. “The biggest opportunities in the sharing economy are with larger transactions; services and products which make a significant financial impact, rather than a high number of small transactions,” says Nitzan Yudan, CEO of FlatClub, and London Business School MBA.
Similar to Airbnb, the medium-term flat rentals start-up works with Microsoft, Google and Skype to find their interns accommodation, and a handful of top UK universities.
The connecting theme is technology. Innovative online platforms have emerged, enabling people to share underused resources — everything from houses to car parking spaces. “Technology is allowing people to share assets,” says Jonathan Masland at Dartmouth’s Tuck School of Business.
The freshest examples range from SnapGoods, a site for lending and borrowing high-end household items to DogVacay, which lets sitters take care of your dog.
The companies’ key advantage is using mobile, cloud and other technologies to streamline the delivery of their services. Rob Biederman, the Harvard Business School MBA who co-founded HourlyNerd, which “rents” 17,000 consultants on short-term projects, says: “We made the difficult and expensive choice to invest in technology.”
With digital, says the CEO, “people are no longer constrained to hiring individuals who are in their immediate vicinity”.
Businesses leading the sharing charge are disrupting their sectors, such as SideCar and Ola, which have upended the US taxi market. With the start-up revolution in full swing, a throng of MBA graduates has setup some of the sharing economy’s most disruptive and promising business ventures, like P2P lender Lending Club, founded by HEC Paris MBA Renaud Laplanche.
Richard Bland, head of employer engagement at London Business School, agrees that MBA students are enticed. “They use these services every day,” he says.
Many are challenging existing players in the financial technology, or fintech, space, such as online lender Propser, whose CEO Aaron Vermut studied at Pennsylvania’s Wharton School.
“Without a shadow of a doubt, new innovative players….Are shaking up the traditional financial services sector,” says Ismail Ahmed, CEO and founder of WorldRemit, an online money transfer business that is valued at about $500 million.
Ismail dreamt up the idea while studying for an MBA at LBS. Since its foundation in 2010, the London-based start-up has raised $150 million in venture capital. “WorldRemit owes much to the connections I was able to make at LBS,” says Ismail, who previously advised leading African money transfer companies for the UN.
But he shakes off the tag of “disruptor”: “For the world’s unbanked, tech-enabled platforms can bring about positive change and financial inclusion — in a transformative rather than a disruptive sense,” he says.
Perhaps sensing the threat posed, established players are moving into the sharing economy with a vengeance. General Motors pumped $500 million into ride-hailing service Lyft, for example.
“There is a significant opportunity for established companies to participate in this success — if they employ the right investment strategy,” says Howard da Silva, Deloitte’s consumer business industry leader.
One reason for the stream of entrepreneurs into the sharing economy is the robust flow of VC investment. There are at least 17 billion-dollar companies in the sharing economy, according to VentureBeat, such as music-streaming service Spotify, which has raised $1.5 billion, or co-working space WeWork, which raised $1 billion.
“We have a lot of funds to fuel our growth,” smiles SoFi’s Daniel, who recently raised $1 billion in a round led by SoftBank.
P2P lending has been the fastest growing sharing economy segment, according to PwC. But online staffing is hot on its heels. “We are bringing supply and demand online,” says Raj Jeyakumar, CEO of SkillBridge, and Wharton School MBA.
At the heart of the so-called “gig economy”, the short-term consulting site works with about 6,000 freelancers, most of whom have MBA degrees. The consultants are attracted by flexibility — “gone are the days when you join a company and know you have a job for life”; companies value the “match making” of specialists to specific projects.
“You can go to your Bains and BCGs, which have general consultants, but if you want specialist expertise you come to us,” Raj says.
Daniel Callaghan, CEO of rival platform MBA & Company, which has 20,000 consultants and clients including Pfizer and easyJet, says on-demand industries will grow as companies become more aware of freelance marketplaces.
“The sharing economy remains a significantly pool of nascent potential,” says the IESE Business School graduate.
Karl Loo, CEO of ServisHero, an app that connects consumers to service providers in Malaysia and Singapore, says such online platforms are the “marketplaces of the future”.
“Before the internet, renting someone else’s assets or exchanging services was….Usually more trouble that it was worth,” says Karl, a University of Oxford, Saïd Business School MBA. Now websites like Airbnb match providers and punters in a matter of hours, he says.
Yet the past year has seen a pushback against the sharing economy, as the likes of Uber have faced lawsuits from drivers who say they should be treated as employees instead of independent contractors.
The regulatory heat has claimed scalps. Shyp, a logistics company, and Instacart, a grocery delivery business, have both moved to turn informal contractors into full-time employees.
Such developments could upend some sharing economy companies’ entire business models. But despite the headwinds, most agree the potential for the Uber and Airbnb set to tap into massive, underused pools of assets and labour remains huge.
As Fred Mazzella, CEO of BlaBlaCar, and INSEAD MBA, wrote in TechCrunch this month: “We are at the dawn of a new era — the sharing age.”