As I listened to Dan Teran describe how his startup is working to provide its employees with a career and middle class perks like health benefits, it all sounded almost too good to be true. Almost.
Teran’s company, the New York City-based Managed by Q, is an upstart office cleaning company that lets its customers manage the services they order through an iPad equipped with its software. After operating in New York City and Chicago for more than a year, the company said Thursday that it has raised a fresh $15 million in new funding and is expanding to San Francisco, a hotbed of startup offices in need of cleaning.
But while it has gained traction with office managers thanks to its nifty — and free — iPad-based dashboard, Managed by Q’s approach to employment is arguably its truly distinctive feature. Unlike many new “on-demand” services that skirt costs by employing contract workers without benefits, Managed by Q gives all its staff members employee status. All employees who work at least 30 hours per week, from cleaners (called “operators”) to corporate team members, get full benefits. Those who’ve make it past the entry-level position are salaried.
“Our philosophy is generally, we want to provide a career path for people,” Teran, who co-founded the startup with Saman Rahmanian, told Fortune earlier this week.
After joining, employees even at the lowest rung can be promoted and build up a career within the company. Experienced cleaners can move on to be supervisors who lead teams and act as mentors and educators for newer staff members. Some can work toward more specialized positions like handyman and a few have even earned jobs on the corporate team, Teran said. The company only requires candidates that be eligible to work in the U.S., own a smartphone and submit to a background check, though prior cleaning experience is highly recommended.
Teran and Rahmanian came up with the idea for the company while living in their respective homes in New York City a couple of years ago. Rahmanian had joined his building’s co-op board and was tasked with overseeing maintenance, which gave him an inside look at the problems with the cleaning industry. The two men started thinking about ways to improve upon it. It eventually led to the company they run today.
Because its cleaning services have such high labor costs — though Teran says the margins are “healthy” — Managed by Q has two other revenue sources. It operates an online marketplace for outside vendors that connect clients to service providers like electricians. It also provides a marketplace for office and cleaning supplies that lets customers manage even more of their office needs through Managed by Q. For both marketplaces, it takes a cut from the contract.
Teran declined to share how much of the company’s business came from each of these three sources, however.
In San Francisco, the birthplace of on-demand startups like Uber and Airbnb, many residents already have jobs working in the sharing economy as Uber drivers, for example. Competing for quality employees will be one of Managed by Q’s biggest challenges, according to Shwetha Arya, who is heading the company’s San Francisco operations and previously ran Uber’s office in Maryland.
“Because we want to be able to control the quality and we want to ensure the best experience for both our customers and employees, we take that W-2 angle,” she said in a phone interview, referring to the IRS form for employee taxes.
While it may seem that large cities like San Francisco would have plenty of labor to go around, ride-hailing companies Lyft and Uber have been fighting over drivers by poaching them with registration bonuses of hundreds of dollars and billboards bad-mouthing the other. A small group of services operating in San Francisco like meal delivery service Munchery and commuter van pooling service Chariot also classify their staff as employees with benefits as long as they work a certain number of hours.
In San Francisco, Managed by Q’s operators start at $13.50 per hour, higher than the current minimum wage of $12.25 per hour, and will get a raise twice a year. Supervisors will get a starting salary of $34,000 per year — not quite enough to comfortably managed the city’s high rents, but on par with many entry-level professional jobs in industries like public relations and marketing.
And while Managed by Q is still part of small minority of on-demand services taking this approach, it may soon be forcibly joined by the rest of this emerging sector of companies. Earlier in June, the California Labor Commission found, in a non-binding ruling, that a former Uber employee who had filed a complaint in California State Court, qualified as an employee instead of a contractor. While the case applied only to that specific driver and Uber filed an appeal on Tuesday, it nevertheless serves as a clear signal that the popular tactic so many services have been using may eventually become illegal.
Fortunately for Managed by Q, it’s already ahead of that trend.
New York City-based RRE Ventures led this latest round of funding, with additional participation from Greycroft Partners, Homebrew, SherpaVentures, SV Angel, Steadfast Financial, Gary Vaynerchuk, Foursquare co-founder Naveen Selvadurai, Jessica Alba, NBA commissioner David Stern, Semil Shah, and Bjarke Ingels. The new funding brings the company’s total to $17.4 million.