Startups Formalize The Gig Economy

Around 40 per cent of migrant workers returned to their hometowns from cities like Bengaluru, Delhi after the pandemic-induced lockdown last year. Experts called it the reverse migration and some even predicted it to become an irreversible phenomenon. However, as normalcy resumes, we now see many workers coming back to cities. This time, they are in more demand than earlier, owing to the surge in users of ecommerce, food and grocery delivery platforms. These sectors are leading the creation of a large number of blue-collar jobs in India. 

Startups Formalize The Gig Economy

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Further, organizations are now more cognizant about the value these workers bring in. This has led to the rise of many startups such as Apna, Vahan, JustRojgar, Betterplace, Lokalpe and others who are leveraging the power of technology to help these workers find jobs that match their skills and organizations find employees who fit the job profile the best. Most startups in the space also offer upskilling for the gig workforce. 

These startups have also become investors’ favorite business models to bet their money on. Apna, a blue-collar employment startup, recently attained unicorn status after raising $100 million in a Series C round. Vahan, a Bangalore-based job and livelihood platform raised $8 million in Series A funding round led by Khosla Ventures and SaaS platform for the blue-collar workforce, BetterPlace raised Series C fundraise of $24 million from CX Partners, Jungle Ventures, others.  CDC Group, Capria Ventures, 3One4 Capital among others.  

“The space has seen a proliferation of networking and job matching platforms. These platforms have simplified the signing-up and job-seeking process, 3 to 4 step registration process, local language options and non-resume-based profiles. This coupled with faster turnaround time, relevant job suggestions and giving the workforce a chance to build professional communities and upskill themselves has led to mass adoption of services. On the employer front, the platforms have gained traction due to fewer hiring costs and a faster turnaround time from posting to interview,”  Ankur Bansal, co-founder and director, BlackSoil.       

Why The Demand

During the pandemic, the inadequacy of skilled blue-collar workers was highly felt by companies, which made them realize the necessity of upskilling this workforce. “The need for upskilling combined with the digitalization of recruitment has led to this segment witnessing massive disruption,” Bansal added. 

Increasing smartphone penetration is making it possible to build mobile-first business models and products for blue-collar workers. “There hasn’t been a better time to build products for India’s blue-collar workforce and that’s why you see so much capital rushing towards startup’s that are building for blue-collar workers,” said Viral Chhajer, co-founder- Smartstaff, a mobile-first blue-collar workforce management platform that digitizes and automates workforce management practices.

Madhav Krishna, founder and CEO, Vahan, explains a few macro trends that have come together to spur this interest in the blue-collar space. “First, India has over 250 million blue-collar workers, excluding those who work in agriculture, and now most of them can be reached digitally given the recent growth in smartphone and internet penetration,” he said.  Vahan’s clients include Zomato, Flipkart, Uber, Swiggy, Rapido, Grofer’s, Dunzo and Shadowfax and they recruit 8000+ blue-collar workers across 200 cities every month. 

Startups like GigIndia operate in the grey-collar workers’ space. The startup works with a high-quality pool of skilled gig workers including young professionals/freelancers/job seekers, who work remotely to help large enterprises scale their businesses rapidly. The company provides a flexible workforce along with tech-enabled real-time tracking for work completion in Inside Sales, Remote Onboarding, Customer Success, Recruitment On-Demand, Influencer Marketing and Field Operations, among others.  “The industry and businesses have realized that this is the future of employee & employer engagement models. Now, enterprises are keen to improve productivity and ROI and hence are moving towards a flexible, cost-optimized and productive channel of employee engagement,” said Sahil Sharma, co-founder and CEO, GigIndia.

How They Leverage Tech

The startups in the space are trying to solve the deep problems of this space in a tech-first manner. For instance, GigIndia’s AI and ML-enabled application helps manage projects end-to-end from automatic sourcing of gig workers to tracking, everyday planning, execution and reporting of every gig in real-time. This, it claims, reduces overall turnaround time. The Smartstaff platform connects workers, businesses and other key stakeholders with a seamless web and mobile platform. Through the Smartstaff application, each business creates a digital ecosystem for their workers through which they can give their workforce a real-time view of their timesheets, payroll summary etc.

As a B2B SaaS platform, BetterPlace works with 1000+ organizations in India and has custom-made tech solutions that allow them to manage the entire lifecycle of their blue-collar workforce from hire to retire.  The product uses a scalable cloud solution built on top of Microservices and deploys deeply engineered systems including AI and ML to automate, recommend and simplify workflows for its TG Ex – automated PF/ESI registration, touchless attendance system, OCR-based doc upload, etc. 

“In Direct-to-Consumer play, we deploy big data systems to record and process every data point that is generated. We use ML algorithms to create intelligent profiles, their scores, and ranking to personalize the offering with guided experience. We use a micro frontend framework that helps to scale up the digital services on offer to consumers as a distribution play,” said Pravin Agarwala, co-founder and CEO, Betterplace.

 Unorganized Sector

Since the market is highly unorganized, challenges galore. For instance, these startups often face resistance from middlemen who have so far benefited from the lack of transparency and accountability in the sector. “When startups try to organize the market and build transparency in the system through technology, they usually face a lot of friction from these middlemen,” said Chhajer of Smartstaff.

Other challenges include sourcing and filtering of the right talent and executing programs in remote areas, where customers may have vernacular differences and different levels of product or service awareness. “Other than these, there can be malpractices and unethical approaches to showcase results and customers having wrong expectations. We have checks and balances in place to mitigate such occurrences,” said GigIndia’s Sharma.

Future Trends And Business Models

The blue-collar ecosystem is, however, slowly but surely moving towards more formalization. While the rate of formalization in traditional industries such as manufacturing and construction is quite low, more modern jobs in logistics, sales and customer service are formalizing at a much faster rate. “This macro trend, in fact, is responsible for making blue-collar jobs a very large opportunity for companies like ours,”  said Vahan’s Krishna.

According to a report by ASSOCHAM, India’s gig sector is expected to grow to $455 billion at a CAGR of 17 per cent by 2024 and has the potential to grow twice as compared to pre-pandemic estimates. “Around 2.5-3 lac delivery workers are hired in India every month and this number is expected to increase 3-5 times in the remaining months of this year. India’s job market has seen a major transformation in the last few years especially with the pandemic adding a number of restrictions that have led to greater adoption of app-based services,” said Vahan’s Krishna.

Further, companies that are able to engage blue-collar workers and capture rich profile data about them and use those data assets may unlock a lot more value downstream. For instance, use cases within financial services such as earned wage access, micro-lending and micro-saving are hugely relevant in this space.

“In fact, we’ve found that gig-economy workers go through 6 financial emergencies a year on average which is very high! The top type of financial emergency is a health-related one. And blue-collar workers don’t have money on hand to pay big hospital bills because they are unable to save in the first place. Giving them access to capital in such times of need would only help strengthen the value proposition and therefore the stickiness for platforms such as ours. This can only be pulled off through deep data-led insights about the audience,” added Krishna. 

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