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.
This is the key failure.
Anyone's whose regularly procured cleaning services knows the dance. You find a reputable cleaning service, they send out a cleaner. If you don't like them, you keep asking for a different one. When you find one you like, you ask them what they'd charge if you deal with them directly.
Why should they pay an app developer (or cleaning service) a cut of their profit when they can just show up and earn it themselves?
Most of the house keepers I've known did this until they'd built up enough of a consistent clientele that they could break out on their own....eventually building their own "crew".
Cleaning services are only good for businesses who require a paper trail for tax deduction purposes and who aren't as price sensitive as individuals.
This is effectively the yellow pages model, where cleaners pay for leads via advertising placements, and own the long-term relationship with the customer.
I dunno. My success rate was 25% at best. Found a few contractors I really liked and kept contact info for. And had a half dozen that only used the "deals" to try to land big remodeling jobs.
Office By Q is a good example of really trying to understand customer needs and putting a compelling proposition into the marketplace.
For in-home cleaning, there might be a middle-ground. I could see trying out a few cleaners to be useful and selecting a favorite. Or maybe 2 different cleaners with different specialties rotating. But for just scheduling the same person at the same time, you can't really count on taking an ongoing cut.
Its the standard in every industry. Once you've built your ground, you never like to go through a third party.
Uber's advantage comes from catering really well to ad-hoc, short-hop travel, but this is a different market.
(taxi expenses are covered by his work but personal car travel is not, so he doesn't drive, go figure)
It becomes a natural fit.
Uber kind of services work because they are currently burning millions of investor money to subsidize your travel. Once they run out of money, you are back to the same thing again.
Which is why some times you must do extra work for free, because it keeps people around you happy and in return they are indebted to do something in return for you(Recommend you, tip you, hire you etc)
Traveling adhoc without planning is only for single 20 year olds start up techies. People with families, elderly etc generally have to plan in advance if they decide to do something.
I can't count the times cabs just no showed when I was living in DC. Nearly missed a few flights.
Yes, for sure. I've had professional home cleaners for nearly 10 years now. And over the course of those years, I've had many conversations with friends and neighbors who do as well (e.g. in giving/receiving recommendations). I can't imagine using a service that sends someone different every time, or even someone for whom I can't see reviews and receive references before the first visit. I think most of the people I've talked to are in the same boat. This is a service that requires putting a lot of trust in the service provider. I could potentially see myself using an app that helped me find a provider, but it would need to give me a lot of information about them up front, and let me choose from several. And then it would have to let me keep getting the same person every time. It ends up being more like an Angie's List than a Homejoy.
For something like a handyman, where the service is less intimate and less frequent, this might make more sense (though I have had enough horrible experiences with handymen that I also would want personal recommendations at this point)...
The morning of my appointment I looked online and they'd switched my cleaner. The new person arrived 45 minutes late, did a poor job, and tried to get me to book her outside of Handy.
Finding someone on Craigslist is easier and cheaper. Answer a random ad, asses quality after their first visit. Either book them on a recurring schedule or move on to the next ad. The only difference is paying with a cheque rather than a CC.
After 4 different attempts to cancel we gave up and called American Express. They blocked Handy from charging the card again and did a chargeback for every dollar we ever spent with them.
Against my better judgment, I attempted to book through them again the next week. Cleaner didn't show up and would not answer his/her phone.
On numerous prior visits the cleaner was very late and/or did a very poor job. Handy doesn't care.
This is a truly terrible service--one of the worst experiences I've ever had with a company.
Apps like Handy want to invert that, but in the case of Handy they basically failed to provide the consistent quality and a critical mass of cleaner to offset people reluctance to engage with cleaners like this. This lead to the kind of frustration the parent describe. The real loss for Handy is not the cancellation or even the loss of that customer for good, the real loss is that they lost the recommendation of that customer and recommendation is the main way your currently chose a cleaner.
If you pay for Bob to come over and clean your kitchen because you know Bob does great work, it's perfectly reasonable for me to call you up and say, "Bob's sick today, can I send Jed over instead?" But it's also perfectly reasonable for you to say "no, so cancel my appointment for today." It is not reasonable for me to charge you a cancellation fee under that scenario.
Here is the relevant clause from the Handy TOS:
"Handy cannot guarantee that the same Professional will be scheduled for each Recurrent Service appointment"
Next, they make it worse by charging a fee for the pleasure of being disappointed. Pretty bad customer experience.
But it's not good customer service to notify your client that their request can't be accommodated when it's too late for them to do anything about it. If the notice was prior to the cancellation-fee period, then sure, charge the fee if canceled within 24-hours. But if you give me late notice, at least allow me to late-cancel in return.
If they let you book a Pro and that Pro cannot make it on late notice, it is absurd to charge a late notice cancellation fee.
At least Amex is great about not giving a shit about awful TOS. If you screw your customers over and accept Amex you'll soon find out that you won't be getting paid.
"We'll do our best to match you up again on your new booking, but please understand that as an independent contractor, it is up to the discretion of the professional to accept or decline your booking. In the event we cannot match you, another professional will be assigned."
If you don't like that deal, don't take it. But don't be all pissed off when they do exactly what you agreed to.
The reason the cancellation policy exists is because if you cancel the Professional doesn't get paid and it's too late to rebook them to someone else. According to Handy, the cancelation fee goes to the Professional who you cancelled on. In this case the Professional cancelled, why should they still get paid?
A cancellation fee makes perfect sense in many cases, but sometimes companies take their own policies by the letter even when it's infuriating and bad for everyone. A better tack is to instead think about what the policy's intent is and how to handle it like adults. Usually in these cases the customer just shuts up and pays the fee and will never use the company again, but at least this time they had the follow through to take their money back (and if there's one thing a company notices it is their merchant account sending money in the other direction). A win for the little guy, great job OP!
If Handy doesn't like the deal where an Amex customer can request a chargeback for inadequate customer service then they shouldn't accept Amex as payment.
That being said I have had Handy come and clean many times now and not changed it, so I think there is a slight convenience factor. It would be better if Handy just facilitated the direct communication with the same person to come every time. And instead of charging me a fee, charged the cleaner a kind of 'management' fee. I think that would better.
The alternative is if Homejoy would have treated Cleaners as employees and properly trained them. A properly trained and paid Cleaner as an employee would have provided that trust you seek.
If I'm paying someone less than 100$ to come in to a place where they could walk out with $10K+ worth of electronics, jewelry, etc I either need to be there to supervise or have a long standing relationship with the person. Ideally I would like to know enough of their other clients that a single robbery doesn't make economic sense for them. Once the relationship exists the agency brings minimal value.
What if the highly qualified employee from Homejoy was for $200-$250?
Finding a warm body to drag a tepid rag around your countertop is easy, sure, but finding someone who's 1) consistent 2) always on-time and 3) not $100/hr is next to impossible.
Perhaps in a large metro it's easier, but I've had basically no luck in suburban silicon valley.
I live in Silicon Valley now. . . found the best cleaner I've ever had. Very happy with her and her helper's work.
Back in the day I had a cleaning service that I trusted and used regularly put a wet rag on top of a CSU/DSU . Not something that I ever thought could happen. Ironically the spare CSU/DSU was sitting right next to that. (Cold and ready to be put in service if the main one failed.) There were of course vents on the top. That's where the rag went. And I was near the equipment at the time (I would never let a cleaning service in where there was sensitive equipment without being onsite).
e.g. "I have never had more problems with any service or company than I have with this business."
When you're standing on an unknown, rainy street corner far away from home, a taxi's services are urgently required, and not abundant. When you're lounging on your sofa and start contemplating how it would be nice for someone else to bin the pizza boxes, it's the opposite on both counts.
Moreover, I don't see the money men being impressed by a founder who can put out a piece so toe-curlingly embarrassing as "Dear Future HomeJoy Engineer".
Does Y-Combinator review those posts at all before they go out and provide any guidance? If not they might want to consider it...
But there is no reason that an app-based cleaning service can't succeed, full stop. There's plenty of room to add value, just like there is in any other business where you can get economies of scale. Homejoy just didn't focus on those parts of the business.
- Partner with P&G and Unilever to get access to trial products that you can give to your cleaners to try
- Act as an agent to negotiate group rates on stuff like health insurance
- Provide business services if you book a certain number of appointments each year. Tax help, those kinds of things.
- Maybe you can provide access to events or something where Homejoy books a group of cleaners and since it's a business you can charge them good rates
- Find other way to book cushy jobs that you can give access to for your most used cleaners
Obviously there's a 1099 line that they don't want to cross but if you provide access and opportunities and tier it based on appointments booked then you provide incentives to stay on the platform.
Similarly for customers, do things like give away cleanings or discounts randomly. Use your partnerships from above to give customers free stuff or coupons. Sell cleanings in 10 packs or offer a monthly or annual subscription that comes with a discount.
That is, once a service provider has a customer, that customer represents the overwhelming majority of value to be had by the service. Likewise, for a customer who is happy with and trusting of a cleaner, discounts would likely have to be unsustainably large to move them.
Finally, with the middleman in the transaction, discountability is actually eroded. There is really little economies of scale to be leveraged at the cleaners' level and customers would probably come out better if cleaners simply passed the Homejoy cut to them.
edit: I'm in Chicago
That said, I'm sure "doesn't seem to be struggling from what I can tell" could have been said about Homejoy, until it couldn't. Venture capital makes it difficult to tell who is succeeding, and who just has money to spend.
My first question when I heard of them is how they prevent cleaners from ever using the platform again. This seems to be the single biggest long term stumbling block, that they never really got close to solving.
Aside: I saw Adora at the London StartUp school hosted by YC. She really didn't come off that convincing to me. Then she said something really, really strange - "You don't fail until you give up", and I wondered why someone would say something like that.
The thing that convinces me is her determination. She worked as cleaner before starting the business, and understood some of the pain. She probably overlooked at the issue and probably overconfident like the article cited, but someone who was willing to cover cleaner to apologize for cancellation on Thanksgiving? That's very good for her (but unable to prioritize some critical negativity in the algorithm? that's just sad). Without knowing the full story (we are just hearing fragments from allegedly ex-Homejoy employees), I think the business model is not profitable. Maybe doing cheap is really hard, and doing fancy and professional is the only way out.
No, it didn't. Some of my previous comments:
Homejoy won't be the last company of this type to collapse.
My next cleaning comes around, and I'm hit with a $101 charge. The receipt literally says "Price: $101, Discount: $58, Total Charged: $101". I end up having to go back and forth over Twitter DM because they refuse to respond to my emails and pick up their phone to get my charge adjusted. I ask if the remaining three cleanings that I was signed up for would honor the $43 price reflected in my account summary. They said yes.
The day before the next cleaning, I get hit with the same $101 charge. Again, I reach out to them and spend about three hours going back and forth finding out that the "last representative did not provide the right information", and that I need to "show the coupon code (I) used" (there wasn't one). I ended up getting my service cancelled for good.
Terrible. Never again. I'd rather pay a premium for a real cleaner to show up.
Handy is also facing lawsuits:
Handy isn't the only one, and this ought to be illegal. If I can sign up online I ought to be able to cancel online.
These companies can lie to themselves and the public all they want - the exclusive purpose of making you call to cancel (or worse, visit a physical location) is to discourage cancellations. It compromises the notion of a free and voluntary exchange of money for services.
And if you send in the paperwork, but not by certified mail? They'll toss it, unactioned.
How can the gyms get away with this?
It seems like providing the gym itself is more of a side hobby to the main business: find people to bill and keep billing them whether they like it or not, and build a core competence to avoid ever not billing someone.
One time, a new cleaner showed up, but I wasn't home. She didn't have the key, and so she couldn't clean. I asked for a refund and never got it.
However both of these sites will have the same problem as Homejoy. I used rover.com to book pet sitting just for the insurance, but after a few positive experiences, I am now booking directly with the pet sitter. Same thing happens on care.com almost all the time.
These sites are more valuable as a craigslist or angie's list competitor: Use them once or twice per year, then don't visit the site again after you've found your provider.
They should focus on making money from listing fees, insurance premiums, and being the strongest market for their respective industries at all times, so that when I go back to the site in 6 months time, I can trust that it will be just as good an experience as it was last time.
Furthermore, they're doing the typical thing that businesses resort to when they're desperate. They're asking you to review every single damn time you use their service. (I had the same sitter for 30 weeks in a row. Clearly I like her or I'd use someone different. Stop bugging me!)
They also try to steer you towards using their service more when there's no need for it. Every time I book a stay, they want me to look into other pet sitters on their site. Why would I do that? I'm completely happy with the one I found. If I ever need a change because I move or the sitter moves, or we have a falling out, I'll consider looking for a new one. Until then, get out of my face!
And on top of it, they're trying to push services I don't need. I never want someone to come to my house to walk my dog. I don't need strangers coming by my house. And I need an overnight maybe 3 times a year. (And I'll continue to use the day sitter I have as they also do overnights.) It's almost impossible to find a day sitter on rover.com, and they seem to be pushing everything but that.
Their whole model seems like it's living on borrowed time to me.
In my state, you need to be licensed to provide child care. It looks like California and a few other states are similar.
It seems to depend on how many children are being looked after and where the care takes place.
Home joys minimum worked out to be about $75 per visit... So about $37.5 per hour... And I don't think folding clothes as a service worth $600 per month.
It's more of a hassle to schlep the clothes to & fro, but may be better value to you.
So, yeah, it's hard to see a couple of hours of work costing less than $50 or so. And, if this is a weekly or more frequent expense, that starts to add up. I have a housecleaner come in every few weeks and it does help to keep my place in some semblance of order, but it's definitely a luxury expense and I would probably be too cheap to have it done weekly.
As a W2 employee, yes. If you're asking someone to work as a 1099 and eat their own self-employment taxes, transit costs, etc, that's going well below minimum wage.
Minimum wage can be as low as $7.25 for W2 employees. This calculator suggests that corresponds to only $10/hour for a contractor: http://www.rate-calculators.com/
I find ghaff's argument more compelling: people will pay more simply because they want someone they can trust in their home.
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.
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.
Lead generation is a viable business, as demonstrated by Yelp (and previously Yellow Pages), it's just not hot and fast-growing.
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.
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.
There's going to be a huge difference between businesses where customer acquisition is needed regularly (eg, taxis; it makes sense to take a different taxi with a different driver, based on whichever is closest to you) and where customer acquisition is needed infrequently (eg, cleaners; it makes sense to use the same cleaner over and over, on a fixed schedule).
I mean, Uber's success is that it connects where you are with nearby drivers. The map.
We could similarly have a "map" not geographically, but thematically, of nearby service providers. I need a foundation guy who does green technology. Or a cleaning lady who knows how to work with antique mahogany.
Of course, this kind of map is far harder to do than a simple GMapps GPS system. So you'd need more human overhead both walking new service-providers and new customers through the tagging system of describing a service.
But still, there's room for that: a complex recommendation engine where you describe the kind of job you need done and it links you up with local experts in that kind of work, combined with Uber-style ratings. Google sucks for this.
You target a high price-point because you shoot for the one-offs, which means they may need human arbitration. Anything repeating and you'll lose them to direct personal relationships anyways - you add value and get profit from the first-time use of a new service-provider.
Something in-between Uber and Yelp, "do stuff at my house".
But you don't get to be a billion dollar unicorn by developing an in-house app for a house cleaning company.
Has cleaning been unionized or tampered with? If anything, I'd almost think it's shifted further to the other side, there might be undocumented workers and more cash businesses than taxis have, even less regulation if you will.
If the market is working, then what's the value? They help customers find cleaners more efficiently? More efficiently than Craig's list and the other sources?
I have considered getting a monthly maid service and I live in the DC metro- somewhere with a ton of choices on that front- and I have not quite pulled the trigger on it because I am pretty freaked out by paying someone to have unfettered access to my house. I don't even have anything expensive to steal or break! There is zero chance I would trust a maid from Craigslist.
That creates a peculiar Venn diagram of people paid too much to clean and simultaneously don't own anything.
This limits growth potential. The customer pool is always going to be extremely small.
On the other hand "everybody needs a taxi" sooner or later for some reason.
It might work as a platform where they only take a cut of the first transaction. But, you’re still stuck with high customer acquisition costs and minimal repeat business.
The other option is to directly higher the cleaners so they don't defect. But, then you’re just running a cleaning business and competing with those who have minimal documentation.
Not likely to end your relationship with Uber entirely, but Uber doesn't do pre-planned trips; an individual driver may.
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.
That explains the low single digit success rate. And that is not really the ethos either. It is mostly a translation of lack-of-experience.
Silicon Valley is a business arrangement. Some folks have money which they spread over a bunch of high-risk/high-return investments. They net out positive. What we get is handful of mega successes, tons and tons of failures, lot of marketing noise, opportunity to work on some cutting edge experimental stuff. It has a mix of people living well (which we hear about) and people who endure bad living conditions.
Couldn't that be the problem, too?
Couldn't agree more. I work at a unicorn and if we blow it there will be a very similar hindsight- and mediocre-employee- biased article. We aren't idiots, we are all taking calculated risks and sometimes they don't pan out.
Also, if Homejoy ended up becoming the next Uber the anecdote about working over Christmas would have been celebrated instead of derided.
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.
> "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.
"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.
I am remembering this. One of those quotes that simplifies but essentially explains a host of unsustainable businesses.
“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.
Perhaps there are CEOs who've scrubbed exactly one toilet for the photo op. Cheung isn't one. She learned the job and led from the front. Some stories are here: http://www.femalefounderstories.com/adora-cheung.html
You're right: the Cheung story from that page is much more compelling than the one in the lede of this article. For those who haven't clicked through: Cheung and her partner started a cleaning service (with them as the cleaners), and Cheung took a job at a cleaning service to learn the ropes.
There are plenty of ceo/founders who would consider themselves not responsible for doing the dirty jobs that make a company work, particularly on a holiday such as thanksgiving (in the US, a very family-time centric holiday)
The model appears to be centralize lead generation nationwide, pool support resources, and then price below market. In some cases that pricing is a result of VC subsidization of middle class customers. Longer term it would have to be through operational efficiency gains.
What makes this easier to stomach is the poetic justice of contractor "leakage" eventually killing the business.
Frankly, I failed to see (and still fail to see) what was disruptive about their process. They were essentially competing in a close to perfectly competitive market (with some minor level of differentiation).
Contrast that with Uber, who was able to capture most if not all of the Schumpeterian rent.
Lead acquisition at a mom-and-pop agency is the 10% project of the owner or office manager or, at best, a local SEO/AdWords/etc agency. The platform companies, by comparison, can totally hire ten people with skills superior to mine to do it, as their only job.
Mind you I'm also not sure that the national chains are a particularly great product for consumer cleaning. I used Merry Maids for a while and thought they were meh. That's an anecdote but the reviews aren't great in general.
Now I have a regular housecleaner who my neighbor recommended and she's great.
Anyways, who picks up their phone and fires up an app to demand that someone comes over and cleans up their house, right f-ing now!
I also suspect that the "on boarding" process of learning to clean probably didn't filter out the candidates that were really passionate about the business so much as it found the ones that would put up with just about anything. I don't know too many top tier developers that would do that. I do value the concept that everyone should understand the dirty work but this particular case might be outside the useful realm of that.
In my opinion, a sane business starts out with the CEO/founders doing the actual work, and only after a great deal of expansion does it reach a point where upper management can think about being disconnected from it. I guess massive VC funding allows companies to skip straight to the second part.
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".
Is there some actual self-consistent, generalizable model behind what you're saying that improves my ability to think about ethical obligations, correctly rejecting or accepting some of them, or were you just signaling there?
Or don't, but don't pat yourself on the back for not doing it.
The question was how the random point about maids relates to the rest of your original comment, and why I'm supposed to throw cash at everyone I come into contact with who's doing their job (as suggested by the original responder), not "how does tipping affect wages?" or "how do I get cash?"
It didn't answer my question to tell me that they're underpaid. 
Second, the existence of the tipping expectation dynamic does not "seal the deal" here: it's well known that there is a large group of people who have no idea that "it's a thing" that maids get tipped. If you want to fight against the tipping system, this is exactly the situation where you should do it, where tips aren't reliable anyway -- just like tipping for takeout or at food trucks.
Finally, I really dislike helping people evade taxes at my expense.
I entered this thread thinking that people who confidently gave advice were familiar with the relevant dynamics and that I could learn from hearing their worldmodel. As it turns out, the responses are just repetition of what I already know (with condescension and moralizing), in a way that doesn't answer my questions. Fool me twice, shame on me. It was really too much to expect that someone who told me that I should tip "too be nice" actually has a self-consistent, scalable model to back that up.
 Remember, "underpaid" is not the same thing as "paid less in expectation of getting tips"; lots of jobs are characterized as underpaid irrespective of tips. You're not supporting the original responder's argument by repeating the obvious tipping dynamic; you're making a different argument.
"there is a new breed of startups that's in the business of selling dollar bills for 50 cents and the bills are counterfeit. Cash out before we're caught."
It really says it, considering that much of the VC groups not only allow breaking the law, but encourage it in the name of "progress". And you know, who cares about the worker anyways. They're replaceable (until the specific AI comes and takes that job.)
And quite honestly, most Uber drivers don't want to be employees. They want the freedom to drive whenever they want just by clicking a button on an app.
The only person that wants to force an employee/employer relationship on Uber are a small handful of angry drivers, and the state.
Kind of puts the motives into perspective.
> Many of the laws are crap anyways and due for replacement - taxi medallions being the canonical example here.
Agreed. It came from a time in which kidnapping and other nefarious tactics were used. Certification and medallions were the answer to that. Their time has grown old.
> And quite honestly, most Uber drivers don't want to be employees.
Unsubstantiated. How about asking if they "Believe the compensation is enough to offset the risks they take as self-employed, plus license compliance and commercial driving insurance?"
Having not run the numbers, I would guess that the risks and costs leave UBER drivers worse off than not working.
> The only person that wants to force an employee/employer relationship on Uber are a small handful of angry drivers, and the state.
Unsubstantiated. When you get into a wreck driving as UBER, and UBER tells you to lie to your vehicular insurance regarding commercial traffic, yeah, I think there's something about the anger that's justified.
And a company that takes advantage of people, recommends felony insurance fraud, and blatantly flaunts lawbreaking in everyone's face, yeah. Something needs to be done.
I know... we're not in a bubble now... but losing money and making it up on volume was the big joke back then, iirc.
It's ok to say we're in a bubble. These companies that are selling goods at a loss predicated on the availability of venture capital, with no clear path to profitability, show that we're almost certainly in a bubble. The real question to worry about isn't whether or not we're in a bubble, but rather how substantial of a bubble it is, and how many companies might have exposure to it.
I've heard people tell me "all these startups with funny money are driving the housing prices up." I can only sit there in response and hold back my snarky "yeah, and I'm sure the giants who have tens of thousands of engineers on staff with billions in profit aren't contributing at all."
Also, everyone who uses home cleaning services usually uses them recurringly. I don't know what kind of value this kind of service can add, except in the initial "find the cleaner" part.
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...
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?
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.
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.
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.
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."
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.
So when did HomeJoy stop trying?
But so are the taxi companies and hotel chains.
The very idea of investing in a unicorn business is that it will either corner the market or go bankrupt, is it not?
How anyone can imagine that they can corner the market in this industry is beyond me!
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.
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.
(Not saying it great, but it is good for the costumer is the short run.)
> ...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.
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.
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.
This indecisiveness and the lack of vision or clarity of business goals really cost the company very dearly in execution and contributed to their demise
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).
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)
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.
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.
Personally I would like a private office but I'd always leave my door open.
Personally I am getting to a point where I would be thrilled with even a "grad student" setup: three desks to a room and if someone needs to talk they go into the corridor if not a meeting room.
It cannot be that expensive to give people working with their minds some peace and quiet to think.
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.
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.
>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?
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.
A lot of companies will fail because their investors will lose patience and no longer support subsidized pricing.
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."
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.
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.
We also have a precedent of wage negotiation for a part-time job in a service industry - an employer advertises a job opening at a given rate, interested parties are welcome to apply, disinterested parties are welcome to move along. (It would have to be a part-time 30-hour-a-week-max job to avoid the ACA penalty).
It has worked for retail, restaurant, manufacturing, logistics and some other industries, why would it be a show-stopper and game-changer for home cleaning industry?
It's not even a drastic change, where 100% of the workforce has to be entirely 1099 contractors or W-2 employees. As long as both options are provided and conversion at later stage is a possibility, it keeps everybody placated.
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.
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).
1. Wage disparity
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.
>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.
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.
Demand is not constant, but adjusts in response to price. Would a low-income worker rather be a zero-income worker, because no-one is willing to have him work for the wages your regulations demand?
It's a no-brainer to cut out employment law and make the choice between "work crappy consultant job or don't work at all", that is, if you can sustain it. Homejoy couldn't, because of gross mismanagement and eventual reclassification by the IRS.
The ultimate goal is to remove all human labor from the market. UBER already came out with that statement: they want to automate their fleet as soon as possible. It's also the trend of every company to reduce labor, increase automated work, lower wages, and increase profits. Damned be the employees/consultants/1099's/hoi polloi.
Why am I against "Sharing economy"? I'm not. What I'm against is "What are we going to do with 50% unemployment?" Republicans can't even contemplate science, and are busy bickering about climate change. Democrats have only a basic view of 'workers good, companies bad', except when they are being funded. But still, the question remains is "How do we transition to an economy that can handle massive unemployment with a great deal of goods and profit being made?"
(Source: https://www.sba.gov/sites/default/files/The%20Impact%20of%20... PDF page 13, paper page 7)
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
Possibly the only difference is that before they were given a sensible name (like "failed startup") instead of "dead unicorn".
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.
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.
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.
You can't make an Uber or Google or Facebook or Twitter without VC money, it simply can't happen.
Uber, Google, Facebook, and Twitter all had working products that were attracting users faster than they could service them before they took VC money.
Even though funding was required in the businesses you listed, none of them would've grown to the size they are unless the market demanded it.
I know this sounds obvious, but it seems to be a counter point to the behavior I see in SV startup stories.
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.
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.
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".
In one case you're risking personal items and privacy; in the other your life is actually in that person's hands.
On the other hand, home burglaries are so common they don't even make the local news.
Of course folks have plenty of incentive to not steal - they have self-respect.
Almost no actual landlord will take your security deposit and run but there's plenty of people on Craigslist posing as landlords to do just that. So the moral of the story is try not to be taken in by a scam.
Probably this was not meant. But its been a hot button, the casual assumption that housekeepers are thieves, since forever. I guess I read that into the comment too readily.
I think you are picking on a rather objective and dispassionate observation about incentives to take a grandstanding against classism, I appreciate the sentiment but the execution is flawed.
Did we read the same post?
With a house cleaner, my desire to keep my possessions is at odds with the cleaner's desire to have more stuff. I have to count on their desire for repeat business, or their morality, to outweigh that.
Maybe it makes sense, though, because the other person in the interaction has more incentive to defect when given access to all of your possessions than when given control over you yourself. That is, you have little reason to think that the Uber driver is working at cross purposes to you, and mainly just have to take their competence on faith. With something like Homejoy, it is their character and motivation you are gambling on moreso than their competence.
I haven't heard of people abusing Homejoy to rob houses or anything, but it seems not entirely stupid that someone would worry about bad actors more than incompetent ones.
While trusting someone with your physical safety should be a
high-trust decision, we treat it cavalierly enough in our day
to day lives that most people clearly don't worry about it.
Essentially our lives are in other peoples' hands pretty much 24/7!
Going back to Uber vs. Homejoy, the level of risk differential is much higher with Homejoy, because when using an Uber, you are probably not assuming much extra risk compared to what else you would do to get where you are going. For a cleaning service, then the risk differential is noticeable ('someone has access to my house' vs 'Only I and my family have access to my house') when jumping up from "doing the cleaning yourself". If you're comparing Homejoy to other cleaning services on a risk basis, you'd have to actually look at the numbers. I'm really not trying to bash Homejoy or cleaning services here.
If an Uber driver wanted to hurt you, he would be extremely likely to pay the legal price. After all, there's an electronic paper trail of the ride he gave you. So an Uber driver won't do that unless he's essentially insane and a) doesn't understand this or b) has nothing to lose and doesn't care if he's caught or c) thinks he can get away with it because you're incapacitated/inebriated or something.
Whereas with housekeepers, it's more a crime of opportunity. They notice that you have valuable items laying around that won't be missed. Or an acquaintance of theirs pressures them for tips on houses to rob. A housekeeper that's an otherwise "good" person can convince themselves that it's a victimless crime if they decide that you won't even miss the item(s) they take. I mean, who wouldn't be tempted to take a shiny, never-used bauble from the home of somebody with 10x their income if it was the difference between having food on their table or not?
Don't get me wrong - the vast majority of housekeepers are great people. I have family members that clean houses. I just mean that an Uber driver would have to essentially be insane to harm you, whereas a housekeeper would just have to give into temptation in order to pinch some items.
You may be trusting a cleaner with you possessions,
but you're trusting that Uber driver with your life.
2. If you have things worth stealing, each person you let into your house increases the odds that a robbery will happen. Maybe the cable guy isn't a burglar, but how many friends does that guy have? 50? Is one of them a burglar? If you were a burglar and you knew a cable guy, wouldn't you bug that guy for tips?
3. Any home burglary is potentially dangerous to one's life. Who knows what happens if you're home while the robbery is in progress or if you arrive home while it's happening.
So yeah, there's a trust factor there!
I do agree there was a trust issue with Homejoy (I've personally tried them once and had similar concerns). But, I don't believe the issue was that they were in an unviable business where trust can't be gained, but rather they didn't have the right mechanics in place that help develop the necessary trust between the consumer and the cleaners.
For large valuable items, they inventory them before the rental, and check the inventory when the rental ends. As such, a thief trying to steal from an AirBNB can only take large expensive items (like the TV), and will be immediately caught during the check-out check.
Cleaners can quietly lift the pearl necklace you only wear for the holidays and you might not notice for a few months, at which time you might have 6 homejoy cleaners as possible suspects. People don't want to theft-sanitize their homes every time a cleaner comes.
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!
(And those are the "good jobs"...!)
> 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.
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.
They should sell the software to local providers, the booking features were quite nice.
* 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.
How about a business model that takes that into account.
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..