There has been consolidation, collapse and other troubles among some on-demand home services startups, but others seem to be cleaning up in their wake. Handy — a platform for on-demand housekeeping and other services like furniture delivery and assembly via an app that connects tradespeople with customers — is announcing today that it has raised $50 million in new funding to continue growing its business.
Handy is not commenting on the valuation, but it is reportedly in the $500 million range.
The Series C round was led by new investor Fidelity Management, with participation also from existing investors TPG Growth, General Catalyst, Highland Capital and Revolution Growth. It brings the total invested in Handy (formerly known as Handybook) to just under $111 million.
The New York-based company says that between its launch in 2012 and June 2015, it completed 1 million bookings on its platform. Oisin Hanrahan — Handy’s CEO who co-founded the company with Umang Dua (its COO) and Weina Scott and Ignacio Leonhardt (both no longer with the company) — says that Handy books 100,000 jobs per month, with “hundreds of thousands” of customers and some 10,000 professionals registered.
The plan, Hanrahan says, will be to invest more in the 28 markets where it is already active — they include major cities across the U.S., plus some international markets like London — before expanding to new cities and countries at the end of 2016.
“We want to deliver a better customer experience, and a better experience for the pros on our platform,” he told TechCrunch. It will also be about expanding beyond cleaning services, which today represent about 80% of the jobs on Handy. “We want to deliver every service to every home.”
The news of the new round of funding is both expected and also a little bit of a surprise.
On one hand, we knew Handy was raising. A report from July in Bloomberg, noting that Handy was looking for up to $50 million at a valuation of $500 million, said as much. (That report, incidentally, had mentioned the possibility of a strategic investor, although there are none named in the current round.)
More generally, the market for on-demand services — from transportation to food delivery and more — is a big area right now for smartphone-equipped consumers, and investors are piling in to get a piece of the action.
At the same time, as companies like Uber and Airbnb demonstrate, succeeding is partly a matter of scale, something that Handy is also taking to heart.
“This is a classic two-sided marketplace with a lot of operations,” Hanrahan says, referring to Handy interfacing both with consumers ordering a service, and contractors who execute the jobs. “The way to do that is to be the biggest player in a category.”
But on the other hand… the on-demand home cleaning space is more than a little messy right now.
Several competitors to Handy have had problems growing. Handy’s rival Homejoy, which Handy was trying to buy at one point, closed in July (with several employees then going to Google). In Europe, another startup called Hassle also failed to scale and was acquired by Rocket Internet-backed Helpling.
There is also the matter of lawsuits against the businesses over how workers on the platform are classified. Homejoy had four of these suits in progress and even cited them that as one reason the company had trouble raising money. Handy itself is also trying to work through two similar suits over 1099 status. The latest on that front is that the company says it is trying to steer the cases into arbitration.
On top of this, given that the area of business is relatively new, the startups involved are seeing growing pains. These include how customers are acquired: over-emphasis on cheap introductory house cleaning deals on Groupon, for example, can make it a challenge to retain customers for subsequent jobs, as this unofficial Homejoy post-mortem explained. And they also include more basic problems with how the business is managed on the customer service front.
Hanrahan admits that Handy itself is not immune to this, either. We’d heard that the company had issues with how customers were unable to cancel cleans before they were charged, because they had to phone or email to do so, which effectively made it more difficult than booking in the first place.
Now Hanrahan says the company is transitioning to an online platform that will make ordering — and cancelling — services easier. “It was a feature gap that we are closing,” he says. “We want to make sure that everyone on Handy is having a good experience.”
It will have a challenge in convincing some people. For example.
Hanrahan also notes that Handy gets less than 3 percent of its bookings today from Groupon and LivingSocial, both of which have been hard to convert to regular users.
On the subject of the company’s business model, he notes that the typical job ordered on the Handy platform costs about $70 to the customer, and of that Handy makes 20 percent on average (it varies between different categories of jobs). Around 80 percent of Handy’s bookings each week come from repeat customers.
When it comes to contractors on the platform — or pros, as Hanrahan refers to them — he says that the majority are active on the platform after 12 months, and are still doing work after a 30-day period, but that the “vast majority” are working less than 20 hours per week, and that many “dip in and out” of working on Handy.
“This is incremental and supplemental,” he says. This is all worded carefully by him, possibly because how people are working on the Handy platform is at the center of those 1099 lawsuits.
Longer term, and because — as Hanrahan himself says — scale is the name of the game, perhaps more challenging than all this might be the spectre of much larger players like Amazon and what position they may occupy as competitors. Handy is not the only one facing that challenge: others like Thumbtack could also be impacted by Amazon and Google if their early ambitions in home services take hold.
This is perhaps the best reason why Handy wants first to improve how it serves a smaller group of markets before expanding to take on more. “When we started Handy we did not internalize the degree to which this is a technology business,” Hanrahan says. “At a local level, as we grow, we realise that. It’s challenging, but to be the leader you have to give the best experience more than anything else.”
Additional reporting Katie Roof, Jordan Crook