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Freelancer marketplace Toptal sues Andela and ex-employees, alleging theft of trade secrets
The war for talent in the tech world can be brutal — and so, it turns out, can the war between platforms that help companies source it. In the latest developement, Toptal — a marketplace for filling engineering and other tech roles with freelance, remote workers — has filed a lawsuit against direct competitor Andela and several of its employees, alleging the theft of trade secrets in pursuit of “a perfect clone of its business”, according to the complaint. All of the Andela employees previously worked at Toptal.
Toptal’s lawsuit, filed in the Supreme Court of the State of New York and embedded below, alleges that the employees reneged on confidentiality, non-solicitation and non-compete agreements with Toptal. Toptal also alleges interference with contract, unfair competition and misappropriation of trade secrets.
While both Toptal and Andela have built businesses around the idea of remote freelancers filling tech jobs — a concept that has increased in profile and acceptance as people shifted to remote work during the pandemic — the pair only emerged as very direct competitors in the last year or so.
Toptal was co-founded by CEO Taso Du Val in 2010, and since then it has grown to become one of the world’s most popular on-demand talent networks. The company matches skilled tech personnel like engineers, software developers, designers, finance experts and product managers to clients across the globe. According to company data, it currently serves over 1,000 clients in more than 10 countries.
Andela, on the other hand, only recently turned to using a similar approach. Founded in 2014 in Lagos, Andela’s original business model was based on building physical hubs to source, vet, train and house talent across the continent. It did this in Kenya, Nigeria, Rwanda and Uganda.
However, Andela struggled with scaling and operating that business model, and in 2019 it laid off 400 developers. Early last year as the pandemic took hold, it laid off a further 135 employees. However this time around it did so with a strategy pivot in mind: after testing satellite models in Egypt and Ghana, the talent company decided to go forego physical hubs completely and go remote, first across Africa in 2020 and globally this year.
“We thought, ‘What if we accelerated [the African remote network] and just enabled applicants from anywhere?’ Because it was always the plan to become a global company. That was clear, but the timing was the question,” Andela CEO Jeremy Johnson told TechCrunch in April.
Yet Toptal believes Andela’s choice to scrap its hubs and source remote talent from everywhere was specifically to replicate Toptal’s business model — and success.
“Until recently, Andela operated an outsourcing operation focused on in-person, on-site hubs in Africa,” Toptal notes in the complaint. “Over the course of the past year, Andela has moved away from its prior focus on in-person hubs situated in Africa and is engaging in a barely disguised attempt to become a clone of Toptal.”
Toptal claims that for Andela to pull off a “perfect clone of its business,” it poached key Toptal employees to exploit their knowledge, and that the ex-employees knowingly breached their confidentiality and non-solicitation obligations to Toptal.
Companies often try to uncover each other’s trade secrets by poaching, and many blatantly copy a competitor and do so without repercussions. On top of this, these two are hardly the only two places to for tech talent to connect with remote freelance job opportunities. Others include Fiverr, Malt, Freelancer.com, LinkedIn, Turing, Upwork and many more.
In a global economy with an estimated 1 billion so-called knowledge workers, and with freelancers accounting for some 35% of the world’s workforce, it’s a pretty gigantic market, which you could alternately look at as a major opportunity, but also a ripe field for many players with multiple permutations of the marketplace concept.
So why is Toptal crying foul play? The company says its ex-employees have not only revealed Toptal’s trade secrets and confidential information to compete unfairly but are also poaching additional Toptal personnel, clients and the talent that Toptal matches and sources to clients.
The ex-employees cited by Toptal include Sachin Bhagwata, vice president of enterprise; Martin Chikilian, head of talent operations; Courtney Machi, vice president of product; and Alvaro Oliveira, executive vice president of talent operations. Toptal says three additional former employees in non-executive roles breached express covenants not to compete in their agreements with Toptal.
While some of the allegations focus on the expertise of the employees, one of the trade secret allegations more directly references Toptal’s technology.
Toptal claims Machi tapped into her extensive knowledge of Toptal’s “proprietary software platform” and used that to help transform Andela “from a group of outsourcing hubs situated in various African locations into a fully remote, global company like Toptal.”
Asked to comment on the suit, Johnson at Andela said he believes Toptal is suing Andela for being competitive.
“With regards to the situation overall, I can say that frivolous lawsuits are the price of doing anything that matters,” he told TechCrunch in an email. “And this is the kind of baseless bullying and fear tactics that make employees want to leave in the first place. We will defend ourselves and our colleagues vigorously.”
Toptal has an unconventional story for a company that started only a decade ago. It is one of the few companies in the Valley that doesn’t issue stock options to its investors or employees. Even Du Val’s co-founder, Breanden Beneschott, was ousted from the company without any shares, according to an article from The Information.
How did it pull this off? In 2012, Toptal raised a $1.4 million seed via convertible notes and investors were entitled to 15% of the company, according to The Information article.
But there was one condition: Toptal had to raise more money.
However, the company hasn’t needed to secure additional capital because of its profitability and growing revenue ($200 million annually as of 2018, per The Information). So investors are stuck in limbo — as are employees who joined hoping that the company would raise money down the line so their stock options would convert.
The Information story strikes a distinct note of resentment, noting that some employees felt “tricked out of stock in a company that Du Val has said publicly is worth more than $1 billion.”
Given that situation, TechCrunch asked Du Val if he thought it played any role in employee departures, and ex-employee relations.
“The issuance of stock options does not excuse theft of trade secrets,” he replied. “Also, there are more than 800 full-time people at Toptal [but] the complaint names seven individual defendants.”
The full complaint is embedded below.
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Andela begins global expansion in 37 countries months after going remote across Africa
More than a year after the pandemic began, remote work shows no signs of going away. While it has its cons, it remains top of mind for potential employees around the world before joining a new company.
But while most people in Africa still go to physical offices despite the pandemic, a few companies have nevertheless embraced this concept. Andela, a New York-based startup that helps tech companies build remote engineering teams from Africa, was one of the first to publicly announce it was going remote on the continent.
Today, it is doubling down on this effort by announcing the global expansion of its engineering talent. Over the past six months, the company has seen a 750% increase in applicants outside Africa. More than 30% of Andela’s inbound engineer applications also came from outside the continent in March alone. Half this number came from Latin America while Africa saw a 500% increase in applications as well.
When Andela launched in 2014, it built hubs in Nigeria, Kenya, Rwanda and Uganda to source, vet and train engineers to be part of remote teams for international companies. It also tested satellite models in Egypt and Ghana as substitutes to physical hubs.
The company would issue a call for applications, select a few (less than 1%), pay them a salary for the first six months and provide them with housing and food. It also helped developers improve their skills via training and mentorship. Over 100,000 engineers have taken part in the company’s learning network and community, and, as of 2019, Andela had more than 1,500 engineers on its payroll.
However, after noticing that this model wasn’t sustainable, it began to make changes.
In September 2019, it let go of 420 junior engineers across Kenya, Uganda and Nigeria. Nine months later, citing the pandemic, it laid off 135 employees while introducing salary cuts for senior staff. But despite the layoffs, the pandemic provided some form of clarity to how Andela wanted to operate — which was remote, judging by the success of the satellite models.
“In the very beginning, a developer had to be in Lagos to work with Andela. Then it became living in Nigeria. Then Kenya. Then Uganda, Rwanda,” CEO Jeremy Johnson told TechCrunch. “Before the pandemic, Andela was opening applications in country after country. The pandemic came and changed that as we opened up to the entire continent.”
Shutting down its existing physical campuses and going remote also helped the company focus on getting engineers with more experience to meet its clients’ requirements. That experiment, which the company conducted in less than a year, is also part of its mission to be a global company.
“That went so well and we thought ‘what if we accelerated it now that we’re remote and just enable applicants from anywhere?’ because it was always the plan to become a global company. That was clear, but the timing was the question. We did that and it’s been an amazing experiment,” Johnson added.
Now with its global expansion, its clients can tap into regional expertise to support international growth.
According to a statement released by the firm, it currently has engineers from 37 countries across Africa, Asia, Latin America, North America and Europe.
Johnson didn’t go into details about how many of these engineers are getting jobs from Andela or even its total developer count. He’s more interested in helping its clients solve the diversity issues that have plagued many Western corporations.
Andela is currently working with eight companies that have hired its engineers in Latin America and Africa. In addition to the diversity play, the CEO says that means Andela engineers get to prove themselves on a global playing field in a way the company has “always wanted to see.”
Andela serves more than 200 customers, including GitHub, ViacomCBS, Pluralsight, Seismic, Cloudflare, Coursera and InVision. GitHub is one company that seems to be benefitting from Andela’s new offerings. The company’s VP of Engineering, Dana Lawson, in a statement said, “As a business in the developer tool space, a lot of us are trying to enter those areas of the world (Southeast Asia, Latin America and Africa) where the emergent developers are coming so we can better understand their needs. Having a local presence there with amazing talent is super valuable to building a global product.”
Image Credits: Andela
In its quest to become a global company, going up against competition is unavoidable for the seven-year-old company. But since most of these companies are horizontal marketplaces (providing a wide range of expertise), whereas Andela is vertical, Johnson believes there’s enough market share to be acquired by the company.
“We are focused on building digital products, and because of that, we’re able to do more, essentially, for our customers… That’s where our focus is — [building long-term relationships] and around building great digital products,” the CEO said.
The company was founded by Jeremy Johnson, Christina Sass, Nadayar Enegesi, Ian Carnevale, Brice Nkengsa and Iyinoluwa Aboyeji. It has raised more than $180 million (up to Series D) from firms like Chan Zuckerberg Initiative, Generation Investment Management, Google Ventures and Spark Capital, at a valuation of about $700 million.
While announcing the layoffs last year, Andela said it was on an annual revenue run rate of $50 million. But when asked how this number has changed over the past year, Johnson said the company is “growing at a healthier pace as we’ve ever had.”
The future of remote work is global and Johnson believes Andela provides the vital link to talent wherever it is found. The company’s head of talent operations, Martin Chikilian, echoed similar sentiments regarding the expansion.
“We’ve seen exponential growth and interest from engineers from across Africa who want to work with some of the world’s most exciting technology-focused companies,” he said. “Growing our network of talent from Africa to include more markets is a unique proposition and we continue to match talent with opportunity beyond geographical boundaries.”
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Join Jeremy Johnson from Andela at Disrupt Berlin
Over the past few years, Andela has built a simple yet powerful answer to the talent shortage in Silicon Valley and other overheating tech ecosystems. The company helps you hire some of the most talented software developers in a handful of African cities. That’s why I’m excited to announce that Andela co-founder and CEO Jeremy Johnson is joining us at TechCrunch Disrupt Berlin.
Andela’s basic premise is that expertise is evenly distributed across the globe. And yet, the biggest tech companies are concentrated in a few places. More and more companies are now open to hiring remote employees, and Andela is taking advantage of that.
The company makes it easy to find software engineers in no time. It screens applications and selects the best software engineers that can develop in JavaScript (React.js, Angular.js), Python, Ruby, PHP and for the Android platform.
So far, 130,000 people have applied and Andela only accepted the top 1,000 engineers. The startup then tries to match your company with the best candidates for the job in order to facilitate onboarding. After that, you have a new team member.
With offices in Lagos, Nairobi, Kampala, Kigali, New York, San Francisco and Austin, Andela is trying to create a bridge between some of the most active tech communities in Africa and U.S.-based startups.
This isn’t Jeremy Johnson’s first startup. The young entrepreneur previously co-founded 2U, a software solution that helps schools and universities provide online degree programs. The company went public in 2014.
Buy your ticket to Disrupt Berlin to listen to this discussion — and many others. The conference will take place December 11-12.
In addition to panels and fireside chats, like this one, new startups will participate in the Startup Battlefield to compete for the highly coveted Battlefield Cup.
Jeremy Johnson is the CEO and Co-Founder of Andela, a company that builds high-performing, distributed engineering teams with Africa’s most talented software developers. Founded on the premise that brilliance is evenly distributed, Andela is solving the global technical talent shortage while catalyzing the growth of tech ecosystems on the African continent.
Prior to founding Andela, Jeremy co-founded 2U, one of the fastest growing education technology startups to date. 2U went public in 2014 (NASDAQ:TWOU) and continues to transform higher education by delivering the world’s best online degree programs with top tier universities.
Jeremy is recognized broadly for his work as an education innovator. He has spoken on education and entrepreneurship at meetings hosted by the White House and Congress. His speaking appearances include conferences and college campuses around the world as well as media outlets like NBC, ABC, FOX, and CNBC. Jeremy was named “30 Under 30” by Inc. Magazine in 2012 and Forbes in 2013 and 2014.
Outside of Andela, Jeremy serves on the board of the Young Entrepreneur Council and the education non-profit PENCIL and co-authored a book for the World Economic Forum: ‘Education & Skills 2.0: New Targets & Innovative Approaches.’
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What is Andela, the Africa tech talent accelerator?
As someone who covers Africa’s tech scene, I’m frequently asked about Andela . That’s not surprising, given the venture gets more global press (arguably) than any startup in Africa.
I’ve found many Silicon Valley investors have heard of Andela but aren’t exactly sure what it does.
In a bite, Andela is Series D stage startup―backed by $180 million in VC―that trains and connects African software developers to global companies for a fee.
The revenue-focused venture is often misread as a charity. In 2017, Andela CEO Jeremy Johnson described the organization as “a mission-driven for-profit company” ― a model for the concept “that you can actually build businesses that create real impact.”
I asked Johnson recently to clarify the objective behind Andela’s drive. “It’s the exact same mission as when we started, based around our founding principle… that brilliance and talent are distributed equally around the world, but opportunity is not,” he said.
“We’re about breaking down the walls that prevent brilliance and opportunity from connecting to each other.”
A major barrier for Africa’s software engineers, according to Johnson, is simply the fact that the continent has been totally off the network that companies look to for developer talent.
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Generation closes $1B growth fund targeting sustainable startups
Generation Investment Management, the firm co-founded by environmentalist and former Vice President Al Gore, was built on the premise of backing sustainable startups. Now, as the idea of sustainability starts to gain wider traction, the firm is doubling down on the concept.
Today, Generation is announcing that it has closed a $1 billion Sustainable Solutions Fund for growth investments. As the name implies, it plans to put the $1 billion to work backing later-stage startups that work on sustainability in at least one of three areas — environmental solutions; healthcare; and financial inclusion, including the future of work — and are creating financially sustainable businesses out of that focus.
Typical investments will range from $50 million to $150 million, and there have already been two made out of the fund before it closed, both indicative of the kinds of investments Generation plans to be making.
Andela — the startup that pairs companies needing engineering talent to work on projects with developers based out of Africa — in January announced a $100 million round. Also that month, Sophia Genetics — the company that applies AI to DNA sequencing to help formulate more accurate medical treatments — raised $77 million led by the firm.
Other companies that Generation has backed include Asana, DocuSign, gogoro, CiBO, M-Kopa, Ocado, Optoro and Seventh Generation.
This is Generation’s third growth fund and the largest raised by the firm to date, which itself is a sign of the swing we’ve seen in the tech world.
In general, founders, workers and investors all remain relentlessly focused on growing new ideas. But along with that there has been a rising conscientiousness of the massive role that tech plays in shaping the world, and so some are now trying to make more of an effort to use that for more meaningful outcomes.
“You are seeing how sustainability is attracting high-performing entrepreneurs,” said Lilly Wollman, partner and co-head of the Growth Equity platform, in an interview. “They care about the mission, and that is also driving financial performance.”
“We believe that we are at the early stages of a technology-led sustainability revolution,” said Al Gore, chairman and co-founder, in a statement, “which has the scale of the industrial revolution, and the pace of the digital revolution.”
In the case of Generation, it’s also an indication that the firm — which has $22 billion under management today — is providing impressive enough returns on its mission to drive more interest from LPs to grow the commitment to back it.
“There is a recognition of this momentum,” added Lila Preston, a partner who is the growth platform’s co-head, “of the 15 years the firm has already spent on this concept and the work it’s put into it. We see this as a movement, but one with a road map based on research and understanding.”
It’s also notable to me that the two people leading the growth team are women. Wollman noted that 60% of the Generation team is female, with the employee base spanning eight nationalities. “The firm believes more diversity leads to better outcomes,” she said.
Consumers are also playing a big role. Of all the good, bad and ugly that has been wrought by the rise of social media, one of the positives has been how social platforms have been used to raise awareness of issues such as climate change and inclusion. We may be getting into more online fights with our distant cousins (and closer friends and relatives), and sometimes issues like trying to curtail emissions gasses seems like an insurmountable challenge. But some will also use what they read about and watch online as inspiration to try to make a change.
“One of the things that is so interesting in this moment is that we are at an inflection point,” said Wollman. “Sustainability is winning on economics alone. You see sustainable products and solutions that are both efficacious and cheap. People are buying electric vehicles not just because they are green, but because they are starting to become cheap enough, and provide better performance.”
That’s bringing in a new wave of investors to the mix, and it’s interesting to see how some more conventional investors are even starting to take a bigger step into making mission-driven investment decisions. (Just yesterday, in the U.K., Balderton co-led a large round for Wagestream, a startup aimed at helping promote financial inclusion by creating a way to easily and cheaply draw down money from monthly paychecks. Generation hinted that it too might be making an investment in a startup working in a similar area in the weeks to come.)
“It helps to have a set of co-investors to ask questions related not only to ‘what are your growth metrics’ but ‘how does what you are doing affect the wider world,’ ” said Preston. “We are finding an increase of sophistication, which we think is positive recognition. Given the context of our shift, whether it’s a new economic model or climate change, we are going to need masses of capital to drive sustainable solutions and re-frame what is successful.”
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Connecting African software developers with top tech companies nets Andela $100 million
Andela, the company that connects Africa’s top software developers with technology companies from the U.S. and around the world, has raised $100 million in a new round of funding.
The new financing from Generation Investment Management (the investment fund co-founded by former Vice President Al Gore) puts the valuation of the company at somewhere between $600 million and $700 million, based on data available from PitchBook on the company’s valuation following its previous $40 million funding.
Previous investors from that financing, including the Chan Zuckerberg Initiative, GV, Spark Capital and CRE Venture Capital, also participated.
“It’s increasingly clear that the future of work will be distributed, in part due to the severe shortage of engineering talent,” says Jeremy Johnson, co-founder and CEO of Andela. “Given our access to incredible talent across Africa, as well as what we’ve learned from scaling hundreds of engineering teams around the world, Andela is able to provide the talent and the technology to power high-performing teams and help companies adopt the distributed model faster.”
The company now has more than 200 customers paying for access to the roughly 1,100 developers Andela has trained and manages.
Since its founding in 2014, Andela has seen more than 130,000 applicants for those 1,100 slots. After a promising developer is onboarded and goes through a six-month training bootcamp at one of the company’s coding campuses in Nigeria, Kenya, Rwanda or Uganda, they’re placed with an Andela customer to work as a remote, full-time employee.
Andela receives anywhere from $50,000 to $120,000 per developer from a company and passes one-third of that directly on to the developer, with the remainder going to support the company’s operations and cover the cost of training and maintaining its facilities in Africa. Coders working with Andela sign a four-year commitment (with a two-year requirement to work at the company), after which they’re able to do whatever they want.
Even after the two-year period is up, Andela boasts a 98 percent retention rate for developers, according to a person with knowledge of the company’s operations.
With the new cash in hand, Andela says it will double in size, hiring another thousand developers, and invest in new product development and its own engineering and data resources. Part of that product development will focus on refining its performance monitoring and management toolkit for overseeing remote workforces.
“We believe Andela is a transformational model to develop software engineers and deploy them at scale into the future enterprise,” says Lilly Wollman, co-head of Growth Equity at Generation Investment Management, in a statement. “The global demand for software engineers far exceeds supply, and that gap is projected to widen. Andela’s leading technology enables firms to effectively build and manage distributed engineering teams.”
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A look back at the year that the Sub-Saharan African startup scene found its stride
African tech in 2017 was about the normalization of market events mostly absent even a decade ago. There were acquisitions, multiple investment rounds, lots of expansion, big strategic partnerships and some surprise failures. Africa is fast becoming home to a dynamic tech sector. Here’s a snapshot of the news that shaped that transition over the last year. Read More
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Peak Ventures shores up its second fund for $50 million
Utah-based Peak Ventures has closed on a second fund for $50 million, outpacing Kickstart Seed Fund as the seed VC firm with the largest coffers in the state thus far. Peak took in $23 million for the first fund and has since invested in local startups like Owlet and Homie as well as the New York-based Nigerian education startup Andela. Sid Krommenhoek and Jeff Burningham launched the fund… Read More
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