Fresh Insights: YC W15 Marketplace / On-Demand Cheat Sheet
At Fresh VC, we’re very interested in marketplaces and the on-demand economy. We’re proud to be early supporters of companies like Shyp, Eaze, Unwind Me, Bannerman, and TIDY. I’ve outlined some basic information and thoughts on marketplaces and ODE companies in the upcoming YC batch. I hope this will help investors have more meaningful conversations with founders and encourage data/thesis/belief driven, instead of hype-driven investments.
You can also read Fresh Insights: YC W15 Developer-Oriented Company Cheat Sheet by my partner Shri Ganeshram.
Yelp:
Overview:
Cleanly offers on-demand laundry and dry cleaning services.
Laundry and related services are big pain points for many city-dwellers. It’s a necessary task baked into everyone’s schedule and puts a huge burden on time, happiness, and physical capability of customers.
Cleanly currently serves N.Y and competes against Flycleaners and local shops such as the Wash Depot Laundromat. Rinse and Instawash serve San Francisco and Washio has raised a Series A and operates in LA, SF, Washington D.C, East Bay, Chicago and Boston.
Pricing:
Notes:
Route density and margins of the business are key. I’m interested to see margins across various competitors. Washio has raised expansion capital but it does not signal that on demand laundry services are sustainable in the long term.
YC has previously backed on-demand laundry service company Prim that has since shut down. Prim charged $25 for the first bag of laundry and $15 for each additional bag and also offered a 24 hours turnaround time.
So far, Cleanly has shown great quality of service. It needs to continue to do so to win in the long term. I have previously written about commoditized on demand services and quality is the way to differentiate in a commodity service such as cleaning.
Having said that, as more millennials move into the workforce, there is potential for a high quality, convenient and fairly priced on demand laundry service. In the busy day of a young professional, the last thing he/she wants to do is drag laundry down the stairs and up the block. It’s an incredibly draining and painful process. High frequency of use among consumers and a vastly superior experience are great for on-demand services.
Coverage: http://techcrunch.com/2015/02/05/yc-backed-cleanly-offers-on-demand-laundry-delivery-in-ny/
Overview:
Chariot is building a network of bus routes to help areas that are not well served by the public transportation system. By crowdsourcing ideas for new routes, Chariot can pre-validate demand and make travel faster and more convenient. At a price comparable to public transit, private shuttle buses run along these routes. This model is potentially applicable to any city with a flawed public transit system. Customers can buy monthly passes or pay on the go.
Pricing:
Notes :
Chariot has huge potential to disrupt any city that has a flawed public transportation system. Private bus routes were active in the late 1900s, and Chariot is taking an interesting approach validating demand using crowdsourcing. Also, commuting/transport is a high frequency, high stickiness behavior. If Chariot offers a convenient, affordable solution, consumers are locked in and have no reason to seek other solutions. There is low network leakage.
I am particularly interested in how public transit departments view companies such as Chariot. These companies have the potential to either directly compete with public transit systems, or work in concert with them during peak hours to offer more affordable pricing and alleviate bottlenecks.
Leap Transit also launched this week in San Francisco, offering a more premium on-demand transportation platform at slightly higher fairs compared to Chariot. However, Leap Transit currently only runs one bus route, so we shall see how this model functions moving forward.
Coverage: http://techcrunch.com/2015/01/26/chariot-new-route/
Overview:
Campus Job is an online marketplace that helps businesses connect with college students for part-time jobs as well as summer internships. Students create a detailed profile, including information not usually asked(E.g fraternity affiliation). Employers are then able to pay to unlock search fields to make targeted and accurate searches for candidates.
Notes:
It’s so obvious how broken college recruiting is. It’s a suprise no one has come up with a better solution.
Discovery — As robust as career services like to claim, it is still hard for students to find their dream opportunity. Different recruiting budgets results in recruitment exposure leaning heavily in favor of bigger companies at career fairs. Current technology solutions look something like this.
The UX is horrendous and leads users to fill out pages of information
through interfaces like this
before landing on pages and pages of plain text…
The process for discovering part time opportunities is even worse because it’s not really a formalized process.
Internships — Most of the attention in the industry is focused on the summer season and the point of interaction for students is either career service or employer company website. It’s an extremely painful process for students to discover internships matching their interest. It’s even worse to keep track of all of the internships they are applying to. Many students still use excel spreadsheets and sticky notes for their discovery and application process. Some career services have tried to create in-house technology solutions to solve this problem.
Part-Time- Part-time opportunities are very limited (supply, variety, location) and mainly posted on campus job boards. Most part-time opportunities are either campus positions or at local businesses. In reality, this is an enormous underutilized resource. HourlyNerd is a good example of a company utilizing this resource by connecting MBAs with SMBs for affordable consulting contracts. University students with skills are spending their time manning library checkouts and calling alumni for donations. Ridiculous. This is a combination of the previous two problems.
Campus Jobs has already built a product that is superior to existing solutions for onboarding students, job discovery and job applications. The product has great UI/UX and is beautifully designed! I am excited to see the product roadmap of the company and how it is targeting and onboarding businesses to the marketplace.
Yelp:
Overview:
VetPronto is trying to make it easier for pet owners to seek veterinary services for their pets. Instead of a true Uber model, customers book vet appointments ahead of time. VetPronto offers standard house call as well as other services such as vaccinations, diagnostics, blood work, end of life care, etc.
Pricing:
House call for $129, other services and procedures vary from $25-$400. Price point is below market price for house call veterinarians.
Notes:
There are already many house-call vets that work on the go. While the technology makes a lot of sense, it is not completely revolutionary to the experience. Bark & Co experimented with a similar service Barkcare, but it’s unclear what happened to the service. Barkcare’s website shows that the service is in private beta even though it was live and was active in both NY and SF back in early 2014. It looks like VetPronto is able to offer quality service at below market price.
According to the American Veterinary Medical Association, mean veterinary visits per year is 2.6 times for dog owners and 1.6 times for cat owners. Veterinary expenditure per household is $378 for dog owners and $191 for cat owners. Together they account for 66.9% of pet ownership. It will be interesting to see whether VetPronto takes a vertically integrated approach for auxiliary service it offers.
Coverage: http://techcrunch.com/2015/01/16/vetpronto-brings-veterinary-house-calls-to-san-francisco/
Overview:
EquipmentShare is trying to bring the P2P sharing model to the antiquated construction equipment industry. The construction equipment rental industry is dominated by large players and primed for disruption. Contractors often make large upfront capital expenditures for heavy equipment, only to have it sit idle without knowing when it would be used. Renters would seek out large equipment rental companies and pay exorbitant prices to rent equipment for contracts.
By bringing the Airbnb model into this industry, EquipmentShare can allow contractors to rent equipment much cheaper than from incumbent equpiment rental companies. At the same time, it will monetize idle equipment for equipment owners.
Notes:
Inefficient pricing, underutilized resources, antiquated industry all make the equipment rental industry seem primed for disruption. It will be interesting to understand the geographic density of contractors, equipment and the logistics of moving equipment around.
At the same time, I wonder how much convincing the industry needs to understand the trust built into the sharing economy (I.e ratings, people will take care of expensive, rented equipment). Big investors certainly think so as firms such as A16Z have put money into both Getable and YardClub. Handholding and using a full service approach will probably help the company scale.
I’m also interested in seeing how EqupimentShare builds out the supply side of the marketplace.
Coverage: http://techcrunch.com/2015/03/09/equipmentshare/
Pricing:
Open Listings, $5000 flat fee
Houwzer, $395 administration cost
Overview:
Open Listings is creating a platform to remove real estate agents from the home buying process. When purchasing a home, potential buyers need to work with a real estate agent even if the heavy lifting has been done and prospective houses have been identified. Internet solutions such as Zillow have become transparent sources for housing data and discovery. Open Listings feel that buyers should not have to pay and work with agents when buying a home.
Potential buyers can work with Open Listings whether they have or have not identified a new home for purchase. The company has experts on hand to aid in the DIY experience. Open Listings refund the buyer the agent fee minus a $5000 flat rate fee for a successful transaction.
Notes:
The house buying process is incredibly frustrating and there is a need to create a more streamlined and affordable process. Housing is a very large market and has room for multiple players that fulfill needs from both the seller and buyer’s perspective.
Different needs can be analyzed by looking at buyer’s incentive and seller’s incentive. Open Listings and OpenDoor do not compete since they serve different sides of the market as well as different segments of the market. Opendoor facilitates sellers while Open Listings facilitate buyers. Opendoor targets underserved segments of the market. In the long term, Open Listings, Opendoor and Houwzer may all compete as they build out services to integrate the other side of the marketplace.
Coverage: http://techcrunch.com/2015/02/26/openlistings/
Overview:
Luka is building a restaurant / bar recommendation engine that uses a texting interface as the front end to the search experience. Luka uses natural language processing to understand user requests and sends back relevant recommendation within seconds. As users use the app, Luka will adapt and learn the preferences of the user in order to offer increasingly accurate recommendations.
Luka works as a standalone app, as well as an invisible app through the number +1 (704) 448-LUKA. Users can simply text that number to get recommendations and book at any restaurant, including ones hard to book on Opentable and other services.
Notes:
Luka is going after an incredibly hard problem to solve. If they can build the technology, it is extremely valuable and has applications far beyond restaurant recommendations. Texting as an interface is extremely interesting as it gives the user an intuitive experience. The app itself is also well designed. With the launch of Luka text, messaging Luka for suggestions is no different from texting a friend.
Luka is improving its accuracy but is still far from accurate. One concern is that excited users are underwhelmed by their initial Luka experience. Bad results and running into the same walls as talking to SIRI will be very problematic for adoption. Google also has been quietly been building similar technology. While Luka is taking a pure technology approach, it may be interesting to incorporate some level of human curation in the process to hack recommendation accuracy.
Another interesting play with Luka is that it can become the interface layer to power hyperlocal on demand services. Ex: After booking a restaurant for a date through Luka at Rich Tab for 8:00pm, Luka can help you call an Uber to pick up you ad your date, order flower from BloomThat while you get ready,etc… etc..
Coverage: http://techcrunch.com/2015/02/24/luka-the-app-that-replaces-your-foodie-friend-goes-live-in-sf/
Pricing:
Varies based on individual request
Overview:
Magic is your on demand VIP convierge . At a price, Magic will fulfill almost any request. Like Luka, Magic uses text as the interface for interaction. Magic is currently run entirely by humans and a price is determined for each individual request.
Notes:
While Magic exploded through HN and PH, the company needs to be aware of true product market fit and whether the current business model is sustainable in the long run. Magic needs to be careful not to encounter the same problems that beleaguered Taskrabbit. For any on-demand service company, there needs to be enough margins, or make up with high volume. In a process where any kind of task is game, I can imagine operation costs eating away at margins (unless most tasks are out of the ordinary, and the customer is knowingly paying a high premium).
Magic can also be a contender for being the interfacce that powers other hyperlocal on demand services. However, it needs to build technology to automate at least part of their current process. Otherwise, it will be very difficult for the economics of the busienss. It seems that the distribution of the types of requests that Magic fulfill will have a long tail. Automation, categorizing tasks can help the service scale.
Turnaround Time:
Good Eggs: ~2 Days
GrubMarket: 1–3 days
Overview:
Through Grubmarket, consumers are able to purchase organic food from locally sourced farms and producers. Grubmarket has already raised a $2.1M round in January to build out its locally sourced food marketplace. The service is currently available in San Francisco, Los Angeles, Chicago, San Diego, Detroit, Sacramento, Portland, and Denver.
Notes:
Consumers are increasingly interested in eating organic, natural, and locally sourced food. In a report on organic food market in the U.S, “Natural and organic food is the fastest-growing sector of the American food marketplace”. Furthermore, small groups of power buyers drive a large percentage of overall sales. This change in consumer awareness is a great opportunity for companies like Grubmarket.
However, it’s hard to become profitable in the grocery delivery space. Grubmarket’s business model allows it to expand faster into new markets, as well as operate at better margins. Good Eggs is slower at expanding because it employs workers and needs distribution infrastructure in each new market it wants to operate in. All GrubMarket needs to do is hire drivers and onboard suppliers. It will be interesting to see the difference in margins.
Coverage: http://techcrunch.com/2015/01/27/grubmarket/
(Disclosure, Fresh VC is an investor in Meadow competitor Eaze)
Overview:
The marijuana market is the fastest growing industry in the United States. While recreational marijuana is slowly becoming legal in different states, medical marijuana is already legal in 23 states. California is currently the largest MMJ market at $980M.
Meadow offers an uber like experience to deliver medical marijuana products to your house. They also partner with CannabisMD to bring doctors on demand to your doorstep to obtain a medical evaluation and medical marijuana recommendation.
Notes:
Companies in this space needs to fully understand the regulatory differences between regions and states. There are legal nuances that make scaling the company more complicated than simply replicating in new markets. However, it is definitely a market to be bullish in. Researchers from the ArcView Group found that the U.S. market for legal cannabis grew 74 percent in 2014 to $2.7 billion, up from $1.5 billion in 2013. The marijuana industry is one of the fastest growing industry in the United States.
Marijuana legalization will happen at a pace much faster than people expect. In 2014, Colorado raked in $53M in tax revenue on legal marijuana. This does not take into account the extra savings from decreased marijuana related crime rates, incarceration, etc.
