Freelance Gang

The gig economy is a segment of the labor market characterized by short term projects done by temporary workers, rather than full-time, semi permanent employees.

When you hear the phrase “gig economy”, you probably think of these guys:

Uber single-handedly revolutionized the taxi industry and created $153B in market value while doing so.

• Uber co-founder and former CEO Travis Kalanick made $3B+

• Garrett Camp, an angel investor that put $220,000 into the seed round, made $2B+

• Jason Calacanis, well known angel investor and member of All-In podcast, invested $25,000 and made a few hundred million

Uber married the demand that people had for ride-sharing with the horde of vehicles that were not being monetized. They took a swing at creating an online marketplace that was, at the time, laden with risk, and the rest is history; in 2023, ride-sharing market revenue ($154B) surpassed traditional taxi services ($151B).

The freelance economy is often used interchangeably with gig economy, but for clarity, I would categorize freelancers as more independent actors. Freelancers typically set their own rates, schedules, and build their businesses from the ground up while gig workers operate within the confines of a platform, i.e. Uber drivers.

In today’s memo, we will dive into (a) the future of freelancing and (b) a related startup case study.

degree of autonomy

MBO Partners is a global talent solutions platform that was founded in 1996. The company enables independent contractors and small businesses to work together, and they have been tracking data around the rise of independent work for 14 years.

Their annual State of Independence Report is rich with insights on freelancing in America.

One of the most interesting aspects of the 2024 report is how quickly Americans are transitioning to the freelance game

COVID was an inflection point for growing trends in the future of work.

People got used to remote work and reversing the work environment to in-office proved rather difficult. One taste of freedom is all it took for the labor market’s palate to permanently evolve.

Job security turned to job insecurity, especially at blue chip firms with tons of knowledge workers, including Meta, Goldman Sachs, Amazon, among others. Very visible layoffs took place in a time of economic uncertainty. The thousands of employees that were laid off typically picked up related jobs or switched industry altogether. But a sizable minority of laid off knowledge workers began to pursue independent income, pouring more energy into side projects they have previously planted or consulting in areas of expertise.

The Internet is jet fuel for professionals with deep knowledge / value in any field. A single well placed tweet could bring in multiple clients for an independent consultant, transforming a side gig to a full-time income. Every tweet, newsletter, or other form of Internet leverage is like a small lottery ticket that costs nothing but the time spent working on said content.

Throw these trends in a pot and we reach a new high:

• The number of freelancers making $100K+ increased to 4.7 million in 2024

• Up from 3 million in 2020 (+57%)

All of these developments are interesting and, on a more macro scale, validate the trends I have been observing within the lives of others.

The most interesting idea to me, however, is the concept of large corporations adopting freelance workers en masse. Not to the extent of replacing full time employees, but in a large enough capacity to unlock a new segment of the economy.

lawtrades

The top 100 law firms in the U.S. generate a collective $140B in yearly revenue…

In 2016, Raad Ahmed and Ashish Walia founded a company named Lawtrades to give legal professionals the ability to run virtual private practices with a focus on startups and small businesses as clients. Early on, they ran into an issue: startups were not frequent users and the work they needed was short-term. The demand side for their target client base was insufficient to feed the legal professionals on the supply side

It took three years of tinkering before a pivot was made.

In 2019, Lawtrades began working with mid-market and enterprise companies and growth followed suit. After digging deeper into their most profitable customers, they found that pre-IPO and late stage startups were a sweet spot.

Ahmed and Walia started selling to legal departments at startups like Pinterest and Allbirds.

In exchange for providing a marketplace, Lawtrades takes 20-25% of earnings paid from companies to legal professionals. To some extent, you could view Lawtrades as a tech-enabled law firm that gives its workers autonomy. “Uber for lawyers”

By 2022:

• 2,000+ legal professionals (lawyers, paralegals, legal operations managers) were using the invite-only platform

• 100 companies (DoorDash, Crowdstrike, Gusto, Udemy, AngelList, and more) were using the platform

• Raised a $6M Series A at an $80M valuation

• Investors include Four Cities Capital (Robinhood, Deel, SpaceX), Draper Associates, 500 Startups, Gumroad founder Sahil Lavingia, and 100+ angel investors

The company’s direct competitors include:

→ Priori: provides a marketplace of 8,000+ lawyers for companies of all sizes, up to Fortune 50 companies. Raised a $15M Series A-1 in 2022 led by Eagle Proprietary Ventures with participation from Thomson Reuters Ventures, Soma Ventures, and Thirty Five Ventures

→ UpCounsel: founded in 2012 and raised a $10M Series A in 2015. At the time 300 lawyers were providing services on the platform. The company faced legal troubles from the multiple parties, including the State Bar of California, LegalForce, and Raj Abhyanker. UpCounsel almost shut down in 2020 before Enduring Ventures acquired them.

Priori seems like a real threat at first glance, with 4X the number of legal professionals compared to Lawtrades + more VC funding than Lawtrades

Zooming in, Lawtrades differentiates itself with a focused marketplace. Although the platform is 4X smaller than Priori, it prides itself on offering high caliber “ex-Big Law” lawyers. The selectivity employed allows a level of quality control that Priori might not be able to match, creating a competitive advantage over the longer term.

How has the legal profession evolved over time?

Before the American Revolution, there were no law schools in the colonies.

Lawyers would study as apprentices under other lawyers and after three years, apprentices would take an oral bar exam to graduate. Thomas Jefferson and John Adams were products of this system

The apprenticeship system suffered from a lack of standardization. John Adams claimed that his apprenticeship did little to prepare him for the rigors of law. Inconsistent quality, however, was not the spark that lit the way for law schools. It was the Revolutionary War that opened up a new opportunity

A large majority of existing lawyers became soldiers during the war, leaving apprentices with a shortage of teachers. The few attorneys that stayed home saw a chance to consolidate legal education, and the first American law schools were born.

According to multiple sources, Litchfield Law School was the first law school in America

Litchfield alumni went on to form precursors to:

• George Washington Law School

• Harvard Law School

• University of Cincinnati Law School

• Yale Law School

Post-Civil War, the number of law schools began to increase significantly, and by extension, the number of lawyers did as well

• From 1900 to 2000, the number of American lawyers soared by 793%, from 114,460 to over 1,000,000.

• The largest jump took place from 1970 to 1980, from 326,000 to 574,000 (+76%)

• By comparison, from 2000 to 2023, the number of American lawyers has grown from 1,022,462 to 1,331,290 (+30%)

Historically, most law school graduates (a) go on to work for big law firms and (b) practice in New York or California.

Constraints on the supply of ex-Big Law lawyers is an obvious barrier to the outlier outcome Lawtrades’ constitituents are searching for. After proving product-market-fit with legal professionals, the next step is to expand to other segments of knowledge work.

Headlines

• Goldman Sachs names largest partner class since 2020. FT article here

• Prediction markets take a victory lap after Trump win. Semafor article here

• How celebrities became VCs and VCs became celebrities. Fortune article here

• OpenAI acquired chat.com. TechCrunch article here

• Perplexity triples its valuation to $9B in 3 months. PYMNTS article here