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On-demand startups—the ones bringing us grocery, housecleaning, parking, lawn mowing, and personal butlers with a tap on our smartphones—have been out of vogue with venture investors for most of this year. When Postmates raised $140 million at a flat valuation, the company made sure to telegraph what a “super, super difficult” time it had finding willing investors.
Part of that is over-saturation. We don’t need eight separate apps just to deliver pizza. (And as we now know, venture investors are all about the pizza restaurant chains these days, not the pizza delivery apps.)
But mostly, the struggle is because the business model is tougher than many initially thought. To use two startup clichés at once, there is no making it up on volume for companies handing out dollars for 85 cents. In March, I wrote that things are getting real for on-demand startups, comparing this class of companies to Wile E. Coyote, moments before he hurls himself off a cliff.
But the entire category hasn’t collapsed yet and there’s evidence of a sustainable future. Here’s one data point to consider: On-demand startups increased the number of hourly workers they hired by 100% between January and October, according to OnBoardIQ. (The company analyzed the hiring patterns at 22 companies.) Year-over-year hiring increased by 125%.
So the startups are growing their armies of personal butlers, housecleaners, and grocery deliverers. The problem is they may struggle to find more of them: A new study from JP Morgan Chase Institute shows that growth in worker participation in what it calls the “online platform economy” peaked in 2014. It's still growing! Just not as fast. As the traditional labor market has gotten stronger, fewer people want (or need) to participate in the gig economy.