Thumbtack
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Thumbtack acquires home management startup Setter
Thumbtack, a marketplace where you can hire local professionals for home improvement and other services, is announcing that it has acquired Setter.
Founded in 2016, Setter provides its customers with video home checkups conducted by experts, then offers personalized plans for how to address any issues. In a blog post, Thumbtack CEO Marco Zappacosta said that by acquiring the startup, his company will be able to offer those same consultations, which in turn could lead to recommendations for different Thumbtack services.
“This is an enormous step for Thumbtack,” Zappacosta wrote. “We won’t just be the platform homeowners turn to when a pipe breaks. We’ll be the only app any homeowner needs for the care and maintenance of their home. For our pros, this means there will be more projects than ever on our platform.”
In response to emailed questions, Zappacosta told me that Thumbtack will “likely” offer both free and paid home consultations: “Our goal is to get this in the hands of as many people as possible and to give homeowners peace of mind when it comes to home maintenance.”
He also said the entire Setter team will be joining Thumbtack, giving the company a presence in Toronto.
“Homeownership is hard,” said Setter co-founder and President David Steckel in a statement. “Together with Thumbtack, we can now give our homeowners both a game plan and a way to tackle their to dos all on one platform.”
The financial terms of the acquisition were not disclosed. According to Crunchbase, Setter raised a total of $12 million from investors including Sequoia Capital and NFX.
Thumbtack laid off 250 employees at the end of March, after the company saw big declines in its major markets. Since then, however, Zappacosta said there’s been “a renewed focus on the home and an acceleration of digital adoption.”
“In this new era of hyperfocus on the home, we are seeing permanent changes in consumer behavior,” he added. “People are investing in their most important asset, their home.”
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Local services marketplace Thumbtack lays off 250 employees
Thumbtack CEO Marco Zappacosta announced in a blog post today that the company has laid off 250 employees.
Much has been written about the impact that COVID-19 and the resulting social distancing/shelter in place measures are having on small businesses (and the steps that internet platforms like Facebook and Yelp — which, after all, make money from small businesses advertising — are taking to help).
Similarly, Zappacosta said the local services that Thumbtack showcases in its marketplace are also seeing anything from a “dramatic decline” to an “outright collapse.” Apparently the company’s business has fallen 61% in San Francisco, 55% in Detroit and 50% in New York City.
Thumbtack raised a $150 million round of funding last year, but Zappacosta said, “No business operates with enough of a buffer to sustain prolonged revenue declines of 40%+ without making radical changes.”
Those changes include reduced marketing, a hiring freeze and 25% salary reductions for executives. (Zappacosta said he will not take any salary at all, starting today.) And it also includes big layoffs.
Laid off workers will receive a severance package with both “cash and equity components,” Zappacosta said. He also said Thumbtack is doing what it can to help its service providers, such as “building features that support more remote work with customers — like video consults for a sink replacement that would typically be done onsite.”
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The next service marketplace wave: Vertical market-networks
Ivan Smolnikov
Contributor
Contributor
Ivan Smolnikov is the CEO and founder of Smartcat, the market network platform for the translation industry.
The last few decades have produced many successful marketplaces. We went from goods marketplace pioneers such as eBay and Amazon to simple service marketplaces such as Uber, Lyft, Doordash, Upwork, Thumbtack, TaskRabbit, and Fiverr. But why haven’t we seen many successful B2B service marketplaces?
Table of Contents
- Why Many B2B Service Marketplaces Failed
- What Makes A Successful Service Marketplace?
- Summary: Figure Out How to Unlock Value for All
Why Many B2B Service Marketplaces Failed
Some would argue that companies such as Upwork, Thumbtack, Fiverr, or TaskRabbit are horizontal B2B marketplaces in the sense that they provide access to suppliers of different services. But while businesses do indeed transact with freelancers on such “horizontal” marketplaces, for most service verticals these are limited-value, one-off transactions. They fail to enable long-term business collaborations.
So, such marketplaces haven’t delivered more valuable services nor introduced a new paradigm for how businesses buy specific services at scale and on an on-going basis. Why is that?
Horizontal marketplaces are stuck at the discovery process
Horizontal services marketplaces don’t provide much value beyond matching clients with quality service providers. In other words, they don’t facilitate collaboration between buyers and suppliers, never mind provide ways for the two parties to collaborate more efficiently over time as they engage in follow-on projects.
In essence, the model these marketplaces were built around is not much different from the likes of Craigslist, which put a convenient UX on traditional classified advertisements.
Complex B2B services require workflow and collaboration tools
In their article “What’s Next for Marketplace Startups?,” Andrew Chen and Li Jin found that there aren’t many successful service marketplaces because those offerings are complex, diverse, and difficult to evaluate. It’s challenging to define a successful transaction in a service marketplace because it’s harder to quantify success.
One reason is that several service providers must often work together to complete a single job for a buyer, requiring a complex workflow from end to end. As a result, it’s difficult for marketplaces to not only mediate service delivery but also make it significantly more efficient for buyers and suppliers. If both the buyer and suppliers don’t see a significant efficiency gain other than being initially matched, why would they continue using the marketplace?
(Image via Getty Images / Lidiia Moor)
The $50 billion translation industry is a prime example of complex B2B services marketplaces. On the supply side are roughly 50,000 small agencies around the globe responsible for more than 85% of this $50 billion industry. (Note we are referring to agencies here as suppliers, though they play on both sides.)
On the demand side are businesses that need to translate text from one language into another. Plus about 1,500,000 freelance linguists work in this industry, many of whom are more specialized than professionals in other industries.
Anyone can find and hire a translator on Fiverr or Upwork. Both provide a vast selection of language translators. However, the quality and cost of the translation depends on the translation tools available to the translator as well as their subject expertise.
Neither Fiverr nor Upwork provide computer-aided translation (CAT) and collaborative workflow solutions for users of their platforms. Additionally, neither provides an effective way for all parties to collaborate and continuously improve the efficiency and quality.
But the problem with traditional marketplaces goes even further: Multiple translators and reviewers are usually needed to complete a single job for a customer. Multi-language translation projects are even more complicated. Such projects require multiple service providers and cost estimates, in addition to project management tools.
This is why building a B2B service marketplace is difficult. Service marketplaces must not only connect buyers and suppliers, but also provide tools to enable an efficient and collaborative workflow that reduces wasted time and effort.
Horizontal marketplaces suffer high attrition
In addition to the problems already outlined, traditional marketplaces experience another issue that prevents them from growing and retaining market participants: Buyer and supplier attrition.
Many business services are based on regularly recurring engagements. In some cases, a buyer and a service provider interact daily, requiring a different workflow than gig-marketplaces are built around.
Buyers and suppliers have little motivation to continue interacting on a platform with no workflow automation solutions. They lack a way to improve service efficiency and quality, automate collaboration, payment, paperwork, and other basic processes required for a business.
This is why many traditional marketplaces suffer from slow network effects and high attrition. (A network effect is what happens when a platform, product, or service delivers more value the more it is used.
Think Facebook, eBay, WhatsApp.) Why wouldn’t companies work directly with service providers outside of a marketplace after they were introduced? What incentives keep the service transaction on the marketplace? These are critical questions to answer when building a marketplace.
Traditional marketplaces target broad services, making it nearly impossible to provide workflow solutions for buyers and suppliers. Going forward, successful service marketplaces will be developed relying on an industry-specific SaaS workflow. This will focus buyers and suppliers on longer-term projects and interactions that serve the unique needs of collaborations and transactions in a specific vertical.
Image via Getty Images / OstapenkoOlena
What makes a successful service marketplace?
In “The next 10 Years Will Be About Market Networks,” James Currier, Managing Partner at NFX Ventures, defines a new era of service marketplaces, which he calls market networks.
A market network is a platform that combines elements of an n-sided marketplace, a network, and workflow solutions. An n-sided marketplace is one that requires coordination of multiple supply-side parties to provide a complex service for a single buyer.
Market networks enable multiple buyers and suppliers to interact, collaborate, and transact on the same platform. They provide users with industry-specific workflow solutions that enable efficient, ongoing collaboration on long-term projects. This reduces costs and leads to a higher quality of services and increased overall value for all users.
But how do you actually build a successful market-network platform? While the answer to that varies from company to company, here is our approach. We were able to build a market network for the translation industry that combines the components: network, marketplace, and workflow solution.
STEP 1: SaaS workflow platform unlocks high-value collaboration
The first step to building an effective complex market network is to develop a workflow that is easy for users to embrace. It might not seem like much, but this increases productivity by enabling teams to perform tasks that were previously impossible.
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Startups Weekly: The Peloton IPO (bull vs. bear)
Hello and welcome back to Startups Weekly, a newsletter published every Saturday that dives into the week’s noteworthy venture capital deals, funds and trends. Before I dive into this week’s topic, let’s catch up a bit. Last week, I wrote about the proliferation of billion-dollar companies. Before that, I noted the uptick in beverage startup rounds. Remember, you can send me tips, suggestions and feedback to kate.clark@techcrunch.com or on Twitter @KateClarkTweets.
Now, time for some quick notes on Peloton’s confirmed initial public offering. The fitness unicorn, which sells a high-tech exercise bike and affiliated subscription to original fitness content, confidentially filed to go public earlier this week. Unfortunately, there’s no S-1 to pore through yet; all I can do for now is speculate a bit about Peloton’s long-term potential.
What I know:
- Peloton is profitable. Founder and chief executive John Foley said at one point that he expected 2018 revenues of $700 million, more than double 2017’s revenues of $400 million.
- There is strong investor demand for Peloton stock. Javier Avolos, vice president at the secondary marketplace Forge, tells TechCrunch’s Darrell Etherington that “investor interest [in Peloton] has been consistently strong from both institutional and retail investors. Our view is that this is a result of perceived strong performance by the company, a clear path to a liquidity event, and historically low availability of supply in the market due to restrictions around selling or transferring shares in the secondary market.”
- Peloton, despite initially struggling to raise venture capital, has accrued nearly $1 billion in funding to date. Most recently, it raised a $550 million Series F at a $4.25 billion valuation. It’s backed by Tiger Global Management, TCV, Kleiner Perkins and others.
A bullish perspective: Peloton, an early player in the fitness tech space, has garnered a cult following since its founding in 2012. There is something to be said about being an early-player in a burgeoning industry — tech-enabled personal fitness equipment, that is — and Peloton has certainly proven its bike to be genre-defining technology. Plus, Peloton is actually profitable and we all know that’s rare for a Silicon Valley company. (Peloton is actually New York-based but you get the idea.)
A bearish perspective: The market for fitness tech is heating up, largely as a result of Peloton’s own success. That means increased competition. Peloton has not proven itself to be a nimble business in the slightest. As Darrell noted in his piece, in its seven years of operation, “Peloton has put out exactly two pieces of hardware, and seems unlikely to ramp that pace. The cost of their equipment makes frequent upgrade cycles unlikely, and there’s a limited field in terms of other hardware types to even consider making. If hardware innovation is your measure for success, Peloton hasn’t really shown that it’s doing enough in this category to fend of legacy players or new entrants.”
TL;DR: Peloton, unlike any other company before it, sits evenly at the intersection of fitness, software, hardware and media. One wonders how Wall Street will value a company so varied. Will Peloton be yet another example of an over-valued venture-backed unicorn that flounders once public? Or will it mature in time to triumphantly navigate the uncertain public company waters? Let me know what you think. And If you want more Peloton deets, read Darrell’s full story: Weighing Peloton’s opportunity and risks ahead of IPO.
Anyways…
Public company corner
In addition to Peloton’s IPO announcement, CrowdStrike boosted its IPO expectations. Aside from those two updates, IPO land was pretty quiet this week. Let’s check in with some recently public businesses instead.
Uber: The ride-hailing giant has let go of two key managers: its chief operating officer and chief marketing officer. All of this comes just a few weeks after it went public. On the brightside, Uber traded above its IPO price for the first time this week. The bump didn’t last long but now that the investment banks behind its IPO are allowed to share their bullish perspective publicly, things may improve. Or not.
Zoom: The video communications business posted its first earnings report this week. As you might have guessed, things are looking great for Zoom. In short, it beat estimates with revenues of $122 million in the last quarter. That’s growth of 109% year-over-year. Not bad Zoom, not bad at all.
We cover a lot of startup and big tech news here at TechCrunch. Sometimes, the really great features writers put a lot of time and energy into fall between the cracks. With that said, I just want to take a moment this week to highlight a few of the great stories published on our site recently:
A peek inside Sequoia Capital’s low-flying, wide-reaching scout program by Connie Loizos
How to calculate your event ROI by Sarah Shewey
Why four security companies just sold for $1.5B by Ron Miller
In case you missed it, Bird is in negotiations to acquire Scoot, a smaller scooter upstart with licenses to operate in the coveted market of San Francisco. Scoot was last valued at around $71 million, having raised about $47 million in equity funding to date from Scout Ventures, Vision Ridge Partners, angel investor Joanne Wilson and more. Bird, of course, is a whole lot larger, valued at $2.3 billion recently.
On top of this deal, there was no shortage of scooter news this week. Bird, for example, unveiled the Bird Cruiser, an electric vehicle that is essentially a blend between a bicycle and a moped. Here’s more on the booming scooter industry.
Thumbtack is raising up to $120M on a flat valuation
Depop, a shopping app for millennials, bags $62M
Fitness startup Mirror nears $300M valuation with fresh funding
Step raises $22.5M led by Stripe to build no-fee banking services for teens
Possible Finance lands $10.5M to provide kinder short-term loans
Voatz raises $7M for its mobile voting technology
Flexible housing startup raises $2.5M
Legacy, a sperm testing and freezing service, raises $1.5M
If you enjoy this newsletter, be sure to check out TechCrunch’s venture-focused podcast, Equity. In this week’s episode, available here, Crunchbase News editor-in-chief Alex Wilhelm and I discuss how a future without the SoftBank Vision Fund would look, Peloton’s IPO and data-driven investing.
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How-to video maker Jumprope launches to leapfrog YouTube
Sick of pausing and rewinding YouTube tutorials to replay that tricky part? Jumprope is a new instructional social network offering a powerful how-to video slideshow creation tool. Jumprope helps people make step-by-step guides to cooking, beauty, crafts, parenting and more using voice-overed looping GIFs for each phase. And creators can export their whole lesson for sharing on Instagram, YouTube or wherever.
Jumprope officially launches its iOS app today with plenty of how-tos for making chocolate chip bars, Easter eggs, flower boxes or fierce eyebrows. “By switching from free-form linear video to something much more structured, we can make it much easier for people to share their knowledge and hacks,” says Jumprope co-founder and CEO Jake Poses.
The rise of Snapchat Stories and Pinterest have made people comfortable jumping on camera and showing off their niche interests. By building a new medium, Jumprope could become the home for rapid-fire learning. And because viewers will have tons of purchase intent for the makeup, art supplies or equipment they’ll need to follow along, Jumprope could make serious cash off ads or affiliate commerce.
The opportunity to bring instruction manuals into the mobile video era has attracted a $4.5 million seed round led by Lightspeed Venture Partners and joined by strategic angels like Adobe Chief Product Officer Scott Belsky and Thumbtack co-founders Marco Zappacosta and Jonathan Swanson. People are already devouring casual education content on HGTV and the Food Network, but Jumprope democratizes its creation.
Jumprope co-founders (from left): CTO Travis Johnson and CEO Jake Poses
The idea came from a deeply personal place for Poses. “My brother has pretty severe learning differences, and so growing up with him gave me this appreciation for figuring out how to break things down and explain them to people,” Poses reveals. “I think that attached me to this problem of ‘how do you organize information so it’s simple and easy to understand?’ Lots and lots of people have this information trapped in their heads because there isn’t a way to easily share that.”
Poses was formerly the VP of Product at Thumbtack where he helped grow the company from 8 to 500 people and a $1.25 billion valuation. He teamed up with AppNexus’ VP of engineering Travis Johnson, who’d been leading a 50-person team of coders. “The product takes people who have knowledge and passion but not the skill to make video [and gives them] guard rails that make it easy to communicate,” Poses explains.
Disrupting incumbents like YouTube’s grip on viewers might take years, but Jumprope sees its guide creation and export tool as a way to infiltrate and steal their users. That strategy mirrors how TikTok’s watermarked exports colonized the web.
How to make a Jumprope
Jumprope lays out everything you’ll need to upload, including a cover image, introduction video, supplies list and all your steps. For each, you’ll record a video that you can then enhance with voice-over, increased speed, music and filters.
Creators are free to suggest their own products or enter affiliate links to monetize their videos. Once it has enough viewers, Jumprope plans to introduce advertising, but it could also add tipping, subscriptions, paid how-tos or brand sponsorship options down the line. Creators can export their lessons with five different border themes and seven different aspect ratios for posting to Instagram’s feed, IGTV, Snapchat Stories, YouTube or embedding on their blog.
“Like with Stories, you basically tap through at your own pace,” Poses says of the viewing experience. Jumprope offers some rudimentary discovery through categories, themed collections or what’s new and popular. The startup has done extensive legwork to sign up featured creators in all its top categories. That means Jumprope’s catalog is already extensive, with food guides ranging from cinnabuns to pot roasts to how to perfectly chop an onion.
“You’re not constantly dealing with the frustration of cooking something and trying to start and stop the video with greasy hands. And if you don’t want all the details, you can tap through it much faster” than trying to skim a YouTube video or blog post, Poses tells me. Next the company wants to build a commenting feature where you can leave notes, substitution suggestions and more on each step of a guide.
Poses claims there’s no one building a direct competitor to its mobile video how-to editor. But he admits it will be an uphill climb to displace viewership on Instagram and YouTube. One challenge facing Jumprope is that most people aren’t hunting down how-to videos every day. The app will have to work to remind users it exists and that they shouldn’t just go with the lazy default of letting Google recommend the videos it hosts.
The internet has gathered communities around every conceivable interest. But greater access to creation and consumption necessitates better tools for production and curation. As we move from a material to an experiential culture, people crave skills that will help them forge memories and contribute to the world around them. Jumprope makes it a lot less work to leap into the life of a guru.
You can watch my first Jumprope here or below to learn how to tie up headphones without knots:
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Sequoia leads $10M round for home improvement negotiator Setter
You probably don’t know how much it should cost to get your home’s windows washed, yard landscaped or countertops replaced. But Setter does. The startup pairs you with a home improvement concierge familiar with all the vendors, prices and common screwups that plague these jobs. Setter finds the best contractors across handiwork, plumbing, electrical, carpentry and more. It researches options, negotiates a bulk rate and, with its added markup, you pay a competitive price with none of the hassle.
One of the most reliable startup investing strategies is looking at where people spend a ton of money but hate the experience. That makes home improvement a prime target for disruption, and attracted a $10 million Series A round for Setter co-led by Sequoia Capital and NFX. “The main issue is that contractors and homeowners speak different languages,” Setter co-founder and CEO Guillaume Laliberté tells me, “which results in unclear scopes of work, frustrated homeowners who don’t know enough to set up the contractors for success, and frustrated contractors who have to come back multiple times.”
Setter is now available in Toronto and San Francisco, with seven-plus jobs booked per customer per year costing an average of over $500 each, with 70 percent repeat customers. With the fresh cash, it can grow into a household name in those cities, expand to new markets and hire up to build new products for clients and contractors.
I asked Laliberté why he cared to start Setter, and he told me “because human lives are made better when you can make essential human activities invisible.” Growing up, his mom wouldn’t let him buy video games or watch TV so he taught himself to code his own games and build his own toys. “I’d saved money to fix consoles and resell them, make beautiful foam swords for real live-action games, buy and resell headphones — anything that people around me wanted really!” he recalls, teaching him the value of taking the work out of other people’s lives.
Meanwhile, his co-founder David Steckel was building high-end homes for the wealthy when he discovered they often had ‘home managers’ that everyone would want but couldn’t afford. What if a startup let multiple homeowners share a manager? Laliberté says Steckel describes it as “I kid you not, the clouds parted, rays of sunlight began to shine through and angels started to sing.” Four days after getting the pitch from Steckel, Laliberté was moving to Toronto to co-found Setter.
Users fire up the app, browse a list of common services, get connected to a concierge over chat and tell them about their home maintenance needs while sending photos if necessary. The concierge then scours the best vendors and communicates the job in detail so things get done right the first time, on time. They come back in a few minutes with either a full price quote, or a diagnostic quote that gets refined after an in-home visit. Customers can schedule visits through the app, and stay in touch with their concierge to make sure everything is completed to their specifications.
The follow-through is what sets Setter apart from directory-style services like Yelp or Thumbtack . “Other companies either take your request and assign it to the next available contractor or simply share a list of available contractors and you need to complete everything yourself,” a Setter spokesperson tells me. They might start the job quicker, but you don’t always get exactly what you want. Everyone in the space will have to compete to source the best pros.
Though potentially less scalable than Thumbtack’s leaner approach, Setter is hoping for better retention as customers shift off of the Yellow Pages and random web searches. Thumbtack rocketed to a $1.2 billion valuation and had raised $273 million by 2015, some from Sequoia (presenting a curious potential conflict of interest). That same ascent may have lined up the investors behind Setter’s $2 million seed round from Sequoia, Hustle Fund and Avichal Garg last year. Today’s $10 million Series A also included Hustle Fund and Maple VC.
The toughest challenge for Setter will be changing the status quo for how people shop for home improvement away from ruthless bargain hunting. It will have to educate users about the pitfalls and potential long-term costs of getting slapdash service. If Laliberté wants to fulfill his childhood mission, he’ll have to figure out how to make homeowners value satisfaction over the lowest sticker price.
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Minted rolls out an on-demand photography service for around $100 per session
When you go through a big life event — say a milestone birthday for a parent or a wedding — there are probably going to be a lot of mini-events that happen before and after the big one. But you might not think to hire a professional photographer for them and stick with a couple phone cameras because it can be tough to find those photographers. So Minted, a company that’s… Read More
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Moving past “on-demand,” Paintzen launches DIY tools, instructional content
Paintzen started out in early 2013 as an on-demand app to book professional painters for homes, stores and offices. Today, the company started catering to the D.I.Y. market, specifically selling supplies to those who plan to paint their own rooms. CEO and founder Mike Russell said, “We’re still a marketplace for home and office painting. When we started, the tech we built was… Read More
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Why Homejoy Failed … And The Future Of The On-Demand Economy
On the heels of Homejoy’s failure, the fundamental “on-demand marketplace” model has come into question by investors, the media and even consumers. That questioning is very relevant, as there has been an overload of VC money that has been injected in the on-demand service platform space over the past few years ($4 billion-plus in 2014). Read More
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