The oversaturated “Uber for x” economy can probably stand to lose a startup here or there. But with increasingly severe legal problems and dubious profit models, some think that it might be time for the market to consolidate.
Mitch Altman / Flickr / Via Flickr: maltman23
There's nothing, the already tired joke goes, that you can't get taken care of in San Francisco at the push of a button. Garbage. Underwear. Drugs. You name it. The phenomenon is so pervasive that a number of (rather mild) satires have popped up, including Here Comes the Airplane, for spoon-feeding, and Whypit, for butt-wiping.
But today's big San Francisco tech scene news item suggests the on-demand bubble might be deflating, if not altogether bursting. Homejoy, a home-cleaning services platform , announced in a blog post that the company will be wringing out its sponges and hanging up its mops. By all appearances, it was several months coming: TechCrunch reported in March that competitor Handy was in talks to acquire the company, and in June, Fusion reported that the company might be in some financial trouble. These are unfortunate tidings for both Homejoy's employees — some of whom, Re/code reported, have already found new jobs at Google — and for Homejoy's investors, which included Google Ventures, YCombinator, and Andreesen-Horowitz, among others.
But whoever bought Homejoy would have been on the hook for whatever comes of the worker misclassification lawsuits that have been weighing on the company. A series of recent lawsuits across the industry suggest that on-demand companies may have broken the law in classifying their workers as cheap independent contractors over full-time benefited employees. This is why Homejoy was being sued by its workers in four separate cases, which co-founder Adora Cheung blamed for the shutdown.
Other recent news, including a California Labor Commission decision that an Uber driver was an employee and new guidelines from the Department of Labor that also erred on the side of full employment, suggests that the on-demand economy's future is murky at best. These startups rely on infusions of cash from venture capitalists to stay afloat, and it's undoubtedly hard to sell a pitch to funders when the underpinnings of your company's business model are on very public trial.
Hunter Walk is a venture capitalist at Homebrew, which funds Shyp, an on-demand shipping startup that recently shifted some of its contract workers to employee status in a reaction to the misclassification lawsuits. On Twitter, Walk acknowledged that funding is difficult to come by when you're being sued.
Elsewhere, however, others have speculated that a failure to turn a profit was what really killed Homejoy, and that the ongoing litigation merely serves as a face-saving excuse. The attorney in one of the cases against Homejoy, Byron Goldstein, told BuzzFeed News that "[t]he suggestion that Homejoy was unsuccessful because their employees sought to enforce the law is a scapegoat. Many sharing economy companies have been successful and are also seeking to follow the law."
Goldstein's firm plans to continue pursuing the suit against Homejoy. A spokesperson for Homejoy declined to comment on the matter.
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