The San Mateo, Calif.-based company is targeting local markets, a strategy favored by such fast-growing startups as Yelp, for consumer reviews, and Groupon, for group shopping. It incorporates social media, using customers’ Facebook connections to tailor service offers.
And, like most of the e-commerce startups that have collectively raised more than $600 million in venture financing this year, it’s betting that a seemingly mature and competitive sector has room for a new approach.
Venture capitalists seem to agree. The two-year-old company, founded by a trio of ex-Googlers, announced last week that it has raised $7.4 million in Series A venture financing from
CEO Ethan Anderson says Redbeacon plans to use the money to hire more engineers and to expand its service, currently available in the San Francisco Bay Area, to more metropolitan areas nationwide.
Anderson says he and co-founders Yaron Binur and Aaron Lee came up with the idea for the site because, coming from the search industry, they’d noticed there was no outstanding all-in-one place to locate and pay for local services.
“We thought, if you’re looking for a carpenter, a dog walker, et cetera, you want to be able to get price quotes and appointment times and to have an ability to set those things up online,” Anderson says.
The vision, he says, was to create something like the experience of booking travel online, in which one is able to see multiple prices and offerings, choose among them, and carry out a purchase.
Redbeacon uses a sort of auction format to match local service providers with prospective customers. A customer enters a description of a job, and Redbeacon delivers quotes from service providers who have signed up with the site, making selections based on price as well as factors such as previous ratings and whether people in the customer’s social network have hired them.
Common requests are for housecleaning, painters, plumbers, massage therapist, gardeners and movers, Anderson says.
The company earns money by charging service providers 10% of their pay from the first job they set up with a new customer using the site.
To date, Anderson says, about 4,000 local businesses and professionals have joined the site. He declined to disclose how many customers are buying services through the site, but he noted that among those who do, about half revisit it within a month. Service costs range from a low of about $10, for running an errand, up to about $15,000 for a driveway installation.
Redbeacon is one of several Internet companies offering platforms to match local service providers with customers.
Angie’s List, founded in 1995, publishes reviews of local service providers, which it charges customers a subscription fee to access. ServiceMagic, founded in 1998 and currently a unit of IAC/InterActive, matches consumers with members of its network of more than 81,000 service professionals nationwide, generating revenue through lead fees from service providers.
Search engines, operated by Google and Microsoft’s Bing, also feature local listings. In addition, Craigslist offers a forum for providers of services, including housecleaning, moving and gardening, to put up free postings.
But while it’s a competitive space, Anderson says, Redbeacon has location on its side, that is, if one believes huge success stories can strike twice in the same place. The company’s offices, he says, are across the street from the modest digs in which a once-struggling startup called YouTube launched its business in a second-floor office on top of a pizza parlor. Not long after, it sold to Google for $1.65 billion.
That said, budget constraints and convenience, rather than location-based karma, were what attracted Redbeacon to the spot. Until last week, Anderson says, the company had funded its operations with $225,000 in private funds, including $50,000 from each founder and $75,000 in prizes from startup business plan competitions.
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