For a long time, we’ve tracked the coveted home services market. One reason for our sustained interest in the home services space is our heritage as the key hub for the multi-billion Yellow Pages industry. If there was a single category that defined Yellow Pages it was home services. So the news that the Indian home services operation Urban Company has raised $255 million naturally caught our attention.
The round carried a post-money valuation of over $2 billion. For some perspective, this amounts to roughly one-quarter of the market cap of U.S. home services player Angi. This is meaningful given Angi has been plugging away at the home services market since its founding in Ohio some 26 years ago.
This Series F round brings the total raised by the company to $470 million. The company — once (unfortunately) called UrbanClap — offers about what you’d expect. Consumers turn to Urban Company to find local service providers from painters to plumbers.
According to a TechCrunch interview with Urban founder Raghav Chandra, the founders couldn’t understand why in India it was so hard to find and select a quality local service provider. And while the company began in India, it has spread its wings to places like Singapore, Australia, and the UAE.
Disrupting a Fragmented Space
According to Chandra, the company now serves some 35,000 service providers. While that may seem like a decent-sized customer base, we’d be shocked if they’ve got more than a 2% market share. The head of investment at one of the company’s investors said this. “Urban Company is disrupting a large, fragmented industry that has seen low digital adoption until now.”
As it has for so many tech-forward, SMB SaaS businesses, the pandemic has been a godsend for Urban Company. The company experienced super fast growth last year when New Delhi was in a state of lockdown due to Covid-19. Given India’s ongoing struggle with the pandemic, we expect Urban Company will continue to see new activity on its marketplace platform.
Considering its challenging model and international ambitions, we’re surprised the raise was for just $255 million. It is very expensive to build and operate a multinational local service provider network.
Process Improvements + Expansion
CEO Chandra indicated that the startup will use its new capital to expand in its existing markets while improving the onboarding of service providers to their network. The company also indicated that it invests considerably in upskilling and training the providers it puts on the platform. To us, this describes a very risky proposition. We wonder how much the company can actually do in terms of training and upskilling an individual to be an appliance repair person or roofing contractor.
The other interesting wrinkle is that the company enables its service providers with expertise in one area to learn another area in an effort to increase coverage. So I guess that means the person who shows up one day to clean out my sewer line might show up the next day to paint my house. Interesting indeed.
Urban Company plans to file for an IPO in the next 24 months. Whether or not that will happen is anyone’s guess. But we do find the company’s approach to building coverage for the various categories of services intriguing. In a market like India, it might just be a winning recipe.