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Home improvement platform Houzz lays off 180, reportedly gears up for public listing

Houzz has built a $4 billion business on the back of a platform and marketplace that lets you plan and execute home improvement projects. But as the startup gears up for its next phase of growth, it is also going through some growing pains. TechCrunch has learned and confirmed the company this month laid off around 110 people in the U.K. and Germany, along with an additional 70 in its U.S. home market in Q4 of last year.

“We restructured our international marketplace workforce, primarily in our U.K. and Berlin offices, so that we can double down on the areas that will have the greatest impact for Houzz,” a spokesperson told TechCrunch. “It’s always difficult to go through a restructure at growth stages given the impact on people’s lives. We value and appreciate all of our employees and will do everything we can to retain them. We are introducing as many new opportunities as possible in other parts of the business so that those affected can apply and transition to other positions. For those who will leave Houzz, we are offering a separation package and providing any help we can as they look for a new opportunity. Houzz’s business is strong and we continue to hire and scale teams across our international and U.S. offices.”

Houzz has 1,800 employees, meaning that these two tranches of layoffs account for approximately 10 percent of the company. The spokesperson added that Houzz has been hiring in Q4 in other areas — some 300 people in all — although she did not specify in which department or region.

Houzz is also not providing much information about which departments have been impacted by the layoffs or what happens next, but details posted on social media point to at least one entire international department getting eliminated.

“Purchased items from you in the UK. For the second time one of my orders was canceled. I emailed your offices + tried to call only to find the phone had been disconnected. I tweeted yesterday & rcv’d a message that all staff had been made redundant,” one customer noted on Twitter.

A source hints to us there could be more layoffs coming, as the company looks to get into the black ahead of a potential IPO.

“The company aims to slash costs in order to be profitable before going public,” the source said.

Starting out as an online community for people redecorating their homes and looking for inspiration and a place to share their ideas — it was co-founded by real-life partners Adi Tatarko (CEO) and Alon Cohen (president) as they were remodeling their own house — Houzz has over the years raised more than $600 million from an illustrious group of investors that include DST Global, GGV, Kleiner Perkins, NEA, Sequoia and more. The aim: to build out a much larger and ambitious marketplace to target an industry — home improvement — that’s estimated to be worth well in excess of $1 trillion in North America and Europe alone.

Today, you can buy furniture, decorative items, bathroom and kitchen units and more across some 65 different product areas. Professionals and would-be customers also use the platform to connect with each other; millions of consumers and more than 1 million professionals currently use Houzz.

Over the last several years, the company has also expanded internationally, made acquisitions and launched new technology to fill out that vision. That’s included buying IvyMark to develop a bigger offering for interior designers, and building out an AR-based service, among other moves.

All that rapid growth and development, however, seems to have come with some challenges as Houzz attempted to make the transition from startup to more mature, large business.

Reviews on Glassdoor posted by ex-employees in recent weeks (see here and here) point to issues at the company with how management communicates with staff, the lack of a coherent and consistent strategy and other operational challenges that can come with building a business with a number of different facets over a relatively crunched period of time.

“The company has fought on many fronts over the last few years — editorial, community, marketplace, visualization software, paid local marketing,” our source notes. “All promising projects but requiring years of incubation and continued investment.”

Houzz has never commented on IPO plans, but last May it hired Richard Wong from LinkedIn as its CFO. Some took this as a signal of its longer-term intentions to go public.

Companies as diverse as Amazon, Pinterest and Wayfair all compete in one form or another with Houzz, and with its most recent valuation at the $4 billion mark, the question is how Houzz proceeds with its next stage of growth.

A sea of money raised by VCs and PE firms has led to a number of companies in turn raising large, late-stage funding rounds — extending the private life for many a startup.

But on the other hand, a recent run of strong IPOs has also laid the groundwork for more companies to opt for public market exits.

Both of these, as well as a potential acquisition, could all be options for Houzz. In any case, they are all options that could be pushing the company to reassess its cost base and strategy.

We’ll update this story as we learn more. For those impacted by the news, we hope you land on your feet.

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Outdoorsy, the Airbnb of RVs, rolls up $25 million in fresh funding

According to serial entrepreneur Jeff Cavins, more than 35 million people each year look to rent an RV — 38 percent of them so-called millennials. Yet they often walk away from the experience empty-handed. The reason, he says: There are fewer than 100,000 commercially owned vehicles available from traditional rental services.

Cavins says that his San Francisco-based company, Outdoorsy, is beginning to address this issue by enabling owners of the 14 million privately owned RVs in the United States to rent them to users, à la Airbnb.

The vehicles are mostly sitting around collecting dust anyway, says Cavins, who co-founded the company in late 2014 after heading up seven previous companies — two of which were  publicly traded.

“Americans desperately want time off, but what happens is they’ll buy a camper van, they’ll use it year one, then use it again maybe one week that second year,” says Cavins. “In the meantime, it’s sitting in storage, with the owner often dealing with both a mortgage and insurance payment. By year three, people go back to the dealership and say, ‘We’re done,’ and the dealer says, ‘I’m sorry but that vehicle you paid $100,000 for three years ago is now worth $40,000.’ ”

Intuitively, the platform would seem to make sense. RVs are unaffordable for most people. Storing them is a hassle. And people are increasingly interested in reaching places where home-sharing sites and hotels cannot take them. Think Burning Man, for example, or the annual Coachella Valley Music and Arts Festival.

But Cavins said venture investors “didn’t get it,” when he began pitching the idea to them several years ago. While he secured meetings with all the right firms, he said he was repeatedly ushered politely out the door by people who deemed the idea too risky.

In fact, Cavins says that he and his co-founder and life partner Jen Young wound up funding the company for its first year. During that time, the platform they created, with two “phenomenal” developers,  was compelling enough to attract four term sheets from VCs. He turned them down, though. (“I didn’t want to give my company to them,” he says.) Instead, his next move was to enroll the company in NFX, a venture firm and accelerator that works with a small group of companies each year that are focused on “network effects,” or ensuring that both sides of a marketplace keep coming back in larger numbers.

The time spent in the program paid off, says Cavins. “At NFX, we learned to professionalize the platform. You think about power sellers on eBay and real estate firms on Zillow and property management companies on Airbnb. What we needed was to get [partner companies] on the platform,” which Outdoorsy has begun to do. Outdoorsy has a cross-promotional partnership, for example, with Kampgrounds of America, the network of campgrounds known as KOA, which has roughly 500 locations in North America. “They sell the dirt and space and Outdoorsy brings the hotel room,” says Cavins.

Cavins says Outdoorsy is also finding users through Facebook ads, via word of mouth, as well as through “emerging power sellers,” as Cavins calls them. He points to a single mother in Huntington Beach, Calif., who has acquired five RVs and using them to pay for her daughter’s law school tuition at UC Berkeley. “It’s almost like a cottage industry of folks who are running their businesses on our platform from their kitchen tables,” says Cavins.

Altogether, says Cavins, Outdoorsy now has 256,000 users, and he says it’s growing by 21,000 users a month. RV owners set prices, keeping between 80 percent and 94 percent of the total based on their “trust” ranking scores on the site and on how many vehicles they are renting. (The more they rent, the more they keep.) Outdoorsy separately keeps at least 10 percent of the overall rental price, in part to pay for on-demand insurance, along with unlimited roadside assistance, which it secures for renters through several partnerships.

It’s enough momentum that Outdoorsy, which now employs 50 people, just landed a sizable amount of Series B funding: $25 million led by Aviva Ventures and Altos Ventures, with participation from Tandem Capital and Autotech Ventures. (The latter had chipped into the $6.5 million that Outdoorsy raised previously — much of it from Cavins, who’d also taken earlier checks from NFX, Tekton Ventures and numerous angel investors.)

Even still, Outdoorsy has its challenges, of course. A look at some of the inventory Outdoorsy has unlocked shows a lot of pick-up trucks, which would seem to stretch the definition of recreational vehicle, at least in so far as people would probably prefer not to sleep in one (or visit Outdoorsy expressly to rent one).

There are also at least 10 other RV rental companies, including Mighway and Campanda.

And Outdoorsy has Airbnb itself with which to compete. Along with homes and other vacation rentals, Airbnb connects its users to RVs and campers.

Cavins argues that unlike these companies and Airbnb in particular, Outdoorsy’s users “connect emotionally” because unlike with Airbnb, where hosts and guests often never meet, Outdoorsy’s hosts have to meet renters in person in order to train them how to use their vehicles. (He insists that he has seen “families become best friends” and even “people get married” as a result.)

Airbnb has also somewhat famously had issues with renters destroying property. Asked how Outdoorsy handles the same challenge, the company explains that its insurance is “episodic” commercial insurance that covers all states, provinces, jurisdictions and territories. Once a consumer goes through Outdoorsy’s DMV check — the company says its software can do this in 20 seconds — he or she is approved for the insurance and covered up to $2 million for a trip. The insurance protects the owner, the renter and any third party in the event of an accident.

Cavins doesn’t mind being compared to Airbnb, as you might imagine. He suggests that in some ways, the two are very alike, pointing to the two companies’ respective focus on partnerships. Cavins notes that, among other things, Outdoorsy is working with numerous event organizers with the hope that in the not-too-distant future, when a customer buys a ticket to a NASCAR race or to a music festival, that person can also book a parking pass and an RV stocked with a favorite champagne.

It’s down the road right now, says Cavins. But “those partnerships are coming,” he adds.

Pictured above: Co-founders Jen Young and Jeff Cavins. Young is the company’s CMO; Cavins is CEO.

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