March 22, 2019

Gig-Economy IPOs

Gig-Economy IPOs

Ten years ago most of us never heard of Uber. Long time readers of this column may remember that I actually applied online and was accepted as an Uber driver for one of my weekly ramblings. Now it’s hard to imagine life without it, at least if you live in a major city like New York. Yellow cabs are a mainstay of New York City culture, but there are times when having a car waiting in front of your office building for you at the precise moment you need it is the only way to make it through mid-town to your next meeting.

Now that Uber and its fast-growing competitor Lyft are getting ready for IPOs, they’re going to be in the headlines a lot in coming weeks, no doubt with a lot of speculation about how well their executives and early employees will make out. What’s interesting is that some of their drivers – all independent contractors – may do pretty well, too. Both ride-sharing services are planning to offer valued drivers cash they can invest in the IPO, before selling stock to the general public, as you might’ve read in the Wall Street Journal. That’s something we don’t usually see.

It’s a good PR move. Lyft has also been in the headlines recently for trying to block a recent ruling that set a minimum wage for its drivers and needs a way to counteract the negative optics.

One thing that’ll be worth watching post-IPO is how Uber and Lyft balance the need to grow and create a sustainable business with the responsibilities of being employers – to a lot of people who are not on payroll. These companies have raised billions, which they’ve mostly spent on growth. They may opt to invest their capital differently once they go public and have to answer to shareholders and the community to a greater degree than ever before.

These issues aren’t only relevant to ride-sharing companies. Many firms – in fields from professional services to manufacturing – are turning to flexible workers to plug gaps in their talent pool. What Silicon Valley gig economy pioneers do will have implications for every company that uses contingent workers, whether you call them freelancers, consultants, temps or one of the other labels they’re given these days.

Here at Marcum, we find many of our clients are experimenting with new staffing models. Sometimes it’s a financial decision, as they stretch their budgets to handle work that doesn’t require full-time, permanent talent. In other cases it’s because they need help ASAP and they can’t find permanent hires quickly enough. Other times, it’s to accommodate team members who want flexible work arrangements. If you’re considering hiring contingent staff, Marcum can help you analyze the implications, including tax impact, for your business.

In the meantime, I hope the ride-sharing services decide on another smart PR move: doing away with surge pricing.