Crowd sourcing marketplace Freelancer has secured a captive payments service for its freelancing marketplace with the acquisition of online escrow services provides Escrow.com for US$7.5 million in cash. On addition, this was funded by an oversubscribed $10 million placement of shares to institutional investors at $1 million, a premium to the last closing price of $0.995.
Founded in 1999 by Fidelity National Financial (a Fortune 500 company), the Californian-based site Escrow.com provides online escrow services including transaction management, from a private investor. Last financial year for the company had a gross payment volume of $265 million, net revenue of $5 million and posted an EBITDA of $1.2 million. Escrow.com is the only licensed, bonded and audited secure online solution that protects both the buyer and seller with a 5-step trust process.
The Australian-listed online freelancing marketplace operator told shareholders in a statement on Monday that the acquisition of Escrow.com would help enable it to position itself in the online payments sector.
With the acquisition of Escrow, Freelancer’s CEO Matt Barrie said, “This highly complementary acquisition will enhance the ability of our 15 million users to transact securely, and there are large opportunities for growth and synergies with core offerings. Finally, it is a strong cornerstone for entering the payments space.”
Escrow.com president and managing director Brandon Abbey said the deal represents a strategic fit for both the companies. The company’s staff will continue to operate the business from its California-based headquarters. Working as a third part that collects, holds and disburse funds according to buyer and seller instructions, Escrow.com partners include eBay, GoDaddy and Flippa.com.
The announcement to acquire Escrow.com comes a week later after Freelancer announced the roll-out of its Freelancer Local Jobs offering, which will see it move to look into the new market well in excess of its existing 15 million users and probably encroach on the market share of fellow Australian online outsourcing startup Airtasker.
Freelancer.com already consists of a version of escrow services called Milestone Payments, which means the site holds funds from an employer until it is released to a freelancer following the completion of a service or a dispute resolution. However, it was a frequent target of complaints from both employers and freelancers who claim that payments are not issued in a timely manner and no protection against bad jobs. But the acquisition of Escrow.com is expected to solve the issues faced by the Freelancer.com.
The acquisition of Escrow.com is subject to regulatory approval. Settlement of the deal is to take place on Thursday. In the past 12 months, Freelancer has been on an acquisition buying spree to build out its community. Last year it has bought online marketplace Warrior Forum, virtual content marketing community fatero.com and Polish online services site zlecenia.przez.net. The company also opened up a domain exchange website called Freemarket and this year added Israeli site DoNanza.