So a little story about Thumbtack. My girlfriend is a chef and she and her chef friends have all turned to Thumbtack at one time or another to seek out private clients. There's a ton of them here in SF since lots of people have money in the city.
One by one, they all dropped off. I've overheard them talking about their experiences. Private client posts gig, asks for bids. Chef buys credits, uses them to bid. Private client opens email, never responds, drops off the face of the Earth. Chef loses money. My girlfriend probably spent $100 without any return. She has since gone on to other much more profitable sources for leads.
Thumbtack of course reaps the reward, but at some point their user acquisition flywheel is going to have trouble turning.
Well, for me at least, the bids were either spammy advertising or just astronomically high. I'm not even going to waste my time responding to someone who is clearly wasting my time. For example, I was trying to get our house ready to put on the market. One of the jobs I posted to Thumbtack was to replace the cutoff valve, supply line, and fill valve of a toilet. All-in-all, it's less than one hour to do the job (which I ended up doing). I also checked that I would provide all parts and supplies, because I already had them. I just had too many other things on my plate at the time. Instead of reasonable estimates, I got crap. The first set was people just using Thumbtack as lead generation. They wouldn't give an estimate, even with the clear details I gave. Instead, they wanted to charge me to come out and give an estimate. Others basically ignored my post and sent me random advertising about their services, which had nothing to do with what I was trying to get done. The final set of people were posting absurd prices that were 4-5x what would be a reasonable maximum for the amount of work. So yeah, I never responded to any of them.
Hey, sorry to hear about your girlfriends troubles, as well as everybody elses. We are working on a marketplace for chefs called Homemade, I love to invite everyone to check it out.
I find the business model fascinating and it is amazing to watch them scale. My family business used to spend over $20k per year on YellowPages ads which drove about 8-12 calls per day at a very high close rate. As YellowPages has died off the money has been invested in an online presence but the skill required to design the site, keep it updated, and to manage all the online advertising spend is well beyond a normal person.
The fragmentation impact of having your customers looking for your services in dozens of different ways vs opening the phone book is costly and complex to overcome.
Once you pay a designer, hosting provider, and then pour the rest into Adwords it is very hard to get the same 8-12 calls per day with $20k of annual spend.
Thumbtack are helping solve that problem and syphoning all the money these businesses used to spend on YellowPages or are wasting on poor Adwords bidding strategies. Paying per lead is not that much different from paying $20k to YellowPages who give you no guarantee you will ever get a phone call.
8 or so leads a day is roughly ~2700 leads per year. A $20k budget means you can spend about $7.50/lead. Depending on your niche that is likely going to be difficult to do with adwords alone.
Again depending on your niche, Thumbtack might actually be good here. In my experience though Thumbtack is very hit or miss from the businesses side of things. If you're spending $5-$10 just to send an email to single potential customer it might not be cost effective.
This is great news because hopefully it will allow Thumbtack to become the domestic services platform.
Think the funding and valuation is too high? It takes inordinate marketing spend to become a focal point outside of metropolitan areas. I've interviewed with a handful of more focused (e.g. industry specific) services marketplaces, and each one's offices felt like a sales boiler room as hundreds of associates reach out daily to service providers across the country all but begging them to join their platform. Pulling it off across multiple industries will take n as many sales associates, but the payoff is enormous (imagine, an e-bay for all local service providers). Thumbtack caters to the broadest swath of service providers, and winning in k industries makes it that much easier to attract providers from the remaining n-k industries; there are very strong network effects here on top of the obvious economies of scale.
On the consumer side, Thumbtack delivers huge benefits.
I spent two hours calling carpet cleaners to schedule a cleaning on my move out day in Seattle. When my carpet cleaner bailed the day of, I tried thumbtack for the first time and someone was at my house within an hour. When I needed a linux box built I reached out to Thumbtack, and within 2 hours I had multiple bids...in Salt Lake City no less. There is, however plenty of room to grow: the number of lead-paint removers on thumbtack in SLC where 90% of the housing stock was built 60 years before lead paint was banned: zero (and I'm still searching for one).
Transferring search costs from consumers to providers, providing a reputation system, facilitating coordination... these are all very valuable things to me, that's why I'd participate even at this valuation and that's also why I so desperately want one of these platforms to win, and so should you.
One of the amazing things to me about Thumbtack is the new user on-boarding experience. If you're building a product that needs user signups you should check it out. Basically if you come there looking for someone to help you mount something, they take you straight there and only ask for your email address so they can send you an update when they've found someone to do the job. What they've done in the background is create an account for you, but they just never asked you to create a password. It's a small detail in the overall service offering, but I think it probably increases their user retention rate quite a bit.
As a developer/employee, is there any benefit to being at a company that has a super high valuation? Or being an early employee at a company that later gets one?
It doesn't necessarily mean a good exit, right? Though I suppose if you trust the valuation then it might imply the chances are higher...
(Had a phone call with a recruiter from here some months ago, never called them back to schedule an interview... vaguely wondering if I cost myself anything.)
Not sure this thread is the best place to get into all this, but in general unless you are one of the very earliest employees of a hugely successful startup you aren't really going to get rich on stock.
It looks like Thumbtack was founded in 2008. All "early" employees would have joined before 2010. So I feel confident in saying that not joining "some months ago" didn't cost you anything. At the stage the company is at, the difference between the value of your stock grant back then and your stock grant now wouldn't be enough for them to probably care if you asked them to make up the difference as a signing bonus. The difference is likely low five figures at most.
A high valuation definitely doesn't necessarily mean a good exit (exits are complicated, read up on participating preference multiples e.g.). And what you should really care about is valuation growth anyway.
Anyone can buy an expensive diamond and sell it later at a similar price. Special things happen if you can get your hands on an expensive diamond that nobody else thinks is expensive yet.
If you're an early employee, there are obviously monetary benefits. Even prior to an exit, there are secondary offerings or occasional company buybacks available at unicorns.
Ignoring the monetary implications (which really only apply to early employees), a unicorn can definitely help your professional brand. Being able to say you were part of the team which grew from $Xm to $Xb is definitely a big deal and will lead to interesting opportunities down the line.
If there is an active secondary market[1] for the company then employees maybe able to sell their share (options). A valuation provides a new baseline for pricing them.
Yet another "UNICORN". The VCs that are funding this company and its ilk are signing deals that immensely limit their downside potential and max their upside. The liquidation preferences, participation rights and antidilution rights the VCs have are very good for their interests. It's truly a pity that when the market conditions change and the money streams dry up, the founders and employees of these companies will have almost nothing. This bubble seems worse than the last one because by now you'd expect people to have learnt their lessons.
>The VCs that are funding this company and its ilk are signing deals that immensely limit their downside potential and max their upside.
How does that limit VCs' potential downside? Of course if the company gets acquired for a good price, they'll get their money back and then some, but for that there needs to be a big co acquiring the company for a large price, which will be hard to find. On the other hand, if the company bankrupts, VCs get nothing.
I'd say that at this level of funding it's IPO or nothing for the VCs.
Another thing here is that these companies are getting valuations that imply that they will have very high margins in the future. But some of them will not be able to make good revenues without having MILLIONS of users. They will have to compete against themselves (eg. postmates, doordash et al). Simply put it's not remotely possible for most of these businesses to exist together and have such high valuations. These companies will make their respective markets as competitive as the airline industry (which has so many players but have such squeezed profits).
The companies are being valued like they'll be monopolies or duopolies someday, but the fact is that they are in businesses that have relatively low points of entry. My problem is not that X1 has a #1B valuation, my problem is that X1 has very similar competitors X2, X3, X4, ... Xn (where n is any number of competitors) that also have very high valuations in a market that cannot accommodate even a few of them. In some cases they have valuations that equal the total size of their addressable market. This is insane.
I would rather agree with what you are saying there, but I don't see what it has to do with your original comment, where you said "The VCs that are funding this company and its ilk are signing deals that immensely limit their downside potential and max their upside. "
For me, when I read about a company that got X0$M of funding, my first thought is often "Holy shit, what are they going to to with all that money?".
Does someone know what the equity of the founders looks like in these ultra-funded companies? Do they still own a significant part of their business? Is it more like 5%? 10%? 30%? 50%? (doubt it)
The whole Thumbtack credits thing is interesting to me because it seems unnecessary - but is a core feature. Can someone explain to me why they prefer to have a credit based system instead of just a variable cost to bid.
With systems that have their own currency (think arcades) you always have some of that currency left over that is wasted - I wonder if that is how they plan on making margin.
I went there for a Go Meetup, and I couldn't easily understand what they did after talking to 5 employees. The private equity bubble is reaching its crescendo.
I think in this case that's less about the climate and more about the industry they're in. Thumbtack is a talent agency. But they want to sound like they're doing something new and clever to differentiate themselves. And since they're marketers, they spend a lot of time thinking about ways to get people's interest in them... without actually having to make clear what they do enough to conjure the negative associations.
From what I understand talking to some other people pursuing similar ventures, the point of services like Thumbtack isn't really whatever they start out as; the point is capturing the talent in a network and then selling that talent infrastructure.
Everyone from "startup banks", to payment-processors, to service marketplaces, to coworking spaces, are all running full-tilt toward this goal, and getting a company there first (and achieving a network effect from doing so) is what has the all the investors interested.
It's not so much pivoting as conglomeration. The end-goal of all these companies is to be "the point-of-contact a small-business-owner has for everything their business does that's not making their product." (In other words, to act as a PE firm or bigcorp acquirer without needing to do any actual acquiring.)
The main method of achieving this goal, from the starting point of having any one "component" of such an offering, is merging with other companies that provide other components, or integrating others' components into your own as a "suite" or "dashboard", or selling a "concierge" service that recommends others' services, etc etc.
Ah, I see. Has anyone achieved this? It sounds difficult. as a small business owner myself, I know I'm super suspicious of middlemen, and I think that's one of my major advantages over larger businesses.
For startups this size, evaluations are usually in the range of 10-30 revenues, so it's reasonably safe to assume their revenue is in the range of 40-100M.
One by one, they all dropped off. I've overheard them talking about their experiences. Private client posts gig, asks for bids. Chef buys credits, uses them to bid. Private client opens email, never responds, drops off the face of the Earth. Chef loses money. My girlfriend probably spent $100 without any return. She has since gone on to other much more profitable sources for leads.
Thumbtack of course reaps the reward, but at some point their user acquisition flywheel is going to have trouble turning.