Homejoy Is Shutting Down At The End Of The Month

[obrian]

what happened to homejoy, i mean i heard it was an amazing service, they've raised 40 million dollars and pow!!!! everything came crashing down.so sad.
http://techcrunch.com/2015/07/17/homejoy-is-shutting-down-at-the-end-of-the-month/

 

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[Vigilante]

Assholes.

$40m of other people's money.

 

[vinylawesome]

The worker classification lawsuits and pricing model appear to be the main culprit.


"I ordered a Homejoy cleaning last year, after seeing ridiculously low prices advertised on Facebook. (The company has been known to advertise a basic house cleaning for as low as $19.) The cleaning wasn’t spectacular, but even so, I knew it was worth significantly more than I paid. And theChronicle’s reporting confirms my suspicions. According to the paper, Homejoy “operates in the red, losing about $12 on every cleaning before even counting the cost of customer acquisition, according to the source.”


"If it really was offering home cleanings for less than the cost of providing them, Homejoy was engaged in a kind of price dumping, a term from international trade that means, essentially, selling things at aggressive discounts to cost, simply to drive competitors out of the market"

http://fusion.net/story/142578/homejoy-uber-for-x-startups-may-be-in-trouble/

 

[throttleforward]

"If it really was offering home cleanings for less than the cost of providing them, Homejoy was engaged in a kind of price dumping, a term from international trade that means, essentially, selling things at aggressive discounts to cost, simply to drive competitors out of the market"

I wonder if the investors were in on it/encouraged it.

 

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[Aidan]

Raising 40m in donated/VC money, to create a business that knowingly loses them money, in a flawed attempt to drive other businesses out of the market?

That's laughable. Any other competitor would know exactly Homejoy was trying to do, and know that their donations will eventually plateau, and die out. At best, homejoy got some action and took some of the market from their competitors. However, they failed to over-deliver on service, create/build a profitable revenue model, and ultimately drove themselves out of the market. All their competitors had to do was step up their service a bit more and play the waiting game until Homejoy either died, or was devalued enough to be cheaply acquired.

The better question is how did they even manage to get that VC money in the first place? Did Homejoy have a promising increase in Net Profit at some point in time? I feel bad for those investors.

 

[obrian]

Raising 40m in donated/VC money, to create a business that knowingly loses them money, in a flawed attempt to drive other businesses out of the market?

That's laughable. Any other competitor would know exactly Homejoy was trying to do, and know that their donations will eventually plateau, and die out. At best, homejoy got some action and took some of the market from their competitors. However, they failed to over-deliver on service, create/build a profitable revenue model, and ultimately drove themselves out of the market. All their competitors had to do was step up their service a bit more and play the waiting game until Homejoy either died, or was devalued enough to be cheaply acquired.

The better question is how did they even manage to get that VC money in the first place? Did Homejoy have a promising increase in Net Profit at some point in time? I feel bad for those investors.

i was kind of shocked because i thought that they were a promising business for the future, and they even came from y combinator, but those investors though they can kindly say it's money well flushed.

 

[Aidan]

i was kind of shocked because i thought that they were a promising business for the future, and they even came from y combinator, but those investors though they can kindly say it's money well flushed.

There must have been a good enough reason for them to get 40m backed into their business in the first place. I just think that they decided to take a giant uneducated risk without talking to their investors about it, and no backup plan to circumvent a largely possible negative outcome. I mean, 'now that we have this 40m cushion' *facepalm* let's pretend that we can do this all really cheap. Taking risks is cool; it's all apart of business, but when there is a constant negative ROI and underwhelming appreciativeness of the Services offered by your company, that would set off a few red flags.

Hypothetically, even if they offered amazing, and over-the-top service, they would still have to manage with the fact that they would need to either charge their customers more (decreasing price is fine, but charging more does not rub over well), or create a new source of revenue in their business that would sell at least as much as their regular cleaning services, and that would cost enough to bring them into the green.

 

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[MKHB]

what happened to homejoy, i mean i heard it was an amazing service, they've raised 40 million dollars and pow!!!! everything came crashing down.so sad.
http://techcrunch.com/2015/07/17/homejoy-is-shutting-down-at-the-end-of-the-month/

Assholes.

Well said @Vigilante ^^^^^^

Nothing in either of these two founder's background give any indication that they could operate this kind of enterprise, let alone at this scale.

This...xxxxxxxxx business is really a technology business-blah blah blah.

But he has a degree from MIT and she worked at Google - oh OK ...they should definitely be able to run a massive house cleaning business.

Good riddance!!!

 

[liquidglass]

While I'm sure the pending employee classification was a scary thought to them I don't think that's what knocked them out, not even charging so little and losing money drove them out of business, Uber has done the same thing just with a bigger warchest.

What caused the downfall or would have in the long run is the lack of control. Sure they connect you to someone to clean your house and charge a commission. Anyone cleaning your house would act in their own best interest (if they were smart) and clean your house amazingly and then offer to set up a schedule to come back....OUTSIDE OF THE APP. So at best homejoy created an introduction for cleaners and home/apartment owners. You find someone you like you're going to want to keep them coming back, especially if they can match or cut homejoys prices either now or later.

I hate to see a great idea go up in flames, because it was a great idea, but it just didn't fly. Hopefully they learned plenty to put into their next business.

 

[theag]

 

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[Lavi Fletcher]

Assholes.

$40m of other people's money.

Statistically, 3 out of 4 VC backed startups fail.

So out of 100 venture backed companies, 75 fail, around 20-22 make the fund break even and 2 or 3 hit the ball out of the park which is where the VCs make most of their return.

Homejoy is just one of the ones who failed. It's sad, I saw one of the co-founders give a talk from a year ago this morning and it was really helpful because she really knows what their doing, however her startup came into regulatory problems which she couldn't of foreseen.

It's pretty ignorant to call them assholes. It's not like they did it on purpose to take money, fail and then take the money with it. The Venture Capitalists who have backed them are obviously confident and want to support them to make them succeed, but it's not like they aren't statistically expecting failure.

There must have been a good enough reason for them to get 40m backed into their business in the first place. I just think that they decided to take a giant uneducated risk without talking to their investors about it, and no backup plan to circumvent a largely possible negative outcome. I mean, 'now that we have this 40m cushion' *facepalm* let's pretend that we can do this all really cheap. Taking risks is cool; it's all apart of business, but when there is a constant negative ROI and underwhelming appreciativeness of the Services offered by your company, that would set off a few red flags.

Hypothetically, even if they offered amazing, and over-the-top service, they would still have to manage with the fact that they would need to either charge their customers more (decreasing price is fine, but charging more does not rub over well), or create a new source of revenue in their business that would sell at least as much as their regular cleaning services, and that would cost enough to bring them into the green.

The 40 Million wasn't necessarily a "cushion". It's obvious that they aren't necessarily going to be making profits from day one and so that 40 million is to support the company so they can scale large enough that one day they can be big enough in terms of number of consumers to actually make a profit.

Look at Uber, it's currently running at an annual loss of like $450 Million (I'm not sure of the numbers exactly but it's something very close to that). This is because right now, they are trying to take over the industry and once they have a large recurring amount of customers, (I think Travis Kalanik's goal was to become profitable by the 12th year, once again, I'm not sure exactly) they will finally become profitable and from then on it's just smooth sailing, and their huge amount of funding is meant to tide them till then. And at the current rate, it's going to happen. Expect Uber to have a monopoly on the taxi industry by 2025 in my opinion lol.

Homejoy had more than 100 employees. If for arguments sake they had exactly 100 employees on $50,000 salaries each, that's already $5 Million in expenses for 1 year. See what I mean?

 

[Vigilante]

she really knows what their doing

LOL. Apparently not.

You don't need to be an MBA, as forbes magazine said, to figure this out. The "brilliance" of the architects of this business model?

1. You sell the first cleaning at a loss, and hope the customers rebook later. Most don't. Your retention "forecasts" you pitched investors never materialize. Speculation is they lost money on 80% of their clients.

2. You get sued because you don't understand employment law.

3. They scaled a business that never demonstrated a positive ROI. They ignored the results, took the money, and expanded anyway. If you have one hot dog stand that doesn't make money, the answer isn't opening another 100 hot dog stands.

4. An estimated 75% of their bookings came from discount sites like Groupon. The business didn't grow organically.

5. The independent contractor nature of their business model made it impossible to create a perfect, replicatable business model. They failed at scale. You walk into a McDonalds in Chicago or Miami and order a combo meal, and you know what you are going to get. You rely on independent contractors, and you'll fail to find consistency in the customer experience. Having run a business before using a similar model, I know the biggest challenge is scale with predictable experience.

6. They didn't pay the people doing the work enough to give a shit.

I have read a lot on this failure, but the best summary article I have seen is here:

http://www.forbes.com/sites/ellenhu...d-homejoy-it-couldnt-hold-onto-its-customers/

but to say that this management team had any clue what they were doing when they fleeced these investors makes me think you either haven't unpacked this enough, or don't understand what happened here. It's not enough to state statistics with a cavalier attitude, as people's lives were ruined by this. Businesses fail for a variety of reasons, but lack of proof of concept and blind scaling using OPM's money earns them the scorn and distain that their actions earned them. You don't get to spend nearly $40m of someone else's money, and then just go "oh well... "

I have a unique ability to comment on this (as would @GlobalWealth) as we both built businesses using a similar model. Neither of us fleeced investors out of $40m while blaming external forces, neither were sued for employment law violations, and neither of us had to give the shit away for free. Ultimately, neither one of us closed and wrecked dozens (hundreds?) of lives in the process of our own failure. Everything you are reading about the failure of their business model was a failure of the intelligence of their founders, as there were hundreds of examples they could have emulated to secure different results.

 

[Vigilante]

I saw one of the co-founders give a talk from a year ago this morning

See, here's another problem. A year ago today, maybe the founder should have been understanding the business and building a fortress rather than giving speeches while their business was taking on water. Talking about how great they were while the mortician was crafting their going out of business epitaph.

 

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[MJ DeMarco]

LOL. Apparently not.

You don't need to be an MBA, as fortune magazine said, to figure this out. The "brilliance" of the architects of this business model?

1. You sell the first cleaning at a loss, and hope the customers rebook later. Most don't. Your retention "forecasts" you pitched investors never materialize. Speculation is they lost money on 80% of their clients.

2. You get sued because you don't understand employment law.

3. They scaled a business that never demonstrated a positive ROI. They ignored the results, took the money, and expanded anyway. If you have one hot dog stand that doesn't make money, the answer isn't opening another 100 hot dog stands.

4. An estimated 75% of their bookings came from discount sites like Groupon. The business didn't grow organically.

5. The independent contractor nature of their business model made it impossible to create a perfect, replicatable business model. They failed at scale. You walk into a McDonalds in Chicago or Miami and order a combo meal, and you know what you are going to get. You rely on independent contractors, and you'll fail to find consistency in the customer experience. Having run a business before using a similar model, I know the biggest challenge is scale with predictable experience.

6. They didn't pay the people doing the work enough to give a shit.

I have read a lot on this failure, but the best summary article I have seen is here:

http://www.forbes.com/sites/ellenhu...d-homejoy-it-couldnt-hold-onto-its-customers/

but to say that this management team had any clue what they were doing when they fleeced these investors makes me think you either haven't unpacked this enough, or don't understand what happened here. It's not enough to state statistics with a cavalier attitude, as people's lives were ruined by this. Businesses fail for a variety of reasons, but lack of proof of concept and blind scaling using OPM's money earns them the scorn and distain that their actions earned them. You don't get to spend nearly $40m of someone else's money, and then just go "oh well... "

I have a unique ability to comment on this (as would @GlobalWealth) as we both built businesses using a similar model. Neither of us fleeced investors out of $40m while blaming external forces, neither were sued for employment law violations, and neither of us had to give the shit away for free. Ultimately, neither one of us closed and wrecked dozens (hundreds?) of lives in the process of our own failure. Everything you are reading about the failure of their business model was a failure of the intelligence of their founders, as there were hundreds of examples they could have emulated to secure different results.

IMO your analysis and the Forbes article is year's worth of startup/business/scaling school mashed into 10 minutes.

Everyone not only needs to read it, but STUDY it.

 

[MKHB]

IMO your analysis and the Forbes article is year's worth of startup/business/scaling school mashed into 10 minutes. Everyone not only needs to read it, but STUDY it.

Come on, all we need is 40M ...please...please...

 

[MJ DeMarco]

Come on, all we need is 40M ...please...please...

They had all the window-dressings of a great business...

Employees.. check.
Funding... check.
Nice offices... check.
Founders with great credentials... check.
Custom branded T-shirts... check.
Founders doing speeches... check.
Great PR from the Silicon Valley... check.

Profit?

Whoops, ya'll forgot about that.

You see at the end of the day, anyone can sell $100 bills for $50 bucks. Losing money is easy. When your local, prototype unit is losing money and your system hasn't been perfected and tweaked into profitability, that isn't the time to scale into a multiplier hoping things will change. Whoops X 200.

EDITED PS: Based upon this experience, I'm willing to guess these founders will succeed eventually, perhaps as soon as their next venture.

 

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[MKHB]

If they had just bought the book, they would of still had $39,999,978.05 left??

Right there in black and white...

Page 297 Step 6: Make it Real "You must deliver on what you say"

 

[Vigilante]

They had all the window-dressings of a great business...

Employees.. check.
Funding... check.
Nice offices... check.
Founders with great credentials... check.
Custom branded T-shirts... check.
Founders doing speeches... check.
Great PR from the Silicon Valley... check.

Profit?

Whoops, ya'll forgot about that.

You see at the end of the day, anyone can sell $100 bills for $50 bucks. Losing money is easy. When your local, prototype unit is losing money and your system hasn't been perfected and tweaked into profitability, that isn't the time to scale into a multiplier hoping things will change. Whoops X 200.

I created an awesome business once. It was so awesome, I knocked out 30 other competitors in an entrepreneurial survival type contest, winning the grand prize as the sole survivor. A business startup finance package. Offices, IT, and $50,000 in consumer advertising. Excellent business cards.

I only forgot one element. Customers. Half a year later and $50,000 in local market advertising spent, and the business was DOA. The cubicles and half drank cups of coffee were all that was left behind.

Want to see it's skeleton?
http://www.springwise.com/weekly/2007-08-22.htm
Scroll down to August 16, 2007.

Fortunately, in my case, the funding was prize money from winning a contest from one of the largest media conglomerates in the United States, and not the retirement savings of some widow that believed in my idea. And the only joy I got from this one was watching multiple dozens of copycats internationally copy the business model based on this simple Springwise article only to meet the same fate one by one.

Two lessons to draw from the Millionaire Fast Lane, which didn't exist when I collapsed this brilliant failure.

The business failed to fill a need, and scale was directly linked. You could throw in a third bonus which was ease of entry, as the business was easily replicated internationally. Other than failing need, scale, and entry (oh and control as I was using someone elses infrastructure) I had everything I needed. OPM. I also had great tee shirts.

If I were Homejoy I should have kept on rolling out more cities and gone on a speaking tour.

 

[AgainstAllOdds]

So it seems like this was the model:

Charge $20 / hour.
Pay employee $ 12 / hour.

Profit $8 margin.

Then assume that employee won't cut you out at $16 / hour. Hence increasing their income by 33%. Or, since they're now getting paid in cash, by up to 75% due to no taxes.

Model was shit.

Good employees will be offered to cut out the middleman. Bad employees will piss off customers.

 

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[hestati]

Homejoy did so many things wrong, this was just waiting to happen. Customers were not happy, "contractors" were not happy.

Now, here's the problem. I hear you when you say "cut out the middleman". At the same time, this "middleman" gets you customers and this is freaking expensive. Middleman makes sure you don't have to call 25 cleaners and listen to their "estimates". Middleman does provide value, just charges too much for it.

Look at AirBNB, I "cut them out" whenever I can and don't feel bad about it. The reason being, they don't offer any value at all. I still need to talk to the owner, get the key somehow, check in with him, check out with him. Book with AirBNB and then find out that the owner never updates his calendar. I hate AirBNB but am forced to use them because people just don't list anywhere else.

I do believe in shared economy. I don't believe in "grow as fast as you can at any cost".

 

[AgainstAllOdds]

Homejoy did so many things wrong, this was just waiting to happen. Customers were not happy, "contractors" were not happy.

Now, here's the problem. I hear you when you say "cut out the middleman". At the same time, this "middleman" gets you customers and this is freaking expensive. Middleman makes sure you don't have to call 25 cleaners and listen to their "estimates". Middleman does provide value, just charges too much for it.

Look at AirBNB, I "cut them out" whenever I can and don't feel bad about it. The reason being, they don't offer any value at all. I still need to talk to the owner, get the key somehow, check in with him, check out with him. Book with AirBNB and then find out that the owner never updates his calendar. I hate AirBNB but am forced to use them because people just don't list anywhere else.

I do believe in shared economy. I don't believe in "grow as fast as you can at any cost".

Completely disagree. There's value in Homejoy for finding a cleaner. Once you've found a cleaner then there's no reason to keep paying Homejoy.

Also, AirBNB fills a different need. 99% of people take vacations to different locations. Hence, no significant recurring transactions. There's little incentive to cut out AirBNB.

For Homejoy, the incentive far outweighs the simple ask of "Hey, do you want to make more money per clean?" Or "Hey, do you want to pay less than $20 an hour?" ... "Great. Let's meet in the middle!"

 

[hestati]

I agree that you disagree . Homejoy was solving a problem of finding a cleaner quickly, but yes, there was no need for it later. In fact, I thought about booking Homejoy and if the cleaner is good, hiring them to work for my other customers.

Uber is a new concept. I don't like them for many reasons, but they do offer value.

Now AirBNB, in my eyes, has none. It's worse than say booking.com for booking right away and also worse than any directory website. And also, if I want to rent for a week or month, do they really think I will pay their commissions?

I think all these giants will fail soon, Uber, Airbnb, all of them. Homejoy was just the first one to go. Not because of the regulations, but because of their business model.

Sent from my SD4930UR using Tapatalk

 

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[Lavi Fletcher]

LOL. Apparently not.

You don't need to be an MBA, as forbes magazine said, to figure this out. The "brilliance" of the architects of this business model?

1. You sell the first cleaning at a loss, and hope the customers rebook later. Most don't. Your retention "forecasts" you pitched investors never materialize. Speculation is they lost money on 80% of their clients.

2. You get sued because you don't understand employment law.

3. They scaled a business that never demonstrated a positive ROI. They ignored the results, took the money, and expanded anyway. If you have one hot dog stand that doesn't make money, the answer isn't opening another 100 hot dog stands.

4. An estimated 75% of their bookings came from discount sites like Groupon. The business didn't grow organically.

5. The independent contractor nature of their business model made it impossible to create a perfect, replicatable business model. They failed at scale. You walk into a McDonalds in Chicago or Miami and order a combo meal, and you know what you are going to get. You rely on independent contractors, and you'll fail to find consistency in the customer experience. Having run a business before using a similar model, I know the biggest challenge is scale with predictable experience.

6. They didn't pay the people doing the work enough to give a shit.

I have read a lot on this failure, but the best summary article I have seen is here:

http://www.forbes.com/sites/ellenhu...d-homejoy-it-couldnt-hold-onto-its-customers/

but to say that this management team had any clue what they were doing when they fleeced these investors makes me think you either haven't unpacked this enough, or don't understand what happened here. It's not enough to state statistics with a cavalier attitude, as people's lives were ruined by this. Businesses fail for a variety of reasons, but lack of proof of concept and blind scaling using OPM's money earns them the scorn and distain that their actions earned them. You don't get to spend nearly $40m of someone else's money, and then just go "oh well... "

I have a unique ability to comment on this (as would @GlobalWealth) as we both built businesses using a similar model. Neither of us fleeced investors out of $40m while blaming external forces, neither were sued for employment law violations, and neither of us had to give the shit away for free. Ultimately, neither one of us closed and wrecked dozens (hundreds?) of lives in the process of our own failure. Everything you are reading about the failure of their business model was a failure of the intelligence of their founders, as there were hundreds of examples they could have emulated to secure different results.

Haha that was a great response. Hindsight is 20/20 I guess.

I was looking at their backers and for some reason, Andreessen Horowitz gave them seed funding, but didn't continue funding them in the Series A and B. They must've figured out the issues with Homejoy and decided not to pursue it. However, Google Ventures started funding them in the Series A and B and I honestly think it's because they have way too much money on their hands and not reinvesting in innovation so they just started throwing money at anything which wasn't a completely garbage idea (Peter Thiel had a debate with the Chairman of Google, getting really pissed off and talking shit about Google saying how they have $50 Billion cash and not using it, while still maintaining they're a "tech" company when in all actuality their biggest product is a search engine, and everything else is minuscule. It's quite fascinating watching him get really angry because he's so passionate about technology and innovation).

I think too many people are making shitty startups using the Uber model for things that shouldn't be using it.

 

[hellolin]

Haha that was a great response. Hindsight is 20/20 I guess.

I was looking at their backers and for some reason, Andreessen Horowitz gave them seed funding, but didn't continue funding them in the Series A and B. They must've figured out the issues with Homejoy and decided not to pursue it. However, Google Ventures started funding them in the Series A and B and I honestly think it's because they have way too much money on their hands and not reinvesting in innovation so they just started throwing money at anything which wasn't a completely garbage idea (Peter Thiel had a debate with the Chairman of Google, getting really pissed off and talking shit about Google saying how they have $50 Billion cash and not using it, while still maintaining they're a "tech" company when in all actuality their biggest product is a search engine, and everything else is minuscule. It's quite fascinating watching him get really angry because he's so passionate about technology and innovation).

I think too many people are making shitty startups using the Uber model for things that shouldn't be using it.

What's funny is that Uber is getting a taste of their own medicine here in China, recently Chinese internet giant Tecent backed app that is similar to Uber, had connections with the Chinese government is making Uber's life hell and kicking them out of the Chinese market, so much for their bully model of growth here in the US, what goes around comes around they say!

 

[obrian]

What's funny is that Uber is getting a taste of their own medicine here in China, recently Chinese internet giant Tecent backed app that is similar to Uber, had connections with the Chinese government is making Uber's life hell and kicking them out of the Chinese market, so much for their bully model of growth here in the US, what goes around comes around they say!

dude china is a planet of their own i mean it's a very weird country.

 

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[Andy Black]

Paul Graham came up with the best definition of a startup I've found in his excellent article here:

• http://www.paulgraham.com/growth.html

I quote:

A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup.

(Read the full article to finally clear up what a "startup" is.)



I worked for a "startup" that also had (I believe) over $40m funding to "accelerate growth" and "grab market share". They folded last year as mentioned in this post:

• www.thefastlaneforum.com/community/threads/company-with-over-25m-users-folds.57359

I hate "startups" and startup culture. It's like a flavour of the month, "gold rush". People are so proud to have a startup or be working for a startup. It actually makes me cringe.


I remember reading Perry Marshall's "Definitive Guide To Google AdWords" book back in 2009.

My favourite takeaway was his story of the Wright Brothers competing with another company to be the first to record a manned, powered flight.

The particular difference that Perry pointed out in their strategies was that the Wright Brother's strategy was to build a machine that flew with no power (a glider), and then add a light-weight engine.

The other company's strategy was to build a more powerful engine to get their plane off the ground. Every time the engine wasn't powerful enough, they'd go build a more powerful engine. Which was then heavier, and needed to be even more powerful to take off. A vicious circle as any sane person can see.



If you need money to scale so that you can get profitable, then there's something wrong with your offer, and/or how you're delivering value.



Something else touched on by James Altucher (I forget where I read it but it resonated), is that if you have a choice with getting cash from funding or cash from customers, then concentrate on the customers.

Startups courting funding can't be 100% focused on improving the value they are providing to their current customers. Their CEO is off doing presentations rather than growing the business. I've seen that too.


I've also been into a local enterprise centre explaining an idea I'm working on. I was just looking for cheap office space. They got excited about how my "idea" could be a "startup" though, and dumped a load of forms on me if I wanted to get government grants and support.

Hmmmm... should I spend my time filling in their forms and presenting to them, or should I try and help people and deliver value such that they pay me and I'm profitable from day one?

It's like they've designed it so new startups don't concentrate on getting profitable from day one. Not a surprise from a Government body, but let's not fool ourselves.


Add value.

Get profitable.

THEN scale (with funding if you want).


"Startups"... Ha!

 

[obrian]

Paul Graham came up with the best definition of a startup I've found in his excellent article here:

• http://www.paulgraham.com/growth.html

I quote:



(Read the full article to finally clear up what a "startup" is.)



I worked for a "startup" that also had (I believe) over $40m funding to "accelerate growth" and "grab market share". They folded last year as mentioned in this post:

• www.thefastlaneforum.com/community/threads/company-with-over-25m-users-folds.57359

I hate "startups" and startup culture. It's like a flavour of the month, "gold rush". People are so proud to have a startup or be working for a startup. It actually makes me cringe.


I remember reading Perry Marshall's "Definitive Guide To Google AdWords" book back in 2009.

My favourite takeaway was his story of the Wright Brothers competing with another company to be the first to record a manned, powered flight.

The particular difference that Perry pointed out in their strategies was that the Wright Brother's strategy was to build a machine that flew with no power (a glider), and then add a light-weight engine.

The other company's strategy was to build a more powerful engine to get their plane off the ground. Every time the engine wasn't powerful enough, they'd go build a more powerful engine. Which was then heavier, and needed to be even more powerful to take off. A vicious circle as any sane person can see.



If you need money to scale so that you can get profitable, then there's something wrong with your offer, and/or how you're delivering value.



Something else touched on my James Altucher (I forget where I read it but it resonated), is that if you have a choice with getting cash from funding or cash from customers, then concentrate on the customers.

Startups courting funding can't be 100% focused on improving the value they are providing to their current customers. Their CEO is off doing presentations rather than growing the business. I've seen that too.


I've also been into a local enterprise centre explaining an idea I'm working on. I was just looking for cheap office space. They got excited about how my "idea" could be a "startup" though, and dumped a load of forms on me if I wanted to get government grants and support.

Hmmmm... should I spend my time filling in their forms and presenting to them, or should I try and help people and deliver value such that they pay me and I'm profitable from day one?

It's like they've designed it so new startups don't concentrate on getting profitable from day one. Not a surprise from a Government body, but let's not fool ourselves.


Add value.

Get profitable.

THEN scale (with funding if you want).


"Startups"... Ha!

lol i really get what you mean it's a shame that the homejoy guys wasted so much money. in my opinion it's like literally throwing over 40 million dollars down the toilet but only it's at a more faster pace.you see i have nothing wrong with certain companies that is labeled as startups to an extent but from my point of view i feel like certain business models does not fit the startup culture and that's like the majority who fail and go straight back to their damn parents home.it's the reality and that's why most startups fail, the founders as well from my point of view start companies for the wrong reason in a sense where a person woke up or in the bathroom and then they have this eureka moment and they get so damn excited and you know what the first thing that comes to their mind is i am gonna be f@@kin "RICH", that's where they get it all wrong that's so damn selfish because they are going to be in it for the money which is kinda selfish from my point of view instead they should've been focusing on creating value and customers are gonna come flying in.

it's a poker game these days although not as bad as the boom though, but overall though the ones that succeed are the ones that change the damn world and push innovation which makes life easier for us and i got to give them a big damn kudos for that.

 

[Andy Black]

Another one down.

I've no idea how much total funding they had, but they received $500k back in 2013.

• http://techcrunch.com/2013/09/02/sooqini

I signed up out of curiosity, looking for a telemarketer. I even paid £50 to get one of their staff to help me, more to see how their onboarding worked.

Even when I raised my hand and marked myself as someone with a need who is willing to pay for a solution, I still got nothing out of it.

Which wasn't a good sign for their business.



I had this email today:

Dear customers,

I regret to inform you that Sooqini has ceased trading with immediate effect. My sincere apologies for this, however we have been unable to attract enough income to continue or additional funding and can no longer remain solvent given we have effectively no remaining assets.

Given the unique nature of our business, you may wish to contact the freelancers who have been working on your business if you would like to continue using their excellent services, however any contractual arrangement would be between you and them going forward.

 

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[Vigilante]

@MJ DeMarco I wonder if we should have a dead pool similar to what F*ckedcompany.com used to have... An archive of companies that were once high flying that are now defunct.

Two purposes… Number one it's Google indexable and number two the history is great for up and comers to learn from.

 

[Andy Black]

So that techcrunch post above links to a post about another "startup" in the UK:

• http://techcrunch.com/2013/04/15/lets-pivot-again

I skimmed the article and the bit I've bolded below tells me not to bother reading the rest.

If you're going to do lead gen, then why do C2C?

I'd rather follow "demonstrated cashflows" where businesses already spend a lot of money generating leads.

Sounds like someone had a "great idea"...