The Future of Work: The Three Trends Investors Can’t Miss

In January of 2020, most people’s routine involved waking up, preparing for a new day and commuting into work. Twelve months later, that commute had been shortened from the bed to the living room or the kitchen table – or potentially the home office for a lucky few. Twenty-four months on, we’re finding out that the future of work isn’t that clear-cut.

Lives have changed, industries have been upended and habits have evolved with the accelerated adoption of digital services and the development of new technologies during the COVID pandemic. However, key for investors and companies is to determine which “revolutions” are relevant, which ones will be permanent and which ones will be short-lived.

The last couple of years have provided us several moments to take a step back, look at the bigger picture and map out the longer-lasting impacts of the changes in consumer behaviour. This broader analysis points to three key elements that Kinnevik believes will be enduring and can guide investors and companies looking to tap the future of work as an investable theme and as a way to recruit and retain the best talent:

1. The roll-out of new technologies and increased digitalisation;

2. The mainstream acceptance of remote working and the ongoing relevance of gig jobs; and

3. The war for talent and shift in expectations for company-provided benefits and social security.

The first, and perhaps most obvious “revolution”, is one that will continue to reshape people’s approach to employment. New technologies to facilitate collaboration and foster employee engagement have contributed to the 159% rise in remote work since 2009. The increased digitalisation that was already in progress before the pandemic was naturally accelerated as people were forced to stay home and adjust to a new modus operandi over video conference.

Remote work, which may have been a luxury reserved for a few progressive start-ups, suddenly became the norm in many places. In developed countries, almost half of employees “teleworked”. As lockdowns kicked in and the war for talent heated up, the door flew ajar for start-ups supporting companies compete for the best talent globally, increasing their appeal to investors.

While many were able to adjust to a new reality, millions were furloughed or lost jobs. With ecommerce growing up to five times faster than before the pandemic, modern supply chains were an outlet for that now-considered excess labour. New technologies and companies helped increase not just the provision of temporary and gig workers but also found ways to digitise the search, vetting and recruitment of that talent, how they’re paid, how they’re incentivised and how they can be more efficient. This, in turn, offered a solution to logistics challenges in warehouses and last-mile deliveries.

The detachment from an historically office-based culture, allied with growing concerns about inequality, rising cost of living and tightening labour markets, bring us to the last vertex of the triangle: the all-out war for talent and the revised expectations for social security and benefits.?????

While not being in the office and making one’s schedule can be interpreted as perks of the new reality, how do employers ensure a safety net for their staff’s wellbeing but also leverage those “extras” to attract and retain talent? The solution many employers found was to revamp their offer, adding better holiday and compensation benefits; finding ways to improve support for employees’ mental wellbeing and for working parents; and adopting solutions to bring the team together and maintain a healthy culture.

Companies that don’t take these three trends into consideration will give up competitive positioning and lose qualified people. On the flip side, these changes offer investors an opportunity to buy into the overall trend of tightening labour markets and back the firms that are helping businesses win the war for talent.

In the last five months, Kinnevik has done just that. We have invested in Omnipresent, a company assisting with global employment for remote teams; Jobandtalent, the leading digital challenger in the temporary staffing sector; and SafetyWing, a firm offering insurance for digital nomads and remote workers.

In each case, the investment trends outlined here are brought to life in the offering of these exciting companies. Start-ups were the initial example of businesses embracing remote working and internationally-distributed teams. More recently, some of the world’s largest companies have leaned into the “new normal” and are more open to hiring staff further afield from their bases of operations. This presents a massive opportunity for Omnipresent to support global teams, making it easier to hire, pay and support the best talent from all parts of the globe, rather than that which is available locally. With an estimated total addressable market of over USD 20bn for employer of record providers, Omnipresent has grown its revenue by 25x and staff by 10x during 2021.

Meanwhile, labour markets have tightened considerably - to the point of Fed Reserve chair, Jay Powell, calling today’s market “tight to an unhealthy level”. This has direct effects on companies, which have record vacancies to fill and now find themselves in fierce battles for the right talent. It is, therefore, no surprise that the temporary staffing sector is an estimated EUR 500bn global market and that temporary workers represent a significant, and growing, proportion of the workforce. The “temp market” is highly fragmented and characterised by poor labour conditions and low career satisfaction. There’s a major opportunity for digital disruption. That’s the gap Jobandtalent is filling by leveraging technology to source and match workers and jobs, resulting in best in class fill rates. While the company’s focus on providing benefits and security for its workers results in best-in-class worker and employer satisfaction.

Finally, as companies grow their remote workforces and face the challenges of setting up and managing remote teams, they are also met with the complexities of attracting and retaining talent globally. The challenge of making a compelling proposition is harder when most companies are raising salaries. As macro tailwinds to remote working continues to be strong, SafetyWing helps firms set themselves apart with better benefits, such as global travel and health insurance. With a total addressable market of USD 18bn for its remote health product alone, SafetyWing enables firms to offer their employees benefits that emulates the famous social safety net of Nordic countries to any worker, anywhere.

These new services and tools are addressing a growing market need, not to mention supporting diversity, equity and inclusion in the workplace. As a by-product of what they are tackling, it is likely that the regulatory environment will make these services and tools a “must-have” rather than a “nice-to-have”, forcing company take-up and furthering the upside for investors and workers.

Natalie Tydeman, Senior Investment Director Kinnevik

Ola Nordbye, Investment Director Kinnevik

Tatiana Shalalvand, Investment Director Kinnevik