KC Underweight Deal: Crypto Payments For Freelancing?

$900,000

Key Stats:

Raise to Date

$2000

Investment Minimum

$45

Minimum Raise

$900,000

Pre Money Valuation

$900,000

Raising Platform

Razitall

Security Type

CAFEs

Target Summary

As of June 26, 2019, CryptoLancers has raised $2,000 of a $90,000 target.


Summary

As of June 26, 2019, CryptoLancers has raised $2,000 of a $90,000 target.

Today we’re diving into the world of online freelancing portals. But not just any online freelancing work portal, this one has a twist: compensation for freelance jobs is paid with cryptocurrency. The goal of this article is to analyze the strengths and drawbacks of CryptoLancers and provide a clear and unbiased view of the potential of the company for interested investors.

As previously noted, CryptoLancers is an online marketplace for the gig economy. Like most of its competitors, it is a peer-to-peer freelancing platform. What makes CryptoLancers is the company’s unique monetization strategy that the company believes to be the answer to the woes of many freelancers.

According to a recent survey (And as noted in the company’s Razitall raise page) an estimated 29% of the freelancers wish to be paid in cryptocurrency. CryptoLancers is banking on the results of this survey to build its business. 

Beyond crypto-compensation, CryptoLancers is an online platform where gig makers can find freelancers, and vice versa, and avail value for their money. This idea is not new – the only innovation is the potential use of cryptocurrency for payments. Fiat currency is completely avoided as the company allows freelancers to get paid in cryptocurrency, thus intermediating secure and frictionless transactions through the blockchain.

It’s not as crazy as it might sound to a crypto-skeptic. Both blockchain and gig economy are growing. This, coupled with estimates that approximately 57 million Americans are expected to be freelancing by 2027, might make for a valuable business. CryptoLancers represents a way for investors to bet on the intersection of these growing markets. 

We wonder how truly unique CryptoLancer’s business model is.  

Other than the crypto-payment option, CryptoLancers does not offer anything unique. It is just another freelancing platform among a multitude of better-established platforms. 

At the same time, there is no assurance that the unique proposition of the company will have many takers. According to reports as well, only 29% of the freelancers prefer to be paid in cryptocurrency. What about the remaining 71%? Does this 29% prefer to be paid in some form of cryptocurrency all the time? Is the company targeting only a minority fraction of the gig economy and disregarding the rest? And perhaps most importantly, what happens if a better-established competitor makes crypto-payments available? 

Below we seek to find answers to these questions.  

CryptoLancers Pros and Cons: Raising on Razitall

Overview

1. Limited Target Audience

CryptoLancers prides itself in its unique payments proposition: Allowing freelancers to get paid in cryptocurrency. The process may, indeed, make transactions secure, frictionless, and less time-consuming.

The company bases its potential success on the survey that indicates that about 29% of the freelancers will prefer to get paid in crypto. However, by doing so, the company is limiting itself to less than a third of the potential market. This may inherently be a problem, we here at KingsCrowd believe in finding market niches, but it also exposes the company to risks should the thesis itself not pan out.  

There does not appear to be any reason why freelancers who do not want to be paid in cryptocurrency, and that segment forms the majority, would prefer CryptoLancers over the many other well-established, efficient, and growing freelancing platforms. 

2. Monthly Fees
CryptoLancers states that it will not charge any commission fees for facilitating freelance work and processing transactions. Essentially, all transactions will directly be between the buyers and sellers, without any transaction fee. Sounds good – until you get into the details.

The catch is that the company will charge a monthly membership fee, instead. Subscription to CryptoLancers will come through a membership agreement costing $29.97 for the first month and $9.97 per month thereafter. 

On the other hand, most of the competitors offer free membership with basic benefits, and freelancers are only required to pay a commission out of the money they end up earning.

This subscription-based business model is a bi-product of using cryptocurrency in the first place: without credit cards on file it’s difficult to collect fees. 

3. Competition

The target market for CryptoLancers is vast. As discussed, more than 60 million of the Americans are expected to be freelancing one day and freelancing generated about 1.7 trillion worth of economic activity in 2018.

However, the market is already occupied by long-term players. The most significant competitors of CryptoLancers include UpWork, Freelancer, Fiverr, and Toptal. All of these players have grown and established themselves as the market leaders and leave only a small window for new entrants.

Let us take a comparative look at CryptoLancers and its top competitors for a better picture:

Founded

Number of Freelancers

Fee Structure

Mode of Payment

CryptoLancers

2019

None

Monthly membership fee of $29.97, no commission

Cryptocurrency

UpWork

2015

12 million

Free basic membership, 20% commission on payment

Direct transfer to bank account, PayPal, Payoneer, M-Pesa 

Freelancer

2009

16.5 million

Free basic membership, a 3% fee on projects

Through PayPal, Skrill, and Freelancer Debit Card

Fiverr

2010

8,30,000

Free basic membership, 20% fee on gigs

Direct transfer to bank account, transfer to PayPal account or to Fiverr Revenue Card

Toptal

2010

N/A

Free basic membership, 50% commission on payment

Direct transfer to bank account or prepaid card

There is nothing to prevent any one of these freelancing platform giants from initiating cryptocurrency payments and robbing CryptoLancer of its only unique feature.  

4. Inherent Uncertainties

In addition to the risks mentioned above, CryptoLancers suffers from the inherent risks of an early stage company. The securities issued may remain illiquid for a long time, or they may never be liquid at all. It goes without saying that any early-stage investor should keep this in mind at all times. 

Lastly, it’s worth mentioning that all the projections in the pitch deck, including average margin, sales, profit, and multiples, are mere assumptions at this juncture. CryptoLancers may not be able to generate expected profits and provide returns on investment.

The Rating

Due to CryptoLancer’s lack of a truly unique value proposition, limited target audience, and high competition, we are assigning CryptoLancers the rating of Underweight. 

CryptoLancers does not separate itself enough from other freelancing platforms, except for the mode of payment. Ironically, the only differentiator of the company seems to be its biggest drawback! Payment in cryptocurrency does promise security, transparency, and less friction; however this advantage is easily taken away. If it does turn out to be a popular choice, the competition will quickly move to offer it’s own crypto-payment processing solutions. 

We advise investors to perform due diligence regarding the potential of the company and returns on investment before investing their money. 

If you have any questions regarding the underweight rating of CryptoLancers, you can reach us at hello@kingscrowd.com.

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