As tptacek said, I'm sure many of the people who created and work for these businesses are well intended and hard working, and we have to applaud them for that.
However, the writing is on the wall for any "sharing economy" service that is simply a technology wrapper for non-SSN'd workers in the US. A couple of challenges that aren't solved by technology:
1. Many unskilled labor positions, especially those that incorporate illegal immigrants, are paid in cash.
2. The price points are absurdly low to create any sort of margin to sustain a business (I can only assume most of these companies are doing < 10% gross margin)
3. Response of workers turns sour when they realize the system inevitably becomes indentured servitude.
4. "Rigorous background checks" - I have yet to see how technology has made background checks any more "rigorous" or how this has allowed companies to scale the quality of workers.
5. Scaling quality - many of these services (moreso for services like Thumbtack) start by hiring skilled people (usually MBA students, aspiring actors, etc) who are looking to earn a few extra bucks for fairly unskilled activities. People enjoy the service since they not only get a higher quality service but also because "it comes with a smile". There is only a limited pool of these type of workers, which inevitably means the supply side of the business gets eliminated at a certain scale.
I think there might be a place for these type of businesses, but perhaps not in the venture world.
Cofounder of thumbtack here. I think you misunderstand our business model. We don't hire anybody; we're just a marketplace. A request comes in, we connect it with qualified professionals, and then they bid directly on the job.
At no time have we gone out and hired "MBA students or aspiring actors" to fill our provider directory. From day one all of our providers were actually working in their industry prior to signing up with us.
Further, I would say that we don't have the same quality problem that Homejoy does. If you submit a request on our site, you'll get a choice between several providers at different price points and quality points. You choose the provider. Poor providers will get low ratings and will either have to lower their prices or exit the system.
Fair enough, thanks for clarifying. I'm having a hard time finding the article but I believe a FastCo/Wired/etc (one of those sites) did a longform article about how many of those type of workers (students, actors, etc) existed on Thumbtack, which was further backed up by someone who had interviewed with you. That was the basis for my conclusion.
Out of curiosity, given you're a marketplace how do you handle reoccurring work then? Or do you focus entirely on net new business?
Interesting. I haven't seen the article, but if it says what you say it does then I think they've got it wrong.
To be clear, I'm not saying that an MBA student or an aspiring artist can't decide to start a home cleaning business and sign up with our service.
I'm no longer with the company, but I will say that the entire time that I was there, at no point was our business model based on recruiting/training unexperienced people to fill our verticals. In fact, our biggest worry was getting enough high-quality experienced providers.
I'm not privy to future plans, but currently any recurring work is just an added benefit to our service providers.
I think you're off on most of your points. Obviously the startups are not using undocumented workers. The risks are far too high. Gross margins are more like 20%, which is plenty to operate such a business. Not sure how it's indentured servitude compared to any other sort of job. Not sure your point about background checks. Supply & demand works out the numbers.
> Obviously the startups are not using undocumented workers.
If this is true, than there would be a massive supply shortage. Point is, pick one argument (undocumented) or the other (undocumented) and you're going to have a biz model flaw.
> which is plenty to operate such a business.
"such a business" - Sure, but not a tech driven one.
Not sure what you mean. Prices would be set in order for supply and demand to even out. The startup is unlikely to use undocumented supply because of risk.
However, the writing is on the wall for any "sharing economy" service that is simply a technology wrapper for non-SSN'd workers in the US. A couple of challenges that aren't solved by technology:
1. Many unskilled labor positions, especially those that incorporate illegal immigrants, are paid in cash.
2. The price points are absurdly low to create any sort of margin to sustain a business (I can only assume most of these companies are doing < 10% gross margin)
3. Response of workers turns sour when they realize the system inevitably becomes indentured servitude.
4. "Rigorous background checks" - I have yet to see how technology has made background checks any more "rigorous" or how this has allowed companies to scale the quality of workers.
5. Scaling quality - many of these services (moreso for services like Thumbtack) start by hiring skilled people (usually MBA students, aspiring actors, etc) who are looking to earn a few extra bucks for fairly unskilled activities. People enjoy the service since they not only get a higher quality service but also because "it comes with a smile". There is only a limited pool of these type of workers, which inevitably means the supply side of the business gets eliminated at a certain scale.
I think there might be a place for these type of businesses, but perhaps not in the venture world.