Tuesday 17 September 2019

Online cleaning service backed by €100m aims to shine in global market

Handy co-founder Oisin Hanrahan is learning fast about the growing pains of a tech startup as he balances a growing customer base with staff needs. He spoke to our technology editor

Oisin Hanrahan, co-founder and chief executive, Handy.com. Photo: Adrian Weckler
Oisin Hanrahan, co-founder and chief executive, Handy.com. Photo: Adrian Weckler
Adrian Weckler

Adrian Weckler

What do you do when you've raised €100m in funding but suddenly need to become profitable?

Not many Irish entrepreneurs face this challenge. But it's what Oisin Hanrahan has been dealing with over the last year.

The online house-cleaning and handyman services company he co-founded, Handy, is burning through €1m a month in cash. It has paused its expansion after reaching 28 (mostly) US cities and 500,000 customers. And it is trying to deal with regulatory and employment issues raised by cleaners on its books.

But Hanrahan says that things are still looking good.

"Business is great," he says. "Different, but good. We've built this platform, this thing, which serves a lot of customers. Now we have to figure out how to make it sustainable."

By sustainable, you mean profitable?

"Yes. How do we make our unit economics really strong? From serving customers to onboarding pros and allowing them to self serve, we're taking out a lot of cost. I'm talking millions, if not tens of millions, of dollars to make it sustainable."

The bulk of Handy's business is made up of people booking cleaners online. The numbers are impressive: 2.5 million bookings and tens of thousands of cleaning sessions every week.

Handy is getting better at the economics of it, too, with the cost of acquiring customers falling and gross margins growing to 20pc. All in all, Hanrahan says that it expects to reach profitability sometime next year.

But some parts of Hanrahan's journey have been tough. Coming from a high-octane startup background that indulged in a 'work hard, play hard' culture, Handy has had to change its culture and tweak its structure as an employer and a business.

"Every business has growing pains," says Hanrahan. "Every organisation that grows from zero to millions of transactions will have growing pains.

"We've been super-transparent about this. We've written blog posts on it and talked about the challenges of going from hundreds of customer interactions a day to thousands to tens of thousands a week."

One of those challenges, he says, lay in replacing manual human processes with robot ones. Handy had to lay off a few dozen employees as part of its automation process.

"We had to figure out how we take all of the manual processes, all of the things that people are doing to serve a booking, and figure out which ones we can automate and which ones we can't," he says. "But we have to get these things right in order to scale the business and make it sustainable in the long term."

Although just 33, Hanrahan has spent almost half his life in high-stakes business. He started as a property developer in Hungary aged just 19.

He was also a co-founder (with Paddy Cosgrave, who went on to create the Web Summit) of MiCandidate, a service that started out as a political content service but transformed into a HR platform. Subsequent to that, Hanrahan dropped out of Harvard Business School (where he met Handy co-founder Umang Dua) in 2012 to focus on his new household services firm.

Since 2012, the company has had seven different funding rounds with the latest and biggest ($50m) occurring last November.

Is this new focus on "sustainability" the end of the funding rounds for now?

"Are you asking whether I might not keep raising money forever?" he says.

"Look, we remain absolutely in growth mode. Our ambitions are exactly the same. We want to deliver every service to every home. So it's not about scaling back at all, it's about choosing the right path to get there.

"We've reached a point where we are saying 'okay, is the path to get there to continue to raise more capital'? We're moving to increasing our platform without more capital."

Doubling down on existing cities means that the chances of expanding the service into Dublin remain far off.

"At some point, I hope we do," says Hanrahan. "But we're committed to the markets we're in. We like to build these strong sustainable flywheels where customers are driving bookings, pros and availability. And once we get that thing moving we prefer to pour more gasoline on it, in that existing city, than to think about spreading across lots of other cities. Eventually we'll get there."

While Handy is present in London, this strategy cedes most of Europe to Handy's competitors. Foremost among these is Hassle.com, the cleaning service co-founded by Irish woman Jules Coleman. Coleman grew up in Leixlip, Co Kildare, less than 10 miles away from Hanrahan's town of Rathcoole, Co Dublin.

But right now, Handy doesn't have much of a choice. It needs to start making money and stop burning through cash. It also needs to focus on regulatory issues around the employment of its cleaners and handymen. This is a big issue for the company. The emergence of the 'gig economy', together with the lawsuits that come with it, are making Handy focus on the rights and status of the workers it deals with.

"This is a very, very complicated problem," he says. "The laws that govern this part of the economy date back to 1938 when they first decided to link employment to benefits. But because there are so many people affected by it, we have to move the ball forward.

"We have to fix this. There are 26 million Americans working less than 29 hours a week which means they don't qualify for any benefits. That doesn't make any sense. There's such a large part of the economy that's going through this transition right now."

What can Handy, or Hanrahan, do?

"They want access to benefits and access to training," he says. "We've proposed some solutions that would involve portable benefits to allow our contractors get access to some of those things without flipping them over to being employees.

"We can also give them access to training and make them better at their jobs. We should have the ability to do that. It's a win-win. Their earnings go up and our customers get a better experience. So it's just the right thing to do. We have to figure out how to give half our platform access to the things they want.

"We spend so much time focusing on our customers, which is the right thing to do. But they're only half the platform.

"The other half are these wonderful people who are working as cleaners, handymen, plumbers. And if I'm not spending time thinking about how to make their lives better then what am I doing?"

As a result, Hanrahan says that he's spending a lot more time in Washington and other state capitals than he thought.

Handy looks set to remain a predominantly cleaning platform for the foreseeable future.

"Cleaning is this juggernaut that keeps growing," he says. "It's by far the biggest part of our business. The thing about cleaning is that it's not this one-off activity. If you need a cleaner, you need one every fortnight or even every week.

"If I acquire a handyman customer, that customer will need a handyman once or twice a year. Whereas if you're a cleaning customer, I'm going to be in your home a minimum 12 times, maybe even 52 times, a year.

"It's a subscription business. And subscription businesses just dwarf one-time businesses."

"It doesn't mean that that's going to be the way forever. We think about other categories. A good example is books on Amazon. Books is this huge category. Everything else is a category too but it's a much less frequent category, whether it's chairs or cushions or light fittings or plants. Nevertheless, they're still super important. So the challenge for us is how to think about taking this core base of half a million customers that love us for cleaning and then layering on every other category. It'll be thinner but it'll be just as powerful."

There is €100m of investors' money betting that Handy will broaden, as well as deepen, its business.

By this time next year the company expects to move into profit.

"We're no longer in a place where we're building just to grow," says Hanrahan. "We're building to make the whole sustainable for the long term."

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