It is no secret how much tougher it has become over the last few years to raise VC dollars in the home services space. Even Rocket Internet’s Helpling reportedly had to take a down round when it raised a further €10 million earlier this year.
This can partly be explained by Amazon’s interest in the home services market, and also because of high-profile failures, such as that experienced by Homejoy.
But we’re not quite done yet, with news that Nordic home cleaning startup Freska, which is headquartered in Finland but also operates in Norway, has picked up a modest €2 million in new funding. Leading the round is Sweden’s Spintop Ventures, with participation from Norway’s Momentum Partners.
A number of individual investors also joined including Lasse Smedsvig and Harald Aalvik, founders of Adams Matkasse in Norway, and Olli Sirkiä, co-founder of Finnish SaaS company Leaddesk. Freska also received public grants and loans from Finland’s public innovation fund Tekes as a part of the financing.
Meanwhile, I’m told the new capital will be used to acquire more customers in the Nordic region, including expanding to further cities and another country, and to further develop Freska’s tech platform.
In a call, Freska co-founder and CEO Sebastian Heinrichs declared the “on-demand” home cleaning market dead. That’s because, he argues, it never actually existed. Instead, home cleaning is all about regularly scheduled and repeat business. “[It’s a] quality subscription play, not an on-demand play,” he says. “No player has or will ever show metrics that work for one-off cleanings you book for the same day ‘on-demand'”.
That’s not to say that Freska doesn’t offer one-off bookings — it does — but Heinrichs sees this element of the business as more marketing than profit. “Today the metrics for one-offs work fine but we consider them as a marketing cost and more than 80 per cent of our monthly bookings come from subscribers”.
The key to succeeding in what he says is a very competitive market is keeping both sides of the market happy, not merely matching supply and demand. “The huge market opportunity hasn’t disappeared, every home demands cleaning and the global market is growing every year,” says Heinrichs in a statement.
“You need to understand the sensitivities of the market and stay laser focused on keeping the business fundamentals healthy. It’s not enough to only create value for the consumer through easy booking, competitive prices etc. Unless you can be a company that your cleaners love as well, you’ll face problems in scaling due to high cleaner churn and platform leakage”.
To that end, retention of cleaners means ensuring that they have enough work local to them and are paid fairly, but also softer things like not feeling isolated and being part of a wider workplace community. This, says Heinrichs, has seen Freska run regular movie nights for its cleaners, for example.
“We have analyzed the market drivers and the players in the market and are impressed about how Freska has solved some of the hardest problems in this space,” says Spintop Ventures’ Finn Persson in a statement. “Freska’s team and numbers have undoubtedly demonstrated their ability to grow a “soft” business at scale without sacrificing on the customer experience and preserving a strong social angle that is important to us. We are excited to join the team”.
Those numbers point to Freska targeting €10 million in revenue run rate by the end of this year. “Despite scaling fast, our secret sauce produce the lowest cleaner and customer churn on the market,” claims Heinrichs.