Thumbtack: A Local Services Hub to Rival Angie’s List? Companies from Angie’s List to Yelp to HomeAdvisor have tried over the past decade to crack the U.S. market for plumbing, gardening, and other local services by developing an online database for homeowners looking for reliable referrals

Thumbtack: A Local Services Hub to Rival Angie’s List?

By Brad Stone on June 13, 2013

Companies from Angie’s List (ANGI) to Yelp (YELP) to HomeAdvisor have tried over the past decade to crack the U.S. market for plumbing, gardening, and other local services by developing an online database for homeowners looking for reliable referrals. There have been limited successes but no breakout leader, partly because many of the nation’s tens of millions of local small business owners spend relatively little time on the Web and run their businesses the old-fashioned way, with a pen and pocket calendar.

Now there’s a new entrant in this crowded field, Thumbtack. The San Francisco startup has operated quietly for four years, building a database of more than 250,000 service professionals who can pay the company fees for referrals. They include home maintenance workers and a wider range of occupations, from wedding officiants to yoga instructors. Thumbtack planned to announce on June 13 that it has raised $12.5 million from a group of investors, led by Sequoia Capital, that are chasing the chance to build the next great online e-commerce hub. “The long-term vision is to build the Amazon (AMZN)for services,” says Marco Zappacosta, Thumbtack’s 27-year-old chief executive officer. “We want to build the kind of brand that the Yellow Pages had for decades.”Zappacosta and co-founder Jonathan Swanson, 30, say they conceived of the company in 2008 in the West Wing of the White House, where they were working for the National Economic Council under George W. Bush. While they weren’t the first to notice that people have “bought and sold local services in the same ways for the last 50 years,” as Swanson puts it, their twist was to develop software, instead of using salespeople, to scour the Web for service professionals and invite them to join Thumbtack’s database. From there, the workers are vetted by the company’s 30 U.S. employees and some 200 full-time contractors based in the Philippines.

Thumbtack says it gets about 2 million monthly visitors who request referrals and provide their Zip Code. It sends each request to relevant workers in its system, who pay up to $15 each time to have their names appear in the particular customer’s list of referrals. The company likens the fees to Google’s (GOOG) AdWords, which sells ad space to the right of search results for desired words and phrases. (Yelp is ad-supported; Angie’s List charges users for subscriptions.)

If its database doesn’t include a qualified service to meet the customer’s needs, Thumbtack’s software crawls the Web to find one. “The hard part is finding the right service professional who is trusted and is available at the right time and at the right price,” says Bryan Schreier, a Sequoia Capital partner who is leading the investment. “That is the art of Thumbtack.”

Thumbtack will have to work hard to keep its database stocked with reliable small business owners. Trying to fulfill all kinds of jobs in every corner of the country, its founders say, is the heart of its challenge, and how it plans to use its new capital. It already has some satisfied vendors: Ricky Jackson, a personal trainer from Houston who goes by the name Coach, joined Thumbtack last year and credits it with a 75 percent increase in business. The key to exploiting the service, he says, is to stop whatever he’s doing and respond promptly to its e-mail and text alerts. “There are probably four other personal trainers that are always as aggressive as I am, and there should probably be 400,” Jackson says. “It’s a quiet little secret.”

The bottom line: A local services startup will try to crack the market with $12.5 million in funding and a 250,000-strong worker database.