by James Johnstone - Bailador Technology Investments
Since its launch in 2009 Uber has become a poster child for the transformative impact new business models, enabled by technology, can have on traditional industries. The term ‘Uberised’ has been coined to singlehandedly describe this impact.
Put simply Uber uses technology to radically improve the process of a passenger booking a taxi and a driver securing a taxi fare. Uber’s model allows consumers to access thousands of potential drivers and rate their performance to create a continuous feedback loop. The end result is a two-sided marketplace that operates more efficiently, benefitting both the passenger (more convenient, a broader pool of drivers and in UberX’s case lower pricing) and driver (access to income and better time/asset utilisation).
The beauty of Uber’s model is that it uses technology to enable it to operate free of legacy infrastructure costs that plague incumbent intermediaries, allowing it to scale rapidly and operate with high margins. These attributes have combined to create a business that in seven years has reached a valuation of USD$62.5bn.
Given the impact Uber’s model has had on the taxi industry, and the valuations it has attracted, it prompts the question - which other industries are being Uberised?
A quick scan of the Australian market indicates there are a number of early stage technology businesses looking to emulate the hallmarks of Uber’s model to deliver a fresh approach in the consulting, legal services and freelance contracting markets.
Expert360 is challenging the existing consulting firm model by connecting businesses with a pool of appropriately skilled consultants. LawPath is providing an alternative to the traditional legal firm by offering customisable legal documents online combined with a network of qualified lawyers to provide legal advice. Freelancer has created a $780m business that facilitates a marketplace for freelance contractor services.
These businesses are all using Uber’s formula of utilising technology to provide efficient access to a flexible pool of service providers who are only employed on an as needed basis. As a result, these businesses are not burdened by the same cost structures as their traditional competitors. This allows them to offer a more cost-effective and compelling alternative to customers.
One industry flying under the radar, but being Uberised nevertheless is the USD$37bn language translation market that is growing at 7%p.a., fuelled by the internationalization of business.
Historically, the translation industry was dominated by large firms with large pools of employees. A problem with this approach, was that unless there was a constant stream of work for a particular language pair, then some employees would inevitably have periods of inefficient down time. Not to mention the infrastructure cost of hosting those employees.
Machine translation has come a long way, but anyone who has used it will immediately recognise the sometimes comical translations which can result from machines being unable to sense context for a word, particularly if the same word can have multiple meanings. (E.g. even, tie, bear, light, wound…)
The business model beginning to dominate the translation industry is initial machine translation, supported by specialist human review.
This is the model employed by Straker Translations. Headquartered in Auckland, New Zealand, Straker already has revenue in the double digit millions, with 80% being generated internationally.
Straker has market leading machine translation capability, supported by access to a network of over 14,000 translators around the globe. Straker only bears the cost of these translators for the actual time worked on jobs, not the downtime. In a further nod to Uberisation, Straker’s translators are rated on their speed and accuracy of each translation they perform. Over time, a translator may build up high ratings on their English to Chinese performance, but poorly on their English to Indonesian. Under the Straker system, the highest rated performers get priority access to work.
As Straker is proving itself to be the most efficient option for language translation, many of the biggest names in e-commerce are paying attention. Straker is already progressing integrations with leading digital players such as Yellow Pages, Magento and Wordpress.
Seeing the huge global opportunity ahead of them, Straker took the decision to take on additional funding during 2015 to turbo charge their international push. Already cashflow positive and growing in excess of 40%, Straker accepted NZ$6m additional funding, led by Bailador Technology Investments, based on our track record of success in helping antipodean companies expand internationally.
Opportunities to invest in high growth businesses such as Straker have traditionally been limited to venture capital firms. Bailador has changed that.
Investors can now access an investment in Straker, as it Uberises the translation industry, by investing in ASX listed Bailador Technology Investments (ASX:BTI), where Straker is one of the seven digital companies in Bailador’s investment portfolio.
About BTI: BTI is an expansion capital fund focused on the information technology sector in Australasia. BTI invests through minority positions in companies that have a proven business model, established revenue base and excellent growth prospects. BTI always secures board representation and works closely with management and founders to support execution and expansion. BTI listed on the ASX in November 2014 (ASX:BTI).