What happens when you spend a lot of time at home? Other than cooking, eating and sleeping, most people tend to start re-imagining their living space. Maybe the TV needs to be mounted on the wall, or the wall needs a different color, or the AC needs some tinkering, or the backyard needs a little cleaning. There is no dearth of home improvement projects that the human mind can conceive. Once you have an idea, you would either DIY or would try and find a professional to help you with it.
Finding a professional looks very different for different people, you may already have an existing relationship with a contractor or you would start off with a Google search and land on a listings website like HomeStars or Yelp and go through a tedious journey. You will read through the reviews of available options, get on a few calls to vet the service, negotiate a price, find a suitable time for the contractor to visit you etc - all while coordinating with them on phone or through sms. OR if you are rich enough to have a ‘Home Manager’ you would just call your home manager and they will take care of the rest for you. Home managers are personal concierges who take care of all home repair and home improvement needs of the rich. In today’s edition of startup dives, let’s dive into the business of “Setter” - a company striving to be your virtual home manager (even if you aren’t in the top 0.1%).
Origin Story
Setter was founded by David Steckel and Guillaume Laliberte in 2015. So far they have raised $12M including a seed and series A round in Nov 2018. The story is that David was building high-end homes for the wealthy when he discovered that they often had ‘home managers’ that everyone would want but couldn’t afford. He thought of the possibility of multiple homeowners sharing a home manager to bring the costs down and that’s what became Setter. This is how they describe themselves:
We provide a one-stop solution for home maintenance services by arranging for verified professionals to assist homeowners with repairs, upgrades, installations, cleaning, maintenance, and other projects around the home.
Based on LinkedIn they now have a 49 member team spread over offices in Toronto, San Francisco and Philippines.
So, what is the business?
Let’s first understand the problem that Setter is trying to solve and that will help us understand the business.
Owning a home can be overwhelming. It consists of a never-ending list of to-dos and breakdowns. Aside from home improvement ideas, there are several home repair needs that keep an owner busy. These needs can crop up anytime - an issue with plumbing or HVAC or roof can cause an insane amount of stress and literally take precedence over any other priority that the owner has. When an issue crops up, the owner wouldn’t always know the costs associated with it or where to go to find help. Home management/repair industry is highly fragmented. There isn’t one place that you would go to for all your needs. You can ask friends and family for contractor referrals or go to your real estate agent for referrals or can end up spending hours browsing different websites that promise to pair you with the best professional who is going to solve all your problems. We all know how these promises end up.
The problem is threefold -
Discovery - it is hard to find the right help
Transparency - there is no way to figure out if you are paying the right price
Quality - how do you evaluate the quality of work?
So what does Setter do to solve this? Here’s a description of Setter’s service:
The startup pairs you with a home improvement concierge familiar with all the vendors, prices and common screwups that plague these jobs. Setter finds the best contractors across handiwork, plumbing, electrical, carpentry and more. It researches options, negotiates a bulk rate and, with its added markup, you pay a competitive price with none of the hassle.
There are a lot of marketplaces/listings where you can find professionals but Setter is going one notch up and trying to provide a white glove - concierge service which is enabled by technology. You don’t have to go through the hassle of browsing listings to find a professional but you pay a marked up price for the service.
Here’s an example of an interaction with Setter:
The homeowner above sends a query with an image of the issue, Setter comes back with a proposed solution and a quote. The homeowner can then decide to accept the quote and Setter will place a hold of $286 on their credit card. In the backend, Setter will find and send a professional to complete the job at a time convenient to the home owner. The professional would receive a pre-negotiated price from Setter and Setter would keep the difference between $286 and the payment to the professional. That’s how they make money.
In addition to this mark-up, Setter also ships home parts like a furnace filter or alarm batteries to its customers. I don’t believe this is a significant revenue stream but could potentially be one if there are enough homeowners who take up the service.
The hope for Setter is to have recurring revenue, i.e. the homeowner keeps coming back to Setter for all their needs. This can happen in two ways, either the homeowner has several needs that they have identified themselves and love the experience with Setter the first time to go back to them, or Setter can help homeowners identify needs through a home consultation. This is where Setter is focusing on. With COVID-19, the consultations have moved online. In a virtual home consultation, a Setter employee will give you suggestions/ideas that will help you improve the safety of your home. You can then work with them to create a plan laying out different projects on a timeline that Setter can then help you with.
Value Proposition for homeowners:
There are a lot of homeowners who aren’t price sensitive and want to take the hassle out of any home improvement/repair project. Setter is a viable solution for them. They don’t have to scour listings and find anyone. Setter will do the job. They can use the Setter app to keep track of all the communication and quotes. Setter will remind them when to change filters or when to change alarm batteries. They can set and forget.
Value Proposition for Pros
Home repair/improvement professionals are always looking for work and Setter is another stream of jobs for them. They no longer have to interact with clients directly. They also get a clean work scope that needs to be performed. Price haggling and negotiating with clients is painful and Setter takes that away from the Pros.
What’s exciting about Setter?
Home improvement industry - Prior to COVID-19, home improvement was one of the fastest growing retail categories.
Not only are homeowners doing more remodeling projects, but they are also taking on more large, discretionary ("lifestyle") home improvement projects, as opposed to just sticking to necessary maintenance. Per-household consumer spending on home improvement, as measured by HomeAdvisor, has risen 17% in the past twelve months, according to a 2019 report, and a significant part of that increase results from an increase in discretionary "want-to-have" projects.
While things may change in the short term, I believe the home improvement category will emerge strong in the long term. With people staying more and more indoors, the need to improve living spaces or even include work spaces within homes will rise. Setter has a tremendous opportunity to fulfill these requirements and I am bullish on them being able to ride the wave.
Virtual consultations - In a recent event, Setter’s CTO - Ambles Kwok explained that even prior to COVID-19, Setter had started to pivot the business towards a virtual consultation focused operation. And now that folks are spending more time at home and thinking about how to make their home life more comfortable, not only are they more available to talk, but also highly motivated to improve their home.
Earlier this year Setter began a business-wide change in focus, from managing and fulfilling services to supporting homeowners with their home safety, home care strategy and homeownership knowledge. It was a sizeable departure from where we ended 2019, rapidly scaling up a operationally heavy, geographically limited service business.
Being able to pivot quickly and take an in-person delivery model to a virtual experience is hard. Given Setter has already done so and is likely ahead of the competition gives me hope that their team will be able to sustain this period and come out stronger.
Higher customer lifetime value: While I don’t have the data to be certain on this, I suspect that Setter will have higher customer retention and therefore high customer lifetime value. Why do I think so? There are two reasons behind it:
Price insensitive customer - Setter’s target customer is less price sensitive given they are okay with paying a markup as long as they don’t have to deal with the hassle of finding a professional. As long as they have a decent experience on the platform, they will come back and will choose not to go through another hassle i.e. finding a similar service.
A concierge led service - Having a model that isn’t tied to a particular type of service say plumbing or carpentry but covers all aspects of home ownership means that the customer can contact the same service to clean the gutters or even change winter tires. Thus, generating multiple jobs a year that would likely result in higher GMV and longer retention.
What makes me nervous about Setter’s future?
Negative trend in reviews: No business is immune to negative customer reviews given the likelihood of someone writing a review is high when they have a negative experience. However, what concerns me is a continuous trend of negative reviews on Setter.
In the last 6 months, every review for Setter has been less than 5 stars. This wasn’t the case a year ago - even after discounting the 5 star ratings from Setter’s own employees, there were several customers with positive experiences.
What is all the more concerning is that these customers aren’t getting any responses from the business (at least on google reviews). Again, this wasn’t the case a year ago. As I dug into previous reviews, usually someone from Setter would jump in and try to address the issue. This contradicts the narrative of a white glove premium service where a homeowner can leave everything to the virtual home manager.
Discovering Setter - Other than those who directly reach out to Setter through their app/webpage, clients discover Setter through Other listing websites such as HomeStars. Half of the time Setter lists their Pros and not themselves on these websites. When the client reaches out with a request they end up receiving a reply from Setter and learning about their home consultation and overall value proposition. This kind of defeats the purpose of being a product where one does not have to go through listings in the first place. Also, given that Setter has been in this business for ~5 years and hasn’t yet figured out a better discovery mechanism signals a red flag to me.
Additional Resources
While the home consultations are now being offered virtually, if you are interested in knowing what a setter home consultation looked like in 2019, watch this 18 minute video of a complete home consultation.
That’s all for now :)
Here are some previous editions of Startup-Dives that you may like:
*Above pictures taken from TechCrunch and Google Reviews.
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