As Home Services Market Heats Up, Handybook COO Sees Big Opportunity | Street Fight

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As Home Services Market Heats Up, Handybook COO Sees Big Opportunity

0 Comments 07 July 2014 by

102419-5b14438e85ef1aa44fb1b65af2953c47-medium_jpgLast month, Revolution, the venture firm helmed by AOL co-founder Steve Case as well as Groupon chairman Ted Leonisis, led a $30 million investment in Handybook, a company that allows users to book housecleaners and other home services providers.

The investment was a must for Handybook. So far this year, the company’s largest direct competitor, Homejoy, has raised $30 million, and rumors have swirled that Amazon is readying a similar product. Meanwhile, a host of not-quite-yet competitors have raised double-digit rounds.

Street Fight recently caught up with Umang Dua, co-founder of HandyBook, to talk about the company’s evolving competitive set, the growing speculation around Uber’s valuation, and why Revolution gets local better than most venture firms.

Earlier this month, NYU Stern School of Business finance professor Aswath Damodaran argued that Uber was substantially over-valued. Why is he wrong?
One of the really cool things in this space is that unlike a lot of other apps, the companies in this market are dealing with real transactions, real customers, and real service providers on both sides. Growth for us, and I imagine for Uber as well, is based very, very purely on either the number of transactions completed or the number of bookings done. Unlike a number of other companies, our success is not hard to measure.

But what’s really driving that for these sorts of businesses is that you’re comparing these new age businesses to what existed before, which was a really shitty buying experience. What people are banking on is that these companies are rethinking trillion dollar industries — whether it’s transportation or home services — and that spend already exists.

Investors are looking at a massive market. They’re looking at the new way of doing things. And they’re taking the point of view that the whole industry’s going to get disrupted and therefore, those valuations are justified by this sort of growth.

Many companies seem to occupy this middle ground between a lead generation tool and a full-service consumer brand, saddled with the risks and liabilities of running a company. Can Handybook succeed as a technology company, alone?
I think the answer is that you have to build a brand. This is a business where trust is super-critical because people need to think that the people on the other end of the marketplace are reliable. You just can’t build a Craigslist-type model where you can get anything on the other side.

We focused a lot on building this brand. We asked, what are the few things beyond the marketplace that you can really form structure around? So whether it’s pricing. Whether it’s saying all the people have background checks. Whether they’ve gone through a certain degree of sort of onboarding. Whether there’s customer service 24 hours supporting it. Those are the things that help you build a brand, and the trust implicit in it — not marketing.

The marketplace model has obviously caught on. Investors have poured money in everything from dog sitting to laundry. Why won’t this massively collapse?
I think fundamentally each businesses is very different and they’re operationally very, very challenging. That it’s not as easy as connecting A to B. You cannot just start plugging these different services into a universal engine. The quality will suffer. It just takes a very different type of network to build these different businesses.

The way I see it playing out is that there will be space for a few dominant players to sort of really be market leaders in different verticals. Then maybe one or two eventually start doing a couple of verticals, but I don’t imagine there being one brand that works across all of these services.

One of the remarks that a number of the folks in the industry make is just how stunned they are that Craigslist has survived so long. Why didn’t this deep verticalization happen earlier?
We’re in a very, very unique time in terms of both how consumers are perceiving the Internet as well as the technology itself. But it starts with mobile. It opens up so much more potential when you have these one-man businesses that are roaming around with the ability to do things remotely and they don’t have to be in front of the computer.

The second thing that extremely critical now is trust. Ten years ago no one would feel comfortable making a booking on their phone or on the website and have this random person then showing up into their house. That just wouldn’t happen. Mentally, people have evolved and they’ve started trusting these brands that are being built to deliver a sort of standardized service. That’s happened literally over the last I’d say two or three years.

So, Steve Case: talk a bit about how his experience in local has informed the way you’ve built the business.
I think it did. I think he has that entire set of experiences, and this insanely good sort of understanding of local and its evolution. When you talk to Steve he talks a lot about how AOL was actually a very, very local company. They were first to understand how it works, and the first to really build it out.

But then there’s Ted [Leonsis] who is the other partner, and is the chairman of Groupon. Between the two of them, there’s this understanding of how these businesses work. They understand the need to think both through the supply side and the demand side, thinking through how fast you scale and what the models are to build out locally. That’s one of the things I think that really drew us to them — they got it. They got it better than most of the people we’ve talked to and seem genuinely excited about this space. And that’s not always the case.

Steven Jacobs is Street Fight’s deputy editor.

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