3 Things: Bundled Residential Vendors, AI Fanfiction, Fringe Benefits Rollup
Happy New Year and a very warm welcome to all the new subscribers! I hope you all had the chance to relax and enjoy your holidays. I’m thrilled and honored to have you as readers and truly appreciate your thoughts and feedback 🙏. Each edition of 3 Things will contain a dive into 3 rabbit holes I’ve found myself going down recently and associated business opportunities. Subscribe to get each week’s edition straight to your inbox and if you enjoy it, please share (I suck at self-promotion so can use your help)! This past week I’ve been thinking a lot about:
Bundled Residential Vendors
AI-Driven Fanfiction
Fringe Benefits Rollup
1. Bundled Residential Vendors
On average, in the US there are around 5.5 million homes sold each year. 2022 saw a slight dip as the market turned in the second half of the year, but the numbers are predicted to bounce back this year or next and exceed 6 million. While it varies by state, the average age of a home is close to 50 years which means that for most homebuyers, you’ll end up needing to do some work on your house (and this can also be equally true of newer homes as they tend to be built with less attention to quality and detail or the new owners may want to change things to suit their needs or style). When you go from renting to owning, you quickly realize that you’re now responsible for things like landscaping, plumbing, electrical, gutters, foundation, tree trimming, appliances, cosmetic updates, and tons of other things that you previously didn’t have to deal with.
Each of these services has a slew of local vendors who are mostly small mom and pop establishments that may or may not have a working website or way to get in touch with them outside of a phone call. You have to research on Yelp or Angi (or ask your neighbors/friends/realtor), contact multiple vendors, have them come to your house to give you an estimate, and then pick a provider for each service. And now you have to do that over and over again for everything you need to do for your house. I would imagine that most of these businesses are slim-margin operations, but if you bundle together general handyman/residential contractor, plumbing, electrical, roofing, gutters, and landscaping you could use technology and simple growth tactics to acquire customers with one service and become their single vendor for every project. I’d also throw in interior design and cleaning services to capture even more revenue potential and truly become the one-stop-shop for homeowners. Certain services are more one-off but others like landscaping and cleaning are recurring so bundling gives a way to achieve some recurring revenue while being top of mind when less frequent needs arise. Since MLS information around new home sales is public data, it’s easy to know when a home sells so you could send both mailers and live humans to a house to introduce the company and services offered. Imagine moving to a new place and a few weeks later someone comes to your door with a box of chocolates congratulating you on the new house and letting you know that whenever you need anything, they can provide quality service. That would be extremely memorable and I’d bet would win a ton of business.
2. AI Fanfiction
The term fan fiction (or fanfiction) was first mentioned all the way back in 1939 to describe (in not particularly positive light) ameteur science fiction writing that borrowed from pre-existing published stories. Before modern copyright laws, it was not uncommon for even famous authors like Shakespeare to take characters or plots from other fiction writers and incorporate them into their own works. Today fanfiction is described as “stories involving popular fictional characters that are written by fans and often posted on the Internet”. As fanfiction grew in popularity, sites like fanfiction.net, Wattpad (acquired in 2021 by Naver for $600+M), and Archive of Our Own (aka AO3) were created and started taking off.
When I first learned how big the world of fanfiction is, I was pretty astounded. Over 100 million people read and/or write fanfiction and there are over 680,000 pieces devoted just to Harry Potter on fanfiction.net alone. The site fanfiction.net (yes, .net) gets 365 million views a month and the average time on site is over 38 minutes which is insane. AO3 touts over 5 million active users and over 10 million works created on the site. People love taking stories that they enjoy and morphing them into new forms that speak to them or incorporate elements of their own life/lifestyle. Most people, however, are not great writers nor do they have the time and energy to produce their own content. With the launch of GPT-3 and ChatGPT, everyone can now be a creator. You could create a new, modern fanfiction site and community where users select an original work and then input prompts as to how they want to evolve the story and the AI would generate the text. People could continue to build off of each other’s works in a much easier way and this could open up the audience for fanfiction even more. By building both the place to create and share content, it becomes easier to add community on top which will make the site sticky and help fuel viral growth.
3. Fringe Benefits Rollup
No matter where you look, the predictions for 2023 are pretty grim. Almost everyone is predicting some form of recession and most believe that the next few years are going to be very rough for the thousands of companies who raised capital over the last couple of years at inflated valuations and have not yet found product market fit (or even those who have but aren’t profitable and downstream capital isn’t flowing). Over the last few years, there has been a growing trend where companies who sell some kind of product or service to individual consumers, shift to a B2B2C business model instead by selling an employee benefit to companies. This GTM path is more attractive as you can sell once and get access to hundreds or thousands of employees and the product becomes stickier as employers are less likely to churn whereas consumers are very fickle.
This model has been working and we’ve seen companies like Lyra Health, BetterUp, Carrot Fertility, and many more scale tremendously and raise hundreds of millions of dollars. The challenge is, during a market pullback, some of the first things that get cut from corporate budgets are fringe benefits. It’s also going to be way harder for new companies to sell into these HR buyers right now. There have been attempts in the past at doing personalized benefits where a startup aggregates offerings and employers create a stipend for each employee to pick what they want. None of these has panned out and it think it’s partially a business model issue and partially a timing issue. Given the prediction that many companies will fail to raise in the near future and will be looking for soft landings, and the fact that HR will be an area that is hit hard, an opportunity to buy and roll up companies selling employee benefits could be a very interesting play right now. I’d focus on a specific demographic of company (enterprise of mid-market) and see what benefits these companies are already offering or what is most important for their employee bases. Then find good companies that are victims of current market dynamics and buy them for cheap, bundle the products, and act as the single fringe benefits provider to larger businesses. As tech companies continue to do layoffs and traditional industries try to hire these workers and continue their digital transformation journeys, many of these employees will be used to fringe benefits and start demanding them from new employers as well.
That’s all for today and I’ll be taking a break for the holidays so see you back in a few weeks! If you have thoughts, comments, or want to get in touch, find me on Twitter at @ezelby and if you enjoyed this, please subscribe and share with a friend or two!
~ Elaine
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