
Thumbtack Raises $125M at a $1.3B Valuation - jsnathan
http://bits.blogs.nytimes.com/2015/09/29/thumbtack-raises-new-funding-at-a-1-3-billion-valuation/
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physcab
So a little story about Thumbtack. My girlfriend is a chef and she and her
chef friends have all turned to Thumbtack at one time or another to seek out
private clients. There's a ton of them here in SF since lots of people have
money in the city.

One by one, they all dropped off. I've overheard them talking about their
experiences. Private client posts gig, asks for bids. Chef buys credits, uses
them to bid. Private client opens email, never responds, drops off the face of
the Earth. Chef loses money. My girlfriend probably spent $100 without any
return. She has since gone on to other much more profitable sources for leads.

Thumbtack of course reaps the reward, but at some point their user acquisition
flywheel is going to have trouble turning.

~~~
jscheel
Well, for me at least, the bids were either spammy advertising or just
astronomically high. I'm not even going to waste my time responding to someone
who is clearly wasting my time. For example, I was trying to get our house
ready to put on the market. One of the jobs I posted to Thumbtack was to
replace the cutoff valve, supply line, and fill valve of a toilet. All-in-all,
it's less than one hour to do the job (which I ended up doing). I also checked
that I would provide all parts and supplies, because I already had them. I
just had too many other things on my plate at the time. Instead of reasonable
estimates, I got crap. The first set was people just using Thumbtack as lead
generation. They wouldn't give an estimate, even with the clear details I
gave. Instead, they wanted to charge me to come out and give an estimate.
Others basically ignored my post and sent me random advertising about their
services, which had nothing to do with what I was trying to get done. The
final set of people were posting absurd prices that were 4-5x what would be a
reasonable maximum for the amount of work. So yeah, I never responded to any
of them.

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adamseabrook
I find the business model fascinating and it is amazing to watch them scale.
My family business used to spend over $20k per year on YellowPages ads which
drove about 8-12 calls per day at a very high close rate. As YellowPages has
died off the money has been invested in an online presence but the skill
required to design the site, keep it updated, and to manage all the online
advertising spend is well beyond a normal person.

The fragmentation impact of having your customers looking for your services in
dozens of different ways vs opening the phone book is costly and complex to
overcome.

Once you pay a designer, hosting provider, and then pour the rest into Adwords
it is very hard to get the same 8-12 calls per day with $20k of annual spend.

Thumbtack are helping solve that problem and syphoning all the money these
businesses used to spend on YellowPages or are wasting on poor Adwords bidding
strategies. Paying per lead is not that much different from paying $20k to
YellowPages who give you no guarantee you will ever get a phone call.

~~~
brosirmandude
8 or so leads a day is roughly ~2700 leads per year. A $20k budget means you
can spend about $7.50/lead. Depending on your niche that is likely going to be
difficult to do with adwords alone.

Again depending on your niche, Thumbtack might actually be good here. In my
experience though Thumbtack is very hit or miss from the businesses side of
things. If you're spending $5-$10 just to send an email to single potential
customer it might not be cost effective.

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CrazyCatDog
This is great news because hopefully it will allow Thumbtack to become _the_
domestic services platform.

Think the funding and valuation is too high? It takes inordinate marketing
spend to become a focal point outside of metropolitan areas. I've interviewed
with a handful of more focused (e.g. industry specific) services marketplaces,
and each one's offices felt like a sales boiler room as hundreds of associates
reach out daily to service providers across the country all but begging them
to join their platform. Pulling it off across multiple industries will take n
as many sales associates, but the payoff is enormous (imagine, an e-bay for
all local service providers). Thumbtack caters to the broadest swath of
service providers, and winning in k industries makes it that much easier to
attract providers from the remaining n-k industries; there are very strong
network effects here on top of the obvious economies of scale.

On the consumer side, Thumbtack delivers huge benefits. I spent two hours
calling carpet cleaners to schedule a cleaning on my move out day in Seattle.
When my carpet cleaner bailed the day of, I tried thumbtack for the first time
and someone was at my house within an hour. When I needed a linux box built I
reached out to Thumbtack, and within 2 hours I had multiple bids...in Salt
Lake City no less. There is, however plenty of room to grow: the number of
lead-paint removers on thumbtack in SLC where 90% of the housing stock was
built 60 years before lead paint was banned: zero (and I'm still searching for
one).

Transferring search costs from consumers to providers, providing a reputation
system, facilitating coordination... these are all very valuable things to me,
that's why I'd participate even at this valuation and that's also why I so
desperately want one of these platforms to win, and so should you.

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dangero
One of the amazing things to me about Thumbtack is the new user on-boarding
experience. If you're building a product that needs user signups you should
check it out. Basically if you come there looking for someone to help you
mount something, they take you straight there and only ask for your email
address so they can send you an update when they've found someone to do the
job. What they've done in the background is create an account for you, but
they just never asked you to create a password. It's a small detail in the
overall service offering, but I think it probably increases their user
retention rate quite a bit.

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nchelluri
As a developer/employee, is there any benefit to being at a company that has a
super high valuation? Or being an early employee at a company that later gets
one?

It doesn't necessarily mean a good exit, right? Though I suppose if you trust
the valuation then it might imply the chances are higher...

(Had a phone call with a recruiter from here some months ago, never called
them back to schedule an interview... vaguely wondering if I cost myself
anything.)

~~~
mbesto
Validation.

"I was a lead developer at Company X, which rapidly grew from $1b to $10b
during my time there."

~~~
coffeemug
Or, even better: "I led engineering, and my valiant efforts grew Company X
from $1b to $10b in two years."

I hear this sort of stuff all the time (used to be mainly from business types,
but engineers are catching on).

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shubhamjain
I just opened their site and I was welcomed with :

"Sorry, this request is coming from a country which we currently do not
support."

Woah! So if I am from a country you do not support, I can't even know what you
guys do.

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ogezi
Yet another "UNICORN". The VCs that are funding this company and its ilk are
signing deals that immensely limit their downside potential and max their
upside. The liquidation preferences, participation rights and antidilution
rights the VCs have are very good for their interests. It's truly a pity that
when the market conditions change and the money streams dry up, the founders
and employees of these companies will have almost nothing. This bubble seems
worse than the last one because by now you'd expect people to have learnt
their lessons.

~~~
S4M
>The VCs that are funding this company and its ilk are signing deals that
immensely limit their downside potential and max their upside.

How does that limit VCs' potential downside? Of course if the company gets
acquired for a good price, they'll get their money back and then some, but for
that there needs to be a big co acquiring the company for a large price, which
will be hard to find. On the other hand, if the company bankrupts, VCs get
nothing.

I'd say that at this level of funding it's IPO or nothing for the VCs.

~~~
ogezi
Another thing here is that these companies are getting valuations that imply
that they will have very high margins in the future. But some of them will not
be able to make good revenues without having MILLIONS of users. They will have
to compete against themselves (eg. postmates, doordash et al). Simply put it's
not remotely possible for most of these businesses to exist together and have
such high valuations. These companies will make their respective markets as
competitive as the airline industry (which has so many players but have such
squeezed profits). The companies are being valued like they'll be monopolies
or duopolies someday, but the fact is that they are in businesses that have
relatively low points of entry. My problem is not that X1 has a #1B valuation,
my problem is that X1 has very similar competitors X2, X3, X4, ... Xn (where n
is any number of competitors) that also have very high valuations in a market
that cannot accommodate even a few of them. In some cases they have valuations
that equal the total size of their addressable market. This is insane.

~~~
S4M
I would rather agree with what you are saying there, but I don't see what it
has to do with your original comment, where you said "The VCs that are funding
this company and its ilk are signing deals that immensely limit their downside
potential and max their upside. "

For me, when I read about a company that got X0$M of funding, my first thought
is often "Holy shit, what are they going to to with all that money?".

------
cocoflunchy
Does someone know what the equity of the founders looks like in these ultra-
funded companies? Do they still own a significant part of their business? Is
it more like 5%? 10%? 30%? 50%? (doubt it)

~~~
tdylan
Given that they have three founders (assuming initial 33/33/33) as well as
their 6 rounds of funding. Founders probably have ~3-6% each.

~~~
cocoflunchy
So that would be like $40-$80M at current valuation... and not much control
unless they have some kind of preferred shares.

------
AndrewKemendo
The whole Thumbtack credits thing is interesting to me because it seems
unnecessary - but is a core feature. Can someone explain to me why they prefer
to have a credit based system instead of just a variable cost to bid.

With systems that have their own currency (think arcades) you always have some
of that currency left over that is wasted - I wonder if that is how they plan
on making margin.

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cft
I went there for a Go Meetup, and I couldn't easily understand what they did
after talking to 5 employees. The private equity bubble is reaching its
crescendo.

~~~
gkoberger
They're Taskrabbit for skilled labor. If you need a headshot, a maid, a new
door, etc, you post it and they match you with a professional.

~~~
15thandwhatever
So, Angie's List for non-contracting?

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yeukhon
> The company doesn’t disclose revenue and is unprofitable.

Valuation to me doesn't mean much until the company is bringing in real money
consistently.

Because soon or later you are going to run out of money and you will just wait
for acquisition.

Also, I have never heard of Thumbtack since its debut (over six years)...
that's just my opinion.

~~~
ffumarola
FWIW, Thumbtack has been all the buzz for the past 18 months or so. I've seen
their name frequently in the context of all things local services.

~~~
derefr
From what I understand talking to some other people pursuing similar ventures,
the point of services like Thumbtack isn't really whatever they start out as;
the point is capturing the talent in a network and then selling that talent
infrastructure.

Everyone from "startup banks", to payment-processors, to service marketplaces,
to coworking spaces, are all running full-tilt toward this goal, and getting a
company there first (and achieving a network effect from doing so) is what has
the all the investors interested.

~~~
lsc
give me an example of a 'talent network' that pivoted.

I mean, being a middleman, I understand... but most of the middleman networks
start out as a thing, and largely stay that thing.

I'm not saying you're wrong... just trying to understand what you are saying.

~~~
derefr
It's not so much pivoting as conglomeration. The end-goal of all these
companies is to be "the point-of-contact a small-business-owner has for
everything their business does that's not making their product." (In other
words, to act as a PE firm or bigcorp acquirer without needing to do any
actual acquiring.)

The main method of _achieving_ this goal, from the starting point of having
any one "component" of such an offering, is merging with other companies that
provide other components, or integrating others' components into your own as a
"suite" or "dashboard", or selling a "concierge" service that _recommends_
others' services, etc etc.

~~~
lsc
Ah, I see. Has anyone achieved this? It sounds difficult. as a small business
owner myself, I know I'm super suspicious of middlemen, and I think that's one
of my major advantages over larger businesses.

