By: Manuel Silva Martinez, General Partner, Mouro Capital
People have been working in the gig economy for years, but COVID-19 has caused demand for part-time and freelance work to spike dramatically. Amid the pandemic, gig economy workers became essential for keeping services running that otherwise would not have survived the crisis. From vital contactless food deliveries to medical services, gig workers have offered much-needed assistance during lockdowns globally. On top of this, as people were made redundant or had their hours reduced, many turned to the gig economy to quickly supplement their lost income. For many, what initially was just another option to support themselves and their household became a necessity.
Working as a ‘flexi’ worker certainly comes with its benefits. This can include low barriers to entry, meaning anyone can enter the gig economy, regardless of their skillset; the ability to work from anywhere around the world; and the choice to decide when to work and for how long.
But there’s a broader question here: Is the emergence of the gig economy a reduction in the quality of the labour market? If so, who is to blame for the creation of an economy where technology allows a ‘ruling class’ of price-and convenience-sensitive consumers to command an ‘underclass’ of servants with the swipe of an app or a tap for a “like”?
There has been quite a bit of blame on venture capitalists as of late. One could indeed support the idea that VCs are funding business models that are creating a ‘servant economy’, but that is different from saying that the causes of such servitude are VCs. VCs are rational asset managers, and so if servant models are emerging, it’s because there’s significant demand for them – as recent success stories show. 10-minute grocery startups are the newest wave of ‘human laziness’, after meal delivery apps, taxi apps, etc. These demonstrate how people’s day to day activities have been granularized, wrapped into apps, and serviced by a new population of workers. Other examples can be found in the media and content and e-commerce industries. VCs have ploughed hundreds of millions of euros into these companies over the past few years, with the pace not slowing in 2021. In fact, experts at AppJobs say that the gig economy is on course to surge 300% in three years – and the long-lasting effects of the pandemic means this is unlikely to slow down.
The ‘servant economy’ model, however, creates undeniable challenges across a broad range of issues. These challenges include employment stability and security with regard to redundancy packages, dismissal notice periods, lack of mental health support and the environmental issues associated with the consumer desire for convenience.
Who, then, is responsible for funding this economy? The public sector and regulators should no doubt shoulder some responsibility, as should the companies providing these services, particularly for educating consumers on the impact of their purchasing decisions.
Of course, we can’t ignore that VCs fund many of these businesses, with their investment and governance rights attached. As such, VCs must consider the broader context in which the businesses they invest in thrive and consider the broader implications alongside any potential profits as they make investments in these kinds of businesses.