2015: More than 400 hyperlocal startups. Over 100 startups funded. Approximately $800 Mn in total funding.
2016: Hyperlocal bubble burst. More than 100 startups shut down. Over 30 acquired. Industry experts say the on-demand model in the home service sector is dying.
Fast forward two years to 2018: Confidence in the segment seems to be back among startups and investors. Things started looking up in 2017.
Speaking about this sector in the Inc42 Annual Funding Report, 2017, Krishnan Ganesh of entrepreneurship platform GrowthStory said, “These business models require capital to reach a steady state and breakeven. The first challenge is to break even on unit order basis. Then breakeven at the operational level, including fixed costs. Finally, breakeven at the company level. For a B2C business with a low ticket size, even a 20% gross margin is too small in absolute terms to reach breakeven, given delivery costs, cost of returns, payment charges etc. So, unless VC sentiment comes back to support these, it will be tough to pull off.”
However, online home services marketplaces UrbanClap and Housejoy seem to have pulled off the business model to emerge as survivors with their efficient management and well-balanced expenses. In fact, the two startups have come up as the two top players in the segment with revenues of INR ~11 Cr ($1.6 Mn) and INR ~32 Cr ($4.72 Mn), respectively, for FY16-17.
Bhaskar Majumdar of Unicorn India Ventures echoed Ganesh’s thoughts: “I believe this sector has now matured. Incumbents need to focus on standardising their operations and providing a rich delivery experience so customers are habituated to repeatedly order without the need for offers/discounts.”
Riding on the good sentiment of the investors for the sector in 2017, and the entry of Internet giant Google with its on-demand service app Areo, Indian digital classified unicorn Quikr entered the space as well. It started QuikrServices and acquired Zimmber and raised a round of funding to strengthen QuikrServices, its on-demand service provider.