Fiverr IPO: Exciting Growth Company With Good Prospects

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Fiverr (FVRR) is a fast-growing and soon to be a well-funded company with excellent prospects of growth for the coming years. I will go over the revenue metrics of the firm and will pick out the most important metrics with which to evaluate the firm going forward.

Overview of the Company

Fiverr was founded in 2010 by Micha Kaufman, the CEO, and Shai Wininger who has left the company to start another one. The company is based in Israel. It provides freelancers and businesses a marketplace across the world to sell their bespoke services across the world. Currently, there are over 830,000 sellers on the platform and 5.5m businesses. That scale does create network effects and makes the platform more valuable for both sellers and buyers.

The news says that the company wants to raise $100m with the IPO less the expenses (Form F-1, Fiverr). If you add that to the cash on hand at the end of Q1 2019, it brings the total to about $134m. This implies that the company might have a runway of 18-24 months following the IPO unless they manage to narrow the losses considerably. Below is a picture of their cash at the end of Q1 2019 as well as other assets. Recently, they started holding on to user funds, there is a possibility that they can use that to ease any cash flow management issues they might encounter going forward.

Source: Form F-1, Fiverr

The company has raised $111m so far from Bessemer Venture Partners, Square Peg Capital, Qumra Capital, and more (Forbes).

This picture explains the history and the major milestones of the company so far:


Source: Form F-1, Fiverr

The above image really shows the massive growth the company has had from its founding. Fiverr uses gross merchandise value (GMW) as an important milestone, and for the year 2018, it was a whopping $293.5m while 2017 was $213m, a very impressive growth of 45%. Fiverr's revenue as a percentage of GMW has gone up to 25.7% in 2018 from 24.5% in 2017. This translates to 45% growth YoY in revenue to $75.5m in 2018 vs. $52.1m in 2017. As Q1 2019 had revenue of $23.1m and a growth of 42%, I expect the company to top $100m in revenue in 2019 and might reach $105m based on the continued 42% growth rate. This is based on the current trajectory and the quality of the revenue coming in, which we will see more about further into the article.

Another impressive development in the metrics has been the spend per customer which has more than doubled from 2012 when it was $64 to over $145 for 2018. In Q1 2019, it increased even further to $150. An important metric going forward.

Source: Form F-1, Fiverr

When we look further at the revenue information provided, to be specific, the cohort analysis for full-year 2018, it is revealed that 57% of revenue came from repeat customers of previous years and it shows there is stickiness. Customers come back again and again. As for the new customers, they were 43% of revenue in 2018, and if the trends hold, they will markedly contribute to the revenue going forward. It will be important to get this broken down further if possible and review the information every quarter going forward as it will be an early warning signal of slowing growth. My own takeaway from this information is that Fiverr is managing to build trust in the ecosystem and more and more customers are willing to tender larger projects out on the platform.


Source: Form F-1, Fiverr

One of the measures Fiverr discusses in its Prospectus is TROI or Time to Return on Investment on marketing spending. As such, every $100 spent on marketing has come back in revenue by the seventh month, which is good. Their goal is to have it under 1 year going forward. Below, we can see a picture of the ROI of the marketing spend over time by quarter. All in all, a pretty decent return on marketing spend, and hopefully, they will deploy some of the cash from the IPO towards marketing to sustain this high growth going forward.

Source: Form F-1, Fiverr

When we dig down into the geographic information for Fiverr, we see that the US growth is stable, European growth is picking up while Asia Pacific and RoW are slowing markedly. It will be interesting to see Q2 and see if those trends continue or if Asia Pacific and RoW will pick up steam again. Israel is a rounding error, but growth there has slowed markedly from previous years. Perhaps a saturated market there.

The last revenue related analysis shows active buyers. The company defines it as buyers who have bought something in the previous 12 months irrespective of cancellations. As we can see, it has gone from 1.8m at year end 2017 to 1.9m at end of Q1 2018. Year-end 2018, it had moved up to 2m and for Q1 2019, it reached 2.1m. The worrying thing about this is the fact that Q1 in both years brings in an additional 0.1m active buyers, but we don't see the sustained increase through the year as it increases by 0.1m for the latter 3 quarters. As mentioned before, the spend per buyer is a good indicator that each customer is bringing in more which alleviates some of the worries about the slowly growing customer base.

Source: Form F-1, Fiverr

The Competition

When googling for similar services like Fiverr, the main alternatives are Upwork (UPWK),, TaskRabbit, as well as several smaller players.

Revenue for Upwork in 2018 totaled $253.4m and as such, they are considerably bigger than Fiverr. Their growth has slowed down considerably to 23%. Upwork's sales as a % of GMW was 14.3% (Source: Upwork) compared to Fiverr's 25.7%. Currently, Upwork is valued at 1.68bn (Google Finance, 24 May 2019) which is 6.6x sales. As Fiverr is growing faster than that, we would expect a valuation higher than that on a price to sales basis. Assuming the IPO price is under that price to sales ratio, Fiverr is a potential buy. Upwork is currently under its IPO price.


There are certain risks with investing in Fiverr, and in the Form F-1, Fiverr raises a number of them. My takeaway from those listed there as well as my own assessment of Fiverr is that the main failure points would be around failing to execute on the company's strategy and more competition making it more difficult to have a positive return on investment in marketing spend to sustain the growth. Going forward, the company has to be able to adjust away from growth and rein in costs to make the operations focused on the long term and become a cash generative entity. If that is not possible, there is a chance it would be bought out by another competitor or go under.

Overall, Fiverr is an interesting addition to the stock market. A new growth firm supporting the gig economy.

I am not willing to commit to a price point as we are still missing some of the information from the IPO prospectus, but I would be very tempted to invest in the company if the price to sales ratio is considerably lower than Upwork. A valuation of $500m to $600m would make it a good growth investment.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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