Today, Group 11 announced closing a $55MM Series B investment in Lili, the fastest growing mobile-app providing banking services for freelancers in the US. Led by serial fintech entrepreneurs, CEO Lilac Bar David and CTO Liran Zelkha, the mobile-first app has had a record first quarter, and at Group 11, we think it’s only the beginning for what Lili will become.
How Lili is a leader in Mobile Banking
Why are we conducting this fundraise only six months after Group 11 led Lili’s Series A, and less than a year after their Seed round? I’d first direct you to get context from our previous articles: ‘Why We invested in Lili Banking’ and ‘Go All in or Go Home’. Next, we would say it’s because the numbers show US Freelancers are running to Lili’s in-app offerings. The US Freelance Workforce continues to accelerate faster than any other US Workforce demographic, and Lili has every indication they will continue to grow with this demographic, and be as large and as meaningful as any of the US other prominent neobanks.
In less than six months, Lili is leading mobile banking for freelancers in terms of new account holders, sign ups, app usage, and revenue growth. Lili has effectively doubled its account base during the COVID pandemic and quadrupled transaction volume since their Series A in October of 2020. They are registering more than one million logins a month and also expanding their demographic presence in the emerging US Freelance Workforce (account holders ages 18–23 now make up ~10% of Lili accounts).
On top of these impressive metrics during a pandemic, Lili was also chosen by the Freelancers Union as their partner of choice for their +500,000 members, and joined Visa’s Small Business Hub alongside other known fintech brands like Paypal, Quickbooks, and Shopify.
In 2020 and into 2021, Lili launched many vital and customer-requested features that simply don’t exist with other banks and their mobile apps. Lili added a tax bucket account (where freelancers can set aside funds each month for inevitable quarterly, or annual estimated tax payments) as well as in-app tax calculators and estimators. These features are encouraging Lili users to save and practice better capital planning. Lili’s internal data shows that almost 60% of their Tax Bucket account owners wisely save 20% or more of their income with this feature! These in-app innovations are effectively small business CPA or tax firm services and provided free of charge to Lili’s freelance users.
Lili’s leading doesn’t stop there. As Group 11 has shared a number of times, a product-market fit between a customer and a tech creator like Lili is ever-evolving; it is not static. Through the rest of 2021, Lili is already gearing up to launch in-app features including invoicing, savings, and new credit products.
Freelancers: Who are you?
After looking at how Lili has grown, who are the US Freelancers growing with Lili? Defined as a US adult (18+) who has engaged in supplemental, temporary, project, and/or contract-based work within the past 12 months, a 2020 report states an estimated 57 million Americans freelanced in 2020. With unemployment at 6% (March, 2021), and the 2020 US Census sizing America at a population of 331,449,281, this is a sizable chunk of the US population and workforce! US Freelancers are self-employed — they are contractors, small business owners, on-demand (seasonal) workers, as well as gig-economy workers.
But US Freelancers are not ‘just gig-economy’ workers as some portray them. Edelman Research puts the figure of gig-economy workers at less than 10% of the reported Freelance Workforce, and that the median rate of freelancers in the US is $28 per hour (which is 70% higher than US workers overall). On UpWork’s freelance platform alone, their community earned over $2.3BN in 2020 across more than 10,000 skills, including: website and app development, design, customer support, finance, accounting, consulting, and operations. Considering that freelancers contributed ~$1TRN in the US economy in 2019, or 4.8–5% of GDP, they are a demographic that can’t be dismissed.
What is accelerating Freelancing in the US? What do freelancers look like going into the future? Judging that more than 2 in 3 surveyed started freelancing in the past 5 years due to a major life event (job loss, marriage, became a parent, moved states, graduation, etc.), it’s no surprise that this demographic could grow to be as much as 68MM people in the US by EOY 2022.
In addition to major life events, the growth of freelancing in 2021 is due to now obvious tech factors such as: the decentralized workforce effects from COVID, the pervasiveness and ease of digital and remote cloud-based collaboration tools, the expanse of freelance job-posting platforms, digital classes and vocational schools, and smartphone penetration allowing participants to post, communicate, and book freelance work from their pockets.
The growth is also generational: 63% of surveyed freelancers reported being under the age of 34 with 39% under 24 (20.9% answered >45). The growth is economic: “51% of freelancers say no amount of money would make them take a traditional job and 59% of non-freelancers say it is likely they will do freelance work in the future.” Of all issues, affordable healthcare remains a top concern of freelancers. Organizations like the Freelancers Union have been specifically formed to help pool and negotiate better rates with health insurance carriers for their members.
All of the above data is to show that businesses, politicians, financial institutions, and new tech providers need to take this demographic seriously and offer them products, services, and solutions now. We are talking about millions of Americans who will need banking, tax, healthcare, and ancillary accounting services that are simply not offered by traditional banks, financial institutions, or consumer-facing neobanks. Companies like Lili, that recognize, respond, and capitalize on this demographic sea change in the US Workforce will certainly be the financial service industry leaders of the future.
We encourage interested readers to dive into UpWork and Edelman’s Research’s Freelancers in the US 2021/2022: Demographics, Platforms, and Trends and UpWork and the Freelancer’s Union annual, and pivotal, Freelancers in America: 2019 Report. Lili has a fantastic blog too full of resources and information. There is a trove of valuable data on freelancers there.
Freelancers: Do Your Thing, Lili Will do the Rest
Like any long-term investor, Group 11 is considering Lili not only from the perspective of how they have performed in 2020 and 2021, but how we envision they will evolve with this sizable demographic into the future. Although we project that Lili will quadruple their customer base by the end of 2021, and ~57 million freelanced in 2020, this is still not even 1% of the current US Freelance market! While many people are enjoying Lili, the remaining 99% of the US Freelance market is still stuck with incumbent banks, neobanks designed for consumers, or left without any digital or mobile-enabled bank accounts or small-business services at all.
Group 11 is excited to see more US Freelancers adopt Lili’s offering. They will find that Lili enables them to focus more on their businesses and income, and less on the headache of finances. We believe that Lili’s mobile-first app and offering will be the new standard for the US Freelance economy.
Group 11 welcomes Target Global to this journey, and we congratulate our existing co-investors, CEO and Lilac Bar David, CTO Liran Zelkha, and everyone at the Lili family!