Why Homejoy Failed | Hacker News Reader

Why Homejoy Failed

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421 pointssteven334 comments

I 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.

> 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.

This is the key failure.

Anyone's whose regularly procured cleaning services knows the dance. You find a reputable cleaning service, they send out a cleaner. If you don't like them, you keep asking for a different one. When you find one you like, you ask them what they'd charge if you deal with them directly.

Why should they pay an app developer (or cleaning service) a cut of their profit when they can just show up and earn it themselves?

Most of the house keepers I've known did this until they'd built up enough of a consistent clientele that they could break out on their own....eventually building their own "crew".

Cleaning services are only good for businesses who require a paper trail for tax deduction purposes and who aren't as price sensitive as individuals.

So, is a "one time referral fee" business model the key to success?

This is effectively the yellow pages model, where cleaners pay for leads via advertising placements, and own the long-term relationship with the customer.

Probably, and for far more than just cleaning. For example, tutoring companies do all sorts of ridiculous things to try to prevent "disintermediation," but they take such massive cuts of a tutor's fees that a compatible student and tutor can split the difference (i.e. each take half of the company's 20% cut) and both benefit. Why on earth wouldn't they?

Is it working for http://www.angieslist.com/ (assuming thats their model)?

Seems to?

I dunno. My success rate was 25% at best. Found a few contractors I really liked and kept contact info for. And had a half dozen that only used the "deals" to try to land big remodeling jobs.

The business model was articulated above. You join a successful crew and scrub toilets with them for a couple of years until you know the business and have people who trust you enough to employee you directly. The they spread the word among their friends and you get more clients. Eventually you get more than you can handle yourself and find some people you trust to help you out.

Basically for every category you have to really try and figure out what the customer needs are, the service dynamics, how to put together a proposition, etc.

Office By Q is a good example of really trying to understand customer needs and putting a compelling proposition into the marketplace.

For in-home cleaning, there might be a middle-ground. I could see trying out a few cleaners to be useful and selecting a favorite. Or maybe 2 different cleaners with different specialties rotating. But for just scheduling the same person at the same time, you can't really count on taking an ongoing cut.

Yep. But then you've got to ask yourself whether you've really got a business model that supports a big global company, as opposed to a business model that works best when you're one person in an office who has personal relationships with every cleaner in town and a flyer on every lamppost.

Yep, thats what Thumbtack.com does.

My dad is a cab driver. I myself have a lot of experience managing cab business, I can tell you cab business works pretty much the same way. You can sign up with as many cab drivers you like and offer them as much business they can handle. Sooner or later they will find permanent paying customers and move on. Especially among elderly, kids and women.

Its the standard in every industry. Once you've built your ground, you never like to go through a third party.

No, that's wrong everywhere I've lived and traveled. With non-recurring trips (pretty much everything except commuting), you almost never migrate to a single provider. The advantages of tapping into a pool of providers is too great. In house-cleaning, there are no advantages to tapping into a pool, and in fact people are leery of it.

Consider the single largest market for limousine services: businesspeople traveling to and from airports. These people absolutely will pay extra for a reliable, no-surprises ride from a person they know, plus they know in advance exactly when they will travel. Uber offers little to no advantage for this group.

Uber's advantage comes from catering really well to ad-hoc, short-hop travel, but this is a different market.

Right. The person said "taxis". And the limo market is tiny compared to the Uber opportunity.

That's one big reason it's hard to scale a service business. Why maybe a fraction of X when you can make X?

Its not just paying commissions to the third party. If you are a good taxi driver, who keeps their car clean, provides bottled drinking water to customers, are punctual, polite, trustworthy etc you will get many people who would like to call you directly instead of going through a service like Uber. And along the way you would have met many customers who are exactly like you- polite, trustworthy and nice.

It becomes a natural fit.

Uber kind of services work because they are currently burning millions of investor money to subsidize your travel. Once they run out of money, you are back to the same thing again.

Which is why some times you must do extra work for free, because it keeps people around you happy and in return they are indebted to do something in return for you(Recommend you, tip you, hire you etc)

Taxi services are different though - you might be nowhere near your valued customer when they call. And they might be more inclined to take an "OK" driver rather than wait 30 minutes for you to get to them.

Wrong. On a gross margin basis, Uber is wildly profitable.

"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."

Yes, for sure. I've had professional home cleaners for nearly 10 years now. And over the course of those years, I've had many conversations with friends and neighbors who do as well (e.g. in giving/receiving recommendations). I can't imagine using a service that sends someone different every time, or even someone for whom I can't see reviews and receive references before the first visit. I think most of the people I've talked to are in the same boat. This is a service that requires putting a lot of trust in the service provider. I could potentially see myself using an app that helped me find a provider, but it would need to give me a lot of information about them up front, and let me choose from several. And then it would have to let me keep getting the same person every time. It ends up being more like an Angie's List than a Homejoy.

For something like a handyman, where the service is less intimate and less frequent, this might make more sense (though I have had enough horrible experiences with handymen that I also would want personal recommendations at this point)...

I gave Handy(Book) a try, and consistency in who arrived was my issue. The first person they sent was absolutely fantastic, send her every week!. Trying to book her again was a nightmare, the docs didn't match the application, and support pointed me back at the documentation. Finally a month later, after several support calls and emails, I had the same cleaner booked. Success!

The morning of my appointment I looked online and they'd switched my cleaner. The new person arrived 45 minutes late, did a poor job, and tried to get me to book her outside of Handy.

Finding someone on Craigslist is easier and cheaper. Answer a random ad, asses quality after their first visit. Either book them on a recurring schedule or move on to the next ad. The only difference is paying with a cheque rather than a CC.

Just had the same issue with Handy. They notified my girlfriend 20 hours before an appointment that our requested cleaner was unavailable, and when we canceled charged us $15 for canceling within 24 hours.

After 4 different attempts to cancel we gave up and called American Express. They blocked Handy from charging the card again and did a chargeback for every dollar we ever spent with them.

Yep. Same story here. Cleaner didn't show up and Handy refused to refund my cleaning fee because the cleaner had attempted to contact me. (Apparently Handy does not find it relevant that I never received a call, nobody ever came to my house, and I am paying for cleaning not a phone call.) Eventually, after much back and forth, their customer service people simply stopped responding.

Against my better judgment, I attempted to book through them again the next week. Cleaner didn't show up and would not answer his/her phone.

On numerous prior visits the cleaner was very late and/or did a very poor job. Handy doesn't care.

This is a truly terrible service--one of the worst experiences I've ever had with a company.

How can Handy survive in the real world where workers reasonably call in sick with less than 24 hours notice if their customers behave like this?

This is ultimately my same issue with Handy. I don't want a different person every single time. I think this makes it really hard to make it work.

That being said I have had Handy come and clean many times now and not changed it, so I think there is a slight convenience factor. It would be better if Handy just facilitated the direct communication with the same person to come every time. And instead of charging me a fee, charged the cleaner a kind of 'management' fee. I think that would better.

>I can't imagine using a service that sends someone different every time, or even someone for whom I can't see reviews and receive references before the first visit. This is a service that requires putting a lot of trust in the service provider.

The alternative is if Homejoy would have treated Cleaners as employees and properly trained them. A properly trained and paid Cleaner as an employee would have provided that trust you seek.

No way.

If I'm paying someone less than 100$ to come in to a place where they could walk out with $10K+ worth of electronics, jewelry, etc I either need to be there to supervise or have a long standing relationship with the person. Ideally I would like to know enough of their other clients that a single robbery doesn't make economic sense for them. Once the relationship exists the agency brings minimal value.

That statement is conditional that you're paying the person less than $100.

What if the highly qualified employee from Homejoy was for $200-$250?

It 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.

> 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.

The Silicon Vallex is in a large metro. It's still pretty dense and you have 8 million people around. I don't think the experience would be different in Oakland, Fremont, San Francisco...

Metro's aren't easier in my experience.

I live in Silicon Valley now. . . found the best cleaner I've ever had. Very happy with her and her helper's work.

"Finding a warm body to drag a tepid rag around your countertop is easy"

Back in the day I had a cleaning service that I trusted and used regularly put a wet rag on top of a CSU/DSU [1]. Not something that I ever thought could happen. Ironically the spare CSU/DSU was sitting right next to that. (Cold and ready to be put in service if the main one failed.) There were of course vents on the top. That's where the rag went. And I was near the equipment at the time (I would never let a cleaning service in where there was sensitive equipment without being onsite).

[1] https://en.wikipedia.org/wiki/CSU/DSU

Finding a taxi in a big city is very easy and has always been very easy. I don't use Uber because they charge $10 for a car seat and I've never waited more than 10 minutes for car when I just call. When my company needed to send people 30 miles round trip every day for 2 weeks, a car service will give you a deal, Uber won't. Uber also has virtually no competitive advantage over Lyft. I think that all this startup analysis is giving way too little credit to the benefits of being lucky.

I wouldn't say that finding a house cleaner is really easy, but once you solve this problem and all goes well you just stick with the same person.

nope... not where the density is lower

True, but the issue is, the Homejoy solution was even less effective in low-density areas...

Average 3-star Yelp review is likely a core issue.

http://www.yelp.com/biz/homejoy-san-francisco

e.g. "I have never had more problems with any service or company than I have with this business."

Yep, the cancellations and late arrivals, plus changing people and therefore variable quality made this a pain when I was using it.

In old-economy-speak what you just said basically translates as "you entered a crowded market".

When you're standing on an unknown, rainy street corner far away from home, a taxi's services are urgently required, and not abundant. When you're lounging on your sofa and start contemplating how it would be nice for someone else to bin the pizza boxes, it's the opposite on both counts.

Moreover, I don't see the money men being impressed by a founder who can put out a piece so toe-curlingly embarrassing as "Dear Future HomeJoy Engineer".

For those unaware, it looks like this is "Dear Future HomeJoy Engineer:" https://news.ycombinator.com/item?id=8794956

Commentary: https://news.ycombinator.com/item?id=8795197

I've been lurking on this thread waiting for someone to mention that post. I'm really surprised it took this long.

Me too dude. I actually <ctrl>-F'd it and was surprised I was the first. Then again it's 4pm in NY, let alone SF. The night is young...(if the HN algo doesn't tank the story, that is).

The link back to the HN post, and the subsequent resurface of the post in HN comments on a related NYT article, are already in TFA.

The downside of comments first on HN.

oooh! "TFA". I had to google that. TIL. You must be a master of UD scrabble.

Well, it was mentioned quite a bit in the linked article.

I visibly cringed reading that.

Does Y-Combinator review those posts at all before they go out and provide any guidance? If not they might want to consider it...

IMO they focused on the wrong parts of the chain. Like you said, anyone can start a cleaning service and if all Homejoy does is match you with a cleaner who might or might not show up then there's no reason for them to exist.

But there is no reason that an app-based cleaning service can't succeed, full stop. There's plenty of room to add value, just like there is in any other business where you can get economies of scale. Homejoy just didn't focus on those parts of the business.

Care to illustrate with a real example?

- Instead of giving away supplies, raise the percentage of the fee that you pay out. Then buy bulk supplies and sell them to the cleaners at a discount.

- Partner with P&G and Unilever to get access to trial products that you can give to your cleaners to try

- Act as an agent to negotiate group rates on stuff like health insurance

- Provide business services if you book a certain number of appointments each year. Tax help, those kinds of things.

- Maybe you can provide access to events or something where Homejoy books a group of cleaners and since it's a business you can charge them good rates

- Find other way to book cushy jobs that you can give access to for your most used cleaners

Obviously there's a 1099 line that they don't want to cross but if you provide access and opportunities and tier it based on appointments booked then you provide incentives to stay on the platform.

Similarly for customers, do things like give away cleanings or discounts randomly. Use your partnerships from above to give customers free stuff or coupons. Sell cleanings in 10 packs or offer a monthly or annual subscription that comes with a discount.

Those sound like good ideas, but I'm not sure they solve the key challenge of there being more value in the connection itself.

That is, once a service provider has a customer, that customer represents the overwhelming majority of value to be had by the service. Likewise, for a customer who is happy with and trusting of a cleaner, discounts would likely have to be unsustainably large to move them.

Finally, with the middleman in the transaction, discountability is actually eroded. There is really little economies of scale to be leveraged at the cleaners' level and customers would probably come out better if cleaners simply passed the Homejoy cut to them.

I use a service called Handy (app-based home cleaning and handyman). It works fine. And doesn't seem to be struggling from what I can tell.

https://crunchbase.com/organization/handybook/

edit: I'm in Chicago

A story about what it's like working for Handy, "My Day Interviewing For The Service Economy Startup From Hell":

http://thebillfold.com/2014/10/my-day-interviewing-for-the-s...

I've used Handy a few times because they offer pretty aggressive pricing. Hit or miss as far as quality of cleaners. I do agree they have some borderline tactics. They make it impossible to find a contact number, force you into recurring bookings, and when I cancelled my last appointment they said they would give me a $35 credit to my account (with $15 penalty off $50 claning) but instead charged me an extra $15 and gave me a $50 account credit. Small thing but kinda shows the quality of their system.

On a side note, I wonder why the reporter bothered changing the name of the co-founder of Handybook in that piece. From the remainder of her description (e.g. the mention of a Harvard MBA and the experience at McKinsey) I was able to determine that "Ajay" was actually Umang Dua, after about two minutes on CrunchBase and LinkedIn.

He comes across as pretty sleazy in the article.

All the more reason to name the co-founder. I disagree that a co-founder has the same right to privacy as an employee. Employees can claim that they're following rules or policies, and that any sleaziness on their part is due to the constraints they're operating under. A co-founder has no such excuse. He or she sets the policies. If the company behaves sleazily (as it did in this article), it's due to the policies and culture that they've created.

I don't know too much about it, but just from an initial glance it seems like it is better positioned, simply by offering things like plumbers, electricians, etc - again, they aren't services you fall into regular patterns with. They're very much on-demand when there is water leaking all over your apartment.

That said, I'm sure "doesn't seem to be struggling from what I can tell" could have been said about Homejoy, until it couldn't. Venture capital makes it difficult to tell who is succeeding, and who just has money to spend.

Yeah, Homejoy's demise took everyone by surprise. Unless the company is public, it's almost impossible for a casual observer to tell how healthy it is.

No it didn't.

My first question when I heard of them is how they prevent cleaners from ever using the platform again. This seems to be the single biggest long term stumbling block, that they never really got close to solving.

http://techcrunch.com/2015/07/31/why-homejoy-failed-and-the-...

Aside: I saw Adora at the London StartUp school hosted by YC. She really didn't come off that convincing to me. Then she said something really, really strange - "You don't fail until you give up", and I wondered why someone would say something like that.

I don't get what's the issue with that statement. Until you give up on the idea, you didn't fail. What other interpretation do you have in mind? It's one of those cliche way of saying failing is just the beginning of success.

The thing that convinces me is her determination. She worked as cleaner before starting the business, and understood some of the pain. She probably overlooked at the issue and probably overconfident like the article cited, but someone who was willing to cover cleaner to apologize for cancellation on Thanksgiving? That's very good for her (but unable to prioritize some critical negativity in the algorithm? that's just sad). Without knowing the full story (we are just hearing fragments from allegedly ex-Homejoy employees), I think the business model is not profitable. Maybe doing cheap is really hard, and doing fancy and professional is the only way out.

The only reason it took everyone by surprise is because tech media (including YC) hailed it as being the "next big thing".

Anyone who followed Exec can't have been surprised by Homejoy's demise.

> Yeah, Homejoy's demise took everyone by surprise.

No, it didn't. Some of my previous comments:

https://news.ycombinator.com/item?id=8468863

https://news.ycombinator.com/item?id=6856221

https://news.ycombinator.com/item?id=8489834

https://news.ycombinator.com/item?id=8709632

Homejoy won't be the last company of this type to collapse.

Handy's software is atrocious. I went to change a recurring cleaning schedule and they presented me with a modal pop-up to keep my cleanings at 50% off. I agreed, and my future cleaning pricing all showed up at $43/cleaning.

My next cleaning comes around, and I'm hit with a $101 charge. The receipt literally says "Price: $101, Discount: $58, Total Charged: $101". I end up having to go back and forth over Twitter DM because they refuse to respond to my emails and pick up their phone to get my charge adjusted. I ask if the remaining three cleanings that I was signed up for would honor the $43 price reflected in my account summary. They said yes.

The day before the next cleaning, I get hit with the same $101 charge. Again, I reach out to them and spend about three hours going back and forth finding out that the "last representative did not provide the right information", and that I need to "show the coupon code (I) used" (there wasn't one). I ended up getting my service cancelled for good.

Terrible. Never again. I'd rather pay a premium for a real cleaner to show up.

> And doesn't seem to be struggling from what I can tell.

http://www.yelp.com/biz/handy-san-francisco

http://www.yelp.com/biz/handy-los-angeles

http://www.yelp.com/biz/handy-chicago

Handy is also facing lawsuits:

http://gbdhlegal.com/wp-content/uploads/cases/Handybook-File...

http://arstechnica.com/tech-policy/2015/07/woman-sues-startu...

Handy's a terrible service, actually. Creepy automatic recurring subscriptions for house cleaning, no way in the UI to cancel the subscription (!), frequent site downtimes. Had to go to great lengths to cancel an appointment I didn't create in the first place.

> "no way in the UI to cancel the subscription"

Handy isn't the only one, and this ought to be illegal. If I can sign up online I ought to be able to cancel online.

These companies can lie to themselves and the public all they want - the exclusive purpose of making you call to cancel (or worse, visit a physical location) is to discourage cancellations. It compromises the notion of a free and voluntary exchange of money for services.

LA Fitness has this one down to a fine art. You have to send a form, -by certified mail- to an address. They will not let you cancel in person, on the phone, or online.

And if you send in the paperwork, but not by certified mail? They'll toss it, unactioned.

Sounds like a recipe to have most of your cancellations be via chargeback.

Was the cancellation form in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying "Beware of The Leopard"? :)

How can the gyms get away with this?

This dark pattern is common to many gyms and fitness programs. :(

I'd love for this to be the case. The New York Times also does this (you must call to cancel), which is a fantastic pain.

Handy is horrible. Had really bad experiences with them

I've used Handy with very varying results. I ended up ditching them because I couldn't get the same cleaner regularly. To use Handy, I would have to take the day off every time I wanted a cleaning, so that I could meet and vet the new cleaner.

One time, a new cleaner showed up, but I wasn't home. She didn't have the key, and so she couldn't clean. I asked for a refund and never got it.

I could swear that was a east-coast version of Grindr. Bad branding?

Care.com is doing similiar things with housekeeping services, although they started with matching child care providers to parents and seem to just be expanding into new verticles -- housekeeping, pet watching, etc. I think it's a good strategy. I'd rather use one app to handle those types of tasks than have to manager a Homejoy, Petjoy, and Kidjoy account.

Rover.com is great for pet sitting, and care.com is great for finding a home care provider.

However both of these sites will have the same problem as Homejoy. I used rover.com to book pet sitting just for the insurance, but after a few positive experiences, I am now booking directly with the pet sitter. Same thing happens on care.com almost all the time.

These sites are more valuable as a craigslist or angie's list competitor: Use them once or twice per year, then don't visit the site again after you've found your provider.

They should focus on making money from listing fees, insurance premiums, and being the strongest market for their respective industries at all times, so that when I go back to the site in 6 months time, I can trust that it will be just as good an experience as it was last time.

I agree completely. I used rover.com once to find a pet sitter and found a great one. I don't need it anymore.

Furthermore, they're doing the typical thing that businesses resort to when they're desperate. They're asking you to review every single damn time you use their service. (I had the same sitter for 30 weeks in a row. Clearly I like her or I'd use someone different. Stop bugging me!)

They also try to steer you towards using their service more when there's no need for it. Every time I book a stay, they want me to look into other pet sitters on their site. Why would I do that? I'm completely happy with the one I found. If I ever need a change because I move or the sitter moves, or we have a falling out, I'll consider looking for a new one. Until then, get out of my face!

And on top of it, they're trying to push services I don't need. I never want someone to come to my house to walk my dog. I don't need strangers coming by my house. And I need an overnight maybe 3 times a year. (And I'll continue to use the day sitter I have as they also do overnights.) It's almost impossible to find a day sitter on rover.com, and they seem to be pushing everything but that.

Their whole model seems like it's living on borrowed time to me.

The regulatory ecosystem around child care is much better and the baseline of quality control is much greater.

That's not true. The regulatory system surrounds day care centers, which is not care.com's business. care.com's business is in 1:1 care (nanny) where there is not regulation or quality control, except a bit of tax control.

> where there is not regulation or quality control

In my state, you need to be licensed to provide child care. It looks like California and a few other states are similar.

https://www.berkeleyparentsnetwork.org/advice/childcare/lice...

It seems to depend on how many children are being looked after and where the care takes place.

For me it was price. I have three kids, so we do a lot of laundry. I simply wanted someone to fold and put away about twice a week...

Home joys minimum worked out to be about $75 per visit... So about $37.5 per hour... And I don't think folding clothes as a service worth $600 per month.

Does your local laundromat have a wash&fold service cheaper than this?

It's more of a hassle to schlep the clothes to & fro, but may be better value to you.

Just use the laundry on-demand apps, they've been working fine for me, they do much better job at washing AND folding clothes than me doing it for hours.

You simply were never the target audience in the first place.

In general, in Western economies, personal services that don't benefit significantly from scale or automation are going to seem reasonably expensive unless you are in the very top tier of income. Consider that $15/hour is about the wage floor and you probably need to add transit time and other overheads for an independent contractor.

So, yeah, it's hard to see a couple of hours of work costing less than $50 or so. And, if this is a weekly or more frequent expense, that starts to add up. I have a housecleaner come in every few weeks and it does help to keep my place in some semblance of order, but it's definitely a luxury expense and I would probably be too cheap to have it done weekly.

The wage floor is way below $15/hour in much of the country, but I believe (correct me if I'm wrong) that Homejoy's pricing was static and independent of location. Does it make sense for someone in a modest cost-of-living area to be paying San Francisco rates?

"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.

I 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.

> 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.

Lead generation is IMO white-hot, maybe not for VCs but certainly to the stakeholders involved. Lots, and lots of legacy businesses yearning for new methods of leadgen, and lots of money involved for someone able to solve it.

The problem was precisely that Homejoy was a leadgen product but attempted to extract a cut of the action for the rest of time, rather than one-time as most leadgen goes.

saalweachter is right - the big question is what value Homejoy provides. In this case it's clear that Homejoy offers (to the cleaner and the customer) a substantial one time value, and then provides little to no value for subsequent engagements. Because the product doesn't offer any value into the future, both participants were incentivized (and IMO well justified) in cutting them out of the deal.

It's worse than that, IMO: Homejoy was effectively a leadgen middle-man. Homejoy was itself relying on other lead generators, namely Groupon. I think if they had been doing better lead generation themselves they might have had a better chance of getting more rounds of investment. When you aren't doing good lead generation and aren't providing good value to your customers/contractors, what is really left to invest in?

This doesn't change what you said; they may still have had a viable business if they had been structured for a one-time transaction.

Thumbtack is also a lead gen business, and they actually are quite hot (just raised at a $1B valuation).

Yeah, 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).

Cleaners, 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.

Publicity does work, but it needs much larger volumes than services to work, because it can not sustain big margins for long.

I think this point connects quite nicely to Untog's comment [1] about why Uber succeeds where Homejoy did not.

[1] https://news.ycombinator.com/item?id=10451531

That'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.

The best solutions that I've seen for that is an explicit charge / fee for doing so, in the original agreement, rather than a prohibition.

I 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.

I 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.

Imho, 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".

If 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

Taxis 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?

The 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.

>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.

Couldn'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.

That'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.

Backfill 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.

I've done this several times with TaskRabbit and i'm actually surprised the same thing hasn't happened to them.

tbh it might be. I don't get the sense TR is doing very well these days. Very quiet out of there.

"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.

Uber does pre-planned trips in some countries.

Seems like there might be a model that works better by focusing on managing relationships-- not necessarily a home cleaning service--

It's called Angie's List.

I'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.

How 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.

Walk 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?"

Additionally, Groupon has a three day return policy. So go to the business and just return the groupon if the business wants to bypass.

Non circumvention agreement solves that beautifully. And I think it is more enforceable.

That's usually too taxing for startups to enforce, and suing customers isn't really positive for your reputation.

How? Keep in mind that most jurisdictions take a VERY dim view of a company trying to prevent someone from working.

Depends. 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.

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.

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.

"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.

> Isn't the ethos of Silicon Valley to 'hack it together' with tape and glue?

Couldn't that be the problem, too?

> 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.

Classic 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.

Why 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.

It 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.

I'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.

"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.

I 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.

But 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.

The premise was more that services like Merry Maids charged a 300% markup on cleaner's labor, but Homejoy could charge 15% because they automated everything.

Perhaps there are CEOs who've scrubbed exactly one toilet for the photo op. Cheung isn't one. She learned the job and led from the front. Some stories are here: http://www.femalefounderstories.com/adora-cheung.html

Most cleaning services aren't Merry Maids and aren't getting anything resembling 300%.

You're right: the Cheung story from that page is much more compelling than the one in the lede of this article. For those who haven't clicked through: Cheung and her partner started a cleaning service (with them as the cleaners), and Cheung took a job at a cleaning service to learn the ropes.

The 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)

Again: 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.

Mild disagree here: the premium isn't coming from cleaners, it is coming from a hundred thousand or so local mom-and-pop operations which own one to five trucks. They hire substantially the same workers by demographics and do not appear to give their employees meaningfully superior compensation than the on-demand service companies.

The model appears to be centralize lead generation nationwide, pool support resources, and then price below market. In some cases that pricing is a result of VC subsidization of middle class customers. Longer term it would have to be through operational efficiency gains.

Sure, but that's tu quoque, isn't it? Meanwhile: none of those mom-and-pops are shooting for billion dollar valuations on the backs of people who by rights shouldn't be 1099s.

What makes this easier to stomach is the poetic justice of contractor "leakage" eventually killing the business.

I think that Homejoy was a thoroughly rent-seeking enterprise, rather than a disruptive technology startup.

Frankly, I failed to see (and still fail to see) what was disruptive about their process. They were essentially competing in a close to perfectly competitive market (with some minor level of differentiation).

Contrast that with Uber, who was able to capture most if not all of the Schumpeterian rent.

What value is there in national lead generation for something that is extremely local?

Economies of scale; national or worldwide brand recognition; improved efficiency of operations; leverage from applying top-tier marketing/etc talent to the problem.

Lead acquisition at a mom-and-pop agency is the 10% project of the owner or office manager or, at best, a local SEO/AdWords/etc agency. The platform companies, by comparison, can totally hire ten people with skills superior to mine to do it, as their only job.

Nit, but many also do the job because it typically has relatively flexible hours and it allows them to manage their families as well as make some money. Or at least that's been my experience with our best housekeepers. Not just were they trying to collect a premium from these really hard working folks but the concept of "being late" is almost completely artificial for many of them (just so long as it gets done on the specified day.)

Anyways, who picks up their phone and fires up an app to demand that someone comes over and cleans up their house, right f-ing now!

I also suspect that the "on boarding" process of learning to clean probably didn't filter out the candidates that were really passionate about the business so much as it found the ones that would put up with just about anything. I don't know too many top tier developers that would do that. I do value the concept that everyone should understand the dirty work but this particular case might be outside the useful realm of that.

Just 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.

>Semi-related reminder: tip your hotel housekeepers.

Wait, what? What's the semi-relation there?

I really hope it's not going to be another variant of "it's a hard job, therefore the tipping model obviously makes more sense there than a pure wage model".

I think the intention is less "the tipping model makes more sense", and more "given that the tipping model is in effect, you shouldn't unfairly punish the housekeepers by not tipping them".

I don't think the tipping model makes sense at all, but as long as we're talking about people we pay to clean up after us, it's worth pointing out that hotel housekeepers have a particularly raw deal, and despite the fact that people frequently seem surprised to hear this, you are expected to tip them.

But how does that (semi-)relate to tptacek's other points?

They're grossly underpaid and they clean up your shit. Leave them cash.

Here here

Lots of people are underpaid. That doesn't mean I should set out to rectify every such instance that I come in contact with.

Is there some actual self-consistent, generalizable model behind what you're saying that improves my ability to think about ethical obligations, correctly rejecting or accepting some of them, or were you just signaling there?

The wages housekeepers make are offset by the expectation that guests will tip them --- the same is true of every tipped job, and it's unavoidable. You benefit directly from their low wages by paying less for your room. Hit the ATM, pull out some cash, and leave it on the desk in your room when you leave.

Or don't, but don't pat yourself on the back for not doing it.

I know how the tipping expectation dynamic works, and I know how to obtain cash. Was the condescension really necessary?

The question was how the random point about maids relates to the rest of your original comment, and why I'm supposed to throw cash at everyone I come into contact with who's doing their job (as suggested by the original responder), not "how does tipping affect wages?" or "how do I get cash?"

It didn't answer my question to tell me that they're underpaid. [1]

Second, the existence of the tipping expectation dynamic does not "seal the deal" here: it's well known that there is a large group of people who have no idea that "it's a thing" that maids get tipped. If you want to fight against the tipping system, this is exactly the situation where you should do it, where tips aren't reliable anyway -- just like tipping for takeout or at food trucks.

Finally, I really dislike helping people evade taxes at my expense.

I entered this thread thinking that people who confidently gave advice were familiar with the relevant dynamics and that I could learn from hearing their worldmodel. As it turns out, the responses are just repetition of what I already know (with condescension and moralizing), in a way that doesn't answer my questions. Fool me twice, shame on me. It was really too much to expect that someone who told me that I should tip "too be nice" actually has a self-consistent, scalable model to back that up.

[1] Remember, "underpaid" is not the same thing as "paid less in expectation of getting tips"; lots of jobs are characterized as underpaid irrespective of tips. You're not supporting the original responder's argument by repeating the obvious tipping dynamic; you're making a different argument.

One person's life is not lived at scale. Stay in right relationship with the people you come into contact with, and the world will be a much more rewarding place for you and everyone you know.

Every time a rug is micturated on in this fair city, you have to compensate the owner.

Rug-peers did not do this. Look at it. He owes money all over town.

http://money.cnn.com/2014/10/16/pf/travel-tipping-guide/

I 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.

Nahh, it's more like:

"there is a new breed of startups that's in the business of selling dollar bills for 50 cents and the bills are counterfeit. Cash out before we're caught."

It really says it, considering that much of the VC groups not only allow breaking the law, but encourage it in the name of "progress". And you know, who cares about the worker anyways. They're replaceable (until the specific AI comes and takes that job.)

Many of the laws are crap anyways and due for replacement - taxi medallions being the canonical example here.

And quite honestly, most Uber drivers don't want to be employees. They want the freedom to drive whenever they want just by clicking a button on an app.

The only person that wants to force an employee/employer relationship on Uber are a small handful of angry drivers, and the state.

Kind of puts the motives into perspective.

Lets say your narrative is true....

> Many of the laws are crap anyways and due for replacement - taxi medallions being the canonical example here.

Agreed. It came from a time in which kidnapping and other nefarious tactics were used. Certification and medallions were the answer to that. Their time has grown old.

> And quite honestly, most Uber drivers don't want to be employees.

Unsubstantiated. How about asking if they "Believe the compensation is enough to offset the risks they take as self-employed, plus license compliance and commercial driving insurance?"

Having not run the numbers, I would guess that the risks and costs leave UBER drivers worse off than not working.

> The only person that wants to force an employee/employer relationship on Uber are a small handful of angry drivers, and the state.

Unsubstantiated. When you get into a wreck driving as UBER, and UBER tells you to lie to your vehicular insurance regarding commercial traffic, yeah, I think there's something about the anger that's justified.

And a company that takes advantage of people, recommends felony insurance fraud, and blatantly flaunts lawbreaking in everyone's face, yeah. Something needs to be done.

IMO, 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.

> 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.

Thank 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."

I would prefer to hire some directly, and pay him directly, instead of suing this kind of site for that. Trustable, reliable cleaners have no abundance of work. This kind of website is good only for connecting yourself to the cleaners initially, but in the long-term I would be much more happy to just pay someone directly.

Also, everyone who uses home cleaning services usually uses them recurringly. I don't know what kind of value this kind of service can add, except in the initial "find the cleaner" part.

Competition is really the big thing. Redbox has pretty much doubled their price in the past few years, and they can because by now all the meat-space video rental stores are pretty much out of business. However, at $2 for a blu-ray, it's already at the point where if I'm not going to the store anyway, I will just rent through the cable company for $4 or $5 bucks. And then I don't have a chance of forgetting to take the movie back and getting charged again. If Netflix got more new-release movies, I wouldn't even have to do that.

For those who don't have a cable (TV) subscription, there are multiple online services that have new-release movies for rent on a transactional basis.

If netflix could rent you a new release, life would be so much simpler. One simple consistent api.

From what I understand Netflix disc service still has a much bigger selection than the online streaming one. A friend of mine uses it to get full seasons of TV shows that are not available online.

I 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...

"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?

A 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.

Compare 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

The 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.

I 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.

The 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-uHSnFig...

Without 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."

I 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.

tl;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.

>"The good news is that you only fail if you stop trying"

So when did HomeJoy stop trying?

After 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.

Maybe 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.

> 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.

Well, 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.

Exactly.

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!

It 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.

> 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.

The 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.)

It 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.

And 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.

I 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.

Talking to Your Neighbour as a Service? Asking People You Trust for Recommendations as a Service? I'm not sure there's a VC-growth business to be had in there exactly.

I mean, Airbnb kinda tried to the latter by getting you to add your Facebook friends so you can see their reviews, but I don't get the impression that's gone far.

That's supposedly the thing about Nextdoor, and then rest of the social network ecosystem out there. Unfortunately, more and more people are ditching social network or disallowing apps sharing data, so what do you say?

The problem with this issue is noted by another commenter below: you just started your own business, why pay another middleman?

They 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

There 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-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)

This 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.

I 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

>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.

No one should be sitting "among employees" - everyone should be in a private office with a door that closes.

Wow, 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?

I suppose an office with library rules would be tolerable.

https://signalvnoise.com/posts/3357-an-office-with-ldquolibr...

I can't think of anyone

Many HN'ers like open offices so now you have someone to think of :)

Personally I would like a private office but I'd always leave my door open.

There's a world of difference between choosing to leave a door open door and not having a door in the first place.

If they are engineers/devs, I think they should at minimum have the option to close the door and get some work done, or at least have quiet spaces to work in from time to time.

I'm always wary of the "one size fits all people" mandate.

That's a strong "should". What would the cost of such an office be?

Quite probably not more than all the "lose on every sale, make it up on volume" shenanigans VC land does with VC money.

Personally I am getting to a point where I would be thrilled with even a "grad student" setup: three desks to a room and if someone needs to talk they go into the corridor if not a meeting room.

It cannot be that expensive to give people working with their minds some peace and quiet to think.

> 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.

Almost certainly high. US seems to be about a $10B market: 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.

That link appears to include commercial cleaning services, which I don't think a service like Homejoy would be able to "disrupt."

A 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?

Most adults have clocked thousands of driving hours. Few have say, shampooed a carpet.

It 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.

I 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.

Homejoy raised $40 million. I doubt it was ever even close to Unicorn valuation. Am I wrong or is this headline fairly misleading?

Well, 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.

I think Unicorn is very specific and $1 billion is the amount

How much a company raises and its valuation are two completely different things.

While 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.

Fred Wilson recently wrote a blog post about this:

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.

The 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."

After 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.

Why 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.

With exception of workers comp, the FMLA and SDI are negligible, as in they shouldn't exceed single percentages off a paycheck. In reality with W-2 such great charitable benevolent behavior on the employer's part is due to lower rate they typically pay an employee (vs a higher rate organizations would pay a contractor with a similar role) - it's understood that employee is trading off per-hour take-home pay and time flexibility in favor of paycheck stability.

We also have a precedent of wage negotiation for a part-time job in a service industry - an employer advertises a job opening at a given rate, interested parties are welcome to apply, disinterested parties are welcome to move along. (It would have to be a part-time 30-hour-a-week-max job to avoid the ACA penalty).

It has worked for retail, restaurant, manufacturing, logistics and some other industries, why would it be a show-stopper and game-changer for home cleaning industry?

It's not even a drastic change, where 100% of the workforce has to be entirely 1099 contractors or W-2 employees. As long as both options are provided and conversion at later stage is a possibility, it keeps everybody placated.

All 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.

Point 5 doesn't seem to apply to self-employed people, and seems like a major difference. Self employed people can negotiate their compensation, these workers have prices set by someone else.

False 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.

My point is, you have to make that distinction more rigorous than "they make less money"; your original points applied just the same to consultants (and legit "independent contractors") as it did to Uber drivers. It seems your real objection and distinction is "but they make less money than my ideal model of an independent contractor". (I don't know what "knowledge" or "lawyer" or "difference of liabilities" means in terms of an articulable, rigorous distinction.)

>This is an intentional misclassification to skirt employment law.

That's specifically what I was addressing with:

>>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.

> 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."

Demand is not constant, but adjusts in response to price. Would a low-income worker rather be a zero-income worker, because no-one is willing to have him work for the wages your regulations demand?

All jobs have lulls and busy times. But what this comes down to is that employment law costs money. How much? Between $7000-$10000 per employee.
It's a no-brainer to cut out employment law and make the choice between "work crappy consultant job or don't work at all", that is, if you can sustain it. Homejoy couldn't, because of gross mismanagement and eventual reclassification by the IRS.
The ultimate goal is to remove all human labor from the market. UBER already came out with that statement: they want to automate their fleet as soon as possible. It's also the trend of every company to reduce labor, increase automated work, lower wages, and increase profits. Damned be the employees/consultants/1099's/hoi polloi.
Why am I against "Sharing economy"? I'm not. What I'm against is "What are we going to do with 50% unemployment?" Republicans can't even contemplate science, and are busy bickering about climate change. Democrats have only a basic view of 'workers good, companies bad', except when they are being funded. But still, the question remains is "How do we transition to an economy that can handle massive unemployment with a great deal of goods and profit being made?"

(Source: https://www.sba.gov/sites/default/files/The%20Impact%20of%20... PDF page 13, paper page 7)

The 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.

Right, 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

Soon 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...

Haven't they always been ?

Possibly the only difference is that before they were given a sensible name (like "failed startup") instead of "dead unicorn".

Seems 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.

I hope my next failure will be documented with an animated metaphor of a robot failing apart.

So, 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)?

Geolocation 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.

I 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.

That'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.

You can take one to the point where it's clear that business growth is constrained by available resources and not by market demand, though. At that point, investing in the business becomes a no-brainer.

Uber, Google, Facebook, and Twitter all had working products that were attracting users faster than they could service them before they took VC money.

I'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.

I disagree. You can make a Google without VC money if you start in 1994.

I actually think within the next 5-10 years companies that require scale like Google, Facebook, etc. will be possible at very low cost. Low enough even that the project can be bootstrapped without funding.

They of course won't start out at that scale, but given the ease with which one can scale cloud products (or have it done automatically for you via things like Elastic Beanstalk) and how cheaply it can be done, I will be surprised if within 10 years there won't be legitimate competitors to all of those companies that were formed in the hypothetical garage startup scenario.

Well that's true that it's low cost. The difficulty I'd run into is how to get people to actually use it without spending on advertising.

The 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.

>The 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.

In one case you're risking personal items and privacy; in the other your life is actually in that person's hands.

With a driver, your life is in the hands of someone who has nothing to gain from getting in a car crash. With a cleaner, your possessions are in the hands of someone who might have plenty of incentive to steal your stuff and sell it.

Have a bit of imagination, there's got to be plenty of ways for a driver to exploit you being in their car for criminal profit too. Provide wifi and slurp data; kidnap you; notify an accomplice that you've left the house empty and it's ripe for burglary; clone a payment card (and/or steal a pin) when you pay; take your DNA to plant at a crime scene for blackmail purposes ... erm, what else, clearly I'm not nefarious enough ...

If this sort of thing were common, I'd hear about it.

On the other hand, home burglaries are so common they don't even make the local news.

This casual assumption that all housekeepers are thieves is galling. Its a kind of working-class bigotry that is tossed around by the entitled without even noticing they are doing it.

Of course folks have plenty of incentive to not steal - they have self-respect.

Almost all maids won't steal, but it's a great cover for thieves who want access to houses. You can't know which is which unless you get a good recommendation or hire the person and test it out.

Its the other way around. The vast majority of housekeepers are not thieves however thieves pose as housekeepers very easily. Thieves (and other criminals) pose as all kinds of different occupations.

Almost no actual landlord will take your security deposit and run but there's plenty of people on Craigslist posing as landlords to do just that. So the moral of the story is try not to be taken in by a scam.

Not to mention, they want more business. A cleaner who steals doesn't work for long. The business is heavily driven by referrals and references.

You seem to be replying to a comment which has very little in common with the one I wrote.

Huh. The Uber driver could rob you too; they could rape or murder. They could kidnap. They have, really, far more opportunities to harm you. But the ol' housekeeper is alone in getting assumed to be a thief.

Probably this was not meant. But its been a hot button, the casual assumption that housekeepers are thieves, since forever. I guess I read that into the comment too readily.

People are more scared of burglary than car crashes.

Which is probably justified. There are a couple of million burglaries per year in the US (many/most of which will affect multiple people), and only about 30,000 traffic fatalities per year. And a good chunk of those fatalities are either easily avoidable by passengers (wear your seat belt!) or unavoidable even by drivers (getting whacked by a drunk driver).

Getting 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.

The difference is that with a driver, our incentives are aligned. My desire to continue living injury-free matches up perfectly with his desire to do the same, and not damage his valuable equipment.

With a house cleaner, my desire to keep my possessions is at odds with the cleaner's desire to have more stuff. I have to count on their desire for repeat business, or their morality, to outweigh that.

This 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.

That'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).

While 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.

     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.

We just can't avoid it. We assume that nobody's poisoned our food, we assume that nobody is going to go suicidal on the roadways and ram themselves head-on into our car, we don't wear body armor to work because we assume our coworkers won't shoot us. We even assume that the anestheseologist at the hospital isn't housing a wicked hangover that will prevent him from doing his job.

Essentially our lives are in other peoples' hands pretty much 24/7!

Right, exactly. I didn't put enough conditions on my "should". I meant that in a crazy utopia, we would never be put at risk because of others, the real world is very very far from this utopia, and we put high levels of implicit trust in other people all the time. There's nothing wrong with this, given the world as it is.

Going back to Uber vs. Homejoy, the level of risk differential is much higher with Homejoy, because when using an Uber, you are probably not assuming much extra risk compared to what else you would do to get where you are going. For a cleaning service, then the risk differential is noticeable ('someone has access to my house' vs 'Only I and my family have access to my house') when jumping up from "doing the cleaning yourself". If you're comparing Homejoy to other cleaning services on a risk basis, you'd have to actually look at the numbers. I'm really not trying to bash Homejoy or cleaning services here.

Lives are infinitely more valuable them possessions.

If an Uber driver wanted to hurt you, he would be extremely likely to pay the legal price. After all, there's an electronic paper trail of the ride he gave you. So an Uber driver won't do that unless he's essentially insane and a) doesn't understand this or b) has nothing to lose and doesn't care if he's caught or c) thinks he can get away with it because you're incapacitated/inebriated or something.

Whereas with housekeepers, it's more a crime of opportunity. They notice that you have valuable items laying around that won't be missed. Or an acquaintance of theirs pressures them for tips on houses to rob. A housekeeper that's an otherwise "good" person can convince themselves that it's a victimless crime if they decide that you won't even miss the item(s) they take. I mean, who wouldn't be tempted to take a shiny, never-used bauble from the home of somebody with 10x their income if it was the difference between having food on their table or not?

Don't get me wrong - the vast majority of housekeepers are great people. I have family members that clean houses. I just mean that an Uber driver would have to essentially be insane to harm you, whereas a housekeeper would just have to give into temptation in order to pinch some items.

    You may be trusting a cleaner with you possessions, 
    but you're trusting that Uber driver with your life.

1. Everybody I know that's had their house robbed has had reason to believe that it was been an inside job.

2. If you have things worth stealing, each person you let into your house increases the odds that a robbery will happen. Maybe the cable guy isn't a burglar, but how many friends does that guy have? 50? Is one of them a burglar? If you were a burglar and you knew a cable guy, wouldn't you bug that guy for tips?

3. Any home burglary is potentially dangerous to one's life. Who knows what happens if you're home while the robbery is in progress or if you arrive home while it's happening.

So yeah, there's a trust factor there!

Also the Uber driver can't easily injure you without injuring himself and his car.

The driver has no incentive to be in a crash. The cleaner has all the incentive to steal your stuff.

Doesn't Airbnb fall in the same category? Renting out your property for a few days to complete strangers requires a lot of trust, and yet from what I can tell, Airbnb seems to have overcome this hurdle.

I do agree there was a trust issue with Homejoy (I've personally tried them once and had similar concerns). But, I don't believe the issue was that they were in an unviable business where trust can't be gained, but rather they didn't have the right mechanics in place that help develop the necessary trust between the consumer and the cleaners.

Most people who rent out their homes to AirBNB strip the home of small, valuable items who's theft would not be noticed. I've never been in an AirBNB that contained jewelry, bank statements, blank checks, or other personal items.

For large valuable items, they inventory them before the rental, and check the inventory when the rental ends. As such, a thief trying to steal from an AirBNB can only take large expensive items (like the TV), and will be immediately caught during the check-out check.

Cleaners can quietly lift the pearl necklace you only wear for the holidays and you might not notice for a few months, at which time you might have 6 homejoy cleaners as possible suspects. People don't want to theft-sanitize their homes every time a cleaner comes.

As 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!

Wow, 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"...!)

The 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.

Many 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.

I used homejoy about every month for a year. The cleaning maids never had good things to say about the company or the management.

The 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.

> 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.

It 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.

Does anyone else think the illustrations accompanying the article are unnecessarily mean-spirited?

Here's my take on it as a former Homejoy employee:

https://medium.com/@rockstox/an-inside-look-at-homejoy-s-fai...

What 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?

Am 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.

The 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...

app-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.

"disintermediation"

How about a business model that takes that into account.

Three 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..

TLDR. Summary: Burn was too high.

..because they didn't have a business plan.

I 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).

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