Episode #207: Jeremy Yamaguchi, “It’s…One Of The Last Markets In The US…That Has Been…Resistant To Technology”
Guest: Jeremy Yamaguchi is a multi-time founder and entrepreneur. He founded his company, Lawn Love, to take on the inefficiencies of the lawn care business by applying technology to offer a superior experience for both customers and lawn care professionals.
Date Recorded: 2/11/2020
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Summary: In episode 207, we welcome our guest, Jeremy Yamaguchi, founder of Lawn Love. We kick off the episode by getting into Jeremy’s background as a son of missionaries, starting his first company at the age of 16, and the curious mind and discerning eye for opportunity that has taken him down the path of entrepreneurship.
We touch on the void he saw in lawn care and the technology that underpins the Lawn Love platform, driving value for customers and lawn care professionals. In his pursuit of building Lawn Love he started 3 companies only to kill 2 and run with the one that gained the most traction!
We also get into a massive personal stride he made in the realization that his startup competitors that seemed to have easy access to networks, capital, and press, didn’t actually have a silver bullet. His takeaway? There isn’t a substitute for the hard work that it takes to build a company.
Don’t miss episode 207 and the details on how Jeremy built this company.
Links from the Episode:
- 0:40 – Introduction to our guest, Jeremy Yamaguchi
- 1:46 – Origins of Lawn Love
- 2:21 – Jeremy’s backstory
- 4:33 – Inspiration for Lawn Love
- 6:39 – How the marketplace works
- 9:16 – Business model
- 9:48 – How Lawn Love differentiates itself from others in the marketplace
- 13:56 – The evolution of the company and its expansion
- 16:54 – Getting started in San Diego
- 19:43 – Y-Combinator
- 21:40 – Silver Bullets (Yamaguchi)
- 24:30 – Progression of the company since Y-Combinator
- 26:29 – How the market fell out from under them in 2016
- 33:26 – Expanding beyond their first few markets
- 35:58 – Biggest needs for growth
- 38:41 – Future plans for Lawn Love
- 42:28 – Opportunities to explore
- 46:18 – Most memorable investment
- 48:12 – Connect with Jeremy: @jeremyyamaguchi, lawnlove.com, Lawnlove.com/apply
Transcript of Episode 207:
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Meb: Welcome, podcast listeners. We’ve got a killer show for you today. Our guest is a multi-time founder and entrepreneur. He founded his company Lawn Love to take on the inefficiencies of the lawn care biz by applying tech to offer a superior experience for both customers and lawn care professionals alike. In today’s episode, we get into our guest’s background, traveling the world as a son of missionaries, starting his first company at the age of 16, and the curious mind and a discerning eye for opportunity that has taken him down the path of entrepreneurship.
We touched on the void he saw on lawn care and the technology that underpins the Lawn Love platform, driving value for customers and lawn care pros. In his pursuit of building Lawn Love, he actually started three companies only to kill two and run with the one that gained the most traction. We also get into the massive personal stride he made and the realization that other well-funded start-up competitors that seem to have easy access to networks, capital, and press didn’t actually have a magic silver bullet. His takeaway? There isn’t a substitute for the hard work that it takes to build a world-class company. Please enjoy this episode with Lawn Love founder Jeremy Yamaguchi.
Welcome to the show, Jeremy Yamaguchi.
Jeremy: Hey Meb, happy to be here.
Meb: You’re a founder. You started a company called Lawn Love. I grew up, like probably many poor children all around the world, mowing lawns. Tell me a little bit about the origin story of this company. What’s Lawn Love?
Jeremy: Yes, so Lawn Love is a marketplace for lawn care and gardening services. We’re cut in a similar vein to something like a Lyft or a Handy in that we are building a technology layer on top of what has historically been a pretty fragmented offline industry.
Meb: Good. We’re gonna come back to all things Lawn Love and I wanna hear about it. But you grew up and had a slightly different trajectory. I don’t know if you were mowing lawns because I know you were growing up all around the world. Tell us a little bit about your path to San Diego and then we’ll get into all things lawn care.
Jeremy: Yeah, so I’ve definitely learned my fair share of lawns as well and know my way around a string trimmer and weed wacker and whatnot, but I grew up overseas. I was born in Yokohama, Japan, and spent the first 15 years of my life over there. My parents are missionaries, so ended up traveling around a lot, grew up in Southeast Asia, East Africa, mostly Uganda, and then immigrated to the U.S. when I was 16 and that kind of kicked off my lifelong career in entrepreneurship.
I started my first company then, which was a web dev shop, more or less originally was a kind of self-taught designer and wanted to add a little more function to the form. And so taught myself how to code when I was a teenager, and started building apps and websites for friends, and ultimately grew that into a digital agency that I ran for about five years into my early 20s. This was interesting, right? It was, for a 19, 20-something-year-old, a pretty successful venture, but it always lacked kind of the true scalability of more of like a productized or kind of scaled service business. Consulting is great, but you’re gated by the absolute number of hours you had in a day.
So I was always on the lookout for something else that would have a better potential for scale. And I found that opportunity actually in 2009 when I went to go book a housekeeper and realized that the existing options in that industry were these enormous, super slow, still fairly antiquated franchises, like Molly Maids or Merry Maids or the Craigslist alternative, which was typically pretty hit or miss when it came to quality. And so realized there was an opportunity to build like a technology marketplace style solution for this problem and went and did exactly that. I walked away from the agency and started a kind of local services platform for in home household services, like maid service, carpet cleaning, window washing, everything like that. Grew that for about five years, bootstrapped it, sold it to a P search fund in 2013, and started Lawn Love a week later.
Meb: Wow. Well, that’s quite a long sabbatical you took in between selling the company. I imagine you had the idea marinating in your head for a little bit before the sales process or was it something where you just looked around the landscape and it was like, “Man, there’s just a world of suck in this industry. There’s so much that needs improving.” What was the inspiration for the idea?
Jeremy: That’s exactly right. So I knew, as kind of things were winding up with the prior business, that I wanted to start my next company in the home services vertical without a doubt, mostly for two core reasons. The general magnitude of suck is one way of putting it, but it’s just this massive industry and it’s kind of like one of the last markets in the U.S. at least that has been pretty resistant to technology, mostly because at that point, circa 2013, smartphones were pretty proliferated across most consumers, but field service professionals were still on the lagging tale of smartphone adoption.
So we didn’t have total real-time GPS in everyone’s pockets yet and it was difficult to coordinate all of these remote workers around a central platform like a Lawn Love. And as a result of the customer experience was pretty low tech. It was often very spotty and poor. It was hard to find a great service provider and then managing quality over time was tricky. Inevitably, you’d get kind of frustrated and churn and have to repeat the broken search process ad nauseum. And it just, it sucked. It was a massive opportunity and it was pretty clear that, with the advent of the iPhone, the tools were gonna quickly hit the space where we could actually aggregate this historically disparate sources of supply and bring it all together under a single consistent brand, which could make the experience for the customer 10X better. And also really just elevate the economics for the lawn pro in the process.
And I could get into that at length, but a big part of what we’re building here and what’s so exciting about it is really the fact that we’re able to democratize software leverage that has historically only been available to huge players in our industry and give it to the half-a-million lawn care companies in the U.S. that are one to two-people outfits, and give them really the equipment to better compete and thrive. So that’s kind of the model.
Meb: Talk to me a little bit about how it works. I mean, my understanding is this isn’t something where you’re actually employing tens of thousands of lawn care professionals yourself. Are you more of a marketplace? How’s the whole company work?
Jeremy: Yeah, so it’s very much a 1099 marketplace. And the way it works is that first off, for you as a consumer, instead of you going to Craigslist or Yelp or the yellow pages and punching a phone number in and calling a bunch of pros and waiting a few hours to hear back because their phones are in their trucks and they’re actually out mowing lawns, you just go to lawnlove.com. We’ve built satellite mapping and quoting algorithms and you’d give us your home address and in the two minutes it takes you to fill out a form, we create a structured blueprint of your entire property. So we measure front side, back lawn areas, driveway length, roof diameter, all of that, and that lets us give you a really accurate personalized quote without having to actually drive out to your home and have you take time off work and all that kind of annoying hoop jumping that you’ve gotta do today.
And then from there, you manage it all through a smartphone or a web browser. You can book additional services. It’s kind of like you’ve got a holistic intuitive landscaping recommendation engine behind this thing to help you know when to book things seasonally. If you need like a pre-emergent weed control in spring, it’ll give you a heads up and just schedule it with your lawn pro. And it’s kind of like a remote control/proto-automation for your entire lawn service. It just makes it a lot easier for you as a customer. That’s kind of the value prop for you as a homeowner.
And then the value prop for the pro, which is essentially the second side of our marketplace, is that we start by bringing them a huge pipeline of new customer demand. So they’re not hanging door hangers and navigating snake oil, SEO salespeople, and trying to figure out how to drum up new business. They just sign up for the Lawn Love platform and they can pick up…once they’ve been screened and onboarded, they can pick up as many jobs as they want, and then we give them the tools, essentially a full suite of field service software that they run on their smart phones to better operate their businesses and do everything from like job routing and clustering to payments, taxes, all that sort of stuff.
Meb: Walk me through just kind of the main service offerings. Is it like 80% are doing just lawn mowing or is it people are actually doing gutter cleaning? What’s the full suite and kind of how does it break down or is it entirely dependent on geography?
Jeremy: Yeah, it definitely varies by market. So we offer snow removal as a seasonal service in some of our northern geos, it’s kind of the natural kind of cyclical seasonal complement to lawn care. But the bread and butter of our business is lawn mowing or lawn maintenance. We’ve got some of the ancillary stuff around gutters and whatnot, but lawn mowing is the bulk of it for sure.
Meb: And so walk me through the business model. This is something that I assume there’s either a monthly fee to the actual on the business side or is it something that’s a percentage of jobs booked? How does it work?
Jeremy: So it’s totally free to the pro. And the way it works is, you know, there’s no like monthly fee or sign up here or anything like that. We just take a percentage of each transaction, very similar in some sense to like what you’d see on an Uber. We make margin on every job and that’s what pays for advertising, technology costs, R&D, OPEX, all that sort of stuff.
Meb: So talk to me a little bit about the industry in general, because when I think of an idea like this, you know, it’s an idea that’s just so obvious to me on both the benefits to the consumer, but also… I mean, I was just thinking about this with my mom in Colorado where she may need snow removal a couple of times a year, but not necessarily consistent and could use help on other things. And the process is such…just pain in the ass. So it’s under this category in my mind of frustration arbitrage.
And there’s a couple of industries that traditionally this seems like an obvious solution for just tech and new innovation. I mean probably laundry and home care and dry cleaning of any number, but they’ve also been, in many cases, a graveyard for a lot of companies and investments. Talk to me a little bit about you guys and maybe the industry in general, any ways that you perceive what y’all are doing that’s different from either incumbents or competitors, if there are any. I don’t know that many. It seems like a very mom and pop sort of industry, but just talk to me about the general industry dynamics and thoughts on the space.
Jeremy: Yeah, that’s a great observation. I 100% agree with you that the kind of Uber for X or on-demand category has seen pretty spotty historical performance in terms of the actual kind of outcomes for a lot of these companies that have been started to replicate Uber’s success. In our case, I think we benefited a lot from the fact that I built my previous home services marketplace before Uber was Uber, and had all the kind of bootstrap DNA and background around operating this sort of a business in a way that was, from day one, in happy unit economics territory, where I think that that is almost always not the case for most of these other consumer on-demand services plays that you see out there.
It seems like if you look at the landscape that really two things have happened. Either companies have managed to raise just extreme amounts of money in the forms of the Ubers, Lyfts and DoorDashes and Postmates of the world and just kind of brute forced their way to IPO through raw fundraising prowess with still somewhat questionable economics on the sort of market level, or they haven’t been successful enough to do that and have kind of summarily vaporized. And it’s not that common, I think, that you see a scenario where you’re building a human services marketplace in a direct to consumer kind of B2C space without extraordinary amounts of cash.
And the reason we’ve been able to do it is a few fold. First off, the kind of financial discipline that starts on day one if that’s your plan. And even though we have actually raised pretty meaningful VC from a bunch of real investors, we’ve been running the company as if almost like it’s a more of like a hybrid bootstrap play with the added advantage of rocket fuel where we need it. But we didn’t put ourselves on venture rails early on where we raised just incrementally or progressively larger rounds and then felt pressured to deploy those rounds in unhealthy ways, which I think has been kind of one of the more common failure modes for a lot of the other players in this space.
I think it, at its core, gets down to just a challenge around CAC and how if you raise $100 million and you’re expected to deploy most of that in sales and marketing, the likelihood that you’re gonna be able to actually put that cash to work in a 18-month timeframe in a way that doesn’t absolutely blow your CACs out of the water is fairly low. And suddenly, there’s this weird kind of paradox and venture where your existing investors are happy to see you raise larger gobs of money at higher valuations and that kind of music keeps playing until suddenly it doesn’t.
And as we’ve seen with WeWork, that music stopped pretty quickly for a lot of companies out there. And there’s kind of tidal shift between growth at all costs to profitability is obviously happening across the industry and it’s a good place to be as a company on the kind of default profitable side of that equation where most of our competitors and other kind of analogous players have not, by design or by default, really been there.
Meb: You mentioned kinda a couple of points I would love to hear you talk a little bit about. You were a not a first-time entrepreneur and kind of been through the game before, and not only that, in a related industry. Talk to me a little bit about or walk through the evolution of the company. So you started it from scratch. And I assume in the beginning was mostly friends and family funded, and then just kind of walk us through how you started to expand, and then also would love to hear about the Y Combinator experience. What was the general progression of the company? It got started in what, 2015?
Jeremy: 2014 actually. So I started Lawn Love… Actually the origin’s even a little more indirect than me having said that lawn care was gonna be the thing and deciding to run wholeheartedly into this particular vertical. What I actually did after selling my prior company is I started three competing companies and ran them in parallel to see which one showed the most early traction and then killed two of them and kept Lawn Love. So I started a on-demand in-home personal training company, a pool cleaning company, and Lawn Love. And as you already know by virtue of where we are today in the story, lawn care showed the best, you know, most legs early on and I kind of unceremoniously jettisoned the other two and went all in on lawns.
And so early on, I knew lawn care showed the most promise. And the way that I did that is I just built websites for each of these different services with conversion funnels and kind of booking flows. And then I threw a bunch of paid traffic at each of these different sites and saw where I could acquire customers at a price point that made sense and where there was enough volume of traffic that we could build a reasonable business on a local market level. And that was kind of the primary signal that I looked at when it came to picking which company to run at more seriously. So that’s how I ended up on lawns.
And after having expanded beyond there, there’s a lot of advantages for the lawn care category when it comes to this particular kind of solution, mainly around the fact that services are all taking place outside the home. That makes for a much easier logistics challenge versus a lot of these other in-home services like food delivery or housekeeping or pet walking where you actually have to have the customer physically present in order to get in and out of the house. There’s a higher trust barrier. Those logistics challenges are also often what created these sorts of companies because it’s just enormously expensive to build a solution that works with independent contractors that can be varying degrees of reliable and still deliver a consistent consumer experience that meets like expectations or is significantly better than the kind of legacy alternatives.
So lawn care has its challenges as well. It’s super seasonal. We’re subject to like weather and all the routing and optimizations we do can get totally blown up by a particularly bad storm. But for all of the downsides, I think this vertical ended up being a really special one and uniquely well-suited for a marketplace-style solution. So yeah.
Meb: You started, you threw up a website. What was the first market? Was it San Diego?
Jeremy: Yeah, so San Diego’s first market just by virtue of me being here. At that point, I was running everything, solo founder. So I was writing code in the evenings and then handling customer service and kind of standing up ad campaigns and running marketing during the day, talking to lawn pros and bringing them onto the platform and coordinating work. And it was definitely a juggling a hundred balls kind of experience early on. I remember points where I’d have to like leave the…well, what was the office at the time, my home office upstairs in my house, and I have to drive out and meet lawn professionals at gas stations and give them $100 in cash so they can put gas in their car and actually make the jobs that we had them scheduled on. And it was just a very “do things that don’t scale” kind of manual lift in the early days. And that actually continued in various forms through the first few years of the company. It was just brute forcing all of the human logistics problems that are inherent to this sort of a model and just making it work.
So did that, applied to YC. I knew having… With the previous company, so I bootstrapped the prior one. And part of what motivated the thinking around selling it when I did is that I just saw this horizon of extremely well-funded competitors cropping up where folks like Homejoy and Handy were raising $50, $100 million from Google Ventures and Andreessen Horowitz and Y Combinator and all these, like, well-known funds and running at negative unit margins and just blowing up the entire industry. That feeling of being the kind of smaller bootstrapped competitor in that environment imprinted firmly on me and I knew that if I could, I would want to go the venture route for the next thing that I built. And so applied to YC and got an interview. And this was kind of right after having first launched the idea, of still building out the site and writing the code, and ultimately, the partners said, “Look, this is great, but more or less, come back with traction.”
And so I didn’t get in the first time around and I just kept working on it, kept growing extremely fast. Over the next six months, we were growing, I think, 200% a month, month over month on average from small numbers to marginally less small numbers. And then six months later, I applied again on the final day of admissions and got another interview and ended up getting in. And that definitely inflected the course of the company because that kind of put me on venture rails in a sense where, or at least give me access to all of the extraordinarily well-known investors who tend to make these particular kinds of bets. So that was the path there.
Meb: Can you tell the audience, we’ve had one other Y Combinator company on, but just a real quick summary of what that means and what the experience is like.
Jeremy: Yeah, so Y Combinator is, I think, pretty commonly known as the premier start-up accelerator in the U.S., probably globally, and it does a few things for you as a founder. Essentially, three core things. First, it gives you a extraordinary network of other talented high achieving founders. The value of the YC portfolio is over $100 billion dollars now and includes companies like Airbnb, Stripe, Dropbox, folks like that, and it allows you to… Instacart, DoorDash a lot of pretty successful on-demand plays as well.
And that network access is hugely valuable as you might imagine. It accelerates your learning and kind of jumps you up the curve around early stage start-up problems. And that’s augmented, I think, quite nicely with the expertise of the partners themselves. So it’s a three-month program that you go through. You have to move up to the Bay Area and you go through three months and it culminates in demo day, which is essentially a two-minute pitch that you give to 500 of the world’s leading VCs. And then you set about trying to raise around, ideally, shortly following demo day and then you’re off to the races.
And I’ve read a statistic recently that YC directly incubated, I think, somewhere around 9 out of the 50 active unicorns that are out there today. So it’s an extraordinary track record. It’s a well-understood to be a solid signal for quality when it comes to seed investors. And that’s kind of the third thing that you get from the program, which is a significant bump in valuation when it comes to where you’re raising your round at. You tend to be able to raise more at a higher price with kind of the YC pedigree than you would if you were raising on your own. Even if you are a two-time founder or you’ve been around the block a few times, it’s definitely worth it for that alone.
So that was kind of the experience and that’s a bit of a high level on them.
Meb: So you come out of YC, now, you did mention in a blog post that I loved, this topic of silver bullets. And I would love to hear…I would love to hear you, if you can remember that blog post where you’re talking about some of the experiences and the bruises and bumps of being an entrepreneur. Do you remember that piece?
Jeremy: Yeah, totally. I completely remember it. Yeah. So what I think it was trying to articulate it in that was this realization that from the outside looking in, right, like when I was running my prior business before Lawn Love, a lot of my direct competitors were YC founders and had been funded by these extremely well-known, tier 1 VC firms and seem to have more or less infinite access to capital and like would sneeze and get press, and it was just this extraordinarily mystifying thing to me where I didn’t know how they did it. It seemed magical. And I could only assume that if I could stand where they stood, I would also be able to do all of those things just as easily. And it was this almost like this like secret cult that I didn’t have access to, and once I did, all of the shrouds would be lifted and I’d be flying high. Right. So that was what I was kind of coming into it thinking.
And then on getting there, while there is an extraordinary amount of the kind of benefit that you get from it, the realization was that there still aren’t really any silver bullets. You’re still having to do the hard gritty work of building a company. And it helps to have better networks and it helps to have better advice, but like to be honest, if you sum the totality of all the advice that you get from smart people, it probably rounds to nothing on average because it all offsets and you probably…part of your job as an entrepreneur is to understand what to internalize and what to reject and build your own compass.
And so that realization that there were no silver bullets, it was just gonna be a nothing short of a gritty slog to our eventual destiny was a super freeing realization because it kind of re-empowered me with the knowledge that I was the arbiter of my own fate and like my destiny was 100% and always had been and always would be in my hands. And so equipped with that knowledge, I think I was able to move forward with a lot more confidence. It was a unique revelation to me and yeah, so I wrote a blog post on it hoping it would be helpful to others.
Meb: Nice. We’ll post the link in the show notes. I just love your comment where you were talking about how it was enabling and freeing and I’m over here thinking that it could also be really depressing. We were like, all right, well, it’s on my shoulders now. I got to go do it. I gotta go do the work now. And so it means the life of an entrepreneur, I wouldn’t wish on anyone. All right, so you come out of Y Combinator, do you then take a little bit of funding at that point? How many people were on the team, how many States you win? Walk me kind of through the progression of last couple of years.
Jeremy: Yeah. So right out of YC we raised a couple million dollars in our first kind of capital round that we’ve put together. And at that point, I think we were about three people total. It was me and a friend of mine to come run operations for us. And I essentially, at that point, had been completely drowning in operations and support and sales calls and pro logistics and stuff like that. So brought her on to help us scale and she ended up being extraordinary and sticking with the company over the next three and a half, four years and growing the team from like 3 to about 60 folks. So we get out of YC, we raise $2 million and immediately go on a hiring spree to kind of build out the technology part of the business and stand up more sophisticated sales and operations and marketing.
And I think over the course of the program, we’d gone from just San Diego to about four other cities across California, Orange County, LA, and SF. And the plan was to roll it out nationwide as quickly as possible because we already had a reasonably good playbook for how market launches worked, informed in some part by my previous business because I, more or less, built a similar thing in a different home service category. So had the benefit of prior domain expertise in this space and built on that with what we learned in the lawn care industry to kind of figure out a repeatable, kind of scalable playbook for market launch. So that was the plan.
We spent the next 18 months aggressively running at market scale. We got to about 40, 30, 40 cities by mid-2016, at which point, we went out to raise a Series A and the entire market fell out from under us and it was a very traumatic experience.
Meb: Oh, those are our favourite podcast topics. Very traumatic. No crying right now though. It’s too early in the morning. All right, so that takes us through 2016. We’d love to hear a little bit about that. What was the aftermath of that? You’re still around, so clearly the business has survived and thrived, but walk us through the last few years.
Jeremy: Yeah. So that was one of those experiences that, in the moment, sucks and in hindsight, you couldn’t be more grateful for it because it ended up putting you on footing that led you to where you are today. And in our case, we’re very stoked with where we are as a company and with our future. So I think people obviously retrospectively ascribe goodness and badness to their experiences, depending on the future outcomes. I’ve learned to not sweat the individual traumas as much because ultimately, it’s stuff that looks extremely bad in the moment can be a blessing in disguise. And that’s one of the many things that I think entrepreneurs who’ve been playing in the game for a while will tell you. But I had to learn it by personal experience, personally. It didn’t work to just hear it from others. I had to actually see it myself.
So yeah, here’s what happened. So we went out to go raise a Series A. At this point, our metrics are still climbing extremely fast. I wanna say we were at about 150K a month in rev. And we, a week before we go out to raise, Homejoy, which was one of the big on-demand most visible competitors in the space, implodes. And what had happened, I think, is that it took a few months to kind of sort through the rubbage and figure out what happened, but they had more or less been running with completely underwater unit economics and managed to spin a sufficiently compelling story to raise $40-plus dollars from a bunch of tier 1 VCs. And then the cows eventually came home to roost on their Series C, and they were dead in the water and tried to execute a last-minute sale to their direct competitor and there was a lot of kind of hair around that. That didn’t work out. They ended up having to shut down the company and investors just took a total bath.
And that started a cascade of, I guess, doubt and speculation on the entire on-demand category. If you’ve been around this space that feels like the watershed moment where prior to that, thanks in large part to Uber’s runaway success, investors were more like, “Look, if you’re doing anything that’s like on-demand-esque and taking a legacy file cabinet industry and bringing it into the modern era, if it’s a multibillion dollar industry, there’s no reason to believe you can’t also be Uber sized. If you have a pulse and are sufficiently promising, we’ll fund you.” And then post Homejoy, the conversation immediately flipped and the whole category fell out of favor.
And that’s where I learned my first lesson in VC cyclicality, which is that industries can trend and you better hope that you’re on the happy side of that trend and not the unhappy side, because as smart as a lot of these investors are, there are relatively few true contrarians among them. And it’s much more common, I think, for folks to make bets that are thematically correlated with what’s largely considered to be the hot spaces. And it’s for rational reasons, right? Like people wanna keep their jobs and if a…got that seems promising to everyone fails, no one blames you. If you make something super wildly contrarian that doesn’t work, you’re largely looked at as an idiot. So I understand the incentives. But…so in short, our category went from imminently fundable to extremely cold overnight.
That week, I’d lined up 30 meetings with all the major VC funds and ended up doing those pitches and kept constantly hearing like, “Wow, this is great. You guys have the best economics of any of the businesses that we’ve seen in this space. Huge industry. Like love the opportunity but we’re in a holding pattern on this industry or like we’re in a holding pattern on like on-demand as a category.” And then that like more or less torpedoed our Series A that we were hoping to raise.
And after about a month and a half of that, I just circled up with our insiders and explained the situation and they were like, ”Look, this is like a phenomenal business that you’re building. Who cares if outsiders don’t see it or don’t believe it, we’ll fund it.” And so they put in more money at a higher price and that gave us runway to keep operating kind of indefinitely or for the next few years before we raised a little more money.
So that was like an experience that, in the moment, seemed pretty bad because you don’t go start these companies to not raise venture if the model is a venture-funded one. And it turns out that in not doing that, we managed to preserve… We grew, still continued to grow extremely fast on very little cash. It forced us to build a capital-efficient business with really good foundational economics, and it allows us to preserve optionality and control and we didn’t like surrender our future to some IPO or nothing dream, which is still a very interesting and potential possibility for Lawn Love. But it’s one that we wanna be able to run at while preserving intermediate optionality all the way up the chain or up the ladder. So that was how that went. It was fun.
Meb: You talk about incentives and a lot of career risk and the hurting of our world and for you, it was more in that kind of venture capital space, but it happens all the time in the public investing space. We spend a lot of time talking about on it here. And the struggle we have is one, getting away from it, but two, in so many cases, for people that are stuck in it is that it’s not that it’s totally irrational for so many people because it is a lot of career risk and they understand that, despite being probably the wrong thing to do. So it’s a hard problem. It’s a hard problem to solve for a lot of people.
All right, so you emerge, you are blessed to have some good backers and investors that believe the story. What was kind of the rollout plan after that? Was it simply to take what you had done in successful markets and just stamp them across the country? Is it something where you’re like, you know, “Hey look, we should focus on the hot climates or the cold climates or the West side or the…” what was the kinda general expansion post this time?
Jeremy: Yeah, so it was exactly that. We wanted to roll out across….we thought there were about 200 or so possible cities that we could launch in with our existing model. And being in a grand total of 30 I think at the time, we still had a lot of room ahead of us. So we basically built a extremely lean market launch model where for a lot of the other players like Lyft or Uber, probably because they had the capital to do it, they would stand up local level offices and have an actual physical presence in each city running that market or at the very least put tons of boots on the ground initially and with these launch teams to jumpstart a market. And unsurprisingly that was very expensive. And what we, by virtue of having no other choice, ended up doing was that we just launched these things completely remotely. We never had a physical presence in the city. We designed the marketplace model in a way that let us matchmake kind of behind the scenes. And that ended up being pretty important.
So there’s various ways that you can build a marketplace. There’s the classic two-sided model, which is what you see with Yelp where you go on their platform and you see all the individual options and you pick them based on ratings or reviews. We use much more of an opaque matchmaking model where you don’t see your service provider, we just pair you with a vetted pre-screened pro that we know is gonna be great. And the reason we thought that would work is because we believed that customers don’t actually want to make that decision. They’ll usually tell you they want the choice, but in practice, they just want this to be insanely simple and easy. And in the same way that you wouldn’t wanna pick your Uber driver based on the year, make, and model of their car or the t-shirt colour that they’re wearing, you wanna just know that you’re gonna be able to travel affordably, that you’re gonna have a pretty quick pickup time, and you’re gonna get to your destination event-free. Those are the sort of properties that you care about.
And it’s the same thing in lawn care where you just wanna know that you’re gonna get someone who’s a skilled domain expert around everything that grows outside your home, can be proactive with recommendations, is gonna be reliable, show up on time, do good work, communicate efficiently, and that you can do this all affordably. That’s the calculus for you as a homeowner.
So we realized that and we went with a blind matchmaking model, which meant that we could stand up a city without actually having some huge base of supply spun up in order to get the market off the ground. And if you have a two-sided model, you’ve got to onboard enough pros at first in order to make it look like you’ve got a viable marketplace, right? Like if you go to search Yeezys on eBay and there’s one pair of shoes there, you’re probably not gonna go back. Options are important in a two-sided model but not important in a one-sided of model. And that let us spin up markets with just two or three pros with broad enough geo coverage to get the flywheel spinning and start kind of rolling from there.
So we, just by virtue of necessity, figured out a bunch of ways to launch markets efficiently and really capital efficiently and set about doing that for the next two years. I went out on 120-ish cities across 38 separate States and that’s kind of how that played out from there.
Meb: What’s some of the bigger challenges of that scale? Because I imagine, and I don’t know the answer to this, but I’m speculating, when you’re dealing with homeowners, I mean they’re kind of the worst. And so thinking about customer service as far as actual man-hours and people dealing with stuff that’s just not pure software-related, what’s kind of the, as you scale and grow, are most of your needs? Is it marketing? Is it on dealing with customers? Is it engineering? How’s the company sort of growing? What’s your head count at these days?
Jeremy: So we’re at about 185 full-time folks and we’ve got a few thousand independent lawn care pros on the platform now, tens to hundreds of thousands of customers. We struggle, I think like one of the central challenges around these businesses, that, really, it’s I think three core issues that do interweave with each other. But the first is that it’s difficult to maintain quality in a human services business at scale, at speed, where you’re not W2-employing the lawn care professionals so you legally can’t train them, can’t kind of take steps to control the manner in which they do the work. It’s very much a 1099 model, so they have to be completely self-directed and independent. And it also means that you’re having to kind of build technology solutions that deliver these sort of consistent outcomes from a pro base that can be unreliable at times. And kind of doing that across 120 geographies and managing supply and demand liquidity where, like any marketplace sometimes, you can have your demand outstrip your supply or vice versa and that usually results in a pretty painful experience for both sides of the market. Doing that with limited resources and lacking a $3 million, $5 million a year predictive analytics team to go and model this all out for you is tough and it’s kind of one of the central challenges that we work on every day.
The solution there really is just figuring out what are all the edge cases to this service? What are the infinite variety of ways in which things can break? And then solving for those edge cases and trying to like automate a lot of those more common flows to make them more efficient and easier and more to life for the customer or the pro. And that’s like a big part of our general approach here. So building technology that scales across all these different cities with local level of regulation and different characteristics of services and schedules and calendars and growing seasons and all that is complex. Managing independent contractors is complex. And doing it all with a seed-stage style funded company is the trick.
Meb: So as we’re sitting here in the beginning of 2020, and as you look out on the horizon for the next one, three, five years, the whole decade, what’s the future look like for Lawn Love? What’s the main initiatives or is there anything in particular that’s gonna be a big push for you guys or that you’re particularly excited about or nervous about?
Jeremy: Yeah, so I think that there’s an extraordinary amount of things that we can still build to make this company even better than it is today. And I mean that both in this human sense where it comes to like designing our processes and like how we approach customer support or sales or like our internal operations. There’s lots of room for improvement there. But also, just on the raw technology front where we’ve given pros the tools to run Lawn Love jobs and kind of operate their businesses. But it’s that one level of sophistication and we can see a clear path to the next level beyond that, which is extremely advanced routing algorithms, stuff that helps us drive density of jobs for our pros in a way that can massively improve their economics.
So when I look at a lawn care professional, ostensibly they are in the business of mowing lawns, but in practice they are professional drivers where they spend half of their day sitting behind a steering wheel, getting from job to job, loading and unloading their equipment. It’s extraordinarily inefficient and they spend like a small fraction of the day actually on the lawn doing the work you’re paying them to do. So if you can cut that down by driving progressive density across your market, through advanced clustering algos and just better job routing, you can deliver an extraordinary lift to the pros just in terms of their economics and you can make the customer experience much better. And you can really transform this business because there’s no reason to believe it’s not a network’s effects style company.
The definition of a network effect as I understand it is that every incremental node to the network increases the totality of the network’s value, and that’s definitely true for a field service business where the more jobs you have in a given zip code, the better the economics are for the pro. You can either share those economics with the customer and drive down job price. You can capture good margins as a company or some combination of the three. And that’s kind of what we’re focused on next is like how do we continue to do what we do well and also build out better solutions, benefit from greater economies of scale and kind of equip the pros with more of what they need to be successful because focusing on them is the key, in our view, because no amount of delightful software or slick user experiences is gonna matter. If you as a homeowner walk out your front porch and your lawns hacked up and it doesn’t look any good, you’re gonna churn.
And conversely, folks have had their…in some occasions, they find a great pro and they stick with them for 20 years. Not because it’s easy to coordinate the work or communicate with them or that they like leaving invoices under their doormat every day, but because they know the work is gonna get done well at the end of the day. So it comes down to the quality of the actual work and that’s why we’re focused so much on delivering a great product for our lawn care provider partners so that they can really realize value in our platform, and we can attract and retain the best of them, which then just immediately feeds back into delivering a better experience for the customer. And it’s kind of the self-reinforcing benefit over time.
Meb: Yeah, and it makes sense. I mean if the actual guys and companies doing the work in all these different cities, if you’re making their life easier, if you’re making it essential and certainly more efficient, it seems like a no brainer that they would continue using it.
Let’s do a quick shift. I only got you for a few more minutes. Jeremy, you got a pretty curious mind. You’ve started a handful of companies, clearly entrepreneurial. As you look around the landscape of the world today in the start-up ecosystem and you mentioned a lot of platforms that made me smile earlier because I just tried to list a pair of skis on Craigslist and God forbid eBay and it’s like, you know, it’s like they’re stuck in like 1997 still. It’s the worst experience. But as you look around, what are some other opportunities? Anything that’s burning or searing inside your brain as you look around and say, “look, that’s a particularly interesting idea over the next decade” or anything that you say is ripe for disruption? Any general thoughts as the founder?
Jeremy: Yeah, I think…first off, I try to moderate how deep I go into these general inquiries, mostly because I wanna stay focused on what I’m building now and I expect to be building it for five or more years from here. So I don’t wanna get a bee in my bonnet and get particularly excited about some other opportunity. And so I limit my energy there. But I think in general, the theme of…it’s almost so obvious an observation that it’s a bit trite, but the theme of software breaking into legacy industries that haven’t really fully seen the applied advantage it produces is gonna continue to create multibillion dollar companies across boring old-school verticals.
I largely stay away from any industry that’s got a particularly bright hype halo, mostly just because these things almost always tend to be over-hyped and not really…they don’t typically end up delivering on the promise that you would imagine given the energy people are putting into it. But some of those would be things like crypto or AI. All of these things are founded on seeds that are very real and genuinely interesting innovations. Building kind of neural networks and ML models that allow us to do amazing image classification and build better predictive analytics in the AI space is genuinely interesting. And there’s applications there that are transformative for some businesses.
But the kind of theme of anything with AI in the name suddenly gets funded to the tune of insane dollars is just hype and crazy and I try to avoid that. I’d rather wait until the dust settles, understand foundationally how that industry…like what about that innovation is truly unique and game changing and then apply it to some boring old industry that can truly benefit from it and see the most lift. That’s probably the vein of the next thing that I end up doing is wrapping my hands around the most highest leverage technological innovations of the moment and then trying to shred all of the like mythical cruft and hype and get to its central core of what makes it better and then applying it to some like overlooked, underexplored category to great effect.
Meb: Do we have any of those left? I feel like it’s hard to look around and find too many of those. I got a few that are continual head scratchers, but we’re slowly running out of time. But I agree with you, it’s tempting to get caught up in what everyone’s excited about, but so many times, you see some of the biggest returns are from these companies that are either not particularly sexy or it’s a category that everyone passed on. I was reading the Journal this morning about Airbnb likely to go public this year at some point, Q2 or 3, and that was the one something like 50 people the VC firms passed on. So you never know.
Jeremy: Totally. I agree.
Meb: We normally ask people on the investing side, as they look back over their career, what their most memorable investment has been. And so you can either answer this one or two ways. You can answer that to the extent you’re a active investor and to the extent you’re not, you could say what’s been your most memorable moment over your entrepreneurship side?
Jeremy: Yeah, so I can actually answer that from like a narrow definition of an investor. So early on, when I started Lawn Love, before I got into YC, I was just self-funding the company and that went on for about six or more months as I was building out the product just in my office. And I day-traded options for almost the first two years of the business to fund the thing. Through YC and all the way through the first couple of years, I was mostly selling like bull put spreads on things like the MDX and SPX and playing the queues [SP] and a bunch of other stuff. And I was like, I realized fully how unsophisticated a options trader I was. So I did it for as little…a short amount of time as I could until I could walk away from it and let the company fund itself or actually, when we raised more capital, that’s really what moved me off of it.
But if I wasn’t doing that and I wasn’t able to like fund this business that way, it would have been extremely hard to float the thing long enough for it to put up the traction that it needed to raise real institutional capital from real investors. So that trade, really like collection of hundreds and hundreds of trades, is definitely the most memorable investment for me because it is the enabling thing that let me do this entire business and kind of build what I’ve built here.
Meb: Awesome. Jeremy, we’re gonna let you go here. Where do people go if they wanna get some lawn work done? If they wanna partner up with you, if they wanna read your thoughts on entrepreneurship, all the stuff you got going on where the best places to find you.
Jeremy: Yeah, so I’m on Twitter, @jeremyyamaguchi. For Lawn Love, you can go to lawnlove.com and get a quote for your lawn, if you have one. If you happen to be a lawn care provider, on the unlikelier chance that you’ve got a lot of those listening to “The Meb Faber Show,” lawnlove.com/apply is your spot. You can sign up and we’d love to work with you. And yeah, I think it’s a pretty significant improvement on the incumbent experience and if you have a lawn and you’d like to give us the test, we’d love to hear from you.
Meb: Awesome. Jeremy, thanks so much for joining us today.
Jeremy: Thanks, Meb. This has been a pleasure.
Meb: Listeners, we’ll post show note links at mebfaber.com/podcast. Everything we talked about, a handful of Jeremy’s investors had been on the podcast before, so we’ll post links to those as well. Love to hear email@example.com. Shoot us any criticisms, thoughts, questions you have for our radio shows. Subscribe to the show on iTunes, Breaker, or anywhere good podcasts are found. Thanks for listening friends and good investing.