The startup economy expands.
TaskUs, a startup that provides outsourcing services to other startups like Uber, Tinder, and HotelTonight, has raised venture funding from Navegar, a Phillipines-based private equity fund. The $15 million deal shows that the even the peripheral companies serving the startup world are investable opportunities.
Today’s startup boom has created a mini-economy of companies which exist solely to serve other startups. Many new tech companies seek out other startups as their first customers by design. The thinking is, startups are supposed to be the most innovative, early adopting companies around, so if their employees are using your product, then there’s a chance Fortune 500 companies and regular Joe’s might eventually want it, too. Slack, the productivity software company worth $2.8 billion, got its start by selling to tech startups. Twitter was brushed off as a Silicon Valley plaything for years before it played a role in the Arab Spring.
Similarly, TaskUs has carved out a niche among startups with its outsourcing services. The company, which got its start in 2008, believes it is better armed to help young, growing companies navigate the outsourcing process for the first time.
The alternative for anyone seeking outsourcing services is working with the likes of Accenture or Teleperformance, whose biggest clients are companies like AT&T, Comcast, Time Warner, and Verizon. “That’s soul-sucking work,” CEO Bryce Maddock says.
“We never had a chance to work with those big guys, and now we refuse to, because doing business with Expensify, Whisper and Tinder is more interesting for people in the Philippines,” he says. TaskUs has a team of 3,000 workers based in Manilla. He noted that a lot of TaskUs’s workers, which TaskUs calls “teammates,” use the client’s products in their daily lives. “If you have great clients, it’s easier to attract better talent,” he adds.
TaskUs’ biggest competition in recent years has been automation. “We lost a lot of early clients to the machine,” Maddock says. For example, an early TaskUs client paid for voicemail transcription services, until Google Voice began automatically transcribing voicemails to text. Same goes for receipt transcription, which software rendered obsolete. As a result, TaskUs has moved its workers to more high-value tasks that are harder to automate, like work with Adobe Photoshop and email- and phone-based customer service.
TaskUs has been bootstrapped until now, growing by re-investing its profits. (The company claims just under $3 million in monthly revenue, or an annual run rate of $35 million.) The decision to raise venture capital came when the company realized it could not keep pace with its accelerating growth. TaskUs will use the capital to add more facilities and employees in Manilla.
Recently, prominent venture capitalist Bill Gurley warned that a downward turn in the market for startup funding would affect more than just the startups—it will affect the companies whose revenue is increasingly reliant on spending by venture-backed startups. This happened in the dotcom bubble, when professional service providers like design agencies, law firms and marketers would do business in exchange for equity rather than cash.
“As you get more of these dependancies, it increases the likelihood that if anything slows we’ll have [problems],” Gurley said in March.
Maddock says TaskUs is aware of its exposure to risk, but believes the company has enough customers that have “crossed the chasm” meaning they wouldn’t go out of business if the funding market dried up. “It’s unlikely that an Uber goes out of business if the bubble bursts,” he says. Still, TaskUs has begun to seek out “compelling” customers that aren’t reliant on venture capital, though he would not disclose any examples.