12 highlights
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In December 2019, Vinay and his brother had answered an ad by Housejoy. “We gave them a call and eventually, signed an agreement for building a duplex house within nine months for about Rs 60 lakh,” he says. “We were told that Housejoy will be taking care of the entire process and all we had to do was make payments on time.”
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In the past few years, however, the gap between the two has widened considerably, as Urban Company has surged ahead both in terms of revenue and investor interest.
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And now, Housejoy seems to be putting most of its bets in a relatively new space—IRC, short for “interiors, renovation and construction”
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As quickly as the sector grew, the companies realized that things aren’t going to be easy fairly early. Margins were thin and revenues abysmal. “The unit economics did not add up,” says the founder of what was once a home services startup.
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Immediately afterwards came a turning point in Housejoy’s history. In May 2016, the board of directors put a stop to the company’s expansion plans and pushed out the founders Arjun Kumar and Sunil Goel.
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Then came the foray into home construction, renovation and interior design and painting in 2018—this is now the key vertical that the company hopes will help it cross Rs 200 crore in operating revenue.
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“After the founders left, the focus shifted to beauty and wellness. That was the big north star in 2017. Soon, newer verticals such as movers and packers and, later on, the focus shifted to construction,” he says, also asking not to be named.
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While Urban Company went full stack on all its verticals, Housejoy adopted a more conservative approach. For instance, Housejoy remained a platform and classifieds play for most of its existence. A classifieds option works when you are setting up the business, but in the long term, it is tough to scale and turn profitable. Urban Company, for instance, went deep into sectors, trained the professionals on their platform and ensured that repeat orders increased.
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Another area where Housejoy faltered was in keeping customer acquisition costs low in what remains a low-margin business. The earlier mentioned founder points out that a horizontal play works only if you have an equally good team in each vertical. “You cannot expect everyone, from plumbers to contractors to painters and beauticians, to work similarly. Instead of dominating everything at once, the focus should have been on one specific vertical with adjuncts to support it,” he says.
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The questions Housejoy needs to be answering are about the price range, the sort of houses it is going to construct, if it is going to be in the bigger cities or smaller towns, and the customer base the company is looking at. Then there will be issues on handling contractors, what happens in case of a dispute and what will be the benefits that Housejoy brings to the table, apart from the questions on cost and margins.
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He says that construction will work only if they adopt the full-stack model and not remain focused on the platform play.
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Investors would think twice before putting in big amounts to revive a company that has been stagnant for two years now. “Considering this is a business that has a non-founder CEO,” says an industry analyst, “doing something very different from what the company set out to solve, investor support will be hard to come by.”