By now, the opportunity for technology companies to build big businesses developing software for local services industries is more or less accepted as gospel in startup circles. Last year, we saw companies like Uber, Homejoy, and Booker raise big rounds to move from proof-of-concept to meaningful growth — as well as a deluge of early-stage companies seeking to replicate their models across a number of industries.
The sector is maturing, but the proverbial door shuts much slower in local than other technology businesses. Although competition among taxi apps in the top five U.S. markets is fierce, there’s plenty of whitespace in other verticals. Last year, four engineers from Qualcomm, who were responsible for the company’s location sensor product Gimbal, left the company to start HouseCall, a system that helps users find and book local providers who service home-related projects like plumbing or audio/visual installation. The company has built a marketplace similar to what Seamless has done for food delivery, providing enterprise software for free to merchants and then selling leads generated by its consumer product.
Street Fight recently caught up with Ian Heidt, founder and CEO at HouseCall, to talk about the challenges in building a product for service providers, what it takes to compete with the search players, and how the sector is shaking out.
What did you and your team see in the market last spring that convinced you to leave the stability and resources of Qualcomm to start HouseCall?
We’re engineers, but the folks we had the most respect for in mobile that we thought were creating sustainable mobile businesses weren’t necessarily the guys that were on the technological side of things. Instead, we were fascinated by the companies who were applying what we already new about mobile to existing, staid industries, using mobile to streamline the workflows and dramatically make the experience better — Uber being poster child for that.
HouseCall takes a similar marketplace approach (like Uber and Seamless), providing software to both merchants and users while monetizing based on lead generation. Outside of lead generation, where can technology add value for service providers?
Today, enterprise software is being written for a new class of service professionals that haven’t necessarily have had a lot technology at their disposal. We’ve focused on independent home service providers that previously managed there business through text message or telephone. What we’ve built is a self-contained way for them to manage their business.
Service providers have a significant amount of downtime — often, between 40-50% where they could otherwise be busy — so we want to fill that. Gas is also a significant cost for these providers — so we’re trying to use mobile to attack that problem by pulling in the client’s radius and doing matching dynamically so they can lower gas costs. The third part is to eat into the time it takes to do invoicing. On average, we’ve found providers spend 15 minutes on invoicing per job, but if you can start to automate that habitually you can dramatically cut down those costs. It’s all about creating this enterprise-class of software tools that we’re giving away for free, and our business model is to create a transaction on the marketplace that we can hook them to.
Over the past few years, we’ve seen a number of startups focused building affordable back- and front-office software for service providers without the consumer-facing component. What impact does this have on the marketplace model?
Our business model is on the consumer-side, so in the long run our goal is to earn our revenue is on the marketplace side. That’s where I put the strategic weight of our company. But it’s still a very open playing field for smaller service providers who do not work out of an office. You think of Booker and those types of companies — they’ve recognized there’s a great need for people who do services on their own site, then being able to streamline and manage that back-office piece. But there had not been enough focus on the smaller, more autonomous services providers who we’re going after. There’s typically no incumbent solution in the market.
ReachLocal built similar services marketplace model in ClubLocal, but has since turned its focus to the company’s new SaaS product. What can you learn from ReachLocal’s experience building a consumer brand?
What a lot of [consumers] who we’ve spoken with express is: what they care about most isn’t necessarily price-sensitive, and it’s not how fast the job gets done, but rather, that they can get someone they feel they can trust. That relationship between the homeowner and the service provider is critical to driving the right experience.
It’s the relationship piece, which is slightly intangible, that other entrants into this field have over simplified with software. If a user is actually going to bring someone into their house, you cannot bury that fact with an automated super-turn-key system.
The search-and-discovery element is an important part of your business, but one that companies like Yelp and Angie’s List have mastered over the past decade. How can you use the transactional element of HouseCall’s product to mitigate their advantage?
Yelp and Angie’s List have done great job helping users find service providers who do a good job. But the other part of it, which is the transactional and commerce part, is still where there’s open territory. And no one has really put those two parts together. The ease which the commerce element allows, is a secondary benefit that you only experience if you’ve solved that upfront piece. That’s a benefit they are not getting else. By closing that transaction loop you can crush all of these workflow inefficiencies that otherwise still exist and are major pain points for both consumers and service providers.
Obviously, the data generated from the transactional component allows you to create more transparency in how you charge businesses. But how can you use that data to improve the search and discovery problem on the consumer side of the product?
Once you actually see end to end what’s happened in a transaction you have a lot metrics about quality. For instance, people feel a certain level of comfort when a service professional who has done work in their neighborhoods. If you can see where the transaction stops, you can begin to aggregate and understand metrics around the average time it take a provider to complete a certain task so you can start to systematize an industry that’s been marked by its opacity. With that you can find relationships in data to help determine.
There’s been a lot of talk about the opportunity to “Uberize” the local economy, and a number of companies who have gone after different verticals in a different markets. What’s the end-game here?
It’s really early. In other verticals, you either have some regional champions like Seamless and GrubHub who decided to get together to increase scale. Or others that have raised substantial capital to conquest into new markets.
In the local service sector, the key question for me is finding frequency. Take cabs. I used to live in the Bay Area, and I know that finding a cab in San Francisco is a frequently recurring problem. That’s why Uber works. In the home services industry, there’s inherently less frequency across any given service. That’s why you’ve seen some of the players start to consolidate around housekeeping because you get higher frequency. We think we can aggregate frequency across a breadth of services. We can include plumbing, carpet cleaning, handymen, et cetera. We believe that, in aggregate, the amount people spend on their homes is high enough to support it.
Steven Jacobs is Street Fight’s deputy editor.