It is no secret how much tougher it has become over the last few years to raise VC dollars in the home services space. Even Rocket Internets Helpling reportedly had to take a down round when it raised a further 10 million earlier this year.
This can partly be explained by Amazons interest in the home services market, and also because of high-profile failures, such as that experienced by Homejoy.
But were not quite done yet, with news that Nordic home cleaning startup Freska, which is headquartered in Finland but also operates in Norway, has picked up a modest 2 million in new funding. Leading the round is Swedens Spintop Ventures, with participation from Norways Momentum Partners.
A number of individual investors also joined including Lasse Smedsvig and Harald Aalvik, founders of Adams Matkasse in Norway, and Olli Sirkia, co-founder of Finnish SaaS company Leaddesk. Freska also received public grants and loans from Finlands public innovation fund Tekes as a part of the financing.
Meanwhile, Im told the new capital will be used to acquire more customers in the Nordic region, including expanding to further cities and another country, and to further develop Freskas tech platform.
In a call, Freska co-founder and CEO Sebastian Heinrichs declared the on-demand home cleaning market dead. Thats because, he argues, it never actually existed. Instead, home cleaning is all about regularly scheduled and repeat business. [Its a] quality subscription play, not an on-demand play, he says. No player has or will ever show metrics that work for one-off cleanings you book for the same day on-demand’.
Thats not to say that Freska doesnt offer one-off bookings it does but Heinrichs sees this element of the business as more marketing than profit. Today the metrics for one-offs work fine but we consider them as a marketing cost and more than 80 per cent of our monthly bookings come from subscribers.
The key to succeeding in what he says is a very competitive market is keeping both sides of the market happy, not merely matching supply and demand. The huge market opportunity hasnt disappeared, every home demands cleaning and the global market is growing every year, says Heinrichs in a statement.
You need to understand the sensitivities of the market and stay laser focused on keeping the business fundamentals healthy. Its not enough to only create value for the consumer through easy booking, competitive prices etc. Unless you can be a company that your cleaners love as well, youll face problems in scaling due to high cleaner churn and platform leakage.
To that end, retention of cleaners means ensuring that they have enough work local to them and are paid fairly, but also softer things like not feeling isolated and being part of a wider workplace community. This, says Heinrichs, has seen Freska run regular movie nights for its cleaners, for example.
We have analyzed the market drivers and the players in the market and are impressed about how Freska has solved some of the hardest problems in this space, says Spintop Ventures Finn Persson in a statement. Freskas team and numbers have undoubtedly demonstrated their ability to grow a soft business at scale without sacrificing on the customer experience and preserving a strong social angle that is important to us. We are excited to join the team.
Those numbers point to Freska targeting 10 million in revenue run rate by the end of this year. Despite scaling fast, our secret sauce produce the lowest cleaner and customer churn on the market, claims Heinrichs.