Inside Story Prompts A Question: Does Upwork Have Upside?

Jun. 05, 2019 7:48 AM ETUpwork Inc. (UPWK)LYFT, UBER5 Comments1 Like
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Penn Little


  • Nasdaq takes a beating on Monday as "technology companies" face potential regulatory burdens.
  • Upwork places a significant emphasis on the importance of classification of employees but offers a stable of freelancers that are independent contractors.
  • A real-life example shows the hazards of utilizing Upwork's platform and the fallout that can ensue.
  • With Fiverr and other similar models emerging, the potential for profitability is placed in question.
  • Upwork's CEO is unloading stock and it doesn't appear that many are buying.

Regulation fears are looming large from Market Street to Wall Street. Monday's market losses, especially on the Nasdaq, were widely attributed to the concern surrounding regulatory windfalls facing so-called "tech companies" that catch attention as they grow. For instance, we discussed the "heavy duty" scrutiny ride-sharing companies face in New York City in a previous article regarding Lyft, Inc. (Nasdaq: LYFT). It seems to be only a matter of time before many tech companies will be reclassified to what they truly are, as the tax man will most definitely cometh.

Now, there's another sector that appears vulnerable: contractor stables like Upwork, Inc. (Nasdaq: NASDAQ:UPWK) and Fiverr. Both companies are dedicated to providing an online portal in which freelancers promote and advertise their services. The benefit of these platforms is the fact that a plethora of freelancers meet a smorgasbord of entrepreneurs and businesses with a variety of needs, albeit with a budget in mind. Upwork simply makes the match, scalps up to a 22.75% fee, according to Inc., and has yet to find a profit.

Like our ride-sharing friends, Upwork has undoubtedly seen a notable decline (in terms of market cap) since their IPO. Could this be predicated solely on the fear of a regulatory shoe dropping? Or is this the result of the regular problem of "big revenue/big loss" IPOs that have been the new San Francisco treat, as well as Wall Street?

Real-life inside experience with Upwork suggests that, aside from regulatory fears, customer service and liability avoidance present concerns. It's not challenging to argue that contracts are (in comparison to days of old) fat stacks of paper or never-ending PDFs. Handshakes no longer hold an underlying bond. The large stable of contractors that is Upwork appears no different than a large consulting firm like Accenture, KPMG, or any other stable of temporary expertise brought in for special projects. The difference? They provide much less and with way more risk. A personal story may offer some valuable insight for investors curious about throwing their money behind Upwork. With direct competition entering the public markets compounded with an already-plummeting stock price, it's challenging to see the upside of Upwork.

An Inside Story

In late August 2017, a West Point-educated consultant found on Upwork helped me present a thesis and SWOT analysis to a skeptical team that embodied my fourth start-up. This occurred in my living room, a regular venue in the cost-saving start-up world. Also, it was cost savings I was seeking when I selected from Upwork's pool of "talent."

Of course, two years later, the platform has shown me nothing but liabilities and potential hazards for investors. The risks surround the basic rules of customer service and potential employment law issues that may stunt the company's growth.

For instance, say an Upwork consultant is posing as a contractor with specialized training or expertise, but you later find out they are lying. Perhaps it leads to three civil claims then upon voicing concern, you receive a benign email with a link to "Terms of Service" that mostly say, in summation: "Not my problem!"

John Lambert is alleged to have conned customers out of thousands. Source:

Well, the above (instance and photo) is not a hypothetical, but a true story. One that genuinely poses questions about the idea that, according to fellow contributor Niki Schranz (on May 20th),

the key to business success in Upwork's view is to focus on onboarding as many clients as possible and making them stick to its platform, i.e., growing its core clients.

Well, I can say that "not my problem" didn't work too well in my real-life experience. That said, we arrive at the story of "Eric Pope" (aka John Lambert), Upwork, and why (similar to my argument that ride-sharing companies claiming to be "technology companies" appear to be cruisin' for a bruisin') if/when regulators bring employment laws into play (in hopes of scooping up tax revenues), things could get dicey for investors, if they haven't already (as seen by the stock's nosedive since IPO).

Is The Customer Still Always Right?

Growing up in Springer, Oklahoma, my first experience of quality customer service was buying nightcrawlers (a type of worm) to use as bait to catch catfish. I would grab a dozen dirt-packed worms from the cooler at Joe's Springer Superette, the gas station and mini-market with two fuel pumps in my hometown of 800 people. I always received eye contact, a greeting by name, sometimes a joke, and a promise (which Joe made good on every time a dead one surfaced) that my bait would remain alive for 24 hours in the little container. All this for $1.50. I felt as necessary and important at age five as the guy buying 50 gallons of diesel and 48 beers. I truly did.

From An Opinion Letter To An Indictment

In an April article discussing the S&P Healthcare ETF (XLV), I brought up the chain of events that moved me from "bullish" to "bearish" with regards to healthcare. In 2017, I was piecing together a second roll-up strategy while also building out a new team. Just before the consummation of the platform deal, I had an epiphany and abruptly paused the closing process. Clarity seemed to pour in and I wanted to re-evaluate the strategy due to concerns of asset inflation.

I quickly needed to obtain an opinion letter to avoid the misunderstandings, and press forward with a new strategy.

The cost-effective solution (or so I thought) was Upwork. At that point, two contracts into our relationship, Upwork was proving to be a cost-effective and helpful platform! Then the batting average dropped - big time.

Enter "Eric Pope"

Two years, three lawsuits, and a great deal of pain, money, and many suitable old-fashioned invaluable lessons later, the solution was anything but a good idea.

Of course, this was thanks to "Eric Pope," a purported attorney with a JD from NYU offering his services on Upwork from his Wall Street office. I retained him on the platform in September 2017 to obtain that opinion letter.

Screenshot of Eric Pope's avatar. Source: Upwork.

Bio Of Eric Pope

Eric Pope's bio on appeared upon querying several options for legal advice on It read as follows:

Pope & Dunn Law, PLLC Contract Law, Legal Services, Corporate, Design, Consulting


81% Job Success

New York, United States (UTC-05:00)


At Pope and Dunn Law, we offer reliable and effective legal services. Our seasoned professionals are led by Eric Pope, a graduate of The New York University School of Law, and Johnathan Dunn. For a list of our services, look below: For more information, visit ◘ Contract drafting, review, negotiation and management, real estate, media, tech ◘ Drafting of: Confidentiality Agreements, Exclusivity Agreements, OEM Contracts, Independent Contractor Agreements, Non-Disclosure Agreements, Powers of Attorney, Business Plans, Terms of Service Agreements ◘ Accredited mediator and experienced negotiator ◘ Business and corporate strategy advice and guidance (incorporation papers) more

Recent Work History & Feedback

August 2017 - Present

Create Services Agreement from Terms and Conditions

Member: Eric P.

Job in progress

2 hours

$100.00 / hr

$240.00 earned

Or, as seen in the graphic below (partially):

Screenshot from my account. Source: Upwork.

I selected Mr. Pope after reading his convincing cover letter. An online conversation with Mr. Pope regarding the scope of the project then ensued. That conversation can be viewed here:

[9/18/2017 9:39:16 AM] Penn Little: Operating Agreement review and opinion for a letter I need

The Letter

Next, he provided the "work product," as seen below.

Page One of Pope Opinion Letter. Source: Upwork.Page Two of Pope Opinion Letter. Source: Upwork.Page Two of Pope Opinion Letter. Source: Upwork.

Trusting the lawyer, I passed this letter along to the team, board, and my former business partner, who had historically voiced concern with my decisions. Unfortunately, while I temporarily believed the product, the content proved detrimental. That same former partner asserted the Pope letter was fraudulent and voiced that sentiment in a demand letter through an attorney.

Of course, UpWork's site says "no surprises." Well, sorry folks, but any time you're dealing with humans, surprises are unavoidable.'s site boasts about "No Surprises." Source: Upwork.

My communications director at the time, a former investigative reporter from the New York Times, delved into the facts and produced a report stating:

At your request, I have looked into the professional licensure of Eric Pope. These are the facts I have gathered:

  1. On September 19, 2017, Mr. Pope drafted a letter read “Standing of Mr. Penn Little in BNC Corporation”. The letterhead has a company logo and the words “Pope and Dunn Law” below it. Below that is the following: Law Offices of Pope and Dunn, Attorneys at Law, 77 Water St., New York, NY 10005. The letter is signed by “Eric Pope” with the postscript, “Attorney at Law” I visited the website, which has the same company logo and a person by the name of Eric Pope identified as “Principle [sic] and Attorney”. The company address is listed as 76 – not 77 – Water Street. I have not looked into that discrepancy.
  2. The proper method through which one determines whether a lawyer is licensed to practice law in the state of New York is to visit the website:
  3. I visited that site and entered the name Eric Pope into the search field. The site responded, “Your search returned no results”.
  4. I did not want to make any determinations based on a web search, particularly for a matter are serious as this, so I called the hotline-like number for assistance with license searches (PHONE NUMBER REDACTED). The agent I spoke with ran a search for “Eric Pope” and said, “There’s nobody in our system by that name.” I asked the significance of this and he said, “Therefore he’s not licensed to practice in the state of New York.” I asked how long the records date back, and he said, “1920”.
  5. The website does not allow searches for last name alone, but he ran the search himself and said, “There are 132 records with the last name of Pope, and none of them are Eric.”
  6. The representative on the phone was very helpful, so he stayed on the line while I searched for any “Pope” with a first initial “E”. The only such listing was an Edgar M. Pope who was admitted in 1955 and is now deceased. Similarly, in case “Eric” was our subject’s middle name, I searched for “Eric” as the middle name and got no results. I searched for the middle initial “E” as the middle name and received two results: a woman named Jennifer Elizabeth Pope and a Thomas Edward Popek, who practices in Buffalo.
  7. I asked the representative, again because of the seriousness of the situation, what next steps should be taken to ensure that no mistakes are being made. He recommended calling Mr. Pope and ask for his “Attorney Registration Number”. I asked what form that number comes in and he said it’s seven (7) digits, and the first number must be 1, 2, 3, 4 or 5.
  8. The representative advised that if Mr. Pope declines to offer this number to call the New York Attorney General’s office at (PHONE NUMBER).

Of course, while my investigator was insistent in furthering the Pope inquiry, I felt that the complaint lacked merit; however, Alex filed (what is, in my belief, an egregious) suit, which I've now been fighting for 18 months. At its heart, it alleges that I fabricated the Pope letter (see below).

Screenshot of Nichols v. BNC/Little (2017, Cook County, IL). Source: Westlaw.

The frustrating corporate governance challenges surrounding the "Pope and Dunn" letter were placed in question.

When I found the time, I contacted Upwork, but they didn't respond. The entire month of October and countless hours spent on two major law firms to address the questions was a never-ending headache.


Vindication Via Indictment

Fast forward to 2019. I'm fighting three lawsuits that, I believe, spawned from this incident. In late April, a federal judge in Manhattan handed down an indictment. Special Agent Adam Leclair, a law enforcement officer working directly under the ambit of the United States Attorney for the Southern District of New York investigated alleged wire fraud and brought charges against a young man accused of impersonating the phony attorney. While many victims were mentioned in the indictment, I am not one of them, nor was I contacted.


While bizarre and vindicating, this traumatic reality cannot be undone.

The indictment alleges that Pope was not a real person, much less a lawyer (as we suspected), but in fact, a fake name. The indictment states that a North Carolina man posing as Pope was no lawyer; however, he was no stranger, either. The alleged conman responsible for this headache was "Students for Trump," Co-Founder, John Lambert.

I ultimately brought this to the attention of Upwork (again) after reading Ben Schweckinger's recent article in Politico detailing this alleged fraud.

While Business Insider suggested Upwork may be the platform that Lambert allegedly utilized to seek out victims, the indictment didn't explicitly name Upwork. My experience with Eric Pope, nevertheless, was born on Upwork. Moreover, the multiple completed jobs his bio lists suggests Upwork may have been the "platform" indicated in the indictment; despite the fact, the indictment fails to name the "platform."

Last week, on Friday, May 31st, I reached out to Upwork for comment via email and telephone, and have yet to receive a response.

A response from Upwork proved to me that the days of guaranteed live fishing worms are truly dead!

Screenshot of customer service response. Source: Upwork.

A link to their Terms of Service (in summation, no responsibility) encompassed the contractor stable's response. "Sorry" didn't quite cut it, much less allow me to feel like I mattered much more to Upwork than I did to "Eric Pope".

Upwork Headquarters in San Francisco. Source: The Muse.

Risks And Hazards

With this instance and a growing platform of freelancers, there's no doubt that a massive freelancer stable is risky if not monitored for the integrity of contractor qualifications and work product. Additionally, it presents various concerns regarding employment law. While Accenture and other groups of consultants generally employ their consultants, Upwork's freelancers are all independent contractors.

Of course, they discuss this issue for clientele on their website, using a photo of one of their "legal experts," Kim Owens, on the same page in what appears as a summary of employment classification laws, along with a lawyer's endorsement... or not...

As a member of Upwork's award-winning legal team and a licensed attorney, Kim supports the Upwork Enterprise team in providing classification compliance services and works with the marketing team to create resources for our community. Before joining Upwork, Kim spent a decade practicing law at top law firms in San Francisco. Her prior litigation experience includes trials, appeals (including before the U.S. and CA Supreme Courts), arbitrations, mediations, and administrative proceedings. But her real passion is for helping people work together compliantly without disputes. Kim's publications include The Emerging New Workforce: 2009 Employment and Labor Law Solutions for Contract Workers, Temporaries, and Flex-Workers. She holds a J.D. from the University of California, Hastings College of Law, and a B.A. from the University of Illinois. A former "military brat," Kim grew up around the world in Germany, Japan, the Philippines, and the United States.

Again, of course, it's complete with disclaimers, too.


Upwork is a freelancing website where businesses of all sizes can find talented professionals across multiple disciplines and categories. Upwork Enterprise is our most comprehensive offering combining technology with talent sourcing and compliance services.

So, they offer their lawyer to help you, but you need to get your lawyer? Is bearing as little risk as possible now a regular staple of business?

Well, you'd think this would widen margins. However, like most San Francisco tech IPOs of late, Upwork boasts significant revenues ($253 million in 2018) and brings in big investors, but posts significant losses ($19 million in 2018) - the third straight year of big red numbers. Even CEO Stephan Kasriel dumped 280,000 shares a few weeks ago, which, for an entrepreneur like myself, doesn't appear to be a sign of confidence.

ChartData by YCharts

As seen above and like Lyft, Upwork has seen nothing but the bottom fall out since IPO. Back in March, fellow contributor LEL Investment, LLC, using a DCF model, asserted that at this company,

revenue will grow to $2 billion by 2030. A conservative estimate of long-term market penetration reaches 0.4% by 2030, given the disruptive business model.

Well, will they have a net income, especially now that competition like Fiverr is also up and coming? Can they avoid the "big top-line, oh wait, a duopoly with no-net income and only-increasing competition?" problem as seen with our ride-sharing friends at Lyft and Uber (UBER).

The Accentures of the world may get annoyed if this keeps up, given all the W2 employees they have, that play similar if not equal roles, albeit in less sum, but with verified qualifications.

Well, it's hard to buck a clear trend that may be the new San Francisco treat. However, I guess the disclaimers make it all okay... right?

This article was written by

Penn Little profile picture
Penn Little is an entrepreneur, researcher, investor, writer, and investigative journalist. Hailing from the small town of Springer, Oklahoma, Penn first began "investing" in the 5th grade, when his group won the 3rd place in a Dallas Morning News-sponsored stock picking contest. Penn has found a passion in his ability to expeditiously investigate companies as well as piecing together how they all contribute or are affected by multi-faceted macro trends. The dual understanding of finance and behavioral health led to the notable Acadia Healthcare series of articles in 2018/2019.He began working for a behavioral healthcare provider, Prescott House, Inc. in 2011. This was a result of his recovery from after struggling with behavioral health disorders and the consequences of his maladaptive behaviors resulting from unresolved trauma. Succumbing to these taught what he says are "the best lessons I ever learned." While not related to securities, Penn served 14-months in federal prison, for bank fraud when he was 23-years-old. He was ordered to pay around $300k in restitution, and while it took him eight years to do so, he settled the bill in 2016. While in graduate school, in his resurgence from the time of tough lessons: Penn became a partner in a start-up management consulting firm, beginning in 2013. Peak Consulting Partners focused on healthcare management and finance. A large non-profit acquired the firm in 2016, and it still thrives today, despite Penn moving on to his passion: investing. Now, a decade later, Penn has exited three start-ups. Before founding Bar Nothin' Capital Management, and then his research firm Bar  Penn was the Co-founder and Managing Partner of Crestview Capital Partners LLC. At Crestview, the firm he co-founded in 2014, Penn led the charge to improve outcomes in mental and behavioral healthcare by scaling quality care models in the arena of community counseling. He sold the company in 2017 to a global private equity firm. Penn serves as a contributor for Forbes as well. He has come to enjoy and find a passion for learning and writing about various verticles including energy and transportation.Penn is a proud graduate of Culver Military Academy in Culver, Indiana. Penn holds a B.A. from The University of Oklahoma in Norman, Oklahoma, where he studied Economics. He holds an M.B.A. in Finance from the University of Arizona's Eller College of Management in Tucson, AZ.Penn founded the Wilkinson-Dorrell Scholarship Program at The University of Oklahoma Foundation. While at Crestview, Penn also co-founded the Shatter Our Silence Initiative, to combat teen suicide in Northern Illinois. Penn loves to spend time with his nieces, Sacra and Emory (both 3) and nephew, Greer (1), as well as fishing in Kona, HI for Blue Marlin. He tries to keep his golf game in shape and is a loyal fan of his alma mater's Oklahoma Sooner football team.Disclosure: Katie Mikles (SeekingAlpha Contributor) and I are colleagues and partners from a journalistic and entrepreneurial standpoint as well as personal friends. We collaborate and research together, as many readers know, however, are expressing our own unique investment viewpoints.

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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