Homejoy (YC S10) Raises $38M as It Looks to Expand Beyond Home Cleaning
techcrunch.com
techcrunch.com
Have raised millions from angels but having trouble
raising an A round, which is very surprising. Probably
because Adora is understated and female.
Separately, have you seen a case where investors completely failed to pay attention to a growing company due to some attribute of the founder?
Investors are always influenced a lot by the founders. Which they should be. The mistake they make is to care about slightly the wrong things.
I could see labor classification being a major stumbling block for them however, and I'm curious as to your thoughts on this. Profitability may be attainable at $20/hr given sufficient scale, but it would be completely impossible with an employee based workforce.
I know SV has a culture of moving fast and breaking things, and when you look at companies like Uber and AirBNB you can see them facing a number of legal challenges around established regulations, many of which are protectionist in nature.
However, worker classification seems to be an altogether different issue, as it's much broader than the relatively obscure hotel or livery laws that those companies are facing, and which vary from city to city. Worker classification impacts nearly every service-based business in the country, and is mandated on both the state and federal level.
I know smart people don't invest in things that have fundamental, life-threatening flaws, so I'm curious to know how they expect to get around this issue.
edit: link to source https://www.homejoy.com/cities
1. Acquire MyClean for its "technology" (website and back office software).
2. Expand into other cities, either through direct investment or through the acquisition of local home cleaning services.
This type of roll-up strategy was not uncommon in the first .com boom. Now, instead of VCs financing the creation of networks of websites, they can finance the creation of networks of small businesses.
Double the work, half the fun, and potentially none of the profit!
Apparently all that matters anymore is how much VC money you can raise, not the underlying business. "Journalism" in this sector is so incredibly lazy.
Margin compression appears to be the trend in many of the saturated, highly-competitive personal services markets like home cleaning. Homejoy might have great growth, but investing nearly $50 million in margin compressed sectors seems like a stretch for venture capitalists who have typically invested in high growth, high margin technology companies. The valuation math just gets crazy.
What's next? VC-led roll-ups of small, local house cleaning services a la the website roll-ups of the last boom/bubble?
[1] http://techcrunch.com/2013/08/18/homejoy-behind-the-scenes/
[2] http://www.geekwire.com/2013/dirty-house-pathjoy-online-maid...
It's easy to look at what Homejoy is currently doing, extrapolate to the point where they dominate that specific market, and say, well, this would be worth $X. But I imagine the vision that HJ has sold investors on is one well beyond the relatively narrow market in which they currently operate.
That's easier said than done. More often than not, when young, fast-growing companies try to enter new markets quickly in this fashion, it doesn't have the intended outcome.
> It's easy to look at what Homejoy is currently doing, extrapolate to the point where they dominate that specific market, and say, well, this would be worth $X. But I imagine the vision that HJ has sold investors on is one well beyond the relatively narrow market in which they currently operate.
It's even easier to look at what markets Homejoy could apply its technology to, extrapolate to the point where they dominate most if not all of those markets, and say, well, this would be worth $x. Even though this is not at all likely.
I could point out all of the fundamental operational and financial differences between a low margin service business like Homejoy and a low margin online retailer like Amazon, but you already know them.
I used a similar service to find a pet sitter. The first time I booked using the website. Every time after I went directly to the pet sitter.
Additionally, in the case of the pet service, they may make much of their money on one-time transactions, say for people travelling.
A well publicized incident happened where someone trashed a person's place. The insurance AirBnb offers makes you try to use your existing policy first.
I don't see how you would prevent this from happening? Its cheaper for me, and the cleaner gets paid directly with no commissions taken out.
I see this as a different situation from airbnb because this is a repeat service (weekly, biweekly, monthly) and this relationship will last longer than an airbnb relationship which is usually a one time deal.
Alternative services like MyClean actually employ the cleaners.