Discovery of local service providers is a problem that startups and publishers have been relentless in their attempts to solve. From Yelp to Angie’s List, the trend has been toward providing a listing marketplace complete with vendor profiles and user reviews. But the problem with this model is that it puts a lot of the onus on the consumer to spend the time and energy sifting through the volumes of data for the perfect vendor based on offering, price, and availability, among other factors.
Thumbtack, which specializes in local services in the events, home improvement and maintenance, wellness, and instruction categories, has taken a different approach to enormous success. When a consumer visits the company’s site, they submit a request for a particular service, including time, location, special requests, etc. and are delivered one to five matching bids from the company’s list of curated vendors. In other words, Thumbtack is a market-maker, delivering pre-qualified matches according to each consumer’s needs.
Last month, the company received requests for more than $300 million in services and converted one-third that amount into bookings for its 20,000 active vendors nationwide. (It has a total of 250,000 registered vendor profiles.) Today, the company looks to accelerate this growth with a $12.5 million Series B financing led by Sequoia Capital, with participation from existing investors Javelin Venture Partners and MHS Capital.
Sequoia has a history with local that hasn’t been overly positive. The company led Insider Pages’ $8.5 million Series A round in 2006, and then watched the company sell to CitySearch for an underwhelming $13 million less than two years later. But we are in a different time, according to Sequoia partner and new Thumbtack board member Bryan Schreier. Six years ago when Insider Pages threw in the white flag consumers weren’t turning to the Web as their primary means of discovering local service providers. At the same time, most small and mid-sized businesses (SMBs) viewed the Internet as a novelty, or a threat, but not as an essential resource to their business. Today, the opposite is true in both cases, Schreier argues.
Redbeacon offered a similar concierge matching service in the home improvement sector, but never achieved meaningful scale before selling to Home Depot in 2012. Thumbtack, which was started in the same year (2008) believes it can one-up its former competitor facilitating matches not just with plumbers, but with tutors, personal trainers, and DJs, among other types of service providers.
The company decided to go nationwide from day one, rather than expand city by city like Yelp and others before it. At the same time, it bypassed the high cost, feet-on-the-street salesforce typically associated with local businesses – look no further than Groupon for why this is a risky model. Four years in, these decisions have enabled Thumbtack to address a large market on just $5.7 million in financing prior to today’s Series B round. Thumbtack has a team of approximately 260 employees, between San Francisco and the Philippines. Previous backers include MHS Capital, Tim Draper, and a host of other angel investors.
One of the biggest risks for Thumbtack and Sequoia is the company’s relative lack of brand awareness among consumers. The vast majority of the company’s new users come through paid search around terms like “yoga instructor Los Angeles”, rather than consumers knowing enough to go directly to Thumbtack.com when looking for a local service provider. Fortunately, more than 200 million unique searches are performed in the US alone each month for local service providers, according to Thumbtack CEO Marco Zappacosta. One of the primary uses of funds for this new round is to ramp up the company’s brand advertising, according to the founder.
The other major challenge will be to grow both its vendor network and its consumer traffic in proportion such that it maintains the necessary liquidity in the marketplace for both constituencies.
As for competition, Thumtack’s biggest risk would appear to be that Google, Yelp, or Angie’s List choose to expand their offering to deliver one-to-one targeted matches rather than simply a comprehensive directory of choice. Angie’s List has begun dabbling in this area, as has Yelp with its OpenTable integration. Google is making similar overtures with its flights and hotels offerings. On the startup front, MyTime is offering an appointment booking and discount marketplace around the health, beauty, home, medical, and pets, categories, but is only active in Los Angeles currently.
Local discovery is a notoriously difficult problem to solve, and Sequoia, along with the rest of Silicon Valley, has the scars to prove it. Schreier and Zappacosta think Thumbtack is different, due to a combination of its timing and its consumer-first model. There remains an enormous amount of risk in the deal, but the opportunity is equally massive. If Marc Andreessen is right that software will eat the world, then local discovery is no exception. It’s a matter of when, and by whom that remains to be seen.
- ThumbtackYour marketplace for local services
Thumbtack : Time :: eBay : Things
We're creating a marketplace where buyers and sellers of local services can easily find and transact with each other -- in effect, facilitating the exchange of time and money.
For service buyers we offer a vetted network of professionals and tools to facilitate finding, comparing, and booking their services.
For service providers we offer a beautiful online storefront, reputation management, and a true pay-for-performance marketing channel.