So Forbes named Homejoy one of the hottest startups of 2013 (and they make a 30 under 30 list). They raise money from top-tier VCs and angels. Adora does quite a bit of speaking (it seems) on growth, regional expansion, and startup inspiration. They expanded to 30+ markets.
But they were really just selling cleaning services for below cost–on the backs of 1099 workers. It's a worse model than Groupon and I can't fathom how the founders or investors thought it would work.
Exactly this. I always felt that this was just another doomed startup that couldn't possibly survive. Curious how we'll revise our views on the company and Adora.
I guess this is the playbook, right? Doesn't matter if you build a sustainable company or not. As long as you raise crazy amounts of VC $ you're considered a success.
I thought about this. Someone made a reddit article outlining how to do this and the profit margin depended on skirting the 1099 rules. This isn't a scalable business. Technology doesn't change the basic factors of the business in any meaningful way. I setup plans, bought a domain, had a partner but, never ended up doing it. My partner was disgusted with it as we were planning and over time convinced me.
Home cleaning is a well established business. The market is well served by multiple traditional companies. A Bootstrap 3.0 website and mobile app aren't really going to change that much. It's an uphill battle and trying to take the Uber model of skirting worker protection laws is your only real source of competitive advantage over time.
Technology doesn't change the basic factors of the business
in any meaningful way.
I think this is the key point. Add to it the loose coupling with the workforce may make the sharing economy model rattle. One exception I can think off is AirBnB.
I firmly believe this business model can work. I know of a local business that is going into its 6th year of operations. Cleaning houses is a large part of their revenues. They match house cleaners, handymen, grocery shoppers, cooks and assistants with professionals starved for time. The model is subscription-based and they have some large companies which give out these subscriptions as a bonus/perk to their employees.
Perhaps Homejoy expanded too fast? They overdosed on funding? Deadlines and progress meetings became too dreadful? Or maybe there are regulatory issues they could not resolve?
I think there is more to this than a shoddy business model imitating Pets.com.
You are comparing apples to potatoes. Every city has cleaning and janitorial service companies (I worked for one in high school). Obviously that model works. We pay our housekeeper $60/week and she's amazing.
What doesn't work is selling a service–cleaning or otherwise–for $20 when you have to pay the contractor $50 and a CAC of $12 (spitballing BTW).
At least Groupon shared the deal price with the restaurant and had some built-in virality.
At least Uber doesn't have to deal with drivers trying to end-around the marketplace and go directly at customers.
But they were really just selling cleaning services for below cost–on the backs of 1099 workers. It's a worse model than Groupon and I can't fathom how the founders or investors thought it would work.
It all feels icky to me.