
Why Homejoy Failed - steven
https://medium.com/backchannel/why-homejoy-failed-bb0ab39d901a#.2jviif7sd
======
untog
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.

~~~
hammock
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/](https://crunchbase.com/organization/handybook/)

edit: I'm in Chicago

~~~
pavlov
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...](http://thebillfold.com/2014/10/my-day-interviewing-for-the-service-
economy-startup-from-hell/)

~~~
quanticle
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.

~~~
gaius
He comes across as pretty sleazy in the article.

~~~
quanticle
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.

------
sageabilly
"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.

~~~
saalweachter
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.

~~~
prostoalex
> 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.

~~~
potatolicious
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.

~~~
saalweachter
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.

------
aptimpropriety
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.

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

Couldn't that be the problem, too?

------
code4tee
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.

------
tcdent
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.

~~~
jakejake
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.

------
apapli
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.

~~~
hitekker
"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.

------
tptacek
_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.

~~~
SilasX
>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".

~~~
jeorgun
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".

~~~
tptacek
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.

------
IgorPartola
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.

~~~
jdmichal
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.

~~~
sib
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.

------
whistlerbrk
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...

~~~
mgkimsal
"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?

------
bungibo
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.

------
ThomPete
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](https://en.wikipedia.org/wiki/ISS_A/S)

~~~
TheOtherHobbes
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.

~~~
ThomPete
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.

------
scorchio
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...](https://www.youtube.com/watch?v=lVDmyRxeGCo&list=PLQ-
uHSnFig5P7scrcPr3VPHrG1OylKhpt&index=3)

~~~
patio11
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."

~~~
scorchio
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.

------
ghaff
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.

~~~
prostoalex
> 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.

~~~
ghaff
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.

------
rconti
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.

------
strommen
> 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.

~~~
Tideflat
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.)

------
cletus
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.

~~~
emmett
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.

~~~
vinayak147
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.

~~~
jarek
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.

~~~
yeukhon
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?

------
jpdus
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...](http://www.reuters.com/article/2015/03/25/rocket-internet-helpling-
idUSL6N0WQ1LG20150325)

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)

------
gotchange
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.

------
mmayberry
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

------
forgetsusername
> _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.

~~~
cballard
_No one_ should be sitting "among employees" \- everyone should be in a
private office with a door that closes.

~~~
paulcole
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?

~~~
intrasight
I can't think of anyone

~~~
BlackJack
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.

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

------
debacle
> 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.

~~~
ghaff
Almost certainly high. US seems to be about a $10B market:
[http://www.sbdcnet.org/small-business-research-
reports/comme...](http://www.sbdcnet.org/small-business-research-
reports/commercial-residential-cleaning-services)

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.

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

------
tyrust
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?

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

------
trimbo
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.

~~~
shostack
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.

------
jusben1369
Homejoy raised $40 million. I doubt it was ever even close to Unicorn
valuation. Am I wrong or is this headline fairly misleading?

~~~
ghaff
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.

~~~
jusben1369
I think Unicorn is very specific and $1 billion is the amount

------
kra34
Fred Wilson recently wrote a blog post about this:

[http://avc.com/2015/10/negative-gross-
margins/](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.

------
kefka
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."

~~~
prostoalex
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.

~~~
kefka
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.

~~~
SilasX
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.

~~~
kefka
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.

~~~
SilasX
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.

~~~
kefka
Money is the biggest sign of a disparity. But it's not the only sign.

Another sign is "does each side know what they are agreeing to?" In medical
industry, that concept is called informed consent. A party who is accustomed
to making $150-$500/hr can afford a lawyer to understand the legal and
fiduciary risk. Someone making 'Uber Salary' most certainly cannot.

Next, contracts that are discussed and hammered out usually have discussions
of liabilities. "What happens if I don't do X?"; "What happens if Y happens?".
Instead, Uber et. al. either do not discuss it, or sweep it under the rug,
only for the end worker to be bit by it when/if it happens.

For example, accepting UBER means you should have commercial driving license
by the state. You should also have insurance that covers that. And there may
also be other license or tickets you need to be in compliance. UBER knows many
of these laws, and they do not inform the workers of these liabilities. It is
not a far stretch to see that UBER is in cahoots to subvert law and be an
accessory to insurance fraud

>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.

We already have a tool for businesses to use: hire them. Good 'ol W2
employment. They're choosing not to, and abuse a system traditionally meant
for specialized temporary labor. And what are we to expect when one side has
such power ($50 billion banked) vs someone who needs a job? One side is being
abused.

------
jusben1369
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.

~~~
mason55
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

------
gloves
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...

~~~
Kurtz79
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".

------
zaroth
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.

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

------
programminggeek
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)?

------
roymurdock
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.

------
datashovel
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.

~~~
mattmanser
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.

~~~
a3voices
I disagree. You can make a Google without VC money if you start in 1994.

~~~
datashovel
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.

~~~
a3voices
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.

~~~
datashovel
I don't think the big problem will be trying to get people to use the system.

I think the whole thing (especially with social networks) rides on just how
hard they want to fight to keep their users' data off of other networks.

If, for example, Facebook decides to prevent other social networks from
pulling user data off of Facebook, then I think that will in large part drive
end users' desire to find alternatives.

~~~
a3voices
Well there's that too. But to get people to use a new social network in the
first place, you either need to hope for a viral effect or spend on
advertising. Unless I'm missing something.

~~~
datashovel
I kind of think these days people generally understand the "groups" or
"communities" or "family members" they are usually in contact with.

So I kind of envision that new social networks don't need to grow in that "all
or nothing" model.

Also I see great potential for "glue networks". Or, in other words, networks
responsible for facilitating the seamless transmission of data to / from
different social networks depending on which one people decide they want to
use.

I think it will get old real fast if people can only interact with people in
Facebook while they're signed on to Facebook.

I want a social network that can seamlessly integrate with all of them so I
don't have to worry about where all my friends are. I just decide I'm going to
try something new and if it works well for me I might stick with it. In the
meantime I'll continue to be able to communicate with people on other social
networks because "I, as the consumer, should be allowed to dictate where my
data can and can't go".

------
cm2187
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.

~~~
jdmichal
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.

~~~
cm2187
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.

~~~
ghaff
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).

------
xmly
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!

------
draw_down
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"...!)

------
jrochkind1
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.

~~~
smileysteve
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.

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

------
jonathanmarcus
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.

------
jldugger
> 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.

------
juddlyon
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.

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

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

[https://medium.com/@rockstox/an-inside-look-at-homejoy-s-
fai...](https://medium.com/@rockstox/an-inside-look-at-homejoy-s-
failure-391d74524a19#.2k6yiimz8)

------
husseiny
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?

------
fab13n
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.

~~~
ScottWhigham
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...

------
paulus_magnus
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.

------
siculars
"disintermediation"

How about a business model that takes that into account.

------
ChristianPerera
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..

------
skhatri11
TLDR. Summary: Burn was too high.

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

------
mrmch
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).

