#vworker

[backinblackpodcast]

Ian Ippolito - Episode 001

[backinblackpodcast]

Ian Ippolito is an American serial entrepreneur and the funder of numerous successful tech companies. His best work includes vWorker (formerly RentACoder), an online portal for outsourcing computer virtual work projects that was later purchased by Freelancer.com Ian is also the founder of the first open-source website Planet Source Code (www.planet-source-code.com) and the skill-based gaming website Peanut Butter and Jelly Games. As an entrepreneur, he has been featured in and provided commentary for numerous publications and media outlets including Forbes, Entrepreneur Magazine, The Wall Street Journal, as well as Fox and CBS News. So sit back and listen to Ian tell you how he got his life Back In Black.

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By failing lots of small times, I avoided failing catastrophically and ironically I succeeded!

Ian is the founder and CEO of vWorker.com as well as Exhedra Solutions, Inc., which is the parent company of vWorker.com. Before founding vWorker.com, Ian founded Planet-Source-Code.com, a site for computer programmers. Prior to that he worked for a number of years in the information technology industry as a consultant and employee for companies like UNIsite, American Tower, Siemens, Verizon, and R.W. Beck and Associates.

vWorker connects 178,000 businesses to remote workers in hundreds of fields (such as programmers, designers and writers). It saves them 36%-80% over traditional hiring and also protects them better with monitoring of worker desktops and a money-back guarantee. It also allows over 350,000 people to work from home, choose what they work on and set their own hours. Entrepreneur magazine called vWorker “one of the 100 most brilliant companies on our radar’. It is a four time consecutive winner of the Inc. 5000 “fastest growing private company in the U.S.” award. It has also been featured on CBS and FOX news, the Wall Street Journal, Business Week, Fast-Company and many other broadcasts, publications and journals.

MO: How have you managed to build a self-sustaining company completely from scratch and organically from an initial investment of only $1,000?

Ian: The first company I built was called Planet Source Code and I loved it because I started it very cheaply, ran it with only 3 people and it had fat profit margins of 95%. That was in the “go-go” dot com days and it sold advertising to many of the dot coms of that time (who paid rates that we would today consider outrageous). So when my customers started dying off, I realized I needed to start another business. My goal was to create one that had a lot of similar qualities. I also wanted to call my own shots, so I tried very hard to find something that I could do in a self-funding manner.

It was not always easy. There were times in the first few years where the company came within a whisker of going out of business. One time, a credit card thief stole $5,000 from me. Back then, that was enough to chew up all the profits for the month and some of the previous month’s profits too. But, along with my team, we found a way to overcome that obstacle and all the others. (In that situation, we invented an anti-fraud verification system that was copied and used by many websites today).

But being self-funded also had its advantages. When you don’t borrow huge amounts of other people’s money to create a business, it forces you to look at things in a profoundly different way. Behind every business decision I made, I was forced to ask myself “Is this really going to make more money than I’m investing in it?” Many funded ventures don’t have to scrutinize things this closely and end up trying 10 things at once, doing none of them well and losing focus. That never happened because I simply couldn’t take on that many things. I had to simplify, and doing things cheaply. And I always got feedback as fast as possible from my customers on everything. If I had a “brilliant” idea, I wouldn’t invest a year and $10 million in creating something in the laboratory that I thought people “should” want. Instead, I would invest a week in creating something quick and dirty and put it out to them immediately and get their feedback. If they liked it, I would build on it. If they didn’t, I’d move on. By failing lots of small times, I avoided failing catastrophically and ironically I succeeded! I was able to move much quicker and nimbly than a larger company.

The common wisdom is that you start a company by coming up with an idea and then borrowing lots of money from other people to make it happen. Certainly back in the old days, making a company always required huge investments in capital. So self-funding was a pipe dream. But that is rapidly no longer becoming the case. And all sorts of resources are available now: from free software to run websites (called “open source”), to cloud servers that are cheaper and more affordable than buying servers, to access to cheap, remote experts (which is what vWorker does). So today it’s easier to create a self-funded venture than ever before.

MO: The remote working trend has really exploded over the past few years with rising concerns over travel costs, sustainability and the challenge of the work-life balance. However, vWorker was launched back in 2001 before the remote working trend was even truly possible on the scale that it is now. Did you anticipate the growing trend and need for remote workers? Were you ahead of your time?

Ian: I wish I could claim I was that visionary! No I didn’t know it was coming down the pipeline. Certainly I hoped it might become a huge trend, but I couldn’t count on it. But I could see that even back then in 2001, there was a need that was a need not being met. I had started that programming website called Planet-Source-Code.com and the programmers were constantly asking me if I could help them with their excess work. I was a paid programming consultant, so this should have made me happy. But instead, it made me frustrated because there were so many more requests than I could ever possibly do! One day, I realized that this frustration was actually a huge potential opportunity. If I could come up with some way that both parties could be completely protected from the opposite party if they did something bad to them, it could be a huge hit. But it wasn’t immediately obvious how I could do that. So it took a few months to work out the major kinks. But that was how the site was born.

MO: Most people working remotely have met their employers. However, with vWorker these long-distance working relationships are taking place through a website and without any personal relationships being formed. What measures have you put in place to protect both employees and employers from being taken advantage of?

Ian: That’s a very good question. I knew that for vWorker to become big, it couldn’t be “almost as safe” as traditional hiring, or “just as safe”. It had to be better.

So the biggest protection for employers is the money-back guarantee. In traditional hiring, if a worker is slow, or doesn’t do the job right, or is just completely incompetent the only thing the employer can do is fire them. The salary they pay them (or the money they are billed, if they’re a consultant) is lost. Everyone simply accepts this.

But I thought “what if I could make it better”? So on vWorker, the employer doesn’t have to pay at all if the worker doesn’t do the job. There’s something called the triple-point money-back guarantee. The work will be to-contract, on-time and on-budget. And if it isn’t, the employer gets their money back. This is so much better than dealing with traditional hiring. And incidentally, it’s also a guarantee that none of our competitors can match. A few offer a similar service but charge significantly extra for it. I don’t think the employer should have to pay extra to get back their own money.

There are also numerous other safety features for employers. Every worker is rated by their employers and this is visible on the site. So they can see their past work history much more reliably than a resume and choose the best ones much easier. There’s a crowdsourcing feature where employer can test workers using an on-the-job trial and pick the best one (instead of guessing from a resume). And employers who need to supervise their workers closely can also monitor their desktops to confirm they’re doing the right thing (and help them if they aren’t). And of course, they don’t get billed if the worker is doing something they shouldn’t such as playing games or making a personal call. There simply is no similar protection in traditional hiring.

For workers, there are similar protections. The payment guarantee is their biggest protection. These days, everyone is freelancing, even in the traditional world. But the problem is getting paid. Last year, 42% of freelancers were not paid properly and lost $4.7 billion from deadbeat employers.

Again, I thought we could make it better. So we force the employer to escrow the funds before the job starts, so the worker knows they are not a dead-beat. And if they employer refuses to pay them, then we will award the funds to them. Of course, they will not get paid for doing shoddy work (like I said earlier). But the typical good worker who is competent and delivers on-contract, on-time and on-budget is guaranteed payment. We also have an hourly payment guarantee where they are guaranteed payment as long as they remember to clock in and out (and aren’t goofing off playing games, etc.). This is an even stronger guarantee and simpler to fulfill.

And there are numerous other safety features for worker such as employer ratings, verification of their phone # and credit card, etc.. We are constantly adding on things that can make the process safer and more comfortable.

MO: You’ve said that the best part of your job “is reading thank-you letters from workers.” What kind of feedback and thanks are you receiving? What is vWorker providing that moves people to write a personal letter in the day and age of e-mails and texting?

Ian: It’s probably easier to just include a few.

Workers:

I came to US one and a half years ago as an immigrant with limited money. I agreed on working remotely with my employer, but somehow he changed his mind and I lost my job. I spent 2 months to find any job, but I could not find one because of the economic crisis (low market, too many candidates, etc.).

I’ve came to vWorker.com after wasting 2 months, and it saved us and my family! Currently I’ve 3 projects going on.

I really thank you for your support of my life!

I left the job market 14 years ago to become a full-time mother. In 2006 I discovered vWorker.com and joined to see if I could make some pocket money from home. Since then I have completed over 1,800 projects and am the #3 rated service provider out of more than 280,000 workers on vWorker.com. The money I earn here represents almost 50% of our combined family income. Thank you vWorker!

It is really appreciated by all of my friends who are working on vworker that you are actually helping Pakistani people out, so million thanks from them. And personally Ian you rock man. I tried million websites really and none of them helped me get even a single project and make a single penny. And you know what i wasn’t here for two days and boom i won a project! And now I’m on a roll! So Ian what ever i earn it is only because of you really thanks for that and you are doing great job my prayers are with the you and the company.

Employers:

After many months of outsourcing more than 30+ ministry projects, I am convinced more than ever that the vWorker.com community is, without a doubt, one of the first great innovations of this 21st Century! I’ve had the pleasure to work with Graphics brilliance in Romania, 3D Animators in Russia, Web Designers in Brazil, Malaysia and Canada, and Software Developers in India… The vWorker.com rating system allowed me to read a trustworthy historical record of each Coders performance record…. I am more than happy to encourage any other potential buyers you might have to join vWorker.com… and try out a test project for a few hundred dollars. They’ll be thanking me for years! ;) Thanks!

As an entreprenuer on a shoestring budget, I can honestly say that vWorker.com is the way to go.

Before finding vWorker.com, I purchased Visual Studio Pro and hired a local programmer to ‘get me over the hurdles’. Then the nightmare began. As my deadline drew closer it became more and more obvious that I was in way over my head. I was really panicked when the programmer I hired to ‘get me over the hurdles’ shrugged and said “I can’t help you”.

Out of desperation I turned to half a dozen internet programming portals, and vWorker.com won out. What an awesome decision it turned out to be. My program got developed under budget and before deadline, and it totaly rocks! My skepticism was shattered, and now I will recommend vWorker.com to anyone.

MO: vWorker initially started out as Rent A Coder. What are some of the main changes the company has undergone since its inception and what inspired the name change?

Ian: The site was originally for hiring programmers and so it was called Rent a Coder. But over time, people started posting all sorts of projects in the “miscellaneous” category. There were projects in writing, SEO, marketing, translations, and design…all sorts of things completely unrelated to programming. I realized we were not doing a service to the non-programmers on the site by calling ourselves Rent a Coder. So we changed the name to fit the new, expanded scope of the company and to support them better.

Another exciting development was winning inclusion in the INC 5000 (for fastest growing private companies in the U.S.) for 4 years in a row. That was a nice honor.

Earlier this year we made another big change. In a survey, the #1 problem our employers reported to us was that it was too difficult for them to select the best worker from a list of bidders. So I thought, “what if we could make it so they could somehow always choose the best worker, every single time?”. So we introduced an on-the-job trial feature that lets them use crowdsourcing to try out numerous workers at once and pick the best performer and then award the project to them. It’s essentially a “try all of them before you buy” concept, and has been a very exciting new development.

MO: What are three trends in your industry that you’re excited by or think that our readers should be paying attention to?

Ian: 1) Broadband is growing so fast. In 2001, many of the things that are done remotely today would not have been possible. In 10 years, we’ll see exponentially more things are capable of being worked on remotely. 2) Movement from overseas outsourcing to domestic outsourcing: The early 2000’s were all about cost savings with overseas outsourcing. However, as the emerging world’s wages rise closer to the developed worlds’, the differences are starting to disappear. As an example, in China, wages are climbing 15-20% per year. By 2015, it will actually be essentially the same cost to manufacture in the U.S. as in China. This is going to have huge implications in other areas too, such as remote work. U.S. workers will be winning more and more of the pie than ever before. Crowdsourcing. I mentioned earlier how useful t is for employers to be able to put huge amounts of workers through an “on-the-job interview” to pick the best one. I think this is going to be copied industry wide. As broadband grows, this will become more and more powerful and useful as well.

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vWorker: Creating the eBay of remote work

 Name of your company and URL?

vWorker: http://www.vWorker.com

Date started? April of 2001

What is your product or service?

vWorker connects 150,000 people and businesses to remote workers and saves them 36%-80% over traditional hiring.  It also allows over 300,000 people to work from home, choose what they work on and set their own hours. Entrepreneur magazine called vWorker “one of the 100 most brilliant companies on our radar’.  It is a four time consecutive winner of the Inc. 5000 “fastest growing private company in the U.S.” award.  It has also been featured on CBS and FOX news, the Wall Street Journal, Business Week, Fast-Company and many other broadcasts, publications and journals.

Why did you start your company?

Before 2001, I created another website called Planet Source Code.com.  Source code is the building blocks of computer programs and that site allowed programmers to quickly use other people’s building blocks to create their software more quickly.  What I found is that these programmers needed help figuring out tough problems.  A large number wrote to me and offered to pay me to help them, but I was so busy I didn’t have the time.  After turning down the 30th or 40th one I realized that there was an unmet need in the marketplace.  I thought “what if I could enable all the programmers on the site to bid on those jobs”?   It was kind of a crazy idea (at the time) and I realized that most people probably wouldn’t hire a complete stranger without very solid protections.  So every project would be protected by escrowing and arbitration, so the employer would get what they contracted, or their money back.  And on the other side: if the worker met the contract, they would be guaranteed to get paid. That was the start of the site.

How was it financed ?

The company have never taken any outside funding or venture capital.  To start it, I used my personal savings and a $5k loan from my parents to buy computer servers.  This was back in the day when you had to actually buy your servers and couldn’t just rent space on the cloud.  After that, it’s been fortunate enough to be self sustaining.

Date officially launched?

The site launched in April of 2001.  The first month is made about $50, which is not a lot!  But on the plus side, it was cash flow positive right away, which is something some businesses take years to achieve.

Do you have a YouTube video URL that you can share with us, and allow us to publish with your story?

How many people are currently working, including employees (freelancers or independent contractors for specific projects)?

There are 10 full time and 4 part time employees.  I have a team of another 20 virtual workers hired from the site that do thing like design work, press releases, marketing, programming, etc.

What almost killed your business in the start?

Within the first year, the company was still struggling.  One day we got a larger than usual order for $1,000, which was nice and got me excited.  But 30 days later, I got a letter from the credit card company about that same order. They said the person who sent the money had actually stolen the credit card.  I asked them how this was possible since it passed all their security check. They told me that many times they don’t catch credit card thieves right away.  They also said that since we didn’t ship a physical product, there was nothing we could do to avoid having the $1,000 taken from us (by them).  And of course, the worker had already been paid, so that would leave me $1,000 in the hole.

The next day, as I was just getting over my anger at what this person had done (and at the credit card company for taking no responsibility) a second letter came in.  It was again from the credit card company, and it was another order for $1,000 that was fraud.  I couldn’t believe it.  Over the next few days a total of $5,000 in charge backs were sent to us.   If it continued much longer, we would be out of business.

So I read up about other business owners who had gone through the same problem.  I learned that there are criminal rings that buy and sell stolen credit card numbers, with the sole aim of extracting as much stolen merchandise and services from merchants as possible before the bad # is caught.  Since they live in other countries, they cannot be prosecuted and then just go on to the next credit card and the next victim.  There are illegal marketplaces where they can buy a credit card # like this for less than a dollar.

So obviously the criminals had  the upper hand, and the credit card companies were not going to help at all.  So I sat down with my CFO (Zoe Edgington) and we came up with a plan.  We would call every single new customer that we got, to make sure they were a real person.  Then we would confirm their credit card information with their bank by calling them.  And finally we would make two small charges on their credit card and ask them to tell us the amount, so we could make sure they actually owned the card and hadn’t stolen it.

Thankfully this stopped that original ring of criminals from using the site.  Over the years the criminals got more sophisticated and so we had to respond with more sophistication as well.   We eventually teamed with a 3rd party company that specializes in internet fraud, that helps us stay on top of the latest schemes and one step ahead of the “bad guys”.

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A brief history of freelance marketplaces

With the world gripped by a global downturn small businesses are clamouring to cut costs and increase profitability to stay afloat. Enter, the freelance marketplace. Freelance Marketplaces are not a new concept, the first marketplace was launched in 1998 and dozens have come and gone since.

In this article we take a brief look at the history of some of the better known freelancing marketplaces on the web.

Guru.com, the first online freelancing or outsourcing marketplace was established in 1998 as SOFTmoonlighter.com, it consolidated its position in the market, rebranding to A2ZMoonlighter.com in 2000 to reflect a move away from software programming and again in 2003 to Emoonlighter.com. In 2003 it acquired the guru.com domain and completed its rebrand in 2004. Under the stewardship of founder and CEO, Inder Guglani, a US based Indian emigre Guru has won a series of awards including: Ernst & Young regional entrepreneur of the year award in 2008 and a Pittsburgh Tech50 award for eight consecutive years since 2002!

Guru was closely followed by Elance which launched on July 4, 1999. Co-founders Beerud Sheth and Srini Anumolu brazenly stole the name from the title of a paper written by MIT professor Thomas Malone in the previous year. Elance quickly acquired over $1.2million USD in seed funding to enable it to get off the ground, operating from a stuffy New York apartment. In 1999 the founders set off on a whistle-stop tour of Silicon Valley in search of some VC funding. Within two weeks they returned to New York with a $12 Million USD deal with renowned venture capitalist L. John Doerr. The company has grown ever since and as of March 2010 it had reported total billings in excess of $260 million dollars.

Other prominent marketplaces for freelance workers and consultants were launched in 1999. The now defunct, Freeagent.com was launched by Opus 360 CORP on July 4 1999 (on the same day as Elance). Within 3 months they had raised $40 million dollars in funding and within a year it was billed as the number one freelance marketplace.1 It claimed to have been a source of freelance talent for companies including Microsoft, Pfizer, Ernst & Young, Lucas Films, MetLife, Lucent, and Xerox. Despite heavyweight backing and early adoption by major corporations, FreeAgent.com disappeared into the abyss of .com failures in 2005, without so much as a whisper to be found about its demise.

Since the launch of Guru.com in 1998 many pretenders to the throne have come and gone, but the turn of the millennium saw a new marketplace emerge –RentACoder.com (RAC) was launched in 2001. Based out of Tampa, Florida, RAC was founded by Ian Ippolito, CEO of Exhedra, a software development company. It was the first niche freelance marketplace to launch with a firm focus on programming and software development projects. With the explosion in popularity of the internet and a surge in small business grappling to get increasingly complex websites developed, Ian and his team at Exhedra were struggling to keep pace with demand. RentACoder.com became an outlet where they could send overflow customers to connect with talented programmers and get their projects completed. Today, RAC has total billings of $65 Million and in recent years it has broadened its horizons to take in additional categories such as graphic design and editorial projects. The second quarter of 2010 will see RentACoder.com rebrand to vWorker (v stands for Virtual), this will undoubtedly help the site move away from its techie roots and become a more widely accepted general freelance marketplace, ramping up their billings in the process.

A lull then followed, with little if any credible new entrants to the market, until 2004, when oDesk, GetAFreelancer (now just Freelancer) and GetACoder were all launched, each has demonstrated strong growth since their inception. oDesk has undoubtedly been the most successful of these, with over $160 million dollars of projects completed by March 2010.

Based in Silicone Valley, California, oDesk was founded by Greek students Odysseas Tsatalos and Stratis Karamanlakis who had a different vision for freelance marketplaces – pay for talent by the hour. While other marketplaces were running on bidding and auction style business models, oDesk was aiming for the untapped potential of a global hourly workforce. It experienced strong growth in its formative years and in May 2006 secured $6 million dollars in Series A funding from Venture Capitalist firms Globespan Partners and Sigma Partners. This was followed by an second tranche of $8 million in funding from the same VC backers in September 2007 and an additional $15 million in May 2008. Therein lies the answer to some of the sites success and exponential growth to its current position in the top 5 marketplaces worldwide - 2nd only to Elance in terms of lifetime billings. In additional to being well backed financially oDesk has courted the media consistently, has a resilient and reliable platform behind its marketplace and has invested a major chunk of cash on marketing – through Google and its affiliate marketing programme.

At the same time that oDesk was launching, a Swedish company, 'Innovate IT' was preparing GetAFreelancer.com for their entry on the global outsourcing scene. They experienced steady growth between 2005 and 2009. In March 2009 the GAF website and brand were spun-off from Innovate It to Plendo Sweden AB – a wholly owned subsidiary of Innovate It. Then, in May 2009 Plendo Sweden AB and GAF were bought by Australian outfit Ignition Networks Pty. By October the new owners had re-branded to Freelancer.com and the site is now experiencing exponential growth buoyed by renewed investment and an aggressive competition based marketing strategy which has seen over $100,000 in prize money up for grabs between October 2009 and the end of March 2010 for a series of competitions including a logo design contest, logo exposure contest, t-shirt design contest and most recently an API programming contest. Freelancer.com holds a strong position overall with $50 million in billings and 1.5 million registered freelance workers in its stable.

In recent years a series of newer marketplaces have come to bare. In 2007, People Per Hour (PPH) was launched in the UK by Xenios Thrasyvoulou, a Greek born Cambridge graduate who, within six months of launching, had managed to secure seed funding from investors who previously held roles at Skype and Ebay for example. PPH aims to be different and focuses very much on home-grown talent or 'home-shoring' with a strong emphasis on quality over price. In our discussions with Xenios he told WhichLance “I think there is a big market for higher quality freelance work both in the UK and the US.”

LimeExchange.com backed by LimeLabs was launched in 2008 and has gained a solid footing in a small space of time. The site has already clocked up over $5M in billings and has hundreds of active jobs open on any given day.

Most recently a trend towards ultra-niche marketplaces which focus on providing highly focused skill-sets has emerged. Two such sites are Joomlancers.com which focuses on providing services to a growing community of businesses which use the Joomla! Content management system as the framework for their online presence. WPLance.com on the other hand focuses on the WordPress community. Both sites are still in a relatively embryonic phase of development, with realtively few jobs and providers available through either. The major sites have also been quick to capitalise on development trends and are proactive about marketing their freelance developers capabilities on both platforms.

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Note to entrepreneurs: Your idea is not special

– Brad Feld is a managing director at the Boulder, Colorado-based venture capital firm Foundry Group. He also co-founded TechStars and writes the popular blog,Feld Thoughts. The views expressed are his own. –

Every day I get numerous emails from software and Internet entrepreneurs describing their newest ideas.

Often these entrepreneurs think their idea is brand new – that no one has ever thought of it before. Other times they ask me to sign a non-disclosure agreement to protect their idea. Occasionally the emails mysteriously allude to the idea without really saying what it is.

These entrepreneurs think their idea is special and magic. And they are wrong.

The great entrepreneurs are already focused on the implementation of their idea. They send me links to their website or software. They describe the business they are in the process of creating (or have already created). They point me to what they’ve done to implement their idea and show real users who validate that the idea is important. And they quickly move past the idea to the execution of the idea.

Google? Not the first search engine. Facebook? Not the first social network. Groupon? Not the first deal site. Pandora? Not the first music site. The list goes on. Even when you go back in time to the origins of the software industry: MS-DOS – not the first operating system. Lotus 1-2-3 – not the first spreadsheet.

The products and their subsequent companies became great because of execution. First, they had to execute on building a great product. Next, they had to execute on building a great business. Finally, they had to execute on scaling, sustaining, and evolving a great business.

Rinse and repeat, over and over again.

It’s awesome when an entrepreneur is obsessed with his idea. Every great product that I’m aware of came from an obsession of an idea and every great company followed. But for every entrepreneur that shifted the obsession with the idea into an obsession with the execution of the idea, I know many more entrepreneurs who got stuck on the idea, but never focused on building something from it.

Sure, they tried, but they didn’t obsess about it, pour all their energy into it, and most importantly get as many great people as they could on the journey with them.

As a venture capitalist, I’m constantly looking for great entrepreneurs who have amazing ideas. But I don’t value the ideas. I value the entrepreneurs’ execution of the ideas.

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Interview with Ian Ippolito: Founder of vWorker.com

Ian Ippolito is the founder and CEO of vWorker (formerly known as RentACoder), a company that connects employers with virtual workers and makes doing business more affordable and safer than traditional work arrangements.

vWorker has over 300,000 workers and 100,00 employers in hundreds of fields and was called “One of the 100 most brilliant companies” by Entrepreneur magazine.  It has been profiled in the Wall Street Journal, Business Week, Fast-Company and many other journals and magazines as a company exemplifying the shift to the new world-wide digital economy. It is also a 4 time (2007, 2008, 2009, 2010) consecutive winner of the INC 5000 “fastest growing private company in the U.S. award”.

Ian is a former computer programming consultant and founded his first company (Exhedra Solutions, Inc. which is the parent company of vWorker) in 1996.  Before vWorker, Exhedra created the accolade winning developer site: PlanetSourceCode.com which currently houses over 29 million lines of source code and receives 9 million page views a month.  It also created several award-winning shareware products such as Help Maker Plus.

In his spare time he enjoys traveling, enjoying good food with good company and weight lifting.

We had an email interview with Ian.

Q1. Tell us something about yourself. What prompted you to start RentACoder? I started RentACoder.com back in 2001.  I had created a site called PlanetSourceCode.com in early 90’s, which was the first site to allow programmers to upload and share source code.  It had a decent regular user base (a few million visitors each month).  The problem I had was that I was flooded with personal requests from people who wanted help with their programming projects.  As an IT consultant, it really pained me to have to turn down so many paying jobs!  That’s when I realized that there was an need that was not being met in the marketplace.  So I created the site to do that.

Q2. When you started, what type of vision you had for it? Did you envision it as a global marketplace?

I had seen too many conflicts occur in the traditional consulting world, and wanted to create something better.  I saw way too many programmers get “stiffed” by employers who never paid them.  And also saw too many bad programmers “milking” good employers and doing very poor work.  So, I came up with the concept that every project would be escrowed in advance, to protect the worker from being “stiffed”.  And then every project would also be protected by an arbitration process run by people who could actually test the programs. So good programmers would always get paid..even if their employers didn’t want to.  And good employers would always get their money back…even if their bad programmers didn’t want to refund them properly.

From the beginning I thought it would be a global site.  I knew Planet Source Code had a global user base, and I hoped I could bring them over to the new site.  Fortunately, for RentACoder, I was successful.

Q3. Initially, the projects posted on the website were verified before being open to bidding. What made you change that?

Actually, at first there was no verification of projects at all.  But unfortunately a few bad apples posted bad projects (example: “please create a computer virus for me”).  So we had to create a verification process.  But by that time there were a lot of projects being posted…more than the staff at the time (which was just myself and two employees) could handle.  So we came up with a system where the first several times a person posted, their project would be verified.  Then after that we assumed they had proved they were trustworthy and could bypass that. If a bad project escaped through, we would rely on our users (who are extremely proactive) to let us know about it.

However, as the traffic grew, even that system no longer worked because we could not keep up with the traffic. Employers were getting very upset that their projects were taking so long to approve, so we had to find a better solution.  So we created a computer program to go through the pending verifications and approve the ones it felt were okay.  It was able to process about 50% of them, which allowed a human to focus on just the ones it wasn’t sure about. The program isn’t 100% perfect, but when it lets one through (or when a person who can bypass verification posts something they shouldn’t) the site users are quick to let us know about it so we can remove it.

Q4. When the question of name change came, what type of issues you had? I mean you knew that it could decrease the traffic and perhaps even customers.

The people most attached to the name were the virtual workers who were programmers.  The people who hated the old name were all the virtual workers who were not programmers (writers, marketers, translators, etc.).  These workers thought the name was hurting business (which it was).  And the employers at the time (who bring the jobs and thus the traffic) really didn’t have a strong opinion either way.  So we figured the name change would probably bring more business to the site, and that is why we changed it.

Q5. What is the present comparison with the name change—have you got better results?

Yes.  As a result of the name change we suddenly received a huge influx of press coverage, including appearances on CBS news, FOX news, etc. In the past, the name “Coder” had always made people think we were a narrow thing that was not of national interest.  But once we became about “Virtual Workers” we were suddenly very topical and interesting for the media to discuss.

Q6. Do you feel in the past 4-5 years, quality of bidders have decreased significantly? At the same time, a lot of top-performing workers on the site have not got any work altogether. What are you views?

No, I don’t believe it’s accurate to say the quality of the bidders has decreased.  We did an employer survey early this year and allowed them to select bid quality as a problem and few did.  The #1 common issue that employers actually have is that the # of bad/spam bidders has increased significantly.  For example: in 2003 the average project got 12 bidders, and out of those would be 3 good ones.  In 2011 they now get 35 bidders, but 20 are spam bids and still only 3 are good ones.  So it gets very difficult for employers to weed them out.

However, we have some things coming up later this year that will deal with this issue. We are going to have a spam-score so that people that get reported for too many copy-and-paste bids will get warned and if they continue it their bidding privileges will be revoked.  And second, we’ll be implementing a bidding point system, that limits the # of bids that people can make at one time.  This will force them to make real bids, rather than spaming across as many as they possibly can.  Workers that have established they are “good workers” (by doing a good job on projects, passing certifications, etc.) will get more bid points to spend.  New workers will start with just a few and have to prove themselves with their actions to earn more.  This will not only help the employers, but is good news for the good workers as well, because it will be much easier for them to be noticed (and command a fairer/higher price) in the bidding, since the spam bids will have been removed.

And we also will have some other “top-secret” features coming out in late 2011 that we believe will revolutionize bidding and allow employers to more quickly weed out the “bad” bidders and identify the “good” one than ever before.

Regarding top-performing workers not getting any work: again, I really haven’t seen this happening.  Every month more and more workers hit a landmark completed project (50,100,150,etc.).  And of course, most of the top 10 are so flooded with requests that they don’t have to even bid and they cherry-pick only the best ones…just like they always have.  What *has* happened is that we’ve been very aggressive regarding certain “top-performing” workers who were very good at winning projects (i.e. excellent sales people)…but not as good at actually completing them (i.e. mediocre workers).  And these people are indeed feeling a squeeze…so perhaps this is what you’re referring to.  However, true top-workers who actually do a good job are always in demand.

Q7. What type of team you have for vWorker?

There are 15 physical employees.  Most do customer service and arbitrations.  We also have 20 or so virtual workers that we outsource non-core functions to, and we’re always looking for good, fresh talent.

Q8. Do you expect a bigger company could offer you a buy-out offer?

Yes.  I’ve been approached several times and have had too many offers to count from venture capital firms.  But I enjoy going into work every day and making the big decisions, which would change if we sold or took on additional investors.  Of course, I can’t predict the future.  But right now I’m happy with the way things are.

Q9. What type of future goals you have for vWorker?

We have some very exciting plans for the rest of 2011 and the next several years, but I can’t reveal too much because our competitors are very quick to copy everything. One thing that is coming up very soon is a beta of a new feature for a “tech-sherpa/project manager”.  Many non-technical customers have said it’s too difficult to use an outsourcing site because they simply don’t know how to create a spec, evaluate which worker is the best to pick, and/or manage the worker and QC their work.  They need a knowledgeable guide that can do this for them, and that is what this beta will connect them with.

Q10. Given that there are millions of websites made almost everyday, what are 3-4 most crucial factors for a web-startup?

1- Identify a real problem and solve it better than anyone else.

2-Be adaptable, humble and a good observer:  You should be excited about your idea when you’re dreaming it up.  However once your idea hits the reality of the marketplace, odds are that it will not work like you expected.  The difference between the successful entrepreneur and a drop-out is that the successful notice what is not working, have the humility to let go of their initial preconceptions an ideas and then change it into something that does work.

3- Be persistent and patient: Success is rarely an overnight process.  You need to prepare and pace yourself to run a marathon, not a sprint.

[qtpros-blog-blog]

Outsourcing: Ian Ippolito, Founder and CEO of vWorker

(Part 1)

Outsourcing websites abound on the Internet, and each one has its own unique spin on the process. And vWorker, once known as Rent-A-Coder, does, too. A global outsourcing company, vWorker or “virtual worker” has nearly 175,000 employers hiring and managing close to 360,000 virtual workers every day.

Sramana Mitra: Hi Ian. Let’s start with some background on how you started this company. What do you do in vWorker? Give us some context, and then we’ll dig into how you’ve done what you’ve done.

Ian Ippolito: OK. How far back to you want me to go? Actually, vWorker was started on the back of another company. Do you want me to talk a little about that?

SM: Yes, sure.

II: OK. I was computer consultant, like, a programmer. As a programmer, I was always looking for opportunities to start my own business. I always wanted to be an entrepreneur and have my own company. Working in the computer industry, I saw lots of opportunities. One of them – this was back in the late ‘90s when the Internet was just coming out. I saw the Internet was just coming out and thought, this is probably going to be very big, but there’s no place out there right now where programmers can share source code, which is the building blocks of programs. There’s no place for them to share it. So, I created a site called Planet Source Code, and that’s what it did. It was the first site that allowed programmers to do this. What it would do is programmers could then go and instead of starting from scratch, all of a sudden, they had all these source code building blocks, and they could create their programs much faster.

That was the business I created before vWorker. It was a very good business. Back in those days, people would pay you big bucks to advertise on your site. So, Planet Source Code was getting over a million people a month, and it was showing ads.

SM: How did you sell the ads? Did you have to go and sell the ads to people?

II: I sold some myself, and I also had a company, a third-party representative, who would go out and try and find advertisers. So, I did both. It was mostly that company, though. It brought in the big ones. At that time, people were paying a lot of money just to have ads on sites. They didn’t really understand how the Internet worked. They just knew that they had to be out there.

SM: That has completely changed now.

II: Yes, it has. People have gotten a lot smarter. Back then, they would pay 40 CPM (cost per thousand), which means $40 to show an ad, and it was a really small ad — it was like a 468 x 60 ad – 1,000 times.

SM: To get $40 CPM on ad pricing is incredibly difficult. To get $4 CPM is difficult already.

II: Oh, yes. If you do $4 today, you’re doing really good. And the companies were fighting for the spaces to advertise. There was Microsoft and Oracle … there were big companies, and there were small companies.

SM: How much money did you make when you had this one million visitors a month kind of site?

II: It was a lot. I can’t remember the exact numbers. It was just me, and I had one employee. So, it was the two of us who ran this whole site. We did have some big expenses. Back then, you didn’t have broadband Internet, so we had to purchase these T1 lines. I had these leases.

SM: T1 is very expensive.

II: Yes, very expensive. Each T1 was about $1,500 a month. I think I had about $6,000 a month just in those. But it was probably bringing probably $10,000 to $11,000 a month, something like that.

SM: It plenty covered your costs and left lots of profits.

II: Yes, exactly. So, it did well.

SM: How long did this go on?

II: At its peak, it went on for about two and a half years. It ended right around 2001, which was the dot com crash. The dot com crash occurred, and then all of a sudden, these people who had bought all these expensive ads were putting off paying their bills. So, they were like, oh, can we pay you next month? And be like, oh, OK, I guess. And then they’d keep putting it off and putting it off. Eventually, I realized that a bunch of these companies didn’t have any money. They’d spent money they didn’t really have, a bunch of borrowed money. And they weren’t making any money. When the crash came, a whole bunch of people folded. I lost almost all of the advertisers. A whole bunch of them had not paid me. It was a pretty bad situation. I had those monthly bills, paying $5,000 to $6,000 a month and no revenues coming in. It was a pretty scary situation.

So, I was like, well, I need to do something else here, or in a few months, there’s going to be big trouble. That’s when I was like, I have this resource. I have a million people a month coming to this site. They’re valuable in some way. Even if people aren’t going to pay for it, they’re valuable. Maybe I can take advantage of that in some way. The thing that came right to mind was the fact that 99% of the time, so many times, I had to turn down these programmers when they would tell me, “Hey, Ian, you’re the owner of Planet Source Code, could you create this program for me? Could you write this for me? Could you tweak this, or could you change this?” There were too many of them, and I couldn’t do them. I had to turn them down. After receiving all those emails and turning down all those people, I realized there’s definitely a need for people to have work done quickly and easily remotely. I thought, if I could just do it in a way that was safe, where you wouldn’t mind hiring someone who you don’t know, then I thought that it would have a really good chance of being successful. That’s kind of vWorker was started. Back then it was called Rent-A-Coder because it was just programmers.

(Part 2)

Sramana Mitra: I think I’ve heard of Rent-A-Coder.

Ian Ippolito: OK. That’s the way it started, and it was just programmers back then. The first month it probably made only $50 or $60, but it grew. Over the next couple of years, it started going faster and faster. We got some good publicity. We were in The Wall Street Journal, which was a big thing. At the time, the idea of hiring someone over the Internet was a new idea. The [journalist] wrote a whole article just on using the site. After that, things really took off.

SM: Which business model do you use? Is it the Elance kind of business model or the oDesk business model?

II: It’s similar to the oDesk model. Obviously, we have differences, but it’s similar to what they do. We connect people who need remote work done with those who will do the remote work. We put in guarantees to make it safe.

SM: Talk to me more about the specifics of your company. We’ve had a variety of companies like yours profiled in the Outsourcing series, so we’ve been very much on top of this trend. Elance, oDesk, Freelancer.com, crowdSPRING, NineSigma, all sorts of companies that follow roughly that business model, so tell me more about the specifics of your business model.

II: Sure. If you’re already familiar with some of the others like oDesk and Elance, we’re similar to them, but we’re also different. All of those are big venture-backed firms. They act very differently from the way we do. Their business models and strategies are different because of that. We are not venture funded. Lots of venture capitalists have offered to fund us, but we’ve grown organically. Because we’re so much smaller than an Elance or oDesk, we have to do things differently. For example, we have to offer better guarantees. Our business model is we have a 100% money-back guarantee. If someone goes to Elance, for example, and there’s a dispute, he has to pay a certain amount of money if he has to go into arbitration, from $99 to $199. With us, it’s all free. And we’re cheaper than oDesk, about 10% to 35% cheaper. The strength of oDesk is that they have that desktop software, [but] we have that. We have same strength as crowdSPRING, offering crowdsourcing, and oDesk and Elance don’t do that. We combine a lot of these things that are the best things from these different sites to create something that, we hope, people can use over and over again.

SM: People can choose what they want to do? They can hire people to do a job or they can crowdsource a project, is that what you’re saying?

II: Exactly. We even have something where we recommend that the best way to hire someone. If you’re not technical, or let’s say I’m trying to hire a designer. I can look at profiles and ratings, and I still don’t know if that person’s going to do a good job for me. First of all, people fake stuff. They fake their profiles, unfortunately. They’ll fake their portfolios. But the other thing is, even if it’s not fake, just because someone else liked what the designer created doesn’t mean I’m going to like it. One of our best practices is combining crowdsourcing and outsourcing. We recommend that when they want to hire someone, they put out a crowdsourcing competition. We call it on-the-job trial. Try to find who is best. Just give a little piece of the job and find out who’s the best at that. Then once you have the person you like, you outsource, which is much cheaper. What that does is it eliminates the interview process, which is the most difficult part of outsourcing for most people.

SM: That works for design jobs. Is that your specialization? Your specialization is coding, isn’t it?

II: It works in coding, too. It just has to be done in a different way. For example, let’s say I’m hiring a programmer to program my website. I will post an on-the-job trial and say, “I want to create the next Facebook.” But I’m not going to put that as the trial. The trial is just, “I want you create the wall,” for example. I want to create the wall, and the person who creates the best wall is the person I’m going to hire for the rest of this project, and this is going to be a year-long project. And I’m going to give a prize to the person who does the best. Not only do they audition, but I’m going to give a prize to the winner, and the winner will also win the rest of this contract.

(Part 3)

Sramana Mitra: That’s one of your differentiators, that you use crowdsourcing instead of the interview process, and then you let people hire based on the best crowdsourced project?

Ian Ippolito: Yes.

SM: What are the terms under which you work? It’s a commission on projects, yes?

II: Yes. With the crowdsourcing, we take 6.5% to 10% of the prize that’s offered, and then once the client outsources, it’s anywhere from 6.5% to 15%, depending on what features the client wants to use. We have the desktop software that monitors what the person is doing. Maybe she’ll want that. Maybe she’ll want the backing of arbitration, whatever the client wants. What we make off it depends on the services we provide.

SM: Where are your service providers, and where are your employers? Give me a breakdown of how the exchange has developed.

II: For the employers, the top three countries are the United States, the United Kingdom and Australia.

SM: The English-speaking ones.

II: Yes, the English-speaking ones. The top three on the workers’ side always fluctuates. It’s not constant, but it would be the United States, India, Romania, and Pakistan. Those four are always going back and forth from month to month.

SM: So, you have a lot of people who are freelancing from the U.S. as well, it sounds like.

II: Yes.

SM: Interesting. What other metrics can you share, or demographics or anything else?

II: Well, we have 350,000 remote workers around the world, we have more than 150,000 employers, people who are employing those remote workers.

SM: Are most of the employers small businesses?

II: Yes, most are. There are some that are just little entrepreneurs, like a one-person business. Some are under 100; the majority of them are in that category of 10 to 100 people in the company.

SM: Any more color on who these employers are from an industry segment point of view? Do you see a lot of technology entrepreneurs? Do you see a lot of e-commerce companies? Where do you see the most activity?

II: We see pretty much all of them, but there is definitely a skew toward technology just because the people in the technology ventures are comfortable with using technology to build their companies. We have a lot of tech ventures and tech entrepreneurs. I’m already excited about technology, so I’m interested in using the Internet to grow my business rather than some of the more traditional type businesses, which [can be] slow to adopt something like that because it’s a new model.

SM: What has been your experience? You’ve been in this business for about 10 years now, or a bit more?

II: It’s a little bit more, yes.

SM: And you’re at about $11 million in revenue?

II: Yes, that’s right.

SM: What are you seeing? Over the course of the past decade of doing this business, are you seeing an acceleration in the trend and adoption of the trend? In the early 2000s, this trend was not that well known. But now I see a lot of companies in this business and also lots of employers, lots of service providers, working in this model. In my company, we hire people on services exchanges all the time.

II: That’s great. It’s becoming more normal. It’s almost becoming typical for a lot of companies, especially technolog-related ones or entrepreneur-related ones like yours.

I’ve noticed a couple of things that are driving the adoption. One is broadband. Back when this started, the Internet was difficult to get to for a lot of people. It was so expensive. In the past 10 or 11 years, the prices have come down a lot. That’s made a big difference. And then the other thing that’s made a big difference is the commoditization of software. In the past, if an entrepreneur needed a website, someone would create something custom for him. And it would take a pretty long time to do custom software. Well, what’s happened is this whole open source thing has happened. Now people can take parts, kind of like what Planet Source Code was, taking components and parts, but in this case, it’s easy to use open source to create a website that looks custom and that is custom. But on the back end, 80% of it has already been created in advance, and it’s just a matter of tweaking things.

These two things are allowing a lot more companies to be created, more than would ever have been created in the past. Ten or eleven years ago, it would have been so much more difficult, so much more expensive. Open source has definitely helped us, and it’s great for entrepreneurs.

(Part 4)

Sramana Mitra: On the service provider side, are these largely solo freelancers, or do you also have companies operating on your platform?

Ian Ippolito: They are both. Most of them in the United States are solo, although one of our largest ones is probably about 15 or 16 people. It’s called Gravity Jack. They’re about number two or number three in our ranking system. We rank all the different workers, and they’re two or three out of all 150,000. They are a larger company. But the majority of the people in the U.S. are solo people looking for extra work, or they’re in a situation where they don’t want to work a normal job, you know, go into the office, drive in and all that sort of thing. They want the flexibility and the freedom to choose their work. That’s usually what it is in the United States.

Overseas, it’s both, but it’s probably more like 60% are companies that have at least two or three people. Sometimes, they’re much larger.

SM: How many million-dollar freelancers have you created?

II: That’s a good question. I don’t know. I’ll have to get you that information. We did have one guy – maybe it was about a year or two ago – who became the CEO of Bloomberg Energy. The way he became the CEO of that is he started his own business on vWorker (it was called Rent-a-Coder at the time), hired a programmer and a few other people, and Bloomberg Energy loved it so much they bought it and made him the CEO. That was a $450 million acquisition. It was a huge one. We have a bunch of stories.

SM: How big is your company in terms of people?

II: There are 15 full-time employees here in the Tampa office, and then we have a slew of part-timers and remote workers. We hire people through the site itself. We’ve got marketers and programmers and graphic artists and stuff like that.

SM: How many freelancers do you think you’re using at any given time?

II: It’s an ad-hoc basis, so at any time it’s, like, hey design this logo. Do this; do that. I’ll guess maybe 15.

SM: It’s a great business model. With 15 full-time people, you’re generating $11 million in revenue. That’s a very high dollar value per person.

I talked to an entrepreneur who runs a site called FineArtAmerica.com.  They basically are an exchange for artists to sell their prints. When I spoke with them in 2010, they were at $1 million. Now, they are at $5 million, and they have only three people in the company.

II: He must do it all through the website, then.

SM: Entirely through the website. All the logistics are outsourced to a logistics firm. So, it’s just three employees doing $5 million a year in revenue. I love this kind of incredibly capital-efficient, highly profitable, sustainable company building model. I just love it.

II: Me, too. For us, we’ve been forced to grow organically, and it forces you to be very efficient. It forces you to refine your business model and make sure it works. You’re not just going to go out there and spray a bunch of money around and try a bunch of things and if a whole bunch of them fail, it’s no big deal. It forces you to think.

SM: You have to count every penny.

II: Yes, every penny. That’s awesome. That’s a great story.

SM: Well, I enjoyed talking to you, Ian. Thank you for taking the time.

II: Thank you.