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Pondering Homejoy’s Failure

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Re: Pondering Homejoy’s Failure

#21

Post by danieltillett »

visakanv wrote: post #19
danieltillett wrote: post #15

Earlier quoted context omitted.

This is true and it is where the investors should have stepped in. A good investor would have said to the Homejoy team "we believe in you and will back you in any viable business venture, but the home cleaning market is not a problem that will be solved by technology. Go and find something better and we will talk - here is $50K so you don’t starve in the mean time."

Hahaha, I'm replying to all your comments: > A good investor would have said to the Homejoy team "we believe in you and will back you in any viable business venture, but the home cleaning market is not a problem that will be solved by technology. Go and find something better and we will talk - here is $50K so you don’t starve in the mean time." I think the investors think, "Hmm, I don't think the home cleaning market…

There is a difference between taking risks and just throwing money at anything and hoping something sticks.

VCs should take risks, but they should be evaluating risks otherwise why should they exist - if the limited partners just want to throw money around at random then they don’t need someone taking 2&20 getting in the way.

Re: Pondering Homejoy’s Failure

#22

Post by danieltillett »

visakanv wrote: post #18
danieltillett wrote: post #16

Earlier quoted context omitted.

It is fine for the team from Homejoy to be wild optimists, but not the VC investors. They are supposed to be a fiduciary with their limited partners money.

> It is fine for the team from Homejoy to be wild optimists, but not the VC investors. Hmm... I don't know if I agree or disagree. I think a VC's experience must be pretty unnerving– she probably turns down seemingly lousy deals and then watches them go on to be staggeringly successful. And that makes her wonder if she's too conservative, maybe. I don't know. I believe that the partners also expect their VCs to take…

I would love to be a VC. Someone gives you 100s of millions dollars which you don’t have to give back for 10 years and which you can spend on whatever crazy ideas you like. Just follow the herd and no one will blame you if you lose the lot and if the herd is right you make out like a bandit. It is a game of heads you lose, tails I win.

Re: Pondering Homejoy’s Failure

#23

Post by 7Figures2Commas »

danieltillett wrote: post #15
reikonomusha wrote: post #9

Earlier quoted context omitted.

It is entirely possible to have an extremely good team and talented, knowledgeable people as leaders, but that doesn't make good businesspeople or imply a good vision.

This is true and it is where the investors should have stepped in. A good investor would have said to the Homejoy team "we believe in you and will back you in any viable business venture, but the home cleaning market is not a problem that will be solved by technology. Go and find something better and we will talk - here is $50K so you don’t starve in the mean time."

Yes, investors should be putting twenty-something would-be founders who think it's a good idea to "lock customers into discount rates that even with infinite retention won’t become profitable" on $50,000 retainers to come up with ideas that they can then fund.

That's an efficient way to deploy a nine-figure fund if I've ever heard of one. I'm sure LPs will love it.

Re: Pondering Homejoy’s Failure

#24

Post by dangoldin »

Two years ago I was wondering why there was such a glut of these cleaning startups. The entire idea of applying the Uber model just didn't make sense - one is a commodity product with no way to bypass the middleman while the other requires letting someone into your home and encourages going off platform.

Dug up the old post for those interested - http://dangoldin.com/2013/12/09/why-are-there-so-many-cleani...

Re: Pondering Homejoy’s Failure

#25

Post by mbesto »

danieltillett wrote: post #22
visakanv wrote: post #18

Earlier quoted context omitted.

> It is fine for the team from Homejoy to be wild optimists, but not the VC investors. Hmm... I don't know if I agree or disagree. I think a VC's experience must be pretty unnerving– she probably turns down seemingly lousy deals and then watches them go on to be staggeringly successful. And that makes her wonder if she's too conservative, maybe. I don't know. I believe that the partners also expect their VCs to take…

I would love to be a VC. Someone gives you 100s of millions dollars which you don’t have to give back for 10 years and which you can spend on whatever crazy ideas you like. Just follow the herd and no one will blame you if you lose the lot and if the herd is right you make out like a bandit. It is a game of heads you lose, tails I win.

Except categorically is an awful business to be in. You might not have a job after your first LP, if your LP fails to return. It's an extremely binary business model - you either succeed in the top 10% of all VC funds available or you simply pack up and do something else. That's why you typically see people get into the VC business when money is not an issue for them...fund failure is much easier to stomach.

Re: Pondering Homejoy’s Failure

#26

Post by mbesto »

reikonomusha wrote: post #9
7Figures2Commas wrote: post #6

> ...the point I am trying to make is that the Homejoy team was exceptionally talented and did amazing things... > Homejoy was led by two software engineers. Both wildly talented humans... > Homejoy and ‘fail’ have gotten tethered together in the tech headlines recently but for myself and many of my colleagues Homejoy will always be more synonymous with success than failure. The entire post describes a litany of horr…

It is entirely possible to have an extremely good team and talented, knowledgeable people as leaders, but that doesn't make good businesspeople or imply a good vision.

This also depends entirely on your definition of a "wildly talented human being".

For the record, my mom says I'm a wildly talented human being.

This is just a typical cognitive dissonance response (the author's, not yours) to "I swear they're smart! It's not that they're not smart that made them fail."

Re: Pondering Homejoy’s Failure

#27

Post by danieltillett »

mbesto wrote: post #25
danieltillett wrote: post #22

Earlier quoted context omitted.

I would love to be a VC. Someone gives you 100s of millions dollars which you don’t have to give back for 10 years and which you can spend on whatever crazy ideas you like. Just follow the herd and no one will blame you if you lose the lot and if the herd is right you make out like a bandit. It is a game of heads you lose, tails I win.

Except categorically is an awful business to be in. You might not have a job after your first LP, if your LP fails to return. It's an extremely binary business model - you either succeed in the top 10% of all VC funds available or you simply pack up and do something else. That's why you typically see people get into the VC business when money is not an issue for them...fund failure is much easier to stomach.

10 years is an awfully long time - if your first and only LP fails oh well - at least it is not your money. Plus if you don’t let any of your companies IPO then no one will know if you have failed or not for a very long time.

Re: Pondering Homejoy’s Failure

#28

Post by xiaoma »

Interestingly, even after it had failed Homejoy was one of the few startups YC specifically called out as on the home page as examples of what the program could provide. I've only just now seen it updated not to include that section.

What was it about Homejoy that got it so much attention, promotion from its investors and press from the media? What's the underrated startup that everyone has been overlooking during the same period?

Re: Pondering Homejoy’s Failure

#29

Post by nostrademons »

danieltillett wrote: post #22
visakanv wrote: post #18

Earlier quoted context omitted.

> It is fine for the team from Homejoy to be wild optimists, but not the VC investors. Hmm... I don't know if I agree or disagree. I think a VC's experience must be pretty unnerving– she probably turns down seemingly lousy deals and then watches them go on to be staggeringly successful. And that makes her wonder if she's too conservative, maybe. I don't know. I believe that the partners also expect their VCs to take…

I would love to be a VC. Someone gives you 100s of millions dollars which you don’t have to give back for 10 years and which you can spend on whatever crazy ideas you like. Just follow the herd and no one will blame you if you lose the lot and if the herd is right you make out like a bandit. It is a game of heads you lose, tails I win.

I'm pretty sure I'd hate it. (I had the opportunity a few years back but turned it down because it wasn't the right time to leave Google. Also, my wife is an institutional investor, but in philanthropy and not tech.) Some of the downsides:

Your life is consumed by pitch meetings, and you have to say no to the vast majority of them. You have to constantly be out hustling for deal flow. If you miss the wrong startup, you've probably missed your chance to get a return.

You are a support role. Your job is to direct resources to the people who actually make things happen, not to make them happen yourself. You don't usually get to build things yourself, and when you do, nobody can know about them.

When things go terribly badly, you are frequently on the hook for cleaning them up.

Your compensation can be pretty awesome, but your liquidity sucks. Many times, you have to buy into the fund with your own personal money. The fund is locked up for 7-10 years. During this time, you basically can't leave, or if you do, you better be comfortable with someone else calling the shots for a significant portion of your assets. You draw a salary which (if you're not a GP) is fairly generous & adequate but is not going to make you wealthy. The way to get wealthy is off the carry of the fund, which, of course, requires that you got into one of the hot startups of your era.

I would much rather be building things. Even if I wanted to get rich managing money, I think that running a hedge fund, doing prop-trading for a big company, or managing the endowment for a pension or university is a much lower stress, higher-return option.

Re: Pondering Homejoy’s Failure

#30

Post by danieltillett »

7Figures2Commas wrote: post #23
danieltillett wrote: post #15

Earlier quoted context omitted.

This is true and it is where the investors should have stepped in. A good investor would have said to the Homejoy team "we believe in you and will back you in any viable business venture, but the home cleaning market is not a problem that will be solved by technology. Go and find something better and we will talk - here is $50K so you don’t starve in the mean time."

Yes, investors should be putting twenty-something would-be founders who think it's a good idea to "lock customers into discount rates that even with infinite retention won’t become profitable" on $50,000 retainers to come up with ideas that they can then fund. That's an efficient way to deploy a nine-figure fund if I've ever heard of one. I'm sure LPs will love it.

Well considering the 50K is basically a rounding error to most VCs the money is not an issue. Given the difficulty of assembling a world class team to let one disintegrate just because their current idea is poor is not a good use of a limited resource.

Actually why VCs think good ideas and good teams should come as a package has never been explained to me. The is no reason to think that the best teams will have the best ideas. If the limiting factor in success is the quality of the team then why let great teams work on anything but the best ideas.

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