Tomorrow, Stoke will announce it has raised $15.5 million in a series A round of funding. The company, which offers a freelance management system (FMS) to help enterprises manage independent contractors, freelancers, consultants, agencies, and gig workers, will use the funds to build out engineering, product marketing, and sales, Stoke cofounder and CEO Shahar Erez told VentureBeat.

In terms of the product itself, he says the company wants to expand its partner ecosystem for marketplaces with sources for talent, including improving the experience for sourcing and adding a greater variety of sourcing capabilities. The company will also work toward launching global compliance for classification, rounding out its compliance offerings for the U.S. and some European countries, which Erez said are now “pretty solidified.”

In March, Stoke launched its Worker Classification Engine, an AI-powered system that analyzes companies’ relationships with contractors and freelancers and alerts them to potentially costly compliance risks. The model is built on more than 3,000 classification cases filed in the U.S.

“We’re seeing more regulatory changes that are impacting the future of work,” Erez said, mentioning classification, data compliance, and tax regulations. “Companies that need to move faster and have a growing number of independent contractors do not have the right tooling in place to build toward this new composition of workforce.”

The future of work

In addition to spurring a shift to remote work, the pandemic greatly accelerated dependence on freelance and contract work. An Upwork survey from September revealed that 59 million Americans performed freelance work in the last 12 months, an increase of 2 million since 2019. These freelancers represent 36% of the total U.S. workforce and half of the Gen Z workforce, with Upwork citing a “tough job market for recent college graduates” as a reason behind the boom. By 2027, it’s estimated that 86.5 million people — 50.9 percent of the total U.S. workforce — will be freelancing, according to Statista. The rapid shift has made it difficult for some enterprises to keep up with the workforce changes happening inside their own companies.

“A lot of these organizations don’t even know how many independent contractors they have,” Erez said. “Ask any CFO, CEO, or head of HR and you won’t find a single person who knows. There are so many things wrong with that because there is really no process. No process for effectively onboarding, no process to make sure they’re signing the right legal documents, and then we’re seeing events like freelancers not getting paid on time. Again, no one’s bad intention. It’s just a huge mess.”

Indeed, payments are a significant problem — 71% of freelancers report difficulty getting paid, according to the Freelancers Union. This type of arrangement also typically excludes workers from accessing company health care benefits and other support structures, like paid time off. The narrative is often that workers are going freelance for the flexibility, but the loss of millions of full-time jobs during the pandemic certainly plays a role. Zip Recruiter reported the percentage of temporary job postings on its platform jumped from 24% to 34% when the pandemic hit. Meanwhile, 90% of active job seekers on the platform are looking for a permanent, full-time position.

Financing the pivot

With these workforce changes rapidly underway, companies that can help enterprises navigate their extended worker base are raking in investor cash. In March, HoneyBook announced it had raised $155 million at a $1.1 billion valuation post-money. Utmost, which functions specifically for Workday customers, also announced a $21 million series B round of funding last month. Other companies in this space include giants like Fiverr and Upwork, as well as Freelancer.com and Guru.com.

This latest round marks a total of $20 million in funding for Israel-based Stoke, which launched in 2019. The round was led by Battery Ventures, with participation from all previous investors and angels, including TLV Partners, Dynamic, and Loop.

“We’ve been interested for years in companies shaping the future of work, and the pandemic has made that investment thesis even more relevant and led directly to our interest in Stoke,” Itzik Parnafes, general partner at Battery Ventures, told VentureBeat.