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Let’s face it: as an entrepreneur, you dream of a successful exit. Whether acquisition or IPO, we live and die by building businesses that scale.
But how do you know it’s time to sell, or how to sell, or who will buy your business?
A successful acquisition is tough. As an entrepreneur, you know the value of your business. You know the inside and outs of every process, but you’re also biased by the blood, sweat and tears that got you here.
In this article, we’ll zoom out by using the talent platform space to show how talent platform executives can successfully sell their platform.
Principle 1: You can’t time timing, but you can spot patterns
Whether selling a hot dog or a business, it’s better to sell when the market is hot rather than having a stellar product when the market is cold. While there are general economic forces, each industry also has its own forces.
In the case of talent platforms and the general freelance economy, five forces make the environment seem ripe for acquisition.
First, there is precedent. In the last year, Talmix entered into a strategic partnership with eTeam; Randstad acquired Torc, a software development talent platform; Toptal acquired Growth Collective, a marketing talent platform; Workday acquired HiredScore; Multiverse acquired Searchlight; Podium acquired Untapped.
Second, there is a systemic and generational shift of individuals choosing independence that is globally consistent and has persisted through the challenges brought by 2023 and 2024.
Third, there are enterprise success stories. Since 2011, NASA has launched 300 freelance projects with cost savings averaging 80%, and UST reported that a freelance model reduced their project timelines by up to 50%.
Fourth, traditional talent players are facing declining markets. Staffing Industry Analysts predict the US staffing market will decline by 10% this year, while SIA Chief Analyst Barry Asian noted that “the last few years have been tough for staffing. Industry revenue fell by 14% in 2023 and will likely drop another 10% in 2024, according to SIA forecasts. The decline has been so widespread that we are now back at 2014 levels of around 2.7 million workers.”
Fifth, talent platforms are experiencing growth with significant potential for expansion. The global market for freelance platforms is expected to expand at a compound annual growth rate of 16.5% between now and 2030.
Thus the business case is clear. There is a large, growing, systemic shift away from traditional talent solutions and towards flexible workforce solutions.
Principle 2: Have comparables, but be ready to educate why they should trust your discretion
Buying a house is relatively simple. The data is known, the multiples are known, and there are plenty of tools to help you. Buying a business is far from simple, and the talent platform industry faces headwinds of complexity that make it tough for leaders to value their company.
Talent platforms have to deal with the below headwinds.
- There are over 800 talent platforms globally, with 14 different segments, creating the perception of a saturated market.
- There are no “unicorns,” and over 80% of talent platforms are bootstrapped. The result is that most talent platforms have no venture capital precedent.
- Upwork and Fiverr, which went public in 2018 and 2019, both are trading below their IPO prices (at the time of writing this). The problem is that platforms might be tied to this performance, even though newer platforms have fundamentally different models that are sticky, have high expansion and low churn.
- Talent platform multiples most likely lean towards staffing, consulting and low technology comparables, even though talent platforms leverage technology to scale in efficient ways that traditional staffing, consulting and headcount-based models can’t.
- Acquired founders cite that the fundamental paradigm of an independent network is commonly seen as a weakness rather than a strength in negotiation. The result is that talent platforms have to educate basic concepts, like the fact that talent platforms can have higher retention rates than corporate full-time employees since the flexibility keeps talent in their network.
The implication for talent platform leaders is that they have to fight harder than most industries to educate why their unique characteristics are strengths rather than weaknesses.
Principle 3: Understand who is buying
Just like sales, it’s crucial to understand your buyer. So far, Private Equity has been the leading investor in talent platforms.
In the US, Primus Capital made a significant minority growth investment into MBO Partners, who subsequently raised $100m from PE in 2022. In 2021, Align Capital Partners made a growth investment in We Are Rosie. And in 2023, hourly worker talent platform Instawork raised $60 million in a Series D funding round.
In Europe, this year, Private Equity firm CVC invested in World of Talents, an HR talent platform, Amsterdam-based Samen Slimmer AI invested in Qneiform, an AI-based talent platform and UK-based JustGroup invested in 55/Redefined, a talent platform specializing in over-50s.
By knowing your buyer, you then need to understand the mindset of your buyer. In the case of talent platforms, the private equity mindset is centered around revenue optimization. This has two major implications.
For those who want to be acquired by private equity, how do you maximize revenue in 2 to 5 years by having an influx of cash and a private equity network?
For those who want to further disrupt the talent platform, what is the implication of most talent platforms being bootstrapped or owned by private equity firms? One major implication is revenue maximization. Thus, investments in major technology or long-term partnerships might be a weakness to exploit.
No matter your industry, understanding your buyer, their mindset, and the implication of that buyer is crucial for a successful acquisition.
Principle 4: Where is the puck heading?
While sales is a great analogy to selling your company, dating is another. Just like dating, where people say “the best time to find someone is when you’re not looking,” the best time to sell might be when you’re not looking to sell, but instead are ahead of the curve because you’ve been so focused on moving towards where the puck is going.
In the case of talent platforms, it looks like the puck is headed toward traditional talent solutions acquiring talent platforms.
In September of 2024, US-based staffing firm TalentBurst invested in marketing talent platform Publicist. In May of 2024, Randstad Digital acquired LATAM-focused software developer platform Torc. Early results of this acquisition show strong success. Six months after the acquisition, Torc saw 4x community growth and according to Torc CEO Michael Morris, now has access to 300 of Randstad’s Fortune 500 customers.
There’s a clear business case for both parties. Traditional talent solutions like Allegis, Adecco and Randstad have existing customer relationships without an explicit platform or flexible talent play. Meanwhile, talent platforms commonly don’t have the needed business insurance requirements, technology stack requirements, or overall sales timeline runway to expand to levels traditional players can. Combined, they can expand each enterprise account by combining access to the growing flexible workforce, new skills and geographies and a platform experience.
What deep insights do you have about where the puck is going? Don’t shy away from making that explicit.
Related: What You Need to Know to Buy the Right Business and Acquire Your Empire
Principle 5: Don’t lose what makes you unique
One last analogy, I swear. Think of an acquisition like a train. If you miss one train, most likely, there’s another. We’ve all heard stories like Google trying to sell in 1999 for $1 million dollars.
The caveat is that you need to have a good business with strong fundamentals.
In the talent platform space, a leading fundamental for platform success is what I call founder-market-fit (FMF). FMF means that a founder is an expert in their niche. They’re speaking at industry conferences. They have industry credibility, and their talent platform is how they enable other companies to leverage their expertise.
The second leading fundamental for talent platforms is an interconnectedness across the client experience. Rather than doing just one thing, they enable end-to-end experiences through close partnerships.
What are your business fundamentals?
No matter what they are, here is my last piece of advice: don’t bet the business on one acquisition. If your business fundamentals are sound, there will be another opportunity. And who knows, maybe you’ll be Google and laugh 20 years later about trying to sell for only $1 million.
