From failure to $37M funding with Adora Cheung – Homejoy

Cleaning sucks.

Luckily, I live in San Francisco where you can get anything as a service (e.g. lunch, dinner, whiskey, washing, your fridge… even WordPress support!). When I read about a service that offered pre-screened cleaners for $20 per hour, I tried it out the following week.

First I will share what I learned from founder and CEO Adeora Chung at Startup Grind, then I’ll give you my first-hand review of the Homejoy service.

Click to Tweet – From failure to $37M funding with Adora Cheung – Homejoy

Look for inefficiency

Adora’s brother and co-founder, Aaron, sounds like most 20-something guys I know. He lacks motivation in a very specific area of his life. Cleaning. He lived like a slob with Adora as his room-mate, but finally caved and decided to hire a cleaner. He quickly realized:

  • Established cleaning companies were prohibitively expensive
  • Cleaners from online classifieds were unscreened… and potentially axe-murderers

Aaron realized that other people faced this problem. After some further research, Adora noted that most cleaning companies operate on tiny margins and pay their cleaners minimum wage. This is not because it’s a bad business, but rather, most cleaning companies are inefficient, relying on man-hours, instead of systems. Adora dug deeper, finding more and more broken business processes. From candidate screening to recruitment to training, the smaller cleaning companies were operationally challenged. Like all good engineers, Adora saw this as a system with inputs and outputs.

Adora had finally found a problem that could be solved with a better system.

Keep it simple

When you’re starting out with a new business, it’s difficult to be concise, clear and specific about who you are, what you do and what problem you solve. Some founders rely on the we’re X for Y formula, kind of like… “Spotify meets Grinder, but for rental cars.”

Other founders will give you a verbose explanation, which is well done by one of our favourite HBO shows:

Pied Piper is a multi-platform technology based on a proprietary universal compression algorithm that has consistently fielded high Weisman Scores™ that are not merely competitive, but approach the theoretical limit of lossless compression.

Adora and her brother stumbled and faltered on their offer multiple times. At one point, Adora rewrote gossip content on a media site to generate a small amount of revenue to keep their lights on, while they hacked away on project after project. Adora and Aaron toyed with the idea of an online video coaching support service, but serendipitously landed on their house cleaning platform idea.

An early customer research game changer was asking potential customers a very simple question.

Would you pay $20 per hour for a reliable cleaner?

The overwhelming response was YES! They had a clear offer, a captive market and a big idea of how to do it. Now, they needed to execute. They set out on their path to deliver a house clean from just $20 per hour.

Growth hack at the grassroots

HomeJoy acquired their early customers the old fashioned way. Instead of trying to game SEO or launch an advertising campaign, they attended local fairs in their Palo Alto neighborhood and distributed flyers about their service.

Was it scalable? No. Was it successful? Not the first time around.

Their flyers tanked, but they came up with a simple idea that grabbed people’s attention.

Palo Alto gets hot. Fair patrons get thirsty. Problem = solution. Adora and Aaron handed out free bottles of icy cold water with Homejoy flyers.

homejoy_water_bottle

This tiny tweak helped to attract their first customers. Simple ideas like this can generate enough interest to get your business off the ground.

Learn the ropes

Great entrepreneurs are self aware.

Adora knew that she wasn’t a natural born cleaner, but realized she needed to learn how to clean to run a cleaning company. Instead of avoiding the discomfort of scrubbing toilets and cleaning ovens, she threw herself headfirst into the industry. She gave herself a self-guided apprenticeship in the field, learning about cleaning chemicals, how to clean a room with maximum efficacy and what to do when something breaks while in a customer’s house.

This trial-by-fire also opened Adora’s eyes to more operational inefficiencies. She submitted dozens of job applications, but only heard back from a handful of companies. Instead of screening and processing applicants, the cleaning companies she applied to manually processed each application and wasted time on back and forth with applicants.

Armed with her apprenticeship, she was ready to shake up the cleaning world.

Systems = success

The business systems that Adora, Aaron and their team have developed demonstrate their engineering ability. This systems approach shows throughout their business, from allowing customers to retain preferred cleaners on their booking platform through to their automated followup of bookings. Here are some sample questions that job applicants are asked to submit before approval of a real-world cleaning trial:

1. Why do we color-code microfiber cloths?

2. You can spray all-purpose cleaner directly on electronic equipment. True or False?

3. You should mop before you sweep or vacuum. True or False?

4. If a client is not home, it’s okay to use a client’s supplies without their permission. True or False?

5. It is unprofessional to take personal calls while working at a client’s home. True or False?

6. You are at a client’s home and you see a $20 bill on the table. There is no note or message on the table indicating what it is for. There is a wallet on the table. What do you do?

7. You see a pile of unfolded clothes on the floor in your client’s bedroom. What do you do?

I failed, so I’m not going to become a cleaner any time soon.

The quiz doesn’t guarantee quality applicants and doesn’t test attitude or behavior, but the Homejoy recruitment process is still lightyears ahead of other cleaning companies. I’ll argue that HomeJoy’s secret sauce is systematically solving the big, painful problems that hold most cleaning companies back from success. Co-founder Dan talks about pain and pleasure in more depth here.

A personal touch counts

A tiny yellow Homejoy sticker. A handwritten message on a cleaning checklist. A fruity smelling candle.

photo (2)

These little ‘touches’ are tested as data points by Homejoy. They are exercises to increase retention, satisfaction and lifetime value. Adora mentioned they are hiring data scientists to delve into the formula for a successful customer experience and measure which personal touches have an influence on a customer returning for another clean.

Build strategic relationships

Adora is a Y Combinator alumni and has strong relationships with tech influencers. This worked in her favor while she was trying to raise capital.

Her relationship with Paul Graham paid dividends as he injected capital to keep the company afloat, then later tweeted the graph above, whipping VC firms into a frenzy.

My review

Homejoy has grown rapidly and it shows.

My first and second cleaners weren’t up to par, but when I landed on my third cleaner Beverly, I was sold. I wrote out a specific checklist of tasks and set expectations up front. She delivered.

I’ve had shaky early-adopter experiences with a number of San Francisco based ‘service as a service’ companies, but I know from personal experience that training, retaining and motivating great staff is difficult for any startup to execute. We share these struggles in our monthly reports.

Check out some Homejoy reviews here and let me know – would you try Homejoy? Does it solve a problem for you at the right price?

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About

Hi, I'm Alex McClafferty. I'm the co-founder of WP Curve.

39 responses to “From failure to $37M funding with Adora Cheung – Homejoy”

  1. Matthew Newton says:

    Great article.

  2. Thanks @disqus_sz2XV3Lyyz:disqus 🙂 I’m working on another, it should ship today… the working title is “9 questions for you from the ICON14 conference”

  3. Jonathan Prieto says:

    I’ve come across your website today Alex and I must say, congrats!

    Great content, great stuff you’re sharing. It has been definitely helping me broaden my vision on the market and ideas for new projects. Great stuff!

  4. Hi Jonathan – appreciate your feedback 🙂 Make sure you jump on the list down in the bottom right hand corner, my co-founder Dan shoots out an email every week with our best stuff.

  5. Jonathan Prieto says:

    Will do Alex!

    Thanks much!

  6. daniel says:

    Great article!

  7. Thanks @disqus_W4kRVRbe85:disqus – glad you liked it!

  8. creedence says:

    HomeJoy violates countless labor codes. Only in the fine print do you see that the cleaners are NOT employees of HomeJoy. Everything from the HomeJoy t-shirts to checklists (and beyond) showcase a level of control that only an employer can have over an employee. Yet they are able to bypass payroll taxes and workers compensation for their “independents”. There has probably never been so illegal of an operation. I suppose this is the American way…

  9. Reem Asaad says:

    I got particularly interested in the story for two reasons: First, I’m a working mom and I have zero time for home chores. Hiring cleaners can be a “vrai” nightmare. Secondly, I live in a country where the labor cost is presumably low (cleaning $4-5/hr, so far). The market is self-automated with little intervention from regulators. The other way is hiring full-time live-in maids ($300-500/month) which is again cheap but they come with an endless list of problems from psycho issues to theft to complete inefficiency. House wives train domestic maids manually, and they do pretty much everything (even baby handling!)
    Thank you for the story.

  10. Dan Norris says:

    No worries, it’s definitely an interesting business in a huge market. And so many opportunities even outside that core business as well. It will be interesting to see how it progresses.

  11. Eden Chen says:

    uh, their yelp reviews are awful though…

  12. Hien Nguyen says:

    nice article, interesting you chose to try 2 cleaners, before ending up with the 3rd one, Usually I’d stop after the first one. What were the issues for the first 2 cleaners and why did u keep going with homejoy?

  13. Bonnie says:

    Interesting … you pay for what you get and a skilled profiicient cleaner will NOT work for this range. heck I won’t… I am surprised no one has asked “how much does the cleaner actually make an hour and what is expected”… I am always a bit baffled that companies boasting of being lucrative with huge investments & paying say then expect $60-90 an hour for coders, and data mining plans find it easy not to have fair wages for service providers … what benefits and insurance or does fair working conditions not matter in tech. The long term health challenges of cleaners mean they need adequate insurance. how are these covered… does it matter. i’ve notice a lack of this type of detail in tech startups… or reports on tech startupsI understand that systems and bulk buying of supplies can cut cost that is assuming homejoy supplies cleaning supplies. I still have a lot of questions… how do they handle what is “expected in teh set timeand what is realistic, heavy vs light . we’re assuming that teh lower cost covers the same things the regular pricing does… until that comparison is made it’s may be less money but is it cheaper.

  14. Vinish Garg says:

    An interesting story! Going through the pain points and then designing a solution – story of many entrepreneurs; beautifully told though! Thanks for sharing it.

  15. Hi Hien, thanks for commenting. The first one wasn’t very thorough and the second one was telling me how he beat up someone a few days prior. Not someone I wanted in my apartment.

  16. It’s a challenging business model – scaling service is hard, so I can’t be too critical.

  17. Hi Bonnie – thanks for your comment. I now pay my cleaner $50 every 2 weeks and she does an excellent job. If you have specific questions, I’d be happy to answer them.

  18. You’re welcome, Reem.

  19. Bonnie says:

    Hi Alex,

    She may be paid $50 but what does she actually Pocket … is it a Living wage. I checked with someone in the Independent cleaning business on overheads and cost factors.and while $50 for two hrs may sound cool.. for those of us not in teh sector

    Svery 2 hr gig starts as 4 hr commitment- unlike most gigs you must prep and carr supplies, cleaning , tools/machinery,chane of clothing… depending on job needs that may require transport – To her quote looseley

    “As an Independent I am responsible for all taxes etc, including health Insurance and a gym membership it’s not a vanity, cleaning takes a toll and after 30 years I’m fighting carpel tunnel syndrome. Cleaning takes time and “2hrs is not enough unless it’s a 2 man job, even then I still insist on $25 take home for the individual working with me ..”

    She also pointe out that in an 8hrday Unless you worked in exclusively one area you could do no more that 2-3 gigs a day – Things those of us who hav eno experience would consider.

    My challenge in accepting these new startups is a belief that a solid plan , should address teh challenges in teh equation rather than shift it and ignore it! Who covers cleaning supplies & tools and transportation.

    Few startups look at pricing from the point of view of those whose very services they rely on… many Etsy artist are on Food stamps and selling at tremendos loss.

    This morning I read this about UBER

    “The drivers we spoke with say they’re making anywhere from $5 an hour to $20 an hour, meaning that in a year’s time, if they’re working 40-hour weeks, they could be making anywhere between $10,000 to $41,000 Read more: http://www.businessinsider.com/uber-drivers-say-theyre-making-less-than-minimum-wage-2014-10#ixzz3HeC8cjLb

    If Mcdonalds treate d it’s employess teh way many tech startups do their freelancer… their would be a huge outcry… and their profit margins would be just as phenomenal.

    It would be interesting to see how your cleaners numbers translate when true cost are considered… Would love to see a break down and how much she actually “profits” as an independent operator.

  20. Chris2812 says:

    I don’t really understand your point Bonnie. No one’s forcing her to do the job, if she didn’t want to be a cleaner she didn’t have to be. It’s not a job that’s ever going pay well. I read that homejoy has something like a 5% acceptance rate for cleaners, so evidently it’s seen as a better alternative from the cleaners’ point of view.

  21. A fantastic article. Thanks for the write up and delighted you attended a Startup Grind event too.

  22. Thanks for sharing this amazing story! The cleaning services market is getting crowded – http://www.helppilot.com/ provides some more information.

  23. Rana Seay says:

    Lol! I helped these guys get out of mountain view.. Yeah, they were failing till they met me..Aaron told me so himself. Look back on their first Techcrunch article. You’ll find me there. These folks are really good at using people and then throwing them away. Sad..I would not even clean for a company I helped create! They are an employee mill. The office gets perks..cleaners get very little. Smoke and mirrors . When this thing finally crashes and burns..it will be interesting to see who is still standing.

  24. Bonnie says:

    “It’s not a job that’s ever going pay well… ”
    The irony is that many with this attitude are the first ones who will call for equal rights around the world and fight the 1%. A LIVING wage in The US is about $15.00 an hour… I’d take the time to lay out the math if i thought t would matter…. The fact is these folks go for venture capital to build out… to build a business that solves a problem… Ignoring overhead or not dealing with them is NOT solving a problem. So what do they actually use that money for… fortunately for Stratups trade unions and workers rights groups within the tech world does not exist!
    we’re speaking about covering basic cost, transportation, machinery, supplies, health coverage etc and a sustainable earnings…
    Fortunately others are starting to ask questions
    How to make a fortune without ‘doing’ anything: The Uber, Airbnb story
    http://fortune.com/2014/11/24/uber-airbnb-sharing-economy-fallacy/

  25. Bonnie says:

    Try running these tech comPanies without “participants on the platform” The thing is cleaners, drivers etc, can run a business without technology… and eventually they get wise and build that technology… But many developers find such work menial.. or can’t execute certain tasks… and BTW the offspring of these people do not like what they see happening to their parents! Remember Myspace was once King in it’s niche!

    Why Uber And Airbnb Might Be In Big Trouble

    http://www.forbes.com/sites/jeffbercovici/2014/05/13/why-uber-and-airbnb-might-be-in-big-trouble/

  26. Chris2812 says:

    I understand what you’re saying. On the other hand her business provides a service and these people are choosing to use it. Does she have a responsibility to pay them more than she has to, particularly if she has already improved the job for them over the alternative? We live in a capitalist society, like it or not, and the world isn’t perfect.

    Also I believe the cleaners are paid more than $15.00/hour.

    Having said that, you are right. I do believe there is a serious problem with inequality throughout the world and it is getting worse. I don’t see an easy solution. Do you?

  27. Bonnie says:

    Like you I believed $15 an hour cool… then I asked someone who cleaned professionally what were the cost factors
    Supplies
    Cleaning equipment
    Transportation, sometimes you cannot simply hop on the
    subway with cleaning supplies
    Medical and insurance a major concern.
    BTW the first 2 hrs requires and minimum of 3 hr commitment- travel prep

    Traditional companies have higher cost because they cover transportation, equipment, . even medical coverage.
    These tech models do not cover these – No RESPONSIBILITY… they are probably attracting the lowest strata of applicants hence only a 5% acceptance of applicants… is actually possible. That’s the thing with data… it’s easily misinterpreted.

    They are getting $37 million in funding to solve this VERY problem… not to side step it in a smokescreen…
    Same with Uber and Air BnB the drivers and the host have all the responsibility and risk… the are platforms not necessarily solutions.

    I do believe that there are solutions… that can be the bases of solid business models… The professional cleaning woman with expertise in cleaning spoke on a few… but these young companies try to take the “experts” out of the equation… I will not state them here…

  28. Lucas Villalba says:

    Nice article, it really shows interesting insigts

  29. Tom Psillas says:

    Bonnie, I think you are forgetting the cost of getting a customer. I knew several Brazlian women in the past who cleanerd homes. They put flyers on homeowners mail boxes in suburban Atlanta. It took them 40 hours of time, gas, wear and tear on car to get 1 client. You need 20 clients to make an efficient living. You lose 20% of clients per year, due to attrition. The client has the burden of checking out your background.
    So, every year, you need to spend 20% of your time getting new customers. That translates to one half-day per week.
    It is a lot more efficient to use a service, like Weezoo.com or Homejoy.com to find new customers, use proven systems, and find customers willing to pay your rate. Honejoy is $20 per hour. Weezoo lets the service provider set the rate. The market will determine what you can get away with. That is why Weezoo.com works better than other platform for most services out there.

  30. Bonnie says:

    Reply Exactly my point … the price these folks deserve is simply for labor. Cost of acquisition is an additional factor and paying them what is unfair and non living wages IS NOT THE SOLUTION. I’ve averaged $40 per head to acquire in NY and as a group sharing that cost can be cut. drastically. For someone making $60 and above paying $ 30 an hour to clean is a savings to them… paying a flat fee an even better deal… since it may take them 4 hours to accomplish what a skilled cleaner can do in 2hrs. However for the cleaner. that $30 will cover transport , medical, living expenses and still BARELY leave enough to set aside for their retirement! by your logic the time taken to connect cleaners with people who need them benefits tehose who make $60 and above more… at teh end it is about perception of value…

    SO who should absorb the cost of acquisition… SMH The cleaners are doing their job and assisting you to do yours…
    your hiring them is not a favor… it’s a trade. their expenses should be covered. These models do not.
    Essentially it is the wealthy who do not want to clean but figure their time is worth $150 an hour and another persons $10… SMH

  31. Tom Psillas says:

    We must also remember that all services are market driven. Take carpet cleaning, for example. The going price in CT is $99 for 3 rooms. It is a commodity, so pricing is extrmely competitive. House cleaning is now becoming the same, hence the $20 per hour. In most mjor cities, you can find house cleaning for $18-$25 per hour. It stinks for the provider, but this has become the new reality. The customer does not care about your overhead, costs, etc. If I as a house cleaner and widh to accept $18 per hour, then that is my choice. You just got priced out of that market, unless you provide something unique, like cleaning windows, cutting grass, cleaning pool, etc. You can pout all you want, but this is how all markets work. Think about it. Twenty years ago, very few homeowners hired house cleaning services. The Brazilians, more or less, created this market by doing a better job than the average house cleaner and word of mouth referrals. Now, it seems that everyone has a house cleaning service. The market became huge and service providers have now exploited it, bringing down prices.
    Most Brazillans charge by the job, however, few are now making the $35 per hour average that they made 10 years ago. Many have returned back to Brazil.
    I would not hire these franchised house cleaners, as they hire minimum wage people, who will steal from you.

  32. Bonnie says:

    Perception of value, Positioning and pricing… Apply even in this industry… Tose I know will not accept that price-point, nor will their client accept inferior work… There will always be the fiverrs of the world The $5.00 street walker and the $1000 a night “Professional” the question here is are companies with so much in their war chest exerting fair and sustainable work conditions and pricing strategies. Does should they cut the $20 of their worker or the extremely lucrative compensation packages.. how is that funding being distributed and can a better model be developed. I understand something that all manual labor is the same but it’s more than the question of values… Why i steh company with such funding not supplying supplies, transport and taking up more of the actual operational cost. Say were UBer to Bulk buying gas and other car needs and redistribute resell at competitive prices to their work force… would they not be better able to control quality and benefit off a secondary market… while supporting the workforce. Why is the automatic train of thought to take advantage of the worker rather than support the worker to the benefit of both! From the original post the service was problematic. A take home of $20 an hour can go a long way in attracting quality workers can their cost of acquisition of quality staff… I work getting these businesses online.. This cleaner will NOT accept less than $30 per person and can command that because of the quality of work she delivers… at this price who and what quality of service are you attracting. What is the turnover rate… What of customer retention… She has had lifetime clients… hence her move online as most of her clients are “evolving”, entering senior living situations, changing states, have grown families and are downsizing. To some $5 for a quick fix is fine… others who value the service provided … will not be caught dead with inferior service.

  33. Haggie says:

    From failure to $37M back to failure again!

  34. fl1nty says:

    Phew. Great points. Would love to see more details if you have the time to write them out. Thanks for writing as much as you have. Very insightful

  35. Helen Ready says:

    Homejoy was a piece of shit company; glad it failed.

  36. Umberto says:

    Hi Bonnie, since this article was written the company has actually tanked. They used to pay their contractors a range 10-12 per hour depending on city. We pay our employees a starting salary of $16 and hour plus benefits at Honest Maids

  37. Frederick Malouf says:

    Few people choose to be cleaners …

  38. Frederick Malouf says:

    Now that Homejoy died, what is your verdict on their practice, and this false sense of being worth $37m? Ludicrous valuations, as are many startups.

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