From the start, Porch has done things big, and fast.
In a little more than two years, the home improvement tech company raised $100 million from a large group of investors, grew to nearly 500 employees, leased a big new headquarters south of downtown Seattle, signed deals with major industry players such as Lowe’s Home Improvement and Realtor.com, and launched an array of services for homeowners and contractors in an attempt to make its mark in an increasingly competitive market.
Porch’s charismatic CEO, Matt Ehrlichman, a Stanford University graduate who grew up in Seattle, was named USA Today’s Entrepreneur of the Year for 2014, recognizing Porch’s rapid growth and aspirations to transform the market for home remodeling, repair and related services.
GeekWire and Seattle’s Museum of History and Industry recognized Porch as one of the 2014 “Seattle 10” companies, startups with the potential to change the world.
But behind the scenes, according to former Porch insiders, the company has struggled to find its focus and achieve a level of revenue that matches its outsized ambitions. The biggest outward sign of the challenges came last week, when 90 employees were let go from the company.
The internal signs began earlier. In the weeks and months leading up to the move, employees started noticing clues that Porch was keeping a much closer eye on expenses — reducing the number of free Friday lunches and limiting travel, for example. The company prides itself on data and transparency, but employees said regular reports to the troops became less forthcoming, no longer including statistics such as month-over-month revenue growth.
Porch is privately held and doesn’t disclose its financial results publicly. However, former employees with knowledge of the startup’s finances say executives have become increasingly concerned about Porch’s cash burn rate, in addition to churn among the paying home improvement pros who use Porch’s services to find and connect with new customers.
In interviews over the past week with GeekWire, Ehrlichman remained upbeat about the company’s prospects. Without providing specific numbers, he said Porch’s revenue has increased four-fold this year. While Porch is not yet turning a profit, he pointed out that nearly every startup loses money as it grows its business, and every startup leader is concerned about burn rate. But the company still has the “vast majority” of its $65 million Series B funding round in the bank, he said.
“Porch is in a healthy spot as a company,” he said. “We’re continuing to hire, we’re continuing to grow, and I’m excited about the future.”
In addition, he said, Porch has seen a “massive, step-function” improvement in its customer attrition since the rollout in September of a program promising to guarantee the work of approved home-improvement pros, up to $1,000.
“Now that we have our data platform in place, and we have our partnerships in place, we have our professional base, and our revenues are growing really well, and we have cash in the bank, and we’re healthy as a company, now it is about taking it to the next level,” he said, describing plans to create “a consumer experience that people love.”
Ehrlichman called the layoffs the most difficult day of his career, taking responsibility for the cuts and expressing his appreciation for those who were let go. He acknowledged complaints about the way the company handled the layoffs, saying that Porch’s intent in taking the affected employees out of the building together was to make the situation less difficult for them.
“It’s a hard situation, and I didn’t want to make it any harder for the people who were impacted,” he said.
But former employees say it’s the latest example of Porch’s struggle with personnel issues as it rocketed to nearly 500 employees. Compounding the situation have been regular reorganizations and departures under Ehrlichman and the company’s chief operating officer, Asha Sharma, contributing to a sense of inconsistency in the startup’s leadership ranks. At least three executives have left Porch in recent weeks, the latest in a series of exits from the company’s management ranks.
“Porch has been a fast and furious ride,” wrote one of those former executives, Seattle startup veteran Joanna Lord, in a post on her site. “I learned so much there, some of it was what not to do, but most of it was ‘on the front lines, get in the trenches, hard as hell, dig in your heels’ type work, and I am thankful for it.”
Ehrlichman has said he wants to build the next great startup to emerge from Seattle. Even some of those who’ve left Porch say the company still has the potential to achieve its ambitions. But the company’s story so far offers a series of lessons for startups and their leaders — lessons that Porch itself seems to be learning through this process.
A struggle to focus
Backed by a large group of investors — from Silicon Valley “super angel” Ron Conway to television star Ty Pennington — Porch often hasn’t needed to make the tough decisions that smaller, cash-strapped startups are forced make. One former Porch employee recalled meetings where managers and executives would use metrics to assess the performance of the company’s products and features, and ultimately continue putting resources behind all of its initiatives rather than throwing out the duds and concentrating on what was working best.
“I think that was partly because we had so much money and so many people that we didn’t have to focus,” said the former employee, one of several who spoke with GeekWire about their experiences on condition of anonymity.
That may be starting to change. As part of the job cuts last week, the company said it was discontinuing a Home Assistant pilot program that it had quietly been testing in Seattle and Chicago. Under the pilot, home assistants worked with homeowners and local service providers, aiming to bring in new business for the startup and its partners.
“When you’re building a startup and a company, you do try many different things,” Ehrlichman said. “Our Home Assistant program was excellent and was a great test, we learned lots of things, and the team performed admirably, but we decided that we wanted to take that product to market differently, led by technology in the future.”
The company noted the discontinuation of the Home Assistant program in a news release last week announcing its acquisition of Fountain, a San Francisco-based startup that offers instant answers from experts via video chat on its mobile apps for iOS and Android. Porch says the acquisition of Fountain, which was co-founded by former Mint.com CEO Aaron Patzer, is part of a new focus on technology, shifting away from in-person services.
The news release did not mention the job cuts. The company initially told GeekWire that its workforce would be reduced to about 400 employees as a result of the cuts, from the 450 that Porch had previously stated publicly. While that statement appears to have been technically accurate, the number reflected ongoing hiring in some roles, plus the acquisition of Fountain and its 10 employees, boosting the resulting headcount and understating the number of people who were let go.
In fact, according to internal data cited independently by former employees this week, Porch’s headcount actually peaked at more than 490 people prior to the layoffs — indicating that the overall reduction in the workforce, including cutbacks and attrition, is even larger than Porch acknowledged when clarifying its initial statement about the layoffs.
The approach to the announcement was characteristic of a company that focuses heavily on its public image. One former employee said media coverage and external perceptions seemed at times to drive the company’s roadmap and business strategy, with executives aiming to maintain a steady drumbeat of product and partnership announcements.
Ehrlichman confirmed this week that Porch’s peak employment was actually more than 490 but said the company’s headcount “fluctuates all the time,” particularly as it brings in new groups of salespeople and some leave.
While Porch has experimented with a variety of products and features for consumers, Ehrlichman disagreed with the notion that the company’s approach has been haphazard or unfocused. “I would say this company’s strategy has been more deliberate than almost any startup that I’ve encountered,” he said.
The view from the pros
Porch offers its service for free to consumers, using a large database of home improvement projects to give homeowners detailed insights into projects completed in their neighborhoods and across the nation, as well as properties they own or are looking to buy. The site makes money by connecting those homeowners to home-improvement pros who pay for marketing exposure and business leads.
The challenge is that homeowners and professionals have a wide array of alternatives for these types of services — including companies like Angie’s List and Pro.com and giants such as Amazon and Sears. Several contractors who spoke with GeekWire seem to agree they have more than enough companies asking to do what Porch does.
Glenda West, owner of Seattle’s Westminster remodeling company, said she already uses competing services like Redbeacon and constantly gets calls from new businesses offering to do the same thing. She said she’s been satisfied with Porch because it has more than paid for itself, but it’s not exactly unique. When her year-long contract runs out in a few months, she thinks she’ll probably take a look to see what the “new faces on the block” like Google have to offer.
“The leads game is a big thing right now,” West said. “I’m not in love with any leads service. It was just about what made sense at the time.”
One of Porch’s key offerings is a listing service that helps homeowners find professionals they can hire. There’s all sorts of competition in this arena, but contractors who spoke to GeekWire seemed to agree Porch does as good of a job as any other. The key, they say, is to keep marketing prices low so they only need to land a few jobs through Porch to make it worth their time.
But that mentality among contractors also reduces Porch’s revenue potential.
One contractor said he paid less than $1,000 to have a more prominent Porch profile for the past year. He said he has seen “a few” jobs come in because of it, so he was generally happy.
Another contractor, Seattle-based Sound Painting Solutions, just upgraded to a paid account after using a free profile for two years. One month in, the business has received two leads — though neither job has materialized quite yet. Over the past two years, the free account has landed the business about three jobs.
“I never really expected any rate of return on a free profile,” Sound Painting operations manager Jeff DuPont said. “For free, it wasn’t bad. For putting out minimal effort, I can’t really complain.”
DuPont gets about 20 calls each week from companies like Porch offering everything from SEO services to yellow page listings. His strategy is to spread the marketing dollars around and hope for the best.
Kellan McCann, owner of KellHampton Flooring, said he has already seen what else is out there, but he’s sticking with Porch for a reason. He first started working with the company when it had about 80 employees. After a “horrible experience” with Angie’s List, he said it was a breath of fresh air to be able to contact a real person who knew his account and could help solve issues as they came up.
As Porch has grown over the years, he said he can tell the company has focused on maintaining that same startup feeling with its contractors.
“When they give you their pitch, you’re intrigued. You feel like you can ask questions,” McCann said. “It’s a different experience from the beginning.”
McCann did say prospective clients aren’t exactly flowing in, but he thinks a lot of that just takes time to build a reputation on the platform.
Porch charges to boost profiles and generate leads per ZIP code, per month. If you search for painters in Seattle’s 98121 ZIP code, for instance, Sound Painting shows up as one of the top results with the “Porch Guaranteed” logo that indicates verified contractors. The business pays about $150 per month to boost its listing in three area codes.
“We got some jobs out of [Porch] for free, so I figured for a few hundred dollars it will at least pay for itself,” said DuPont, of Sound Painting. “As long as it at least pays for itself, it’s just more exposure online. Even if it doesn’t get us a job, it gets us market exposure and people trust us more.”
Expanding into new areas
DuPont said he was an early beta tester for both Porch and Fountain and he thinks the two services fit together nicely.
He said a big problem in his industry is that customers can almost never provide the amount of detail a painter needs to give an accurate job estimate over the phone. Things like holes in the wall, doors or vaulted ceilings can really impact how long a job will take. But if Porch could use Fountain’s video calling technology to let professionals see the workspace before they quote a price, things would be much easier for everyone.
Like many startups still looking for a niche, Porch has been experimenting with other services, too. It has tried things like a “concierge” that connects users with company representatives in real time, and Porch Booking, which bills itself as “Uber for home maintenance.”
Not all of those experiments have gone smoothly. One service provider, who spoke with GeekWire on the condition of anonymity, said he has serious concerns about Porch’s booking product. He explained customers pay for jobs directly through Porch, which takes a 20 percent cut and then routes the business to one of its selected contractors.
The problem, the longtime business owner said, is that professionals like himself have no say in the price customers pay. And usually, it doesn’t end up being a very good deal for the buyer. Porch recently charged one of his customers $600 for a job that should have cost about $200. Even after Porch took its cut, the business owner said he made significantly more off the job than usual. But he also ended up with an unhappy customer.
“Morally, it was terrible,” he said. “The customers don’t see Porch. They see my company.”
The contractor said he hasn’t received any repeat business from the service and he plans to stop working with Porch when his contract runs out.
“It doesn’t feel good to me,” he said. “My instinct is to get out before anything weird happens.”
Porch CEO Ehrlichman acknowledged the problem with the pricing approach, described the issue as one of the lessons learned in the pilot of the Porch Booking program, and said the company is moving forward with a plan to let professionals set their own prices through the Porch service.
After being told about the feedback GeekWire was hearing from some of the company’s professional customers, Ehrlichman forwarded a contrasting message that he had just received about a fencing contractor in Florida who had gotten five jobs from Porch in his first 30 days using the platform.
GeekWire independently confirmed the story with the contractor, Dal Waddell of M&C Fence in Lakeland, Fla. “So far I’ve been really happy with it,” he said about his use of Porch.
One of Porch’s big early wins — and a major point of differentiation from its competitors — was its partnership with Lowe’s Home Improvement, which is also a minority investor in the Seattle company. Under the partnership, associates in the retailer’s more than 1,700 stores introduce customers to Porch to help them find professionals to help complete their projects.
In an Ask Me Anything video chat with Porch professionals in July, Ehrlichman addressed questions from pros who were disappointed that some Lowe’s associates weren’t familiar with Porch when they went into stores. Ehrlichman acknowledged that the company has learned lessons and adjusted its approach to make sure the startup and the professionals who use the service get the most out of the Lowe’s partnership.
“We expected — naively, certainly — that all the associates would know about Porch,” Ehrlichman said. “Because there are so many new associates that are working — there’s 250,000 associates that are working out there — we have to be constantly training associates.” He added, “We’ve hired people that are actually going around to stores and making sure that (associates) continue to get trained, they continue to use the solutions that are in the store.”
Based on available data at the time, about two-thirds of Lowe’s associates had gone through the training, he said. “I’m proud of the relationship that we’ve built together, Lowe’s and Porch, and all of the things we’ve done in a relatively short amount of time.”
A path forward for Porch
Joanna Lord, the former Porch vice president of marketing, declined to comment for this story, but she wrote about her experience at Porch on her site — praising the company and its potential while also acknowledging that it was a “hard ride.”
“We don’t talk enough about the hard in startups,” she wrote. “But it’s there. Building the right product, organizing the right way, leaning in at the right time, pausing in others. Startups are hard. And I don’t think there is an honest entrepreneur out there that would say otherwise. All we can do is make the best decision through a blend of instinct and data, be kind as we make them, and do better the next day.”
She added, “I am excited to see what Porch does with their recent technology acquisition and the recent talent they’ve added to the team. There are so many great people at Porch. I wish them the best of luck as they roll into this next year.”
Ehrlichman, the grandson of the late Nixon aide and Watergate figure John Ehrlichman, graduated from Stanford in 2003 with degrees in entrepreneurial engineering and management science engineering. He co-founded the Thriva events management software company, which was sold in 2007 for more than $60 million to Active Network Inc., where Ehrlichman was chief strategy officer leading up to and beyond the company’s 2011 initial public offering.
An article about Thriva in the Spokane Spokesman-Review in 2004 said Ehrlichman and his Thriva co-founder “insisted on keeping the company’s management hierarchy loose and informal; neither carries a special company title, in order to simplify their roles.”
According to some former Porch employees, the hierarchy at Porch has seemed at times too formal and simultaneously too fluid, with its set management structure upended repeatedly by the series of reorganizations.
Several former employees described the 36-year-old Ehrlichman as a strong salesman, with one recalling the CEO’s ability to impress the company’s sales team with his ability to get on the phone and close deals. But he has also frustrated the company’s engineering leaders by having the final say on product decisions, making them feel less autonomous and contributing to the wave of departures.
Ehrlichman said he has essentially played the role of chief product officer during the company’s first two years, and he acknowledged that he is “not the easiest person to work with” in that role.
Porch recently brought on Eric Doerr, previously a Microsoft GM, as its first chief product officer; and Jim Dantzler, previously the head of UX Design for Amazon Instant Video, as vice president of design. Ehrlichman said he gave Doerr and Dantzler assurances during the interview process that he would “back off and let them go do their job.”
“Matt’s a great leader,” said one former Porch employee. “If he can find the product he wants to build and focus on it, I think they have a chance.”