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Online home services sector set for wave of consolidation

Online home services sector set for wave of consolidation

Online home services sector set for wave of consolidation.

VC firms have invested more than $25 million in over 100 home services companies, an amount that could help these firms snap up smaller rivals.

Bengaluru | Red Newswire | Nov 21 2015. 03:03 AM IST.

Housejoy website
Housejoy website

When Srinivas Rao opened Snoways, a laundry services chain in Bengaluru in 1995, life was good. Those were the days before the Internet, and Rao’s annual sales ran into a few crores of rupees.

However, a dozen years later, Rao sold off his business to a larger rival as he did not have money to scale up. Now an independent consultant, he advises online laundry chains looking to grow through acquisitions.

The online home services sector—which includes laundry, carpentry and plumbing services among others—is poised for a wave of consolidation, mirroring the experience of e-commerce, food tech and delivery services firms, which scaled up through acquisitions. According to data analytics firm Tracxn, venture capital firms have invested more than $25 million in over 100 home services companies, an amount that could help these firms snap up smaller rivals.

Housejoy, UrbanClap and Zimmber are among the larger firms in talks to raise funding, according to news reports and two people familiar with the developments. These companies are looking for fresh funds, partly to finance acquisitions.

Investors such as Tiger Global, Lightspeed Ventures, SAIF Partners, Accel Partners, Matrix Partners and IDG Ventures have invested small amounts in the sector, which is yet to see the emergence of clear leaders.

“Marque investors investing in the segment shows that there is investor interest. However, most investors are looking for models to prove themselves,” said Shivakumar R., co-founder and director of investment banking firm IndigoEdge. “There haven’t been any big-ticket investments parked, so it is more of wait-and-watch to see how the service providers are able to solve the large problem that presents itself,” he said. Online platforms with vertical strategies are likely to join hands with end-to-end service providers, Shivakumar said, referring to reports of e-commerce major Amazon looking to buy a stake in home services provider Housejoy.

Home services start-up Timesaverz Dotcom Pvt. Ltd is in talks with three companies for potential takeovers and has already acquired one. Zimmber (Rejuvenate Solutions Pvt. Ltd) acquired Dhulai, a laundry services firm and is looking at potential acquisitions in the laundry and home cleaning segments. Taskbob (Crenovative Ideas Pvt. Ltd) acquired Zepper Services Pvt Ltd. earlier last week.

“Consolidation is bound to happen in this category which is witnessing the sprouting of various regional and niche players. To expand faster and reach scale, some amount of consolidation is bound to happen,” Debadutta Upadhyaya, co-founder of TimeSaverz.com said.

With customer enquiries rising from a few hundred to several thousand and expected to rise, these companies are in a hurry to raise funds and grow.

Lack of sufficient finances and poor domain knowledge are driving acquisitions in the laundry and home cleaning services, Rao said, adding the high initial costs of setting up operations have deterred investors otherwise keen on the sector.

Many companies who raised funding and experimented with various ideas were forced to sell by investors looking to recover their investments when the ideas did not work, said Dirk Lewis, co-founder of laundry start-up DirkDaDhobi.com.

Some deals are spurred by the need to expand into newer categories and geographies. Laundry Project India Pvt. Ltd-run Wassup, which operates in Delhi, Chennai and Bengaluru acquired Chamak Direct in November this year to add Mumbai to its network. The first quarter of 2016 could see bigger consolidation, according to Aaditya Rao, founder and CEO of Bengaluru-based LocalOye (Imma Imma Web Pvt. Ltd). Others like Shaifali Holani, founder of EasyFix Handy Solutions India Pvt. Ltd, say it has already started.

Like other segments in the Internet world, the sheer number of start-ups in this space will lead to the emergence of two to three leaders while most fade out or get acquired, according to Rutvik Doshi, partner at Inventus Capital. “Consolidation is a natural cycle,” he said.

Source: Mint

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