
Homehero is shutting down - rcarrigan87
https://medium.com/@kaleazy/theres-no-magic-in-venture-backed-home-care-8f5389528279
======
orthoganol
So the gist is laws were upheld protecting homecare givers - minimum wage and
overtime pay - and new mandated increased minimum wage, ultimately led to
their decision to abandon their supposedly successful model. Their own
internal "surveys", if we should even consider that, supposedly indicate these
laws are not good for homecare.

Maybe their business model just depended on exploiting cheap labor?

Or maybe they went the way of Homejoy and are saving face, as many speculated,
former employees coming forward, etc. with Homejoy that their customer
retention was just really bad.

~~~
justboxing
> Maybe their business model just depended on exploiting cheap labor?

How do you say that they were exploting cheap labor, when they claim that
their business model enabled them to pay their caregivers 25% higher than
industry average.

> The 1099 independent contractor model, below, is very attractive as it
> removes excess cost and restrictions for employers. We were charging clients
> 30–40% less than industry average, and we were paying caregivers 25% higher
> than industry average. Both sides were winning.

To me, it looks more like the Union Bosses at SEIU made a calculated -- and
eventually successful - move to pull strings and get laws passed that would
stifle HomeHero as they seem to be disrupting that Industry the same way Uber
or AirBnB distrupted a different industry.

> On Oct 15th 2015, the entire home care industry got rocked. The Department
> of Labor upheld a federal ruling stating that over 2 million home care
> workers would qualify for the Fair Labor Standards Act —essentially
> requiring all home care workers to be treated as W-2 employees and receive
> overtime benefits. This was viewed as a huge win by the controversial and
> outspoken labor union SEIU, as well as the “Fight for $15” crowd in
> California.

Not saying it's the right (or ethical) thing to do, but if they'd had the
funds, they should've gotten in front of that Act (before it got signed into
law) and poured resources -- lobbyists, ads -- into killing it. They could've
also asked the people receiving the service to write to their reps / senators
/ congressmen stating the Bill / Act would increase costs to them.

Just like Uber and Lyft have done so in the past.

Last year, when state officials tried to roll out a regulation the company
didn’t like, Uber emailed their drivers and customers telling them to oppose
it. The response flooded regulators’ inboxes and the state backed down.

> In just the last month, the ride-hailing giants have secured a string of
> victories at the Capitol, killing or delaying legislation and regulations
> they didn't like and shepherding in new rules favorable to the industry.

SourceL [http://www.latimes.com/politics/la-pol-sac-why-uber-is-
winni...](http://www.latimes.com/politics/la-pol-sac-why-uber-is-winning-in-
california-20160507-snap-htmlstory.html)

~~~
gnicholas
> How do you say that they were exploiting cheap labor, when they claim that
> their business model enabled them to pay their caregivers 25% higher than
> industry average.

When I read this figure I wondered if they're looking at it on a pre-tax
basis. 1099 workers have to pay employment taxes that W-2 workers do not
shoulder (because they are paid by the employer). This wouldn't add up to 25%
— probably more like 15%. So while I don't think they were "exploiting cheap
labor", I think it's possible that the win-win scenario they claim wasn't as
big a win for workers as it might seem.

~~~
OmarIsmail
1099 workers also get to expense a lot more stuff from their taxes than
employees (I think... please correct me if I'm wrong).

~~~
justboxing
> 1099 workers also get to expense a lot more stuff from their taxes than
> employees

Correct. As of 2012, deductible expenses can include health insurance
premiums, office supplies, auto and travel expenses, a portion of home rent or
mortgage payments, and a portion of utility costs.

IANAL/B yes, the HomeHero 1099 caregivers could've reduced their taxable
income by rightfully claiming auto and travel expenses to and from the client,
and if they were using their residence to do extra work for client (like
research or preparing food etc, then they can also deduct business / home-
office expenses.

Related Reading: [https://turbotax.intuit.com/tax-tools/tax-tips/Self-
Employme...](https://turbotax.intuit.com/tax-tools/tax-tips/Self-Employment-
Taxes/Top-Tax-Write-offs-for-the-Self-Employed-/INF18049.html)

------
tptacek
_On Oct 15th 2015, the entire home care industry got rocked. The Department of
Labor upheld a federal ruling stating that over 2 million home care workers
would qualify for the Fair Labor Standards Act —essentially requiring all home
care workers to be treated as W-2 employees and receive overtime benefits._

I took a few minutes to read _Home Care v. Weil_ and I don't think this is at
all an accurate summary.

What the DC circuit found (and SCOTUS, in denying cert, allowed to stand) is
that _third party employers_ of home-health workers are required to provide
overtime and minimum wage protections for home health workers.

~~~
vosper
So you can't be the exploitative middleman, but home care workers are still
able to work directly for the people in their care, at a rate they both agree
on? Seems reasonable to me, provided it doesn't also mean there can't be any
kind of marketplace or clearing house that connects workers with people who
would like to employ them.

~~~
ThrustVectoring
Depends on how hands-on the marketplace is. Something that works like
Craigslist is probably fine, something that works like Uber probably isn't.

------
dataminded
I think he misses the point entirely.

His business only worked if the country continued to insist that the
vulnerable (elderly) can subsists off the backs of the disenfranchised and
disadvantaged (home health care workers). Even if he won, the world would be a
significantly worse place for it.

The problem is that people are entering their later years without an
appropriate safety net. Demanding that a subset of Americans work in poor
conditions or at a discounted rate to cover the gap isn't OK.

~~~
bmmayer1
> Demanding that a subset of Americans work in poor conditions or at a
> discounted rate to cover the gap isn't OK

No one was demanding anything. Home care workers were working by mutual
agreement with their respective employers. "The country" had nothing to do
with it.

~~~
Chaebixi
> Home care workers were working by mutual agreement with their respective
> employers. "The country" had nothing to do with it.

"The country" can force someone into accepting the "best" bad deal ("by mutual
agreement") if all the other options are worse. It's an error to stop your
analysis at the agreement without considering the full context in which it was
made.

~~~
oconnor663
That's true, but it casts the solution here in a weird light. If all of
someone's options are bad, removing one of them doesn't help anything.

In the minimum wage debate in general, the response is that demand for workers
is kind of inelastic, and that removing low wage jobs will create higher wage
jobs. At least in this specific case, it doesn't sound like that is happening?
(Though the details matter a lot, and I don't know them.)

~~~
bmmayer1
What really seems to be happening is the jobs continue to exist as before, but
they are driven under the table which is certainly not where we want most
people to be working if we truly care about workers' rights. Keep in mind the
true incentive of unions like the SEIU which pushed for this change is to
improve the wages of _their_ members, even if it comes at the expense of other
workers who are 1) willing to work for less, 2) not represented in the union
for whatever reason 3) economic progress/productivity on the whole

~~~
Chaebixi
> Keep in mind the true incentive of unions like the SEIU which pushed for
> this change is to improve the wages of their members, even if it comes at
> the expense of other workers who are 1) willing to work for less

This kind of rhetoric is classic divide-and-conquer, which _oddly_ seems to be
applied more to labor than employers. I've never heard a company criticized
for working in its own best interest and not for the benefit of all employers.

And honestly, I have the least concern for protecting the labor right to work-
for-less than the other guy, especially if "less" is a pittance with no
benefits.

------
badrequest
If your company was only viable if you could get away with not paying people
overtime rates when they work overtime hours, then your company was never
viable.

~~~
FussyZeus
Exactly. Simply not paying people living wages is not a disruptive new idea,
it's just exploiting your workers to provide a lower cost to your customers.
You're exactly the same sort of scum you're attempting to unseat.

Bring on the downvotes! You can call it whatever you want, "side hustles",
"the gig economy", whatever new age bullshit the VC companies are using this
week but it's the same thing: ducking labor laws to pay less than living wages
to people to do work you don't want to do.

------
exogeny
I think the biggest problem here, above anything else, is my first reaction:
"Who the hell is Homehero, and why should I care?"

Also: LOL at "The 1099 independent contractor model, below, is very attractive
as it removes excess cost and restrictions for employers." Yes, it is very
awesome when you get people to perform full-time labor for you without having
to worry about giving them insurance or benefits or anything like that!

~~~
zacharycohn
Obviously, a startup. And just because you're not in their target market, and
so probably wouldn't have heard of them, doesn't mean there isn't something to
learn here.

~~~
exogeny
Oh, there's plenty to learn. I just think that agnostic of the labor and
regulatory issue he's describing, a much bigger problem was that we're inside
of an incredibly niche, startup-focused community here on HN and the
overwhelming response so far is "Who the hell are these guys, and why should I
care?"

------
tahw
I feel like the way they told their story (being vague about the challenge
until halfway down the page) implies that they realize the reason they failed
is because they were exploiting contract workers just like Uber does. Good
riddance to another "disruptive" company full of "geniuses" making money by
throwing some javascript on top of an exploitative labor model.

------
DGAP
I was part of a team that was attempting to compete with HomeHero, but based
out of Texas. I'm curious why they didn't attempt a geographic pivot if
California regulations were truly their main barrier to success in the home
healthcare market.

~~~
yesimahuman
Was going to say, this whole post talks about a challenging regulatory
environment in California, and is clearly meant as a "told you so" reaction.
However, I see no reason this had to be bound to CA.

~~~
mi100hael
You mean other places exist outside the bay area????

------
Chaebixi
> We launched with a workforce of vetted independent contractor (1099)
> caregivers, who we endearingly referred to as “Heroes”.

How often are pompous titles like that just cheap window-dressing meant to
hide some kind of underlying smelly ugliness? I'm getting really skeptical
whenever I come across them.

What are some other examples? I know I've seen stuff like this before, but the
only other ones I can think of are title/job descriptions like "guru" or
"ninja," which are similar but don't quite cover the same space.

~~~
bjl
Apple 'Genius' definitely falls in that category.

~~~
prawn
Subway's "Sandwich Artist"? They're following a formula for assembling a
pretty basic roll, and often taking instruction from the other side of the
counter. Sounds about as far from artistry as you can get.

------
opportune
Important to note that we're only getting one side of the story here. It would
be nice to get a second opinion, ideally from an actual carer, on the DoL
ruling that killed HomeHero's business model. For example, if this ruling
(which forced a transition to a W-2 employee model away from 1099) actually
ended up getting health insurance to a lot more employees, that could be
considered a good thing to some. Of course, that ignores the fact that the
regulation did probably end up putting a lot of home carers out of over-the-
table work, as Kyle noted.

------
sergiotapia
After the mandated increase in pay and W2 obligation, a lot of people just
shuttered their home care businesses. Now the employer is no longer in
business, and the employees are left jobless.

Would there be similar results if the minimum wage increased for low-skill
jobs? McDonalds employees want $X, but McDonalds can just build those
autonomous cashiers which are already all over the place here in Miami.
Suddenly no more jobs for people.

~~~
matthewmarkus
Once, when I was in Seattle, I witnessed a volunteer cajoling a McDonald's
employee to sign up for her Fight for 15 campaign. I was going to tell the
fellow that he was about to commit economic suicide, but I let it go.

Fast forward a year, and that McDonald's is now a hole in the ground and a new
fancy high rise is going up in its place.

If the cost of an activity exceeds its value, that activity will cease. Of
course, if the cost can be passed on it will be passed on. So, if you raised
the minimum wage to $1M per hour, a hamburger would cost $300k (or more).

~~~
learc83
The average McDonald's makes $1.75 million per year in profit for the owner
and the average payroll and payroll expenses are in the neighborhood of $500k
(according to their franchise information).

Let's assume all of them are making minimum wage, so $15 per hour would
basically double it (the average wage is almost definitely higher than $7.50
considering minimum wage in some area).

Now the average profit per year for a McDonalds owner is $1.25 million per
year. You think the activity is going to cease?

Of course it may make automation about $500k more appealing, but automation
was happening one way or another.

~~~
matthewmarkus
To simplify things, let's say the McDonald's owner owns the property. If his
profit drops to $1.25 million per year, but he can sell the property and
invest the proceeds so that he earns $1.3 million per year, then the activity
will cease. Even if a McDonald's is profitable, something else may be even
more attractive when costs change.

~~~
learc83
The average cost to start a McDonald's is around $1 million.

The rate of return is absurd.

Most franchise owners also become experts running at running a restaurant
franchise making them even less likely to move into something else. McDonalds
isn't going anywhere when minimum wage goes up.

Your point would have been better if you'd been talking about someone working
at a small struggling restaurant that was barley able to stay open.

Even then, you're completely ignoring the effect that moving money from the
wealthy to low income earners will have on the economy (read up on velocity of
money). There are definitely more efficient ways to do this, but you can't
just ignore the effect and state that _minimum wage = fewer jobs_.

~~~
matthewmarkus
I never said that minimum wage = fewer jobs in all contexts. It will
definitely destroy certain employment opportunities in certain circumstances.
I suppose I would consider it an accelerant for automation.

~~~
learc83
You implied that a minimum wage of $15 would eliminate fast food jobs. The
numbers indicate that it won't.

>It will definitely destroy certain employment opportunities in certain
circumstances.

Sure and a 0.1% sales tax will destroy certain employment opportunities in
certain circumstances.

The key is to find a balance. I'd prefer a universal basic income or an
increase in the EITC. But I think fighting for a $15 minimum wage that won't
kick in until 2024 at the earliest, and will probably be negotiated down to
$12, is better than what we have now.

$15 in 2024 will be about $12.50 in 2016 dollars based on projected inflation
by the way.

------
dr_
I followed homehero and some of its competitors movements for a bit. Home care
is not an easy business, and there are many local vendors in any given
community. There's always this argument as to whether going "full stack"
(providing the workers, technology - the full solution) is a better option in
healthcare than just providing a software product for clients to start using.
The argument Kyle makes, that is worth noting, is that existing homecare
agencies started deploying software more readily than homehero may have
anticipated.

Thay being said, some of the messaging and marketing may have been off as
well. I found it odd when they started advertising their workers as W2 heros,
or something to that effect.

------
mladenkovacevic
Can anyone name one of these "gig-economy" startups that treats their contract
workers fairly?

------
Mz
So, they have a problem paying $15/hour while claiming to pay better than
average and talking about how harmful this was to live-in caregivers. I am
reminded of the recent story on HN about a family that had a slave.

[https://news.ycombinator.com/item?id=14350059](https://news.ycombinator.com/item?id=14350059)

These guys are too busy trying to figure out how to get rich to take care of
their grandmother themselves. Instead, they want to pay people a pittance to
do it for them and then whine about how hard it is to find good care givers.

As I said in the discussion about "My Family's Slave," it tends to not work
well to pay people to care. That tends to result in paying people to _pretend_
to care.

But, the other side to that is that expecting people to care while you don't
care enough about their welfare to make sure they get paid adequately and get
adequate time off, etc. is just incredibly broken. It is a horrible form of
hypocrisy that has little hope of failing to become abusive.

This is often a gendered issue. Women often do "caring" work and then no one
wants to pay them.

On the one hand, I would like to see more marketplaces with 1099 employees
that actually work well. On the other hand, I have trouble feeling like this
was not an exploitative and ugly model. Why didn't you just go take care of
your grandmother yourself instead of creating an entire business to avoid
having to do the caring work she required?

Caring about money above all else makes for a poor boss. Or relative.

------
aresant
As somebody with an interest in the space I appreciated the honest breakdown
of the challenges and failures, 100% agree that this is a tough market.

But this part stood out:

"We were charging clients 30–40% less than industry average, and we were
paying caregivers 25% higher than industry average. Both sides were winning."

Both sides were winning at the expense of Homehero's investors and the
viability of the business model.

It is damn easy to grab market share in nearly any price-sensitive marketplace
by underpricing service or over-pricing HR but it will ALWAYS ALWAYS catch
you.

And while the W2 math / wage wouldn't be completely solve by bringing pricing
to parity, it certainly would have had a huge impact and maybe provided enough
runway to drive the scale efficiency.

------
deft
So basically they shut down because the law was forcing their 'employees' or
whatever to get paid properly and they could no longer extract surplus value.
Sounds like a good thing :)

Maybe if they really wanted to fix things they'd do it as a non-profit.

------
wehadfun
What added benefit did homehero add to justify their costs? Either way the
majority of people who work in this industry do not get paid a lot for what
they do. It is hard to argue that they should get paid less to support the
middle men

------
gumby
I am intrigued by all the messages pointing out that the business was
predicate on unfairly low payments to workers, and when that problem was
rectified, their business model stopped working.

What intrigues me is that the common, tired narrative I see on this topic
(from nerd friend on FB, typically) is more of a Libertarian/Ayn Rand oriented
"the government shut down people who had had the freedom to work below a
living wage, as should be their choice."

As it happens I disagree with that libertarian view, but even if I didn't, I'm
glad to see a more complex understanding of business models and sympathy for
the staff.

------
scottfr
I know this is supposed be about unnecessary regulation killing a company that
was bringing wins to both homeowners and providers, but... am I reading this
right:

"By the Summer of 2015, we had onboarded over 1,200 Heroes, provided care to a
few hundred clients ... In June 2015, we raised a $20 million Series A,
bringing total funding to $23 million."

So two years and $3 million dollars after they launched, they had only
"provided care to few hundred clients". And using those metrics they somehow
raised another $20 million dollars?

It seems like they had other problems then a change in the regulatory
landscape.

~~~
LoSboccacc
with 10 heroes per customer it must have been stellar service

~~~
swrobel
Snark is so easy but thoughtful analysis is hard. Marketplace businesses
necessitate having adequate supply and demand to keep both sides happy. Rarely
can you scale them in lock step.

------
evanwolf
The supply of skilled, vetted labor exists at the higher regulated prices in
most locations. The demand for the service exists in most locations at today's
lower prices. Even squeezing out inefficiencies to lower costs and improve
convenience/quality/flexibility/coverage, the only way this works is if wages
are subsidized. Few people can afford a full time employee, let alone the 3+
needed for 24 in-home hour care.

------
swrobel
In case anyone is wondering what they're up to now:

[https://news.ycombinator.com/item?id=14501081](https://news.ycombinator.com/item?id=14501081)
[https://blog.goharvey.com/homehero-rebrands-as-an-
integrativ...](https://blog.goharvey.com/homehero-rebrands-as-an-integrative-
medicine-company-called-harvey-742766b8dce0)

------
nowarninglabel
Is there something new here? This is the same post that was posted here 3
months ago.

------
palakchokshi
I'm going to try and address each of the "negative" impacts this person states
of the DOL ruling

1.In a survey we conducted internally, the cost for live-in/24-hour care
doubled from $250 to $550 per day average in Los Angeles, pushing the price
above a skilled nursing facility on a per day basis.

At the rate he mentions of $250 per day, hourly wages would be $10.4 for 24/7
live in care giver. So he was paying less than minimum wage in California.
Let's revise that number to meet the minimum wage. It comes to $360. That
number of $550 is inaccurate. The correct number is $480 (8 hours of regular
pay at $15 per hour if you are in California and 16 hours of $22.5 per hour)
So in California the cost went up from 360 to 480. That's a 33% increase not
the over 100% increase he states.

2.Families were forced to reduce caregiver hours or fire their agency
completely (and go under the table).

This seems to suggest that families were ok with exploiting the care givers
even if they had to go "under the table". What kind of care givers will take
less than mandated by law? Ones that can be exploited because of their
immigration status?

3\. Hundreds of thousands of caregivers who were unable or unwilling to be
employed as W-2 workers were either removed from their families or let go by
their domestic referral agency.

????what?? unable to be employed as W-2? why? Is it because they are not
legally allowed to work in the country without a permit? Not willing to work
as W-2?? I don't understand why someone would not want to work as a full time
W-2. Are they trying to avoid paying taxes? Either ways this is a choice that
the caregiver has to make. They would rather make $10.41 and hour than go to
$15 or $22.5? Something doesn't smell right.

4\. Seniors struggled with “continuity of care” issues as agencies started
rotating multiple caregivers in and out of houses throughout the day to avoid
overtime costs. This had an especially negative impact on Alzheimer’s and
dementia patients.

I get this. I do. My grandmother was bedridden for 12 years and we had a live
in caregiver and I know my grandmother would sometimes get confused and scared
if we got a replacement when the caregiver was on vacation.

5.The additional rotations in shifts increased gas, parking and transportation
costs and added a layer of complexity to scheduling.

This is a problem for the agency. This is where you can have your USP. Don't
cry about it. Figure out a kick ass algorithm to reduce scheduling complexity.

6.Caregivers saw their working hours and income reduced, seniors weren’t able
to get the 24/7 care they needed, and home care agencies saw a significant a
decline in revenue from live-ins.

Caregivers only saw a reduction in working hours and income because agencies
didn't want to pay overtime and pass the cost down to the family.

