Idiosyncratic Phenomenon #1: Wingspan
As an early stage, seed investor it’s really hard to approach identifying promising startups just by applying general patterns based on fundamental assessment frameworks typically deployed in venture capital investing. In an effort to demystify the art of identifying outlier companies at 186 Ventures, we decided to put together an internal framework that focuses on two key components that every breakout startup ends up exhibiting — idiosyncrasy and a clear market phenomenon.
Last year we published our thoughts surrounding the idiosyncratic phenomenon. This is our attempt at 186 Ventures to deconstruct an important part of our assessment approach. It’s important to note that we still do apply fundamentals to each startup assessment, e.g. team, market size, differentiation, business model/economics, etc.
In this new series, we will focus mainly on what we find to be both idiosyncratic and a phenomenon. This inaugural post is based on Wingspan. We led Wingspan’s December 2021 seed round after they had been building Wingspan for more than two years. Since then, Wingspan raised their Series A in January, 2023 led by a16z and more importantly has continued to rapidly grow across all key business metrics. The idiosyncratic phenomenon was non-obvious when we first met the founders, but after getting to know them it became clear they had all the ingredients to make magic happen in an industry that needed it most. As of today, the company is on pace to 30x+ revenue and 10x’d total payment volume into the billions of dollars in less than three years.
The Idiosyncrasy:
In 2019 (pre-pandemic!) Anthony Mironov and Greg Franczyk saw a profound shift occurring within the workplace, specifically as it relates to how companies of all sizes accessed human capital — and the trend towards generating revenue with independent contractors. The two brought the optimal balance of finance, product and engineering experience, and vision. They set out to build a system of record and payroll platform for independent contractors and change the way companies engage with independent contractors at scale.
Their unique approach was to not just simply offer payroll payment processing, but they saw a world where independent contractors should be offered a purpose-built platform that meets their needs, including managing taxes, accessing healthcare, and buying critical insurance, among other things. In other words, they deployed a very specific wedge (payroll) with the end goal of owning a multitude of financial services products for a market in which ~$2 trillion is processed annually in payment volume in the US alone.
Wingspan was the first to build an enterprise grade, world class product suite that was specifically tailored to both those who are responsible for interfacing with independent contractors and the independent contractors receiving payment. This white glove, high touch approach was unprecedented compared to other startups we had seen tackling this problem set. Their approach could have been easily discounted given the company was very early on in revenue generation and payment volume, but we knew this product suite could be the differentiator needed for the team to truly breakout.
The market phenomenon:
When the COVID-19 pandemic hit, businesses around the world were forced to rethink, quite literally overnight, how to accommodate both a distributed workforce and those who preferred to work as independent contractors. At this time, 45 percent of businesses are using more freelancers than before the pandemic and 39 percent+ of the US workforce, or 60 million Americans, performed work as independent contractors in 2023, with that number continuing to grow.
The pandemic catalyst for independent contractor work becoming normalized within the US marketplace coupled with the age of embedded FinTech offering up tools for insurance, benefits, etc.,has made way for a market phenomenon. This has resulted in a massive market size of $7 trillion being processed through embedded FinTech platforms annually in the US alone, with $1.9T being 1099 US gross spend annually (SIA).
The results so far:
Wingspan found itself with the right level of product fidelity and preparedness at the right time. Since then, among many other fundamental milestones, the company is on pace to 30x revenue and has already exceeded $1 billion in annualized transaction volume. The number of contractors on platform have similarly skyrocketed, being the root catalyst for all of their growth over the last three years.
Conclusion
Although we are still in the early stage of this paradigm shift in financial services offered to independent contractors, it is clear that there is a lot of excitement and momentum brewing both on the macro problem set Wingspan is tackling and specifically on the traction Wingspan has been able to generate in a short period of time. We’re super excited and privileged to be on the journey with Anthony, Greg, and the rest of the team.
If you know anyone in need of upgrading their independent contractor payment infrastructure, please feel free to reach out to hello@186ventures.com or directly to the Wingspan team!
