One Founder Told Me He Wanted to Overpay His Employees. So We Invested.

When tech reporters start writing their 2014 wrap-ups, my guess is we’re going to see wages and treatment of service professionals as a highlighted theme, especially in reference to the local/on-demand economy platforms. At Homebrew we’re very interested in these industries, which means Satya and I think about these factors not just as moral questions but with an eye towards investment filter. Several of the companies Homebrew has backed would fall into the marketplace or local services categories, including UpCounsel, Shyp and ManagedByQ. We get excited about marketplaces which have the ability to raise take-home pay through increases in hourly wage, not just utilization. We tend to avoid services that can achieve profitable economic margins only by using PT workers/contractors to avoid taxes or benefits (it’s totally sustainable in our minds to employ these classes of employees in many cases such as to manage supply/demand surges or because some prefer flexible work schedules).

When we invested in Shyp, the founders were pretty set on trying to create stable and respected employment paths for their drivers and warehouse workers. Besides feeling this was consistent with the culture and brand the company intended to build, Kevin and Joshua hypothesized it would be ultimately better for the business to attract and retain motivated employees (lower turnover, lower training costs, more bottom up innovation, higher quality customer service). The majority of companies like Shyp have only two touchpoints with their customers: the app and the associated service professionals. What sense is it having a pixel perfect, beautifully designed app if your IRL customer contact is horrible?

That’s why most recently we were attracted, not skeptical, of ManagedByQ’s desire to pay their Operators full medical coverage (“Operators” are their catch-all term for the assistants, cleaners and other professionals who fulfill some of the responsibilities on the Q platform for customers). As Q scales in NYC and beyond to help be the ‘operating system’ for the modern office, they need to deliver a triangle of trust between Q, Operators and the offices which hire Q to manage cleaning, maintenance, supplies, and so on. I tend to also believe that treating employees well at all levels enforces consistency and trust internally. A company which tells one class of employees “don’t worry, we value you” while screwing others, is one where I’d always keep an eyebrow half-raised. It’s definitely costing Q a bit more than some of the buzzy residential cleaning services are paying their workers but our bet is the Q team is 100% correct in their priorities.

Ultimately whether it’s through regulation or competition I don’t think optimizing for just the lowest possible labor cost at the expense of service and expertise is sustainable for many of these marketplaces or on-demand services. My guess is the first place it shows up is in the app store ratings and NPS scores of those companies who grind workers up, weak economy or strong.

(oh, and Q is hiring a Finance & Administration lead in NYC HQ if anyone you know is interested. Or if you’re a NYC office that wants to vote with your dollars for a great cleaning and maintenance service that shares your values, here’s the Q website).

2 thoughts on “One Founder Told Me He Wanted to Overpay His Employees. So We Invested.

  1. Pingback: Can service startups pay contract workers well? This investor says yes | Bratano

  2. Pingback: Jordan Meyerowitz | Can service startups pay contract workers well? This investor says yes

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