What started as a way for MBAs to make a little extra cash has evolved into an elite freelancing marketplace with over 10,000 consultants or “nerds” bidding on projects for the likes of GE, Microsoft, and Au Bon Pain, among others. HourlyNerd is disrupting the traditional consulting industry by providing businesses access to inexpensive but highly skilled labor.
HourlyNerd’s approach to building this two sided platform initially focused on top quality talent with plenty of spare time…the MBA student. As business school students themselves, the founders found it easier to start with the supply side of their marketplace because they could easily leverage their network. It was also a compelling pitch to MBAs because there was little downside in setting up their profile. Once they had sufficient supply, they targeted small to medium size businesses, a group that has historically been unable to hire expensive consultants.
As businesses post projects in the HourlyNerd marketplace, nerds can then bid on the projects by setting their own price. Businesses then rate and recommend nerds so a consultant who delivers a great product at a reasonable price for a small business can leverage positive reviews and start moving up the latter to higher paid work. The rating and reviews are key to managing the nerds and the quality of their work.
They key challenges facing HourlyNerd are (1) quality assurance and (2) negative network effects. HourlyNerd has tried to create a network of high-quality nerds by exclusively recruiting from the top business schools. They can also rely on the rating and review system to do some of the policing but occasionally when a nerd fails to deliver as promised, HourlyNerd must mediate the dispute and resolve any complaints by the nerd or company that hired them. The second challenge facing HourlyNerd is the negative network effects associated with becoming so large that it’s difficult for nerds to sort through all the projects. They raised $7.8MM earlier this year to address this problem by making technology improvements to better match nerds and their jobs.
The value creation for nerds is the ability to work on side projects to make additional cash as well as the flexibility of choosing when and where to work and at what price.
Companies see value in this two sided market place because it gives them access to fast and inexpensive consulting advice. Previously many of the small and medium size businesses were priced out of the consulting industry and this gives them the ability to solve some of their complex business problems.
HourlyNerd takes a 14.5% cut of the nerd’s bid. I found it interesting that they charge the nerd, as opposed to the company, but believe this is because they’re facing a demand shortage rather than a supply shortage.
Is HourlyNerd disrupting the consulting industry the way Uber changed the taxi world? I don’t think so. As we discussed in the Upwork case, there are a number of reasons Uber was able to grow so quickly while freelance skilled labor like HourlyNerd will take more time. Companies are hesitant spend money on unknown outcomes and the process of posting a consulting project and selecting a nerd takes time. Having said that, I still think HourlyNerd has huge potential and look forward to seeing what they are able to do with this latest round of funding.