Home Repairs Appeal to VCs

If the last two months are any indication, 2017 is shaping up as a good year for software startup ServiceTitan Inc. Following the March 15 close of an $80 million Series B financing round led by San Francisco multi-family office Iconiq Capital, the Glendale company has announced three different partnerships that bring a host of new features to its namesake product, a software program that helps home service professionals such as plumbers, electricians and air conditioning techs manage their business. “It takes significant investment to stay at the forefront of technology,” co-founder and Chief Product Officer Vahe Kuzoyan said in a statement about the funding round. “We are committed … to continue improving and expanding the tools available to our clients.” ServiceTitan’s platform was originally built by Kuzoyan and co-founder and Chief Executive Ara Mahdessian, software engineers and the sons of residential service contractors. The friends were motivated to develop the software after they couldn’t find a program suited to their fathers’ business needs. “Home service providers are critically underserved when it comes to advanced technology that can dramatically improve their operations,” Mahdessian said in a statement. ServiceTitan did not make any executives available for comment for this story. The software platform’s features include customer relationship and invoice management; marketing analytics; technician dispatching; payment processing; and the ability to monitor supply inventory. Mr. Rooter Plumbing, Baker Brothers Plumbing Inc. and Winters Co. Home Services are among hundreds of large service providers that have signed on to use the platform since its launch in 2013, according to ServiceTitan. The company licenses its product to home service providers. That software-as-a-service business model is one reason Iconiq Capital, Bessemer Venture Partners and other venture capital firms have invested more than $98 million in ServiceTitan to date. Software platforms are particularly lucrative investments because they offer different revenue streams, explained Michael Panesis, executive director of California Lutheran University’s Center for Entrepreneurship. “A company that can do multiple things is attractive to investors because if one revenue stream doesn’t work out another one can take its place,” he said. “If you have all your eggs in one basket that makes it riskier.” Another factor that makes ServiceTitan a strong buy is the size of its “addressable market.” U.S. heating and air-conditioning contractors alone comprise an industry valued at $88 billion in yearly revenue, with an annual growth rate estimated at nearly 5 percent, according to market research firm IbisWorld Inc. The U.S. plumbing industry constitutes another $105 billion at a growth rate of 4 percent, while electricians generate $171 billion on a similar growth trajectory. “Whereas some startups target niche markets or small groups of customers, thinking they can build barriers to entry, ServiceTitan is attacking a market that’s huge and has a lot of cash flow,” Panesis said. “It’s the type of business that would be a possible acquisition target by a bigger company, or it could be a candidate for an IPO.” Rohit Kulkarni, head of research at San Francisco SharesPost Inc., a private securities investment firm, noted that while ServiceTitan has no shortage of indirect competitors for funding – Angie’s List, Yelp, Thumbtack, NextDoor and Home Advisor all offer ways for consumers to find service providers – few other companies have a contractor-facing business model. “ServiceTitan is in a crowded space,” Kulkarni said. “But, last-mile SMB (small-and-mid-sized businesses) automation for service-oriented businesses remains a large and fairly unfulfilled market opportunity.” Problem-solving partners ServiceTitan has put Iconiq’s money to use by establishing strategic partnerships with other technology companies to build features into its platform. Days after closing the funding round, the company announced it would integrate the search engine optimization functionality of Plumbing & HVAC SEO, a Doral, Fla. internet marketing company that works exclusively with home service providers. While the firm has worked with many customer relationship management systems in its almost seven-year history, no other software platforms have been quite as innovative as ServiceTitan, said Plumbing & HVAC SEO Chief Executive Josh Nelson. “This partnership makes sense because our company specializes in generating leads on the internet, and ServiceTitan is an amazing platform to put those leads to use,” he said. “It’s also pretty much the only platform that gives information not just about the cost per lead, but about the revenue associated with those leads, because their clients are actually dispatching and billing through ServiceTitan.” The ability to qualify leads comes from ServiceTitan’s partnership with another online advertising firm, VitalStorm Inc. ServiceTitan on March 23 announced it had closed a deal to use VitalStorm’s call-tracking software as well as its online scheduling program, through which customers will be able to book appointments directly to ServiceTitan’s platform. “Measuring the effectiveness of online marketing is critical to making sure a business owner’s limited budget is impacting the bottom line,” Mahdessian said in a statement about the VitalStorm partnership. A third collaboration, this time with Santa Barbara technology company Clear Path GPS, will allow ServiceTitan clients to track dispatched employees to work sites in real time. In addition to reducing fuel costs and overtime, live traffic updates will enable crews to reach their destinations as quickly as possible, Clear Path said. Odds of survival No matter how promising an idea may seem, it’s no secret that most startups fail. While accurate statistics are hard to come by, 2012 research by Harvard Business School suggests that as many as 95 percent of venture-backed firms will fail to produce a return on investment. “There are all kinds of reasons a company like this could fail,” Panesis said. But the progress ServiceTitan has made since its founding in 2013 suggests that it could very well be among the fraction that thrives, he added. The last time the Business Journal spoke with Kuzoyan and Mahdessian was in August 2015, a couple months after the company received an $18.9 million investment from Bessemer Venture Partners in Menlo Park. Back then, ServiceTitan’s 50 employees were working from a temporary location while its new office was under construction. Today, the company has a team of nearly 200 at its Brand Boulevard headquarters and is looking to grow. It has posted job openings for positions in several departments, including sales, marketing, finance and engineering. As of September, more than 1,000 home service providers had licensed its software, according to ServiceTitan. With a market the size of ServiceTitan’s, it’s an opportunity that investment firms are not eager to pass up, Panesis said. “Investors are seeing this company in its early stages,” he added.