If Uber have had defend their case and employee classification, perhaps HomeJoy may get their next round of funding and not have to close...but year, the timing sucks.
Wow. Lots of doublespeak from the founder in the Re/code piece. While it's true that "The [California Labor Commission’s] Uber decision...was only a single claim", I'm not so sure it was "blown out of proportion." You could also see it as the tip of a big iceberg. Presumably, that's what the investors they were courting thought.
If Homejoy cleaners were going to be classified as employees, entitled to minimum wage and subject to being verified as citizens or legal residents, then this seems like the right move. I can't see how they would ever be able to compete on price with all of the independent outfits out there that employ undocumented workers.
It's one thing to sell your services at a loss while you're growing. In the home-cleaning business, though, there will never be a shortage of undocumented immigrants willing to work for less than minimum wage, quite possibly at a higher quality level. There would be no way to ever raise prices to fully cover costs without immediately losing out to that competition.
That's probably part of it, but also, to the extent that they were bona fide contractors, the cost of actually policing them to prevent direct contracting with and referrals from the people they were matched with through Homejoy was probably a problem.
Contracts may theoretically restrict this behavior, but actually policing them is non-trivial.
Yeah, I think that's part of the general cost breakdown here: something like house cleaning is already very competitive so there's a pretty narrow range where you can convince workers to give you a cut without pricing the service out of consideration. Successful attempts to do that rely on high volume, which is completely incompatible with the kind of things you mention or even basic customer service and quality review.
The biggest is probably that the home care industries operate on such a shoe string budgets that there really isn't all that much room for a middleman to take a cut.
This isn't taxis where you can bank on regulatory arbitrage to take a cut. They seemed to be trying to make money on customer acquisition and scheduling, but I'm sure they realized too late that their partner companies don't spend a huge amount of money on those activities.
> This isn't taxis where you can bank on regulatory arbitrage to take a cut.
If anything, the incumbents are better positioned to arbitrage the law/regulations in this case. An online service like this leaves a paper trail, which makes it much harder to use the "shortcuts" common in the cleaning industry: use of undocumented immigrants, underreporting of taxable income, etc. Much easier to do that in a pure cash business with informal booking.
They got in trouble with lawsuits because of the recent Uber employee vs contractor verdict. In addition, they were bleeding cash in customer acquisition so that didn't help too. The lawsuit was the trigger but the bleeding of cash was the fundamental reason.
Was this the company that posted their ad directly onto HN talking about how happy they were to be working on Christmas eve (or whatever holiday it was)?
I used Homejoy and I liked it's ease of use. But after the cleaning lady they sent me was done, she offered me her direct phone # and told me I could contact her directly for any future cleaning needs.
I always wondered how this business model was going to work if Homejoy's contractors could just give out their phone # at the end of their first service and the customer could just contact them directly for any future needs, instead of going back through Homejoy for any future bookings.
Founder of Lawn Love here. We think a lot about disintermediation risk.
We do a number of things to prevent it, but it ultimately comes down to providing enough value to the supply side of your market. If you build a product that drives real, ongoing value for your service pros, they will be much less incentivised to cut you out of the transaction. The same is true for the demand side.
Also, lawn care has a reduced risk profile compared to services that take place inside the home (maids/babysitting, etc). There is no key hand-off and the nature of the service is somewhat less intimate. Our customers don't need to be present for the work, which both reduces this risk and boosts the value of our platform as a means of managing your service.
I think one of the issues with Homejoy and disintermediation is that cleaning inside the home is well up the intimacy scale. It's different from say a commercial cleaning service. The risk for the customer is that next time they will send someone different. The new person will be more of an unknown quantity whereas the current cleaner, if they are good, is exactly who the customer wants sent out next time. When this happens, the customer benefits more from coordinating their schedule with the individual cleaner than from the on-demand scheduling via Homejoy.
For Homejoy, saying "we are bonded and insured" reduces reluctance for a first you or when on-demand service is the primary consideration. But for recurring service, having trust with an individual beats the crap out of being able to point to the contract or collect against a bonding agency if something goes wrong.
Do you schedule the customers close by to minimize travel time for your lawn care guys? I know cleaners that drive across town to jobs, effectively losing money while they're stuck in traffic. I don't know if Homejoy did that.
To incentivize that, you could offer discounts for neighbors who use the service together. If Homejoy had a bunch of apartments in one location, then cleaners would make more money per day.
Yep, that's one of our primary value props. Once we reach critical mass in a market we're able to do job clustering and route optimization. More jobs per day + less time spent burning fuel sitting behind a steering wheel means much better economics for our lawn pros.
Aren't lawn care providers already pretty much doing this by means of fragmentation? (i.e. in one suburban town, there are only 3 providers that serve the whole area) What additional value do you guys provide that isn't already there?
That's not actually the case for a market of any scale. More like 1000 providers / market. :)
Also, routing optimization is a fairly hard problem and requires significant critical mass in a geo. Pretty hard for individual service providers to build this on their own. The closest thing may be a small-town service pro who has been in business for 30 years and eventually reached sufficient mass / frequency to optimize his routes, but that's a rare case.
> They stated they are folding primarily because of lawsuit pressure, not referral issues.
I haven't seen any reasons for the closing. Where was this mentioned?
Edit: More reading turned up a shady Re/Code article proclaiming that the Uber decision shuttered Homejoy. Loads of clickbait, nothing firm in the way of substantiating the title.
The gig economy works for things like driving because there's little benefit in having the same person do the job every time because the job varies (the pickup and dropoff places are different, the time of day is different, etc). There's no reason to care about who is doing the work. When it comes to things like cleaning that is very different. Who you let in to your house matters. Homejoy's benefits are worth something while you're 'auditioning' cleaners, but once you find one who's good at cleaning, reliable and honest then those advantages evaporate and you're better off hiring the cleaner directly.
I'd wager that most AirBnB stays are one-offs on vacation. Home cleaning is recurring, making it more vulnerable to the "here's my phone number" weakness.
AirBnB's that business now. They used to claim they were only a matchmaking service and any risks were to be worked out between the homeowner and renter, but after some really bad publicity c. 2011, they've really doubled-down on customer service and insurance. Everyone I've known whose had a bad experience with AirBnB lately has had it turned into a good experience.
"Everyone I've known whose had a bad experience with AirBnB lately has had it turned into a good experience."
Minor nitpick on this... it's doubtful that it 'turned into a good experience', as much as "AirBnB was able to compensate, monetarily or otherwise, for the bad experience (which still exists)".
AirBnB goes to a lot of lengths to make sure you at least have to book through them the first time. They filter out phone numbers and email addresses in messaging, even if you try and get clever (like spelling out phone numbers).
Easy recurring payments, payment processing, scheduling, job details (customer A gets the whole 9 yards, customer B only needs X, Y and Z), easy customer communication, etc. But I'm not a cleaner so I have no idea if those are worth it.
Give new customer priority to the contractors that have a high in-service retention rate, perhaps. If you have a history of customers who stop using the service after contracting with you, you stop getting customers.
Recurring business is really tough when you're effective just introducing customers to other businesses. Thumbtack handles this by not even addressing the recurring aspect, and focusing on getting good introductions. Recurring revenue is great, but how does a matchmaking service continue to provide value once a good fit had been found?
Thumbtack also services a very wide range of verticals, which allows them to succeed purely as a matchmaker. It's an inherent flaw in what folks like Homejoy were doing (although they had aspirations of a larger vertical focus).
I need thumbtack like 3 or 4 times a year. I need Homejoy once ever.
It never occurred to me to try hiring my HJ cleaner directly... If i have to travel and reschedule, i can just push a button on my phone and reschedule. I never have to worry about writing checks or tipping (thinking about it in hindsight.. does that make me a jerk?). The time I had an issue, their support made the experience "magical"
Also if a cleaner ever started to get lazy and cut corners, i have the option to just chose another one... that gives me a lot of influential power even if i never have to use it.
Those benefits are what made the service worthwhile for me... If I wanted to find a cleaner at the lowest rate and handle all the overhead myself i could just look on craigslist...
Not too sure about Thumbtack, but Home Advisor basically just buys Google Ads to get consumer traffic, then turns around and sells the lead to contractors at a higher rate. If contractors spent 20 minutes figuring out how to set up a Google Ad campaign, they could easily outbid Home Advisor for the exact same customer. I feel like this is pretty much the same thing Thumbtack does, with a few logistical differences. These business models really seem unsustainable (or rather uncompetitive) with any service professional that takes his or her business seriously and doesn't mind putting in the work to market themselves. These companies are basically playing Google Ad arbitrage.
FWIW Thumbtack and many other companies have the same problem, and it can be solved by just charging the cleaners more money for the initial introduction. Instead of charging 20% of the first cleaning, charge 50% or 100% or 200% and let them own the customer (Thumbtack charges fixed amounts but it is the same principle).
> FWIW Thumbtack and many other companies have the same problem, and it can be solved by just charging the cleaners more money for the initial introduction.
Which inherently reduces the degree to which the service is attractive to contractors compared to other marketing channels (which is really what it is for them), which reduces the contractors on the service, which reduces the value to consumers.
That it works in some industries doesn't mean that its an easy solution which works profitably in all industries.
I ran the same business as Homejoy but on a smaller scale in Germany before stopping last year (for a variety of reasons that I won't go into here). What you mentioned is the main reason we focused on holiday lettings and B2B cleanings.
A prediction about "sharing economy" companies. Almost all of them are tacking on a thin rind of web/mobile UI and smart dispatch technology to an existing service. The long-term winners will be companies like Flywheel that recognize this and focus on providing that service to existing operators, much like payment processors. This, of course, is perceived as a smaller market since they can't count revenue the same way.
EDIT: on the other hand, an advantage is they don't have to worry about acquiring customers, drivers, etc, nor the regulatory overhead of the underlying business, but instead just focus on customer experience, schedule/dispatch, etc.
Disregarding the competitive aspect, it's absurd to me that people praise banning Uber and Tesla for the "consumer safety" of taxis and car dealerships.
There is a significant consumer safety element to the way Taxis are regulated. The fact that this is used to protect a monopoly is a separate issue and I agree that it is a real problem.
The Tesla analogy is perfect, though. I've never felt like car dealerships being independently owned was a useful benefit. I don't see any reason why both models can't coexist.
> There is a significant consumer safety element to the way Taxis are regulated.
Whatever those safety elements are, I've certainly never experienced them. Theoretically they're there, I guess, but my (admittedly anecdotal) experience has been that Uber is safer in every way than taxis are.
* Obviously, whether the guy is going to try and kidnap you. Well, Uber has rating, but the background checks are pretty flimsy. Still, I'll concede that it may well be just as good.
* The second thing affects non-customers and it's ensuring the roads aren't congesting with a glut of taxis driving around looking for fares all day (with all the attendant problems that causes). While the average car spends 2 hours or less on the road in a day a taxi or an Uber is going to spend a lot more than that. I'm not really convinced Uber has an answer to that.
There are also issues like insurance/liability and so on that are rarely encountered, but are something of a big deal if they do come up. And there's the worker protection aspect of it.
You're missing the point, which is that the costs are not borne by customers but by everyone on the road. Supply and demand is not a mechanism to solve this kind of problem
I think taxi regulations are there to deal with a world way before mobile computing. The regulations addressed at it's heart an information asymmetry between taxi drivers and riders, especially with tourists.
With current ride sharing apps, a lot of that goes away. You don't worry about tampered meters and being driven the long way around, because the trip is GPS tracked on both sides for example. You don't have to worry about getting in a random car in a city with a complete stranger, because reputation systems have pre-vetted your drivers and your driver's cars. a If taxi drivers get angry at you for using credit cards or for short trips, you can complain to a central agency that will deal with it. In developing (and some developed) nations, these ride sharing apps have a better safety margin than the local regulations do. Inefficient systems like taxi lineups at airports are not necessary anymore.
The international nature of these ride sharing apps also give you a universal set of rules as you travel, and make it you can communicate your destination without being able to speak the language. The advantages go on and on. The companies making and creating these things don't really matter, but the general app really does and we shouldn't smother them with regulations.
> I've never felt like car dealerships being independently owned was a useful benefit
Eh, it was useful for car manufacturers when they were first getting going: they didn't have to put up the capital to open shop. The regulation came in when a dealership showed that a given region had high demand for the company's cars, so the company would move in across the street and undercut the franchised dealer. Obviously the franchised dealer had more clout with local politics than the auto manufacturer did - this is why all the dealership laws are state laws. It was kind of a legitimate regulation back /then/, but really has no bearing on things now (especially for a car company that has never franchised any dealers).
If by "legitimate" you mean "useful" or "good" (as opposed to the law not being passed through the established legislative process, because that criticism wouldn't make sense), then even then it was illegitimate. If the manufacturer can come in and undercut the dealer, they should. Unfortunately, the dealer was local and the manufacturer often wasn't. The same reason any protectionist measures are created.
In the case of using the "independent contractor" loophole to avoid paying UI, social sec tax, minimum wage, etc, it's an issue of making sure everyone plays by the same rules. Operators who abide by these rules should not be punished for doing so.
The quote from one of the lawsuits suggests that the 'independent contractors' really weren't very independent...
"Cleaners are unable to provide any additional information before jobs are assigned. For example, a Cleaner cannot tell Homejoy that while she may have picked different zip codes or cities as part of her territory, she only wants to stay within one zip code, or within one small part of a zip code, each day. Instead, if a Cleaner chooses Oakland and San Francisco as part of her territory, Homejoy alone determines whether the cleaner will stay in Oakland on a given day, stay in San Francisco on a given day, or travel in between the two cities multiple times on a given day. Furthermore, Cleaners cannot tell Homejoy whether they want a little or a lot of down time between each job, or each job start time or end time. Cleaners cannot tell Homejoy how much driving they prefer to do, whether the jobs need to be near public transportation, whether the Cleaners prefer to be stuck in rush hour traffic or instead on routes that are reverse commutes, how many jobs the Cleaners want to perform each day, or whether or not they want to return to a previous customer."
If that was the question, then these companies would be lobbying to get rid of those regulations. Far too many of them see their ignoring of regulations to be a competitive edge.
> The long-term winners will be companies like Flywheel that recognize this and focus on providing that service to existing operators, much like payment processors.
I don't think this creates a very big moat - that's essentially what Uber started out as (dispatch for private driving companies that already existed); they started letting anyone drive in order to meet demand.
If all the services are interchangable (and now, at least for ridesharing, it seems like they are), the winner will be the app that's used by default.
You would use the same house cleaning professional over and over again but you will likely never ride with the same Uber driver again. This means that the Homejoy house cleaner can bypass Homejoy but the Uber drivers/users can't do without it.
> you will likely never ride with the same Uber driver again.
In theory, having your "own" driver would not be a bad thing. But the main difference is in scheduling.
With taxis and Uber, you want a car to show up in 10 minutes at any time of the day without advance booking. This requires a large pool of drivers on standby and a middleman to handle the communication.
A cleaner can visit pretty much any time during the week, and is usually pre-booked for every week indefinitely into the future. This doesn't need a middleman, since you can arrange the details directly.
Defaults can change really quickly. Unlike Facebook Uber has basically zero network effect between cities. So, a competitor can win one or two small cities and just keep growing.
Consider there are only 40,000 taxi drivers in New York.
All it takes is for a company to find the top 5-50% of Uber/Lift drivers in a city offer them a minimum income of a few k/month assuming they take A% of rides and work y hours and boom instant driver network. Sure, doing it now when Uber is flush with cash is a bad idea, but after it pop’s there is no way they can stay competitive without paper thin margins long term.
There is no scenario that's rather optimistic of you.
Don't get me wrong there currently very popular and profitable so they don't need to worry about a Pets.com style crash. However, the barriers to entry are relatively low just look at Lyft. Eventually investors are going to want to get their money back, so they either start issuing dividends or face a hostile takeover.
Actually, everything I've read says they are in mature cities. Leaked numbers say they're stupendously profitable in their oldest markets: nyc, sf, etc. They are losing money overall because they subsidize drivers when they move into new markets. But the key is always to look at existing markets.
The quickest numbers I could find were leaked in 2014.
est yearly rev run rate city
======================= ====
$212+mm sf
$312 mm nyc
$141 mm dc
$150 mm chicago
======= =======
$815 mm total
I guess the larger question is how do drivers respond when their rates get dropped after a market is mature. I imagine the answer is different depending on the market.
Those above cities are, I believe, post rate drops. Also other leaked numbers have said Uber continues to grow. My guess is driver happiness doesn't impact Uber's business much; our economy seems to generate enough desperate people that they have a nearly never ending stream of people willing to drive for $5/hour (a reasonable estimate of an UberX driver's true net comp.)
Saying the barriers to entry or low is completely uninformed. The incumbent has a massive advantage in driver/rider liquidity that is nearly impossible to overcome. Lyft is the perfect example in that it still massively trails Uber in every one of its markets despising having very deep pockets and for many, a more attractive product.
IMO, Lyft's mistake is attacking more than one market at the same time. Spending 100M to just get NY is a good investment and there are far smaller cities out there with lower barriers to entry. Further, if you can demonstrate that Uber only raises rates after they show up you can build up a lot of hate in the driver’s community.
AKA: Uber pays a lot to get ex: NYC and LA drivers, wins both markets, lowers payouts to make money. New competitor shows up in NYC so Uber dramatically raises rates in NYC and not LA. Then, before that competitor moves to LA a lot of drivers are going to get pissed there stuck with low rates. Basically, by attacking one city, Uber is forced to either raise rates in all its cities’ which it can't afford or piss off all their drivers.
> There is no scenario where Uber becomes MySpace to a competitor.
Sure there is - the IRS says their drivers are employees and they need to provide multiple years worth of backpay/benefits. Any competitor that's been doing that already wins.
It's debatable whether the ride sharing industry can survive if drivers are classified as employees (which is why Uber and others are working on self-driving cars).
If they play it smart Uber will never die, but I've seen lots of companies fail because a competitor showed up and forced them into a vicious cycle of cutting quality to keep profits up, which drove out customers, etc.
If the good drivers stop working for Uber because Uber is squeezing them, for example, Uber may get a reputation for having poor drivers.
There is a great deal of schlep involved in generating supply and demand, and more importantly developing good technical controls to promote quality and reduce fraud, and the human support to handle the disputes and quality issues that slip through the cracks. There is nothing thin about the layer. Interchangeable maybe, but Uber et al are not going to be replaced by pure software anytime soon.
Dispatch services where by design you interact with a variety of vendors work because there's no value in building long-term relationship on either side.
But dispatch services where worker-customer relationship can evolve into long-term are indeed not adding much value outside of the original lead generator.
Nope. The Uber/Lyft experience is so far superior, for both drivers and riders, that it is the obvious eventual winner. How drivers are employed/compensated is a mere technicality. Uber could pay some drivers minimum wage + benefits and probably make even more money.
I think ride sharing companies like Uber are a bit different though because the dispatch system (the element of coordination and availability) is critical for that type of service.
This is different from cleaning because people don't need down-to-the-minute availability.
Homejoy had to find a way to lock their cleaners into ongoing agreements to prevent them from bypassing them.
I agree that it's natural with these services for consumers to want to 'bypass' the middleman if possible.
Unfortunately, under capitalism, creating value and capturing it are two very different things. There are a lot of business ideas which have potential to create amazing value for society, but these businesses will not be able to exist because they are not capable of capturing that value.
> But after the cleaning lady they sent me was done, she offered me her direct phone # and told me I could contact her directly for any future cleaning needs.
All companies that contract to contractors have this issue and it probably isn't solvable using the same model. For instance Home Depot and Lowes will contract out service to contractors and I've had them, on every single occasion, give me their information to contact them directly in the future.
For Home Depot and Lowes, lead generation for contractors is just a way for them to sell more building materials that need installation. They don't care if you call the contractor directly for your next installation job, as long as the materials come from them.
I've had the exact same experience with Vint (https://www.joinvint.com/) - Go through personal trainers until you find one you like and then move off the app. The hourly cost will be lower but the personal trainer will still make more money.
I've also had Uber Black drivers give me their personal limo service business cards. The difference is that a cab is a commodity while a personal trainer is something that needs to click on a personal level.
I see no future for Vint even though I loved it when I used it.
It's not just that rides are a commodity, they also have an immediacy effect. I don't care who drives me, but I care that they pick me up in the next 3 or 4 minutes. When an uber driver gives me a card that's great, but it's kind of worthless because they're unlikely to be nearby. Hell in the time it takes me to call them I can likely have another car at my front door if I just use the app.
Depends. I like being able to schedule rides to the airport in advance, so I know exactly when I'm going to be picked up. And the rate will be pre-determined.
The only situation where it's nice to have a known driver is when you are scheduling a ride in advance, i.e. to the airport or something. In those cases, I frequently call a day ahead to a driver I know.
I think a real value is if you add many service types together in one platform and you can manage all of your household in one website/app. Then you can still get the cleaning lady's number, but you don't want to, because you have a much better overview when you can use the app for all the services you buy.
Comparing HomeJoy to ridesharing companies, I see that both had telephone analogues: You can call a taxi company, and there are lots of agencies you can call for cleaners.
Besides tapping instead of calling a human (which is annoying), what is the big win for rides? For me, it's the map. When I'm told my taxi will be there in five minutes, I can see the progress on the map. I never believe a taxi company when they say, "10 minutes." Sometimes it's five, sometimes I call them back after twenty minutes to ask where my taxi is.
For the next sharing economy startup founders, ask yourself what you can do in real time for users. This is ridiculous, but for another cleaning company, you might provide the cleaners with GoPros and allow the user to stream what they see, so you can watch them clean.
Technically, you could set that up yourself with nanny-cams, but imagine contacting a service (via app or web page), having them clean your home, and watching it happen (or knowing that they know you can watch it happen). That bypasses the whole "call me personally" problem. If I call the cleaner personally, I don't get the cleaner-cam.
To me, if you're going to give me an app or a web page, give me something in real time that I care about.
This was very common with AirBnb as well at the beginning: you could exchange private information with the host and then pay them directly. However, over time it just made more sense to use AirBnb's interface.
What these companies need to do is provide an ease-of-use, reliability, and security so that the customer is incentivized to use the official way over doing it under the table. Sure you could pay the cleaning lady directly, but having it automatically debited from your credit card is much easier.
If this sunk them I am shocked that no one saw this coming. I asked about this on HN over a year ago [0]. There are 2 things they could have done.
1. Hire and provide real value to the cleaners contract Uber to drive the cleaners to the houses, That would have solved the classification issue and the middle man issue
2. Charge the cleaners to be on the site, let verified purchasers leave reviews, and offer an optional payment gateway.
When I lived in New York, I was a customer of a home cleaning start-up that magically managed to avoid all of the legal quagmires and platform defections that plague sharing economy companies.
The magical secret to its success: the cleaner that would visit your home was an employee, not a contractor. That meant the company could control and guarantee the quality of the service provided and would be able to have its cleaners sign non-competes if necessary.
I believe that the cleaners were not supposed to be allowed to give out their number to be contacted directly. If they did so and Homejoy found out, they could be kicked out of Homejoy. That said, it would not surprise me in the least if a great many cleaners did it anyway.
I agree that match-making is the more correct model for house cleaning. But there are certainly ways to minimize what you describe. The threat of dismissal, for one.
Even after meeting my doctors, I still use ZocDoc to schedule appointments. It's much easier for me to find the ideal appointment time when I can put my schedule and the doctors schedule side-by-side as opposed to calling the receptionist. If the doctor built a high-quality scheduling app, I might still use ZocDoc because it would likely be easier to remember how to get there.
I really loved the idea, and maybe I'm just being cheap, but no way I was going to pay $250+ a month to have my 1296 sq ft house cleaned. That's a $150/month value at market rates in my area. $100/month for a bit of convenience was not worth it at all to me.
I had the same experience. I signed up but, when it came time to actually make a reservation I did some comparison shopping and found many cheaper alternatives. I think Homejoy's main challenge is simply the vast pool of available labor out there, much of which is also bonded and insured, like Homejoy, and that is already quite accessible to customers. The added layer of technological ease that Homejoy brought to the table was welcome, but ultimately not worth too much monetarily. For me, the real barrier to hiring a home cleaning service is the awkwardness and trust problems of having a stranger cleaning my house. And the technological mediation that Homejoy and similar services provide actually heighten this feeling of alienation, if anything.
To make matters worse, I then got an almost comically confrontational phone call from a Homejoy rep demanding to know why I hadn't completed my booking. This is probably an isolated case (maybe the rep was just having a bad day?), but it certainly didn't make me feel like I was missing out on much--all the more so since this experience was so at odds with the rest of the Homejoy brand.
This is an incredibly important point. We often imagine that the price of convenience is pretty high, but more often than not, the markets we serve turn out to be incredibly price conscious. Sure, there are sections of the socioeconomic pyramid that will pay a strong premium for even marginally better, smoother service but the majority of the pyramid (a surprisingly large majority) will not pay such a premium.
They've raised $40M. I'd be surprised if they were valued at more than $400M when they raised the last $38M, but I don't think that was public.
http://techcrunch.com/2013/12/05/homejoy-38-m/
Or perhaps we need to re-evaluate our laws surrounding employment. Events like this (supposing they were caused by employment laws) are perfect illustrations of how overregulation kills jobs.
There are laws surrounding employment? California is an at-will state. Further, 1099 contractors don't get health insurance, workers comp, or any coverage by the employer. There's also no assurance of long-term employment, thus no reason for the company to be loyal.
Yes, there are laws surrounding employment. Minimum wage laws are one example. IRS regulations/tests as to whether you are an employee or a contractor are another.
California has extensive laws that impose fixed costs on employers (paid family leave, for example). CA is also notorious for lawsuit risks. There are also federal laws - Obamacare for anyone working 31+ hours, and many more.
In economics, fixed costs and regulations like this are called "rigidities", and are well known to cause shortages/surpluses and misallocation of resources. (E.g., according to Keynesian economics, such things cause most/all recessions.)
Those laws are usually based on the size of the company. FMLA (not CA, but relevant) only applies to companies of over 50 employeees, and if you've been there for more than a year. You can get around a lot of those laws with using contractors.
Regarding Obamacare, one of the criticisms of the law was that companies promptly began offering employees one hour fewer a week than would meet the health care requirement.
almost every employee i ever fired in california got some kind of check as an offering to ask them not to sue for more... at will is misleading statement in a litigious state.
I agree. It would be far more efficient to have the government provide a baseline level of services to everyone. Then the vast majority of small companies and startups employing contractors wouldn't have to worry about it.
We already have a baseline level of retirement covered with Social Security. Companies who want to attract more talented employees offer enhanced retirement benefits in 401k plans or other incentives like stock options.
I propose we should give everyone healthcare regardless of employment; the exchanges should be open to all and offer Medicare as the baseline plan for free to anyone who wants it. I further propose that the government provide unemployment that matches your salary for 3 months, 80% for 9 months, then 50% for a year. I also propose free training and schooling so people can switch careers if needed. Now getting fired or "laid off" doesn't mean destitution... it means time to find a new job or go back to school to train for a different one. Then employers can be free of a lot of these pesky "regulations" and "taxes". We can pay for it by soaking billionaires with taxes which won't have any negative effect on our economy because we are overflowing with capital seeking return right now (and have been for 15-20 years). The only downside is listening to them whine and moan about how oppressed they are because they're money-penis isn't as big as they'd like.
... or were you just talking about fucking over everyone but the billionaires? (That's usually what "overregulation" means in this context)
I'm talking specifically about imposing fixed costs on the purchase of labor.
I'd propose a different method of handling a "baseline level of services", specifically a Basic Job Guarantee which pays only in-kind benefits [1]. But that's a somewhat orthogonal issue. The key point is that when you impose kinks and missing regions in supply&demand curves, bad things happen.
[1] I.e., you show up, do 8 hours of work for the govt and in return your basic needs are met; you get a govt dorm, govt brand clothes and 3 nutritious govt meals/day in a cheap location.
The labor force participation rate is at its lowest level in 40 years. When companies like Homejoy come in and make it easy for people to pick up gig work, they are making real and substantial contributions to human welfare.
That's a much more complex issue, which involves how many people simply give up trying to find work after six months or so, as well as companies replacing employees with automated robots and such. I would be much more in favor of Homejoy using contractors if they also allowed them to become a full time employee if they desired to, after meeting some requirement (like working there for 3 months).
The service was getting increasingly terrible in my market. I am not surprised at all to see it go the way of the dinosaur. Too bad, this type of service has a lot of value to busy professionals and people with families.
> Too bad, this type of service has a lot of value to busy professionals and people with families.
Housecleaning service has a lot of value to professionals and people with families, to be sure. But that service existed long before Homejoy, exists in more places than Homejoy ever served, and was served by plenty of providers not working through Homejoy even where Homejoy provided services.
I'm less convinced that Homejoy brought indispensable new value to the table for customers or cleaners.
I get the sense that many of the people involved in Homejoy are well-intentioned and hardworking. But I can't say that I think it's a bad thing that tech startups are finding it difficult to monetize unskilled labor.
The technology that most companies like these offer (with the possible exception of Uber) is a commodity. The real asset they have is the network effect. Which makes the balance of power between the tech company and the "1099 contractors" deeply suspicious. What are these companies doing for the laborers that makes them valuable enough to be skimming returns from the work?
Homejoy expected that a better service would increase the customer base. I don't hire a maid currently, but if it were easy to find a trustworthy and thorough maid, I might.
That depends. It's incredibly valuable if the provider retains those customers. But if the service is set up to fence off the customer relationship from the provider, that's a much harder argument to make!
> What are these companies doing for the laborers that makes them valuable enough to be skimming returns from the work?
As someone who used to build/sell websites to small cleaning companies, real estate agents, tradesmen, etc.
Marketing+Parts+Labor was the formula for almost all of their costs. Marketing represented ~20-25% for the few that were willing to discuss it with me.
That is in line with what Homejoy was asking for [25%].
Homejoy providers had direct access to the customer base they interacted with and could siphon off those clients they built a relationship with relatively easily. I know that is what I did once I found one I liked.
What does Apple or steam offer developers for their 30% cut ? customers and ultimately revenue to sustain themselves. An open marketplace has incredible value if its popular. Tech is the easy part of most startups.
Apple builds the marketplace, just like Steam or HomeJoy. The fact that it's Apps are also based on their tech is irrelevant in this context. Steam also just provides a Marketplace without meaningful technology and has revenue in the hundreds of millions and nobody seems to complain.
I think you have it wrong here. The fact that HomeJoy was actually playing in a market which required skill labor was responsible for their downfall. Think about it - if there is an HomeJoy operator who's actually good and did her job very well (and thus is skilled), next time I will want to deal with her directly (to save on cost) and not deal with HomeJoy at all. I certainly did this. In fact, many HomeJoy operators proactively offered to do this.
However, for unskilled labor, like Uber, I care a lot about needing a car right now - and dealing with drivers directly is not efficient at all. As such, Uber is doing so well in this market.
You think cleaning is skilled labor and driving isn't? Uber drivers better not be unskilled. You're putting your life in someone's hands every time you ride in an Uber (as with any car). There's almost no skill to scrubbing toilets and vacuuming rugs, and if you mess it up you get fired but no one dies. The only skill required is attention to detail and caring enough to do a good job.
I can't argue that driving is unskilled, but cleaning is certainly a skill. I've gone through several services for house cleaning in the last few years and the quality of service varies dramatically.
> The only skill required is attention to detail and caring enough to do a good job.
Thought experiment: imagine yourself cleaning 100 houses professionally for two hours. My bet is that the last house would be 2X - 3X more clean than the first.
The poster I am responding to is clearly referring to "skilled labor" in the colloquial sense, as in a worker for whom adequate performance requires more skill than a lay-person.
I agree that it is not a very skilled job. But attention to detail (i.e. caring to clean the house) is a more rare skill than you think. I have so many operators who have to come to clean our space and have done a messy job. The difference between good and bad operators is very stark - and it is the good ones you want to deal with.
With driving, nothing of that is required. Many people are in auto mode when they are driving. Think about it - is it easier to drive vs. cleaning your place? Of course you want basic driving skills to be there - but I think the DMV licensing process and Uber ratings generally takes care of that. You are going extreme by talking about death etc. - but how many Uber journeys have resulted in that. There are millions of Uber being driven every day - and I haven't read about a single death (of the passenger).
Driving is a common skill. Most people with a license can drive a car safely. This isn't heavy equipment.
Cleaning, being good at cleaning, is an uncommon skill. I've gone through my fair share of housekeepers. When you find a good one that you trust with the keys to your home, you want to hold on to them.
Uber and AirBnB caters to immediate needs for a short term engagement, so the dispatching capabilities are the real value (find me someone who can do X right now).
Homejoy is dispatching for a long term relationship, so it has a hard time staying engaged in the relationship as it progresses.
I think the skill is less important than the duration of the engagement for a dispatching service like this.
Upwork/oDesk connects people with long-term providers and are more or less able to avoid disintermediation by providing services that the providers want to take advantage of, like time tracking, payment processing, and tax documents. Companies like HomeJoy need to figure out what services their providers really crave and make those contingent upon using their platform. Maybe there isn't anything lacking like that in the home cleaning business.
Agreed! My point was not against the home cleaning industry, as it was the "dispatch-as-value-add" model. Tax and liability are probably the biggest "headaches" that could be managed by homejoy and ensure they retain their position in the relationship.
Anecdotally I pay Molly Maid to clean my apartment, because i don't want to deal with liability, legality or tax complications.
From the article:
> Homejoy was able to raise funding, but not enough to grow
> the company as big as its founders and backers had hoped.
> “We declined those investments because it wasn’t enough, and
> we wanted to stay true to our vision,” Cheung said.
I'm sorry but shutting the company down because the round you could raise wasn't as big as you hoped feels like wimping out. Alive beats true to your vision and dead. In "The Hard Thing About Hard Things", Ben Horowitz coins the term WFIO (pronounced wiff-e-o) for that "We're Fucked, It's Over" feeling that entrepreneurs get on a regular basis. Lawsuits spooking investors is certainly bad but hardly even qualifies.
Given how big an issue the worker classification issue is for the whole economy, I could see the regulatory issues getting sorted out over the next few years. Quitting seems like a premature move to me. How do the investors who put $40m into the company feel? Who's going to invest in this team again? Who's going to go work there?
> the balance of power between the tech company and the "1099 contractors"
That hits the nail on the head. A 1099 contractor has to cut some 30%-40% off their wage to support things like self-insurance, etc (or add yea much). If you're "working" for a gig provider, you're not a 1099 employee by the inherent nature of the thing. Granted, you're not in a normal employer-employee relationship, but neither are you a skilled freelancer contracting your labor out on wages you yourself set and negotiated.
While I fully support the idea of TaskRabbit, Lyft, Uber, Homejoy et al, certain realities have to be faced squarely: they are not being real about the nature of their business. They really are something like employers, with something like employees.
Cheung is likely correct that a third legal category needs to be created (neither 1099 freelancer nor true employee), but in the absence of that, it seems profoundly more ethical to consider the workers employees.
It seems like you're a 1099 as soon as you give a client your phone number to cut out HomeJoy. The law might not agree, but it certainly seems well within the spirit. Seems very common too (at least based on the HN comments).
I think Homejoy would be in the clear if they were more of a two-sided marketplace. If users could hire specific cleaners based on their ratings, and cleaners were free to set their own rates, that strikes me as more 1099 appropriate.
But the convenience increases the size of the market, benefiting both customers and laborers.
I never ordered from a cleaning service before Homejoy, and I doubt I'll bother with it after Homejoy. It's a useful service to me, but I'm not going to call half a dozen random guys on their cell phones to find one that will work for me.
Similarly, ride volumes are way up after Lyft and Uber come to town. Before, there is a lot of demand that is simply going unfilled.
I read it as: We had 3 years to exploit a loophole with $40MM in the bank and couldn't build a real business, so we're using California's law as a scapegoat.
As a former customer (have not used in years), I actually felt uncomfortable with the cleaners. Not because of anything they did, but because you could just tell they were low income and being paid very little by Homejoy (I think less than $15/hr). It didn't feel right, and I stopped using them in part because of that.
I would pay more for a professional cleaner. I have no idea what the experience level of the average Homejoy cleaner is but I had very mixed experiences when I used them.
Not just that. Uncomfortable with Homejoy's relationship with the cleaners. From everything I read, including Glassdoor reviews from the cleaners it sounded toxic and demeaning.
I actually have to agree with this. If you're uncomfortable around low income (also, when the fuck did $15/hr become low income?) people, then isn't really your fault, not theirs?
For a house with 4 roommates, this service worked great as a solution to the "tragedy of the common [space]" problem. We've been using them for a year or more now and I'll be sad to see them go. I hope they follow through on putting people in touch with the actual cleaners.
Easy (Homejoy customer here). They show up at the scheduled time, say hello, clean, leave. I'm sure it's a personal relationship for some customers but wasn't for me.
this isnt that abnormal. i used to not see my cleaning lady for many months at a time. just left a $50 on the counter every wednesday on my way to work, came home to clean house, folded clothes, everything in its place... it was awesome.
Sometimes when you think you're "building things that enable and will change the way people live and work" you might just be missing out on family time as a young person because you've prioritized your goal of helping make the affluent slightly more affluent.
Not only that but apparently "this is not an overnight venture; we know it'll take a long time, and we’re all committed to it." Appears to have been exactly a 204 day "commitment".
"You keep using that word. I do not think it means what you think it means." seems apt.
For job hunters, be alert and suspicious when hiring and marketing overlap.
I had heard of them but with most companies that spring up then wind down a little later they never expanded to where I live. I would have loved to try them though.
This is surprising to me. I'm INUNDATED with Homejoy ads all over the internet. I've never used them (which also might have been part of their problem). Perhaps you just live somewhere they don't provide service to yet? :)
It looks like they have taken the Steve Miller Band approach [1] to users who are also creditors: http://blog.homejoy.com/faqs/ . Hope you didn't have a gift card!
[1] i.e., hoo hoo hoo, go on, take the money and run
I never used the Homejoy service, but I was in the audience for the Startup School Europe talks last year where Adora gave a fantastic speech (Notes: http://theinflexion.com/blog/2014/07/26/notes-from-startup-s...) about going through so many ideas and working so hard to get to Homejoy. The talk's ending had a 'And look, we made it, so you can too' feel, and I had no idea that they were doing anything but crushing it after all those years of grinding work.
Its hard not to be disheartened when a pair who seem to have worked as hard as they have still don't make it with an idea. I just hope they keep going.
I get the opposite reaction when I hear of someone grinding away until they've got a startup. I understand that investors invest in people. But the idea has to have a life of it's own, and a value on its own. I remember when urban adventure games were a thing, and a thing that tended to attract very energetic people. But it was shown that no matter how much hustle you've got, urban adventure games are not an investable thing.
Success comes primarily from doing the right things, not working hard. If you work hard, but are doing the wrong things, your chances of success are slim to none.
There is a qualitative difference between this and other on-demand services such as Uber in that you will never see the "here is my phone number" phenomenon in Uber.
Uber will be the eBay of this "bubble", which I think is limited to on demand startups but not startups as a whole. It'll be one of the few co's to survive, imo
Could they operate as small business and/or flip the company as a running small business? I imagine home cleaning is sort of loyalty space, where they must have a good number of regulars?
It's also interesting that they are managing a workforce of around a 1000 cleaners, and they burnt through $40 MM. That's the amount of seed Elon Musk needed for SpaceX.
I'm assuming they folded before burning $40m. IMO, it would be hard to go through that much money when you have (hundreds of?) thousands of customers and (should have) a decent profit margin.
I'm more inclined to believe that HomeJoy was sold to investors as the beginning of a platform, and when it failed to hit traction, or growth potential seemed to stall, the investors decided to cut their losses and move on.
Homejoy customer here. For me, they succeeded in making home cleaning accessible to a guy in his early 30s who clicked a few buttons past a Facebook ad to schedule 2x/mo cleaning - a big stress reliever and quality of life improver. I never used a cleaning service prior to Homejoy.
Where they failed was in providing an adequate supply of cleaners (no one available for weeks on occasion) and last-minute cancellations without substitutes.
Never did a cleaner solicit me to hire direct, but I DO think Homejoy should leave their customers with a way to reach the cleaners I did like for rehiring. Why not, after all?
Cofounder Adora Cheung is worth following. The story is a great example for founders. Check out her lecture at Sam Altman's startup class: https://www.youtube.com/watch?v=yP176MBG9Tk
So we should watch a video about "how to go from zero users to many users" from someone who did it by selling services at a loss and then going out of business?
Yes, but that doesn't mean you should exactly seek out the advice of those who haven't conquered the failures and reached the end of the road of "success". Everyone has their own wisdom to offer, but I would agree with the parent, there's more notable persons to learn from and I personally feel most comfortable with someone who has BOTH failed & succeeded.
This was a good talk but I can't help to think that she should have spent more time working on the business than doing these types of speaking engagements (because she had done quite a lot of them, not just this one).
Though the time spent doing these engagements and preparing, maybe that was worth it for the advertising? Not sure but they don't sit right with me.
The story and message was almost same in all those lectures. So, i doubt she put lot of time just preparing for it and moreover it was her story that she was telling, so even less preparation is required.
For people working in christmas, its a good break to have. And i doubt those hours spent otherwise on the startup can could have changed the outcome.
One of the primary responsibilities of a CEO is building (and maintaining) relationships with external parties, such as prospective clients, partners, or even potential employees. Speaking engagements are a great way to do that because it gets you in front of such audiences and helps you demonstrate authority, which builds trust.
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[ 2.7 ms ] story [ 285 ms ] threadAnd maybe the main one: http://recode.net/2015/07/17/cleaning-services-startup-homej...
It's one thing to sell your services at a loss while you're growing. In the home-cleaning business, though, there will never be a shortage of undocumented immigrants willing to work for less than minimum wage, quite possibly at a higher quality level. There would be no way to ever raise prices to fully cover costs without immediately losing out to that competition.
http://arstechnica.com/tech-policy/2015/03/startup-workers-s...
Contracts may theoretically restrict this behavior, but actually policing them is non-trivial.
This isn't taxis where you can bank on regulatory arbitrage to take a cut. They seemed to be trying to make money on customer acquisition and scheduling, but I'm sure they realized too late that their partner companies don't spend a huge amount of money on those activities.
If anything, the incumbents are better positioned to arbitrage the law/regulations in this case. An online service like this leaves a paper trail, which makes it much harder to use the "shortcuts" common in the cleaning industry: use of undocumented immigrants, underreporting of taxable income, etc. Much easier to do that in a pure cash business with informal booking.
https://news.ycombinator.com/item?id=8794956
Wow, that woman sounds incredibly obnoxious. Talk about a humblebrag.
I always wondered how this business model was going to work if Homejoy's contractors could just give out their phone # at the end of their first service and the customer could just contact them directly for any future needs, instead of going back through Homejoy for any future bookings.
We do a number of things to prevent it, but it ultimately comes down to providing enough value to the supply side of your market. If you build a product that drives real, ongoing value for your service pros, they will be much less incentivised to cut you out of the transaction. The same is true for the demand side.
Also, lawn care has a reduced risk profile compared to services that take place inside the home (maids/babysitting, etc). There is no key hand-off and the nature of the service is somewhat less intimate. Our customers don't need to be present for the work, which both reduces this risk and boosts the value of our platform as a means of managing your service.
For Homejoy, saying "we are bonded and insured" reduces reluctance for a first you or when on-demand service is the primary consideration. But for recurring service, having trust with an individual beats the crap out of being able to point to the contract or collect against a bonding agency if something goes wrong.
[aside: I found Adora Cheung's presentation for How to Start a Startup thought provoking: http://startupclass.samaltman.com/ ]
To incentivize that, you could offer discounts for neighbors who use the service together. If Homejoy had a bunch of apartments in one location, then cleaners would make more money per day.
Also, routing optimization is a fairly hard problem and requires significant critical mass in a geo. Pretty hard for individual service providers to build this on their own. The closest thing may be a small-town service pro who has been in business for 30 years and eventually reached sufficient mass / frequency to optimize his routes, but that's a rare case.
I haven't seen any reasons for the closing. Where was this mentioned?
Edit: More reading turned up a shady Re/Code article proclaiming that the Uber decision shuttered Homejoy. Loads of clickbait, nothing firm in the way of substantiating the title.
If you use AirBnB to visit NYC once every 3-4 years, its a very different situation than someone coming to clean every 2 weeks.
Minor nitpick on this... it's doubtful that it 'turned into a good experience', as much as "AirBnB was able to compensate, monetarily or otherwise, for the bad experience (which still exists)".
555-123-1234 would become
"55512
part 2
31234"
I've done this to get around the issue when trying to get in touch with the property owner.
Thumbtack also services a very wide range of verticals, which allows them to succeed purely as a matchmaker. It's an inherent flaw in what folks like Homejoy were doing (although they had aspirations of a larger vertical focus).
I need thumbtack like 3 or 4 times a year. I need Homejoy once ever.
Also if a cleaner ever started to get lazy and cut corners, i have the option to just chose another one... that gives me a lot of influential power even if i never have to use it.
Those benefits are what made the service worthwhile for me... If I wanted to find a cleaner at the lowest rate and handle all the overhead myself i could just look on craigslist...
Which inherently reduces the degree to which the service is attractive to contractors compared to other marketing channels (which is really what it is for them), which reduces the contractors on the service, which reduces the value to consumers.
That it works in some industries doesn't mean that its an easy solution which works profitably in all industries.
EDIT: on the other hand, an advantage is they don't have to worry about acquiring customers, drivers, etc, nor the regulatory overhead of the underlying business, but instead just focus on customer experience, schedule/dispatch, etc.
The Tesla analogy is perfect, though. I've never felt like car dealerships being independently owned was a useful benefit. I don't see any reason why both models can't coexist.
Whatever those safety elements are, I've certainly never experienced them. Theoretically they're there, I guess, but my (admittedly anecdotal) experience has been that Uber is safer in every way than taxis are.
* Obviously, whether the guy is going to try and kidnap you. Well, Uber has rating, but the background checks are pretty flimsy. Still, I'll concede that it may well be just as good.
* The second thing affects non-customers and it's ensuring the roads aren't congesting with a glut of taxis driving around looking for fares all day (with all the attendant problems that causes). While the average car spends 2 hours or less on the road in a day a taxi or an Uber is going to spend a lot more than that. I'm not really convinced Uber has an answer to that.
There are also issues like insurance/liability and so on that are rarely encountered, but are something of a big deal if they do come up. And there's the worker protection aspect of it.
Ever hear of this thing called supply and demand?
With current ride sharing apps, a lot of that goes away. You don't worry about tampered meters and being driven the long way around, because the trip is GPS tracked on both sides for example. You don't have to worry about getting in a random car in a city with a complete stranger, because reputation systems have pre-vetted your drivers and your driver's cars. a If taxi drivers get angry at you for using credit cards or for short trips, you can complain to a central agency that will deal with it. In developing (and some developed) nations, these ride sharing apps have a better safety margin than the local regulations do. Inefficient systems like taxi lineups at airports are not necessary anymore.
The international nature of these ride sharing apps also give you a universal set of rules as you travel, and make it you can communicate your destination without being able to speak the language. The advantages go on and on. The companies making and creating these things don't really matter, but the general app really does and we shouldn't smother them with regulations.
Eh, it was useful for car manufacturers when they were first getting going: they didn't have to put up the capital to open shop. The regulation came in when a dealership showed that a given region had high demand for the company's cars, so the company would move in across the street and undercut the franchised dealer. Obviously the franchised dealer had more clout with local politics than the auto manufacturer did - this is why all the dealership laws are state laws. It was kind of a legitimate regulation back /then/, but really has no bearing on things now (especially for a car company that has never franchised any dealers).
"Cleaners are unable to provide any additional information before jobs are assigned. For example, a Cleaner cannot tell Homejoy that while she may have picked different zip codes or cities as part of her territory, she only wants to stay within one zip code, or within one small part of a zip code, each day. Instead, if a Cleaner chooses Oakland and San Francisco as part of her territory, Homejoy alone determines whether the cleaner will stay in Oakland on a given day, stay in San Francisco on a given day, or travel in between the two cities multiple times on a given day. Furthermore, Cleaners cannot tell Homejoy whether they want a little or a lot of down time between each job, or each job start time or end time. Cleaners cannot tell Homejoy how much driving they prefer to do, whether the jobs need to be near public transportation, whether the Cleaners prefer to be stuck in rush hour traffic or instead on routes that are reverse commutes, how many jobs the Cleaners want to perform each day, or whether or not they want to return to a previous customer."
http://arstechnica.com/tech-policy/2015/03/startup-workers-s...
I don't think this creates a very big moat - that's essentially what Uber started out as (dispatch for private driving companies that already existed); they started letting anyone drive in order to meet demand.
If all the services are interchangable (and now, at least for ridesharing, it seems like they are), the winner will be the app that's used by default.
You would use the same house cleaning professional over and over again but you will likely never ride with the same Uber driver again. This means that the Homejoy house cleaner can bypass Homejoy but the Uber drivers/users can't do without it.
In theory, having your "own" driver would not be a bad thing. But the main difference is in scheduling.
With taxis and Uber, you want a car to show up in 10 minutes at any time of the day without advance booking. This requires a large pool of drivers on standby and a middleman to handle the communication.
A cleaner can visit pretty much any time during the week, and is usually pre-booked for every week indefinitely into the future. This doesn't need a middleman, since you can arrange the details directly.
Consider there are only 40,000 taxi drivers in New York.
All it takes is for a company to find the top 5-50% of Uber/Lift drivers in a city offer them a minimum income of a few k/month assuming they take A% of rides and work y hours and boom instant driver network. Sure, doing it now when Uber is flush with cash is a bad idea, but after it pop’s there is no way they can stay competitive without paper thin margins long term.
Don't get me wrong there currently very popular and profitable so they don't need to worry about a Pets.com style crash. However, the barriers to entry are relatively low just look at Lyft. Eventually investors are going to want to get their money back, so they either start issuing dividends or face a hostile takeover.
Are they? Everything I've read indicates that they are not.
http://www.bloomberg.com/news/videos/2015-06-30/uber-loses-m...
The quickest numbers I could find were leaked in 2014.
http://www.businessinsider.com/uber-revenue-rides-drivers-an...edits: made table
AKA: Uber pays a lot to get ex: NYC and LA drivers, wins both markets, lowers payouts to make money. New competitor shows up in NYC so Uber dramatically raises rates in NYC and not LA. Then, before that competitor moves to LA a lot of drivers are going to get pissed there stuck with low rates. Basically, by attacking one city, Uber is forced to either raise rates in all its cities’ which it can't afford or piss off all their drivers.
Sure there is - the IRS says their drivers are employees and they need to provide multiple years worth of backpay/benefits. Any competitor that's been doing that already wins.
If the good drivers stop working for Uber because Uber is squeezing them, for example, Uber may get a reputation for having poor drivers.
But dispatch services where worker-customer relationship can evolve into long-term are indeed not adding much value outside of the original lead generator.
This is different from cleaning because people don't need down-to-the-minute availability. Homejoy had to find a way to lock their cleaners into ongoing agreements to prevent them from bypassing them.
I agree that it's natural with these services for consumers to want to 'bypass' the middleman if possible.
Unfortunately, under capitalism, creating value and capturing it are two very different things. There are a lot of business ideas which have potential to create amazing value for society, but these businesses will not be able to exist because they are not capable of capturing that value.
All companies that contract to contractors have this issue and it probably isn't solvable using the same model. For instance Home Depot and Lowes will contract out service to contractors and I've had them, on every single occasion, give me their information to contact them directly in the future.
That model does not work for HomeJoy.
I've also had Uber Black drivers give me their personal limo service business cards. The difference is that a cab is a commodity while a personal trainer is something that needs to click on a personal level.
I see no future for Vint even though I loved it when I used it.
> We hope that you are able to continue your relationship with your current cleaner, independently of Homejoy.
http://blog.homejoy.com/faqs/
Besides tapping instead of calling a human (which is annoying), what is the big win for rides? For me, it's the map. When I'm told my taxi will be there in five minutes, I can see the progress on the map. I never believe a taxi company when they say, "10 minutes." Sometimes it's five, sometimes I call them back after twenty minutes to ask where my taxi is.
For the next sharing economy startup founders, ask yourself what you can do in real time for users. This is ridiculous, but for another cleaning company, you might provide the cleaners with GoPros and allow the user to stream what they see, so you can watch them clean.
Technically, you could set that up yourself with nanny-cams, but imagine contacting a service (via app or web page), having them clean your home, and watching it happen (or knowing that they know you can watch it happen). That bypasses the whole "call me personally" problem. If I call the cleaner personally, I don't get the cleaner-cam.
To me, if you're going to give me an app or a web page, give me something in real time that I care about.
What these companies need to do is provide an ease-of-use, reliability, and security so that the customer is incentivized to use the official way over doing it under the table. Sure you could pay the cleaning lady directly, but having it automatically debited from your credit card is much easier.
1. Hire and provide real value to the cleaners contract Uber to drive the cleaners to the houses, That would have solved the classification issue and the middle man issue
2. Charge the cleaners to be on the site, let verified purchasers leave reviews, and offer an optional payment gateway.
[0] https://news.ycombinator.com/item?id=6855047
The magical secret to its success: the cleaner that would visit your home was an employee, not a contractor. That meant the company could control and guarantee the quality of the service provided and would be able to have its cleaners sign non-competes if necessary.
To make matters worse, I then got an almost comically confrontational phone call from a Homejoy rep demanding to know why I hadn't completed my booking. This is probably an isolated case (maybe the rep was just having a bad day?), but it certainly didn't make me feel like I was missing out on much--all the more so since this experience was so at odds with the rest of the Homejoy brand.
Edit: and the downvotes are rolling in! Would anyone who has downvoted this comment care to share why?
California has extensive laws that impose fixed costs on employers (paid family leave, for example). CA is also notorious for lawsuit risks. There are also federal laws - Obamacare for anyone working 31+ hours, and many more.
In economics, fixed costs and regulations like this are called "rigidities", and are well known to cause shortages/surpluses and misallocation of resources. (E.g., according to Keynesian economics, such things cause most/all recessions.)
Regarding Obamacare, one of the criticisms of the law was that companies promptly began offering employees one hour fewer a week than would meet the health care requirement.
We already have a baseline level of retirement covered with Social Security. Companies who want to attract more talented employees offer enhanced retirement benefits in 401k plans or other incentives like stock options.
I propose we should give everyone healthcare regardless of employment; the exchanges should be open to all and offer Medicare as the baseline plan for free to anyone who wants it. I further propose that the government provide unemployment that matches your salary for 3 months, 80% for 9 months, then 50% for a year. I also propose free training and schooling so people can switch careers if needed. Now getting fired or "laid off" doesn't mean destitution... it means time to find a new job or go back to school to train for a different one. Then employers can be free of a lot of these pesky "regulations" and "taxes". We can pay for it by soaking billionaires with taxes which won't have any negative effect on our economy because we are overflowing with capital seeking return right now (and have been for 15-20 years). The only downside is listening to them whine and moan about how oppressed they are because they're money-penis isn't as big as they'd like.
... or were you just talking about fucking over everyone but the billionaires? (That's usually what "overregulation" means in this context)
I'd propose a different method of handling a "baseline level of services", specifically a Basic Job Guarantee which pays only in-kind benefits [1]. But that's a somewhat orthogonal issue. The key point is that when you impose kinks and missing regions in supply&demand curves, bad things happen.
[1] I.e., you show up, do 8 hours of work for the govt and in return your basic needs are met; you get a govt dorm, govt brand clothes and 3 nutritious govt meals/day in a cheap location.
Housecleaning service has a lot of value to professionals and people with families, to be sure. But that service existed long before Homejoy, exists in more places than Homejoy ever served, and was served by plenty of providers not working through Homejoy even where Homejoy provided services.
I'm less convinced that Homejoy brought indispensable new value to the table for customers or cleaners.
The technology that most companies like these offer (with the possible exception of Uber) is a commodity. The real asset they have is the network effect. Which makes the balance of power between the tech company and the "1099 contractors" deeply suspicious. What are these companies doing for the laborers that makes them valuable enough to be skimming returns from the work?
I've heard this as a need from literally every service provider I've ever used. They relish referrals.
I driver Uber more because it is easier to get a cab. They alone are already making more than the entire taxi industry in SF.
If anything, it seems Homejoy's problem is in making it too easy for their cleaners to find retained customers.
As someone who used to build/sell websites to small cleaning companies, real estate agents, tradesmen, etc.
Marketing+Parts+Labor was the formula for almost all of their costs. Marketing represented ~20-25% for the few that were willing to discuss it with me.
http://blog.sfgate.com/techchron/2014/07/22/homejoy-hikes-ho...
That is in line with what Homejoy was asking for [25%].
Homejoy providers had direct access to the customer base they interacted with and could siphon off those clients they built a relationship with relatively easily. I know that is what I did once I found one I liked.
However, for unskilled labor, like Uber, I care a lot about needing a car right now - and dealing with drivers directly is not efficient at all. As such, Uber is doing so well in this market.
> The only skill required is attention to detail and caring enough to do a good job.
Thought experiment: imagine yourself cleaning 100 houses professionally for two hours. My bet is that the last house would be 2X - 3X more clean than the first.
With driving, nothing of that is required. Many people are in auto mode when they are driving. Think about it - is it easier to drive vs. cleaning your place? Of course you want basic driving skills to be there - but I think the DMV licensing process and Uber ratings generally takes care of that. You are going extreme by talking about death etc. - but how many Uber journeys have resulted in that. There are millions of Uber being driven every day - and I haven't read about a single death (of the passenger).
Cleaning, being good at cleaning, is an uncommon skill. I've gone through my fair share of housekeepers. When you find a good one that you trust with the keys to your home, you want to hold on to them.
Uber and AirBnB caters to immediate needs for a short term engagement, so the dispatching capabilities are the real value (find me someone who can do X right now).
Homejoy is dispatching for a long term relationship, so it has a hard time staying engaged in the relationship as it progresses.
I think the skill is less important than the duration of the engagement for a dispatching service like this.
Anecdotally I pay Molly Maid to clean my apartment, because i don't want to deal with liability, legality or tax complications.
I'm sorry but shutting the company down because the round you could raise wasn't as big as you hoped feels like wimping out. Alive beats true to your vision and dead. In "The Hard Thing About Hard Things", Ben Horowitz coins the term WFIO (pronounced wiff-e-o) for that "We're Fucked, It's Over" feeling that entrepreneurs get on a regular basis. Lawsuits spooking investors is certainly bad but hardly even qualifies.
Given how big an issue the worker classification issue is for the whole economy, I could see the regulatory issues getting sorted out over the next few years. Quitting seems like a premature move to me. How do the investors who put $40m into the company feel? Who's going to invest in this team again? Who's going to go work there?
That hits the nail on the head. A 1099 contractor has to cut some 30%-40% off their wage to support things like self-insurance, etc (or add yea much). If you're "working" for a gig provider, you're not a 1099 employee by the inherent nature of the thing. Granted, you're not in a normal employer-employee relationship, but neither are you a skilled freelancer contracting your labor out on wages you yourself set and negotiated.
While I fully support the idea of TaskRabbit, Lyft, Uber, Homejoy et al, certain realities have to be faced squarely: they are not being real about the nature of their business. They really are something like employers, with something like employees.
Cheung is likely correct that a third legal category needs to be created (neither 1099 freelancer nor true employee), but in the absence of that, it seems profoundly more ethical to consider the workers employees.
The recent US Dept. of Labor interpretation suggests the same: see "Does the Worker’s Managerial Skill Affect the Worker’s Opportunity for Profit or Loss?" at http://www.dol.gov/whd/workers/Misclassification/AI-2015_1.h...
Of course then you're even more at risk of disintermediation, so you're probably charging for listings. It's a useful business but a smaller one.
I never ordered from a cleaning service before Homejoy, and I doubt I'll bother with it after Homejoy. It's a useful service to me, but I'm not going to call half a dozen random guys on their cell phones to find one that will work for me.
Similarly, ride volumes are way up after Lyft and Uber come to town. Before, there is a lot of demand that is simply going unfilled.
While a bit off topic, I was really happy to see this sort of comment from you. I'd love to buy you a coffee or beer in Chicago sometime.
Also, Homejoy let you tip, with 100% of that money going to the cleaner(s). I usually gave the cleaners a 20% tip.
I didn't have a single bad experience. The level of cleaning was the same as other services.
Working as a family on a holiday may not be enough to save a startup.
"You keep using that word. I do not think it means what you think it means." seems apt.
For job hunters, be alert and suspicious when hiring and marketing overlap.
Best of luck to the ex-HomeJoy engineers.
Then I realize, that may have been part of the problem.
[1] i.e., hoo hoo hoo, go on, take the money and run
Its hard not to be disheartened when a pair who seem to have worked as hard as they have still don't make it with an idea. I just hope they keep going.
https://www.crunchbase.com/organization/homejoy
It's also interesting that they are managing a workforce of around a 1000 cleaners, and they burnt through $40 MM. That's the amount of seed Elon Musk needed for SpaceX.
Where they failed was in providing an adequate supply of cleaners (no one available for weeks on occasion) and last-minute cancellations without substitutes.
Never did a cleaner solicit me to hire direct, but I DO think Homejoy should leave their customers with a way to reach the cleaners I did like for rehiring. Why not, after all?
http://recode.net/2015/07/17/google-hires-homejoys-technical...
Perhaps that success is coming sooner than even I had anticipated.
Though the time spent doing these engagements and preparing, maybe that was worth it for the advertising? Not sure but they don't sit right with me.
For people working in christmas, its a good break to have. And i doubt those hours spent otherwise on the startup can could have changed the outcome.
So I'd say that she was simply doing her job.