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Why Homejoy Failed
- sageabilly 11y ago"The steady leak of its best workers to direct employment arrangements with its own (now former) clients." This is a huge hurdle in any direct services market. While you're not likely to hire your own private driver and thus end your working relationship with Uber, you're probably very likely to find a cleaner that you like a lot and who does a great job cleaning your house and go on to form an exclusive working relationship with them instead of continuing to use a service that sends you random cleaners from a wider pool. Same with services of the same type- babysitters, dog walkers, etc.
- IgorPartola 11y agoI actually did this once with Move.com. I have moved a lot over the past decade and used them pretty extensively to hire movers. Since two consecutive moves were local and I told the movers that during the first one, they told me to contact them directly for the second one. I got a discount, they got to keep more of the money.
- lhc- 11y agoI was involved with another company that used to operate in the same space, and they had a big problem with that. Movers would show up, offer the client a slightly lower rate if they paid cash, then both parties would cancel with the company and just work it out directly. Finding reputable contractors who wouldn't just cut the service out turned out to be a very hard problem.
- ChazDazzle 11y agoI've done this several times with TaskRabbit and i'm actually surprised the same thing hasn't happened to them.
- jusben1369 11y agotbh it might be. I don't get the sense TR is doing very well these days. Very quiet out of there.
- saalweachter 11y agoI think it's an important question any entrepreneur has to answer: what value do I add to the business? If you're providing some expertise or startup costs to purchase expensive investments (buildings, machinery...) or creating some sort of efficiency of scale, you've probably got a viable business. If your business plan is to skim money off of workers who could do their jobs and get paid without you, your workers are going to eventually figure that out and cut you out of the equation.
- prostoalex 11y ago> If your business plan is to skim money off of workers who could do their jobs and get paid without you Lead generation is a viable business, as demonstrated by Yelp (and previously Yellow Pages), it's just not hot and fast-growing.
- saalweachter 11y agoYeah, I agree. There's going to be a huge difference between businesses where customer acquisition is needed regularly (eg, taxis; it makes sense to take a different taxi with a different driver, based on whichever is closest to you) and where customer acquisition is needed infrequently (eg, cleaners; it makes sense to use the same cleaner over and over, on a fixed schedule).
- shostack 11y agoCleaners, and some other industries, still need lead generation as they lose customers but also seek to expand their businesses. If they are spending time cleaning, they are not spending time marketing other than through the resulting word of mouth.
- morgante 11y agoThumbtack is also a lead gen business, and they actually are quite hot (just raised at a $1B valuation).
- marcosdumay 11y ago
- arxpoetica 11y agoSeems like there might be a model that works better by focusing on managing relationships-- not necessarily a home cleaning service--
- hvs 11y agoIt's called Angie's List.
- TheCondor 11y agoTaxis have been tampered with. There are medallions and monopolies and such, the fair market hasn't reigned. Uber can change that, there is room to wiggle. Has cleaning been unionized or tampered with? If anything, I'd almost think it's shifted further to the other side, there might be undocumented workers and more cash businesses than taxis have, even less regulation if you will. If the market is working, then what's the value? They help customers find cleaners more efficiently? More efficiently than Craig's list and the other sources?
- sageabilly 11y agoThe initial value is the piece of mind on the customer side plus ease of use/scheduling. With maid service, you're letting someone in your house unsupervised for long periods of time, so it becomes extremely important to have accountability built into the transaction. I have considered getting a monthly maid service and I live in the DC metro- somewhere with a ton of choices on that front- and I have not quite pulled the trigger on it because I am pretty freaked out by paying someone to have unfettered access to my house. I don't even have anything expensive to steal or break! There is zero chance I would trust a maid from Craigslist.
- aianus 11y agoCouldn't you get someone to clean while you're home watching football on Sunday or something? I don't see why it has to be totally unsupervised.
- sageabilly 11y agoThat's an option- issue is that if you get someone who's being paid cash they're not licensed or insured in any way and if they break something or are injured on your property then you don't have any legal recourse to rectify the situation and, in fact, might be violating labor laws depending on how much you pay them/ how much they work.
- VLM 11y ago>I don't even have anything expensive to steal or break! That creates a peculiar Venn diagram of people paid too much to clean and simultaneously don't own anything. This limits growth potential. The customer pool is always going to be extremely small. On the other hand "everybody needs a taxi" sooner or later for some reason.
- InAnEmergency 11y agoI've noticed this even with Groupon. Walk into place with a Groupon, they offer you the same price but just bypass Groupon. They get a new customer in the door, the customer is fine with it because it's the same price, but the business makes more money because they don't have to pay Groupon their cut.
- aamar 11y agoHow would that work? Groupon takes their cut when the the customers pay for the deal itself, days or weeks ahead of them showing up at the business.
- michaelt 11y agoWalk in and say "I'm here for the groupon deal but I haven't brought it yet. Can you sort that out for me, or is it easier for you if I buy it on groupon now using my phone?"
- irl_zebra 11y agoAdditionally, Groupon has a three day return policy. So go to the business and just return the groupon if the business wants to bypass.
- deleted 11y ago[deleted]
- geomark 11y agoThat's a problem even in B2B businesses. I used to run a design center where we often contracted out teams to work onsite at a client's place. Clients sometimes offered one of my guys to go direct, even though there was a big nasty clause in the contract forbidding that. But then we didn't want to start suing our clients so they usually got away with it. It must be way worse in a B2C business. I just don't see how this had any legs.
- sib 11y agoThe best solutions that I've seen for that is an explicit charge / fee for doing so, in the original agreement, rather than a prohibition.
- Retric 11y agoBackfill is a useful feature that an app like this can provide. The problem is it's a small fraction of initial sales and has high customer acquisition costs. It might work as a platform where they only take a cut of the first transaction. But, you’re still stuck with high customer acquisition costs and minimal repeat business. The other option is to directly higher the cleaners so they don't defect. But, then you’re just running a cleaning business and competing with those who have minimal documentation.
- venomsnake 11y agoNon circumvention agreement solves that beautifully. And I think it is more enforceable.
- s73v3r 11y agoHow? Keep in mind that most jurisdictions take a VERY dim view of a company trying to prevent someone from working.
- venomsnake 11y agoDepends. They take very dim view because of the broadness of the non compete clauses. Here is extremely specific - you cannot clean that specific house unless you give me 30% of your earnings.
- jmngomes 11y agoThat's usually too taxing for startups to enforce, and suing customers isn't really positive for your reputation.
- dllthomas 11y ago"While you're not likely to hire your own private driver and thus end your working relationship with Uber" Not likely to end your relationship with Uber entirely, but Uber doesn't do pre-planned trips; an individual driver may.
- qq66 11y agoUber does pre-planned trips in some countries.
- Pxtl 11y agoImho, this is why a generalized system of home-services might work better. I mean, Uber's success is that it connects where you are with nearby drivers. The map. We could similarly have a "map" not geographically, but thematically, of nearby service providers. I need a foundation guy who does green technology. Or a cleaning lady who knows how to work with antique mahogany. Of course, this kind of map is far harder to do than a simple GMapps GPS system. So you'd need more human overhead both walking new service-providers and new customers through the tagging system of describing a service. But still, there's room for that: a complex recommendation engine where you describe the kind of job you need done and it links you up with local experts in that kind of work, combined with Uber-style ratings. Google sucks for this. You target a high price-point because you shoot for the one-offs, which means they may need human arbitration. Anything repeating and you'll lose them to direct personal relationships anyways - you add value and get profit from the first-time use of a new service-provider. Something in-between Uber and Yelp, "do stuff at my house".
- Animats 11y agoIf the service employed the cleaners as straight employees, they wouldn't have that problem. The service's value add for employees should be good scheduling and steady work. Merry Maids, the big company in the field and a unit of Servicemaster, does have their people as employees. Their problem, from reviews, is that many of their local managers are disorganized.[1] What they need are better tools for their people. But you don't get to be a billion dollar unicorn by developing an in-house app for a house cleaning company. [1] http://www.indeed.com/cmp/Merry-Maids/reviews?fcountry=US http://www.indeed.com/cmp/Merry-Maids/reviews?fcountry=US
- IgorPartola 11y agoI read a comment on HN a while ago that went along the lines of "there is a new breed of startups that's in the business of selling dollar bills for 95 cents". I really like that formulation. Your job gets a lot easier as soon as you provide more value than you charge for it. Seems like that was one of the big problems with Homejoy: they were not able to charge more. The reality is that home cleaning is very price competitive. Anyone with a mop and a bucket can undercut your price, and as long as the customer trusts them and likes them they have no reason to switch. For example I know of a 12 year old kid who decided to start his own cleaning business. He calls it "a boy and a bucket", and from what I am told does a fantastic job. He also charges about 1/2 of the market rate around where I live, yet provides a superb service.
- mgkimsal 11y agoIMO, that's the late 90s bubble all over again. I know... we're not in a bubble now... but losing money and making it up on volume was the big joke back then, iirc.
- w4 11y ago> I know... we're not in a bubble now... but losing money and making it up on volume was the big joke back then, iirc. It's ok to say we're in a bubble. These companies that are selling goods at a loss predicated on the availability of venture capital, with no clear path to profitability, show that we're almost certainly in a bubble. The real question to worry about isn't whether or not we're in a bubble, but rather how substantial of a bubble it is, and how many companies might have exposure to it.
- shostack 11y agoThank you for making a logical statement around this. People love to trot out the bubble line, but I always wonder how much of the "tech industry" at this point is comprised of small startups with large amounts of funding vs. large established tech giants like Google, FB, Apple, Adobe, etc. with BILLIONS in revenue (if not profits). I've heard people tell me "all these startups with funny money are driving the housing prices up." I can only sit there in response and hold back my snarky "yeah, and I'm sure the giants who have tens of thousands of engineers on staff with billions in profit aren't contributing at all."
- ghaff 11y agoAfter reading this, I'm left to ponder why anyone would think this was a potential "unicorn" business where it made sense to take big losses to grow revenue. After all, as the article notes, cleaning services like Merry Maids are a well-established thing. (As are personal references for housecleaners.) That doesn't make a potential new entrant bringing a better UX to the process a stupid idea. But it would seem to limit the potential opportunity.
- mdorazio 11y agoMaybe ask sama? Homejoy was a YC company and Adora even game a lecture during the most recent Startup School. I'd personally like to see a "lessons learned from failed YC companies" lecture next time since it seems we're starting to see more high-profile failures in the market, often based on high-growth with negative margins.
- denniskane 11y agoExactly. The very idea of investing in a unicorn business is that it will either corner the market or go bankrupt, is it not? How anyone can imagine that they can corner the market in this industry is beyond me!
- prostoalex 11y ago> After all, as the article notes, cleaning services like Merry Maids are a well-established thing. But so are the taxi companies and hotel chains.
- ghaff 11y agoWell, the taxi experience has oft-discussed problems in many places. And AirBnB is typically a different experience from chain hotels. There's also the skirting of regulation thing in the "sharing" economy. But leave that aside and Uber/Lyft and AirBnB are still qualitatively different in many ways from the incumbents they're competing with. (Not saying they're universally better, just different.) However, it's hard for me to see Homejoy as being much different from a cleaning service.
- cm2187 11y agoThe difference with Uber is that it requires a lot more trust to give someone access to your home while you're away to clean it. Not sure I would want to subscribe to a service where I would have to trust any local dude to visit my home. It's like a nanny. Picking someone to look after your kid is a very personal thing. It's not a lowest bidder thing.
- jdmichal 11y agoGetting in a car is pretty much the most dangerous thing a person does in an average day. You may be trusting a cleaner with you possessions, but you're trusting that Uber driver with your life.
- cm2187 11y agoThis is a VaR vs Average risk discussion. Yes the potential harm is higher in an absolute worst case with a taxi but it is a really rare event. Cleaner stealing stuff is unfortunately quite common. When you know the person the risk is relatively low but when it is a complete stranger that has been selected by an online company which itself never met that person, I would say the probability is too high for my own taste.
- ghaff 11y agoThat's a reasonable evaluation to make. I'd note though that people use cleaning services all the time so Homejoy wasn't in any way unique in this regard (which was one of their problems).
- Mickydtron 11y agoWhile this is statistically true, people don't act as if this were the case. While trusting someone with your physical safety should be a high-trust decision, we treat it cavalierly enough in our day to day lives that most people clearly don't worry about it. Maybe it makes sense, though, because the other person in the interaction has more incentive to defect when given access to all of your possessions than when given control over you yourself. That is, you have little reason to think that the Uber driver is working at cross purposes to you, and mainly just have to take their competence on faith. With something like Homejoy, it is their character and motivation you are gambling on moreso than their competence. I haven't heard of people abusing Homejoy to rob houses or anything, but it seems not entirely stupid that someone would worry about bad actors more than incompetent ones.
- forgetsusername 11y ago>Adora Cheung opted to sit among employees, rather than in a swanky corner office. It's a pretty sad state when it's considered admirable and rare that the CEO of a company that is spending other people's money, and making none, doesn't have a "swanky" corner office.
- cballard 11y agoNo one should be sitting "among employees" - everyone should be in a private office with a door that closes.
- jusben1369 11y agoI'm always wary of the "one size fits all people" mandate.
- paulcole 11y agoWow, pretty sweeping generalization. You can't think of anyone who might prefer an open office arrangement, or you can't think of anyone like you who would prefer it?
- intrasight 11y agoI can't think of anyone
- 11y ago
- kra34 11y agoFred Wilson recently wrote a blog post about this: http://avc.com/2015/10/negative-gross-margins/ http://avc.com/2015/10/negative-gross-margins/ A lot of companies will fail because their investors will lose patience and no longer support subsidized pricing.
- jusben1369 11y agoHomejoy raised $40 million. I doubt it was ever even close to Unicorn valuation. Am I wrong or is this headline fairly misleading?
- ghaff 11y agoWell, there's no formal definition of "unicorn valuation." But $40 million is a fair bit of money to raise and, if you figure 10x return as a target ballpark, that brings you up to $400 million which is at least in the ballpark of $1 billion.
- jusben1369 11y agoI think Unicorn is very specific and $1 billion is the amount
- maxlamb 11y agoHow much a company raises and its valuation are two completely different things.
- sib 11y agoWhile that is true, it is also unusual for a Series B round to represent less than 10% equity in the target company, so it would be safe to assume a post-money valuation of no more than $400MM.
- ThomPete 11y agoCompare it to the Danish facility company ISS [1] whos been around since 1901 has more than 500K employers and is in more than 75 countries and pay their employers a fair salary. No freelance contracts or anything like that. The real challenge isn't growing a company like that, it's being profitable from day one. And so the real innovation is going to be a company that find a way to either completely automate many of those areas or somehow manage to provide benefits beyond the stability a company like ISS can offer which is no easy task. Managed by Q seems to be doing things in a much more realistic fashion IMHO. [1] https://en.wikipedia.org/wiki/ISS_A/S https://en.wikipedia.org/wiki/ISS_A/S
- TheOtherHobbes 11y agoThe flaw in the model is that companies like these do not exist to provide a service to customers - they exist to persuade investors they're worth funding. Homejoy was primarily a cash hoover, not a carpet cleaner. On that basis it worked okay for a while. But the emphasis on Insane Growth [tm] as a metric for potential unicorn-hood meant that customer care, customer retention, and service quality - never mind basic business metrics like profitability - all declined to the point where these was only an empty shell of a business covered by a paper imitation of a multinational corporation. The lawsuits didn't help, but I doubt they killed the company on their own.
- ThomPete 11y agoI agree. Also ISS was actually so modern that my own mom who was a simple cleaning lady had stock in the company and this is 20 years ago. So actually disrupting them requires something more than underpaying your workers.
- whistlerbrk 11y agoI found the scheduling process to be flawed. The assumption that I'll be home at the same hour every week was not a good one. There wasn't a confirmation phone call, text or email to remind me. But yes, I could manually reschedule. The phone support wasn't glowingly friendly to boot, very forgivable though. The initial cleaning needed to be deep and thorough. I honestly think that's what people want. Get you back to square 1 and then do maintenance cleanings from there on out. I wasn't blown away by the service enough to continue it. The guy spent 15 minutes polishing my tea kettle when I had much larger issues looming. Also the experience of saying "I need an extra hour or time on my oven" was odd. Maybe I don't? Maybe I do? I'm not the professional cleaner, you guys are. What I want is to not have to think about this. If the onboarding process was actually harder as in - provide us keys, your first cleaning is going to be an overhaul a big one, etc. I think retention would have gone up even though conversions would have been low. But no one wants to play the long game nowadays...
- mgkimsal 11y ago"There wasn't a confirmation phone call, text or email to remind me." Really? That's about the only thing I'd expect from a web-based service scheduling tool - something to remind/confirm/verify my scheduled appointment. Dare I ask what they're doing that something as fundamental as this didn't make the 'feature' cut?
- skhatri11 11y agoTLDR. Summary: Burn was too high.
- apapli 11y ago..because they didn't have a business plan.
- untog 11y agoI think this is a demonstration of the limits in "app-ing" an industry. Uber worked fantastically because it leans heavily on the geolocation facilities in a smartphone - you're always moving, getting picked up from different places, by cars located in different places. Homejoy had none of that. You rarely move home, and your cleaner rarely does either. Effectively, from transaction #1 you're in a perfectly replicable pattern - Cleaner X comes to your house every Y weeks and works for Z hours. No matter how great that initial app experience is, it's basically not needed afterwards. There's also something interesting in here about the limits of the "gig economy". Arguably, by creating a marketplace of cleaners competing with each other for your money, they'd drive costs down for customers. In reality, inviting someone into your home is a very personal thing, and people much prefer to build a relationship with someone that they might pay a little more on a regular basis, than get a different person each time. It is a premium service, after all.
- mikeash 11y agoIt also solved a problem that's more or less already solved. Uber is great because finding a taxi can be hard, and finding a good taxi can be really hard. Finding somebody to clean your house is really easy. I must get half a dozen flyers a week for cleaning services stuck on my door. If I don't trust that, I can just ask my neighbors for a recommendation.
- harshaw 11y agonope... not where the density is lower
- sib 11y agoTrue, but the issue is, the Homejoy solution was even less effective in low-density areas...
- Domenic_S 11y ago> Finding somebody to clean your house is really easy. Finding a warm body to drag a tepid rag around your countertop is easy, sure, but finding someone who's 1) consistent 2) always on-time and 3) not $100/hr is next to impossible. Perhaps in a large metro it's easier, but I've had basically no luck in suburban silicon valley.
- kefka 11y agoThe underlying question is "Does skirting employment law by using only 1099'ers make a profitable business solution?" In this case, the answer is no. But the general answer to that question is "Yes, it is very profitable to upend employment law for the profit of the few, on the backs of the many."
- prostoalex 11y agoAfter a certain growth period it might be more cost-effective for a company to convert certain contractors to W-2 employees. Company can now mandate hours and keep a highly-rated worker from switching to a competitor. Homejoy never passed that "certain growth period", though. So it's not a clear-cut "contractors = good, employees = bad" thing. It's just that companies exploring these markets are all at early stage of their growth.
- kefka 11y agoWhy would it be? I'm seeing a lot of reasons to bust "employment". Here's some. 1. Unemployment insurance? Well, you aren't employed. 2. Get hurt on the job? You're not on a job, 1099'er. 3. You "get" to pay the employer's tax as well as your own. Jokes on you, bub. 4. Want to join a union? They kill your account. 5. Real contracts can agree upon wages. How do you do this via Uber/Homejoy/"sharing job"? You don't. 6. Pregnant or sick? FMLA protects employees; not you.
- SilasX 11y agoAll of those points apply equally well to any self-employed person. Should self-employment be abolished too? To the extent that there's a problem, it's in the fact that the law doesn't treat the self-employed/other-employed spectrum sanely, such that employer incentives don't align with social goals. We should fix that, not demonize business that optimize for the current broken system.
- kefka 11y agoFalse equivalence. Consultants have been around for a long time. And they command a high rate, because they are pros. No, they aren't an employee, nor would either side want them to be. They do the job, paid well, and part company. Most consultants get paid somewhere between $150-$400/hr . I know of one who's compensation is $500/hr. This new thing, the "sharing economy" is a way to shove out employees from their protected status and government-fought for rights into the plan that mainly the professionals occupied. Instead, the companies that uses these tools figured out the masses can be convinced that these roles are better, somehow. These people are evident by the fact that they "work" for one company, have standards in which they must follow, and are paid around the low-middle wage for their services (8-12$/hr). Big differences: 1. Wage disparity 2. Knowledge 3. Lawyer or legal team 4. Difference of liabilities 5. "Works for" but not really Tl;Dr. This is an intentional misclassification to skirt employment law.
- jusben1369 11y agoThe risk here is that many of the comments are extrapolating to the larger market. Yet Handy seems to be doing well and has much higher retention rates. Homejoy could just be bad management. Seems like a classic case of a leader who was good early on (rushing off to do a bathroom on a holiday) but couldn't solve for the bigger problems at scale (retention) which Handy has.
- mason55 11y agoRight, I think there is plenty of space for value-add in this market, it's just that Homejoy wasn't doing it. They thought they could act an uninterested intermediary whose focus was on scheduling and on demand cleaning but that's not where the gaps are in this market. It seems like there is a ton of room for them to leverage their economy of scale and that provides the moat that keeps cleaners from striking out on their own. Some easy things I can think of where it makes sense for both cleaners & customers to stay with Homejoy From the cleaner side: - Offer help with the business side of things for the cleaners (taxes, setting up retirement accounts, etc) - Instead of giving cleaners supplies, raise the rates you pay and sell supplies to the cleaners at a discount by leveraging your economy of scale - Group negotiation for health insurance From the customer side: - Give customers a reason to continue ordering through the app. Maybe it's randomly giving away free cleanings, maybe it's a frequent buyer discount, maybe you offer monthly/yearly subscriptions - Mentioned elsewhere but have a way to request the same person
- deleted 11y ago[deleted]
- jrochkind1 11y agoThe lawsuit over independent contractors may not have been the deciding factor in their failure, but: > For example, according to Zietsman, Homejoy city managers were tasked with buying up and distributing cleaning supplies They chose and supplied the cleaning supplies to workers? And still thought they had _any_ chance of prevailing in a lawsuit where they claimed the workers were independent contractors and not employees? Um.
- smileysteve 11y agoMany franchise systems work like this, I wonder if they had provided a business class on llcing and then required training , supplies, and maybe even equipment how a lot of these cos would turn out.
- gloves 11y agoSoon the floors of Silicon Valley will be littered with the corpses of Unicorns. Sustainability surely has to take precedence over growth at any cost soon?! One can hope...
- Kurtz79 11y agoHaven't they always been ? Possibly the only difference is that before they were given a sensible name (like "failed startup") instead of "dead unicorn".
- roymurdock 11y agoGeolocation in smartphones turns people into nodes, and successful apps/services solve an impersonal, one-off matching problem between these nodes. The more personal/temporally repeated/geographically repeated the problem is, the less you need a smartphone to have a successful service. Then you find yourself competing with web services companies and your competitive advantage is gone.
- cletus 11y agoIt can be pretty much boiled down to this one quote: > ...and the steady leak of its best workers to direct employment arrangements with its own (now former) clients. Services such as Homejoy create value by providing a market for the discovery of those seeking work with those seeking workers. For any regular type work the incentive for the employer and the employee (if you can call them that) is to cut out the middleman. Why this comes as a surprise to anyone is a mystery. In attempting to take a commission off future earnings companies like Homejoy just don't understand their value proposition and are simply rent-seekers. But hey, X% of future earnings from a given job into perpetuity sure makes for one hell of a revenue projection slide in an investor deck. Look at the case where "intermediation" works and why. Airbnb and Uber spring to mind. In both cases usage is likely to be unpredictable so a direct relationship doesn't really work. 3 hours of cleaning a week on a somewhat flexible schedule? That works really well with a direct relationship.
- emmett 11y agoAnd now I am sad again because cleaning service discovery is still broken. Not that you're wrong, just that it would be really nice to be able to find cleaners through a service with good reputation tracking and recommendation. Which is intrinsically difficult to build for exactly the reason you specify.
- gotchange 11y agoThey should start then considering owning their operations or assets and not renting them like what happened with Homejoy. It seemed at least from this analysis to me that they were on the fence all the time torn between going full-scale and building a reputable home cleaning business that's adequately equipped for the 21st century life or keep feeding off those maids through commissions into perpetuity which is totally unrealistic in my opinion. This indecisiveness and the lack of vision or clarity of business goals really cost the company very dearly in execution and contributed to their demise
- vinayak147 11y agoI asked my neighbor about cleaners, they use X and gave me her phone number. I called X and she did an amazing job. Turns out, X has a higher incentive to clean my house because she can synchronize timing with my neighbor and reduce her overhead cost. The arrangement has worked great for everyone, running 9 years in a row and more neighbors have joined. I see this as an ideal win-win experience for all parties involved. It would be really nice to have a service that can create this type of experience at scale.
- draw_down 11y agoWow, good thing all those employees ground their lives into dust for a while, working past 11pm to "get their hands dirty" for a business which was fundamentally a cash pit. (And those are the "good jobs"...!)
- tptacek 11y agoBut on this particular holiday, a booking had slipped through unnoticed, due to a website malfunction, according to a former employee. Rather than cancel an appointment at the last minute, Homejoy’s cofounder and CEO Adora Cheung grabbed a toilet brush and a vacuum cleaner. Then she headed to San Francisco’s Mission Dolores neighborhood and scrubbed. “The customer had no idea,” said Arjun Naskar, one of the earliest employees at Homejoy, who shared the story as an example of the founders’ intense determination to succeed. Profiles in courage! I mean, you can take this sentiment too far (I'm sure Cheung is a great person). But this is a website premised on capturing a premium off the work of people who scrub toilets every day, day-in, day-out, right? It's telling that a tech founder doing that job just once constitutes a lede. Semi-related reminder: tip your hotel housekeepers.
- brwnll 11y agoThe snark us unwarranted here. The article explains that all employees went through a house cleaning during on boarding. There are plenty of ceo/founders who would consider themselves not responsible for doing the dirty jobs that make a company work, particularly on a holiday such as thanksgiving (in the US, a very family-time centric holiday)
- mikeash 11y agoJust because lots of people are terrible doesn't mean this is laudable. One of the major roles of management is (or is supposed to be) to jump in and fill holes when needed. In my opinion, a sane business starts out with the CEO/founders doing the actual work, and only after a great deal of expansion does it reach a point where upper management can think about being disconnected from it. I guess massive VC funding allows companies to skip straight to the second part.
- tptacek 11y agoAgain: the premise of the business is that there's a premium to collect on top of the work of housekeepers, who generally do that job because it is the only way they can scrape by, and that the premium should be assigned to people who can code. The article's author thinks that performing the gig once is somehow an illustration of a startup founder's determination. I winced.
- code4tee 11y agoClassic case of a company finding itself in the position of being a middleman with questionable value-add. Once you introduce someone to their new cleaner there's zero motivation for the customer to not just kick out the middleman and deal with the cleaner directly. Especially when these app companies throw their hands up and say "hey they don't work for us... they're an independent contractor" if something goes wrong. They tried to have the best of both worlds (be a middleman with no responsibility) and, not surprisingly, the market called them out for it.
- scorchio 11y agoThe unnatural way Homejoy raised their seed rounds, with Cheung basically calling up Levchin and PG [1] was instrumental in setting up a failed business. This gave the startup undeserving social proof and let to the huge funding it should have never received. [1] https://www.youtube.com/watch?v=lVDmyRxeGCo&list=PLQ-uHSnFig5P7scrcPr3VPHrG1OylKhpt&index=3 https://www.youtube.com/watch?v=lVDmyRxeGCo&list=PLQ-uHSnFig...
- patio11 11y agoWithout specific reference to any company, "Convincing an investor to invest in a company which is not, at the present moment in time, either profitable or cashflow positive" is not in any way exceptional or unnatural. That's the nature of the game in early stage investing. They're all high-risk companies which, if you simply linearly project out where they are today, will "default to dying" (to use PG's phrasing). Sophisticated investors bet that they can perceive some X factor about the business, the market, or the founders which will cause the business to actually not achieve the default outcome. Usually they lose these bets. Occasionally they bet that two Stanford gradudate students who know nothing about business will nonetheless figure out a terribly difficult CS problem allowing them to unlock money from an oversaturated low-margin business that every smart analyst correctly believes has no future. If you invest in nine $STARUP_WHICH_FAILED_INGLORIOUSLY and one Google you do very well for yourself. To misquote the Wire: "All in the game, yo."
- scorchio 11y agoI agree. But such access to Silicon Valley luminaries is rare and a seed round from PG and Levchin is going to distort and inflate investment in subsequent rounds. The initial seed round gave Homejoy more rocket fuel than was natural. I watched the speech live, and at the time I felt that Homejoy was a Mini with a jet engine. It was imbalanced and was likely to blow up.
- williamstein 11y agotl;dr; summary of video -- "The theme that most people want me to talk about and which I will oblige today is ... how not to die in the context of a startup. ... Our goals (1) make people happy, (2) build a huge humungous business, which is a proxy for making a huge impact." She goes on to talk about how they spent years looking for the Homejoy idea since they did not have any personal problem that they cared enough about. At 22:00 she talks about getting $25K each from Max L. and PG: "It's like skydiving... and a hundred feet before hitting the ground, you magically get pogo sticks and bounce up. ... Now we have over 40 million in investment and we are living the dream. ... The good news is that you only fail if you stop trying." She also ends saying that her success is due almost entirely to hard work, not luck.
- programminggeek 11y agoSo, what happened was they lost money on each job, couldn't retain customers, and then used venture money to accelerate growth (to be even more unsustainable)?
- leroy_masochist 11y agoDoes anyone else think the illustrations accompanying the article are unnecessarily mean-spirited?
- aptimpropriety 11y agoPostmortems like this are always a bit unfair. You ask employees who lost their job when the company folded what was wrong with the company, and they'll air every little complaint or inefficiency that existed within the company. Isn't the ethos of Silicon Valley to 'hack it together' with tape and glue? Moreover, I'm pretty sure that's the reality of almost every high growth company. I'm sure you could find matching stories from within almost every winning unicorn: key bugs they didn't catch, poor decisions that cost them along the way, leadership gaffes, etc. I think there are a couple interesting points to consider that the other comments address: difficulty of direct services, customer acquisition costs, 1099s. But we should expect more from reporters than to throw in every other possible anecdote they could dig up.
- scott_karana 11y ago> Isn't the ethos of Silicon Valley to 'hack it together' with tape and glue? Couldn't that be the problem, too?
- deleted 11y ago[deleted]
- WWKong 11y ago"Isn't the ethos of Silicon Valley to 'hack it together' with tape and glue?". That explains the low single digit success rate. And that is not really the ethos either. It is mostly a translation of lack-of-experience. Silicon Valley is a business arrangement. Some folks have money which they spread over a bunch of high-risk/high-return investments. They net out positive. What we get is handful of mega successes, tons and tons of failures, lot of marketing noise, opportunity to work on some cutting edge experimental stuff. It has a mix of people living well (which we hear about) and people who endure bad living conditions.
- t2phukeq 11y ago> Postmortems like this are always a bit unfair. You ask employees who lost their job when the company folded what was wrong with the company, and they'll air every little complaint or inefficiency that existed within the company. Couldn't agree more. I work at a unicorn and if we blow it there will be a very similar hindsight- and mediocre-employee- biased article. We aren't idiots, we are all taking calculated risks and sometimes they don't pan out. Also, if Homejoy ended up becoming the next Uber the anecdote about working over Christmas would have been celebrated instead of derided.
- bungibo 11y agoA lot of the problems with the gig-economy as it stands now is that too many everyday people feel that the elite startup entrepreneurs are trying to build a new feudal economy.If these entrepreneurs were more humble and just worked to empower the ones doing the gig then their reward would be greater. One could empower these hard working individuals by allowing them to set their own price, by building tools that they could use to gain credibility in the eye of their customers, and give them a stronger safety net longer they work. In order for capitalism to work, the ones who do the work need to be able to reap what they sow.
- trimbo 11y agoIt was odd to see Groupon (somewhat) blamed for HomeJoy's demise. Groupon's problem for businesses is that the customer has no intention of ever coming back, they just want the deal. HomeJoy's problem, no matter how they acquire a customer (Groupon or other) is that once the vendor-customer relationship is established, there's no reason to ever involve HomeJoy again and let them take a cut.
- shostack 11y agoI found that ironic as well. Seems like every new customer acquired increases the risk of losing them more cleaners. A steep discounting through Groupon would just expedite that as it would reduce the risk/cost of trying a cleaner.
- mmayberry 11y agoI pay my housekeeper $80 to deep clean my entire house. Homejoy wanted $145 for their non-professional apathetic cleaners to do a light cleaning. Thats why they failed
- deleted 11y ago[deleted]
- jpdus 11y agoThere is a Rocket Internet clone of Homejoy in Germany, Helpling, which already raised a high double-digit million euro amount [1] and tries to grow as fast as possible at all costs (ads with vouchers in every local train and on the streets). They also had talks about a possible acquisition of Homejoy before the shutdown. I always wondered who invested that much in a not-proven market, will be interesting to see if they succeed where Homejoy failed (my guess: they won't). [1] http://www.reuters.com/article/2015/03/25/rocket-internet-helpling-idUSL6N0WQ1LG20150325 http://www.reuters.com/article/2015/03/25/rocket-internet-he... Edit: Just saw that they already ceased operations in a few countries and fired 1/5 of their employees, so it seems they have the same problems.. (found only sources in german on that news)
- thehenster 11y agoI hope my next failure will be documented with an animated metaphor of a robot failing apart.
- deleted 11y ago[deleted]
- paulus_magnus 11y agoapp-ing an industry won't allow you to charge more for the same service. Real innovation is supposed to bring costs down and productivity up which in turn increase demand for the service.
- mrmch 11y agoI feel like this is the founders story to tell, not some medium blog. Not that you can't learn anything from this, but Adora and Aaron have the most insight, and deserve the chance to share it (if they chose to).
- siculars 11y ago"disintermediation" How about a business model that takes that into account.
- strommen 11y ago> But he said they were forced to rely on [deeply discounted first time Homejoy cleanings] heavily because of intense competition with their chief rival, Handy, which employed a similar strategy. This is one of the bizarre aspects of VC that is bad for the economy as a whole. A regular business that is aiming for profit must be careful about how much it spends on customer acquisition. A VC-backed business that is aiming for "unicorn" growth must spend whatever is necessary, even if it's not sustainable. And the collateral damage is that traditionally profitable businesses (in this case, non-app-ified home cleaners) are priced out of the market.
- Tideflat 11y agoThe costumers do get VC-subsidized cleaning for a while though. (Not saying it great, but it is good for the costumer is the short run.)
- debacle 11y ago> Home cleaning represents an estimated $400 billion global market Any limited critical thinking will show that this number is likely off by 1-2 orders of magnitude. Your median US homeowner is spending $0 on home cleaning a year, and the average is likely very close to that. Outside of the US and Europe, labor costs drive that small amount to almost nothing. I would be amazed to learn that the actual size of the market was over $10 billion.
- ghaff 11y agoAlmost certainly high. US seems to be about a $10B market: http://www.sbdcnet.org/small-business-research-reports/commercial-residential-cleaning-services http://www.sbdcnet.org/small-business-research-reports/comme... Note though that, outside US and Europe, labor costs are indeed a lot lower but having a lot of personal help (cooks, housekeepers, nannies, etc.) is far more common also as a result.
- debacle 11y agoThat link appears to include commercial cleaning services, which I don't think a service like Homejoy would be able to "disrupt."
- gotchange 11y agoThis might be an unpopular opinion around here but having an MBA under the belt or at least some form of entrepreneurial intuition and business shrewdness is an indispensable skill esp. when you're planning on taking on a new category or market. I know that this analysis is bit skewed to justify and reinforce the conclusion placed in the title and repeated throughout the piece, and as they say hindsight is 20/20, but I still think that the founders made big rookie mistakes when it came to structuring a viable and sound business model for their venture and securing a recurrent revenue stream that they would have avoided had they been equipped with professional business education, knowledge and expertise.
- tcdent 11y agoWhy Homejoy failed: > "We didn’t figure out how to deliver a consistently high-quality service" The review sites agree and so does their churn rate. If you don't have a high quality service, you don't have anything. Trying to hack growth numbers with Groupons and extreme discounts while ignoring retention numbers demonstrates a lack of respect for the dynamics (basic math) and suggests expectations of a 'silver bullet' to success. Additionally, home cleaning has got to be one of the most subjective services you could choose. Who doesn't idealize an absolutely spotless home, but act very differently themselves when tasked with actually achieving it. "This shiny new Internet will solve my problems perfectly." Unfortunately, all you're really getting is an under-trained, underpaid human laborer.
- jakejake 11y agoIt seems to me that they focused really hard on the consumers, but perhaps it was the cleaners who were their true customers? Of course that becomes a niche business model which isn't that desirable for investors.
- tyrust 11y agoA tangential thing I noticed: >Unlike Uber, which requires a drivers’ license, cleaners need more intensive training to do the job properly. It's sort of bizarre to have higher expectations for cleaners than automobile drivers. Driving a car with multiple people around town to semi-familiar places? Sure, that driving test you took when you were 16 years old is fine. Cleaning a house? Waaaait one minute, what are your qualifications?
- brandonmenc 11y agoMost adults have clocked thousands of driving hours. Few have say, shampooed a carpet.
- rconti 11y agoIt blows my mind that a company this small would have any desire to have an international presence. I get that the "growth first, profits later" mentality can have some benefit, but why on earth deal with the hassle of language, culture, currency, and legal barriers? These things are bad enough from state to state and city to city. The international push seems more about hubris and ego than out of any practical concerns -- at least until urban areas in the home market of the company are saturated. Also, buying cleaning supplies for 1099 workers who do other jobs on the side? Why this was ever considered a core competency is beyond me.
- fab13n 11y agoAm I fair if I sum the business model as follows? Homejoy: * proposed a service best provided by employees, * planned to save money by using independent contractors, * but had no plan about addressing any of the consequences of using independent contractors.
- ScottWhigham 11y agoThe service is "best provided by people who have experience doing that thing", be they employees or contractors. There's no value to any one of the three parties (Homejoy, customer, contractor) in the cleaner being an "employee". It's not bad/good; it's just not a factor in this situation. Do I care, as a homeowner, that the person coming from Homejoy is an employee or a contractor? It's likely that I prefer them to be an employee but, if the price is right, I could care less...
- iblaine 11y agoI used homejoy about every month for a year. The cleaning maids never had good things to say about the company or the management.
- husseiny 11y agoWhat I don't understand is if someone is willing at accept employment at a company under 1099 vs W2 why is it up to the government to say that it is not allowed? Can't that person just not work at this employer and seek employment elsewhere?
- apapli 11y agoI'm reminded by a simple but powerful message one of my professors delivered to my MBA class a few years ago. "You can't just look for a gap in the market. You also need to verify there's a market in the gap." Homejoy most likely saw opportunity in the first sentence, but it appears they may not have spent time thinking about the second (or didn't research a broad enough segment of the market). 'Disrupting' a market isn't simply about creating a mobile app, or a 'marketplace' for service X after all. That's just a game of buzzword bingo.
- ScottWhigham 11y agoI love that saying. However, don't forget that a lot of really, really smart people put money into Homejoy because they felt Homejoy had solved the market (i.e. there was a market in the gap). It's not enough to just say, in retrospect, "... they may not have spent time thinking about the second (or didn't research..."). That's just clearly not the case here - they spent plenty of time on that as did their investors. Sometimes it comes down to the fact that they left out key components, the founders weren't capable, the market didn't react as anticipated, etc.
- hitekker 11y ago"You can't just look for a gap in the market. You also need to verify there's a market in the gap." I am remembering this. One of those quotes that simplifies but essentially explains a host of unsustainable businesses.
- jonathanmarcus 11y agoThe part about Homejoy needing to keep up with Handy's flood of Groupon 'deals' just further drove home how destructive Groupon has been for businesses, except Groupon, which still has a multi-billion dollar public market valuation. Groupon should really be called Pandora's Box.
- datashovel 11y agoI operate my business on such a tight budget it seems almost criminal for a business to fail with $40 million to work with. I could spend many lifetimes growing my business with that kind of money. IMO you don't force a market to grow. You accept what the market gives you and then you grow into the market as it allows you to grow. Not the other way around. This is one of the biggest flaws in how investors expect their businesses to grow. I would argue that having a small business that one day will be a big one (perhaps 10-20 years later) is far better than shoving a ton of money at a problem and if it doesn't grow fast enough then pull the rug from beneath them. I think it's also a sign that investors who are actually in SV are not dictating how things are run. While this may be common knowledge, I'm unaware of precisely where money is flowing in from. But if I had to guess, I'm almost certain it's big money coming in from all over the world who expect VCs to treat startups like they would treat stocks and bonds.
- mattmanser 11y agoThat's the old bootstrap vs VC money argument, but bootstrapping doesn't work for a lot of business. You can't make an Uber or Google or Facebook or Twitter without VC money, it simply can't happen.
- datashovel 11y agoI'm not saying forego funding, but what I am saying is if VCs took a longer view and didn't throw tons of money at companies that haven't proven the need for it, expecting unrealistic returns, we would probably have a much higher success rate in SV startups than is the case today. Even though funding was required in the businesses you listed, none of them would've grown to the size they are unless the market demanded it. I know this sounds obvious, but it seems to be a counter point to the behavior I see in SV startup stories.
- a3voices 11y agoI disagree. You can make a Google without VC money if you start in 1994.
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- xmly 11y agoAs a customer of homejoy and handy, first of all I have to say Handy is cheaper and better UI. Second, the key of the business success is about Quality of Service. If you can not control it, you will not succeed. For Uber, their service quality control is much simpler. The skills of the driver has been qualified by DMV. People only care about whether they arrived where they want. I do not care too much about the condition of the car as long as it is not full of shit. For home cleaning, it is much harder. My experience with Handy or HomeJoy's service is really bad. I am not picky person, but I can see the persons they sent are not working well. And it is my house, so I care a lot!
- ChristianPerera 11y agoThree words: Negative Gross Margin Even a lemonade stand cannot stay in business when the price you're charging for lemonade is less than what it costs you. Fred Wilson has written about this..
- jldugger 11y ago> direct employment arrangements with its own (now former) clients. There's really no way to avoid that, and it dooms the whole enterprise if Homejoy is serving as a middleman. I'm kinda curious how MerryMaids and the like work. Seems like the only viable system is simply a lead generations service.
- huntleydavis 11y agoHere's my take on it as a former Homejoy employee: https://medium.com/@rockstox/an-inside-look-at-homejoy-s-failure-391d74524a19#.2k6yiimz8 https://medium.com/@rockstox/an-inside-look-at-homejoy-s-fai...
- juddlyon 11y agoIt failed because it was unreliable and a good deal of contractors felt no obligation to be loyal. I could never book the same person on the same day. As has been pointed out - cleaning is a routine. They should sell the software to local providers, the booking features were quite nice.
- zaroth 11y agoSeems to be plenty of blame to pass around. It would be interesting to read more perspectives and definitely enough material for a book. That HN job post is immortalized even more now. But one interesting take-away it seems, not just for Homejoy, but for just about everyone in the market; the software is really bad. Not scheduling time to get from Point A to Point B - is that rocket science? If the customer support line is on fire, isn't that when you start fixing the bug? Failing basic usability and billing is not an MVP for a $40m funded startup. One thing I'll say, is trying to own the experience, establish a heavy brand, and take a large cut means you have to be providing a valuable service in return to the contractor. For the on-demand economy, the way I think I would approach the problem is my customer is the service worker first, and their customer second. These companies think about churn all wrong. The service provider is ultimately providing the service to the end-user, intentionally churning the end-user across different service providers is madness. You only win by making the service provider's job more difficult? I don't get it. Obviously a lot of value in connecting a new household with a new service provider, whatever that service may be. Making that connection is a job well done and should be monetized at that time. If you can provide a new reliable repeat customer then that's even more valuable to the service provider, and the startup who made the connection can in theory charge a higher price for those customers.