All posts in “payments”

Airbnb invests as Zeus corporate housing raises $55M at $205M

As Airbnb absorbs more and more of the demand for housing, it’s exploring how to monetize opportunities beyond vacation rentals. A marketplace for longer term corporate housing could be a huge business, but rather than build that itself, Airbnb is making a strategic investment in one of the market leaders called Zeus Living and will list its homes on the Airbnb site.

In just four years of redecorating landlords’ homes and renting them for 30+ day stays to relocated workers, Zeus Living has grown to a $100 million revenue run rate. It grew revenue 300% in 2019, and now has 250 employees and over 2000 homes under management. Zeus make money by charging landlords one free month of usage, and marking up the rent charged to customers. It could rent out a $4,000 per month home for $5,000 plus take the extra month to earn $16,000 in a year.

Zeus CEO and co-founder Kulveer Taggar tells me “I fundamentally believe that a lot of human potential is bound by location. At Zeus, we’re deeply committed to making it easier for people to live where opportunity takes them.” It’s already hosted 27,000 residents for a total of 650,000 nights.

Strong margins, swift momentum, and that megatrend of more mobile workforces have earned Zeus Living a new $55 million Series B round it’s announcing today. The funding comes from Airbnb, Comcast, CEAS Investments, and TI Platform Management, plus existing investors Alumni Ventures Group, Initialized Capital, NFX, and Spike Ventures. The funding comes at a $205 million post-money valuation.

“The opportunity here is huge, consumer spend is going toward housing and everyone needs to stay somewhere. But it’s Kulveer and Zeus’s go-to-market strategy that is impressive” says Initialized co-founder and managing partner Garry Tan. “Zeus decided to start with corporate rentals, which we believe is the best go-to-market since it is the highest margin, and capital efficiency wins in a space with many competitors. Corporate needs are longer term, consistent and predictable, and partnering with Airbnb strengthens this approach as they expand to build a platform for every city.”

Zeus co-founder and CEO Kulveer Taggar

Zeus had previously raised a $2.5 million seed and then an $11.5 million Series A led by Initialized, as well as $10 million in debt to cover taking on properties in the San Francisco Bay, Los Angeles, New York, Seattle, and D.C. Now that it’s scaling up, Zeus could add a sizable debt facility to cover the risk of filling apartments with employees from clients like Brex, Disney, ServiceTitan, and Samsara.

Instead of moving into a bland corporate housing block, struggling to find a place themselves, or ending up in expensive long-term Airbnbs, workers moving to new cities can work with Zeus. It takes over apartments, handles maintenance, and fills them with branded comforts like Parachute bedding and Helix mattresses Zeus gets at bulk rates. The startup is betting that as workers move between jobs and cities more frequently, fewer will own furniture and instead look for furnished homes like Zeus offers.

Thanks to the premium stay it offers, Zeus charge can clients a lucrative rates while Taggar claims his service is still about half the price of standard corporate housing. For property owners, Zeus makes it easy to get a consistent rent paycheck with none of the traditional landlord work. Zeus takes care of cleaning and key exchanges so owners don’t need to do any chores like if they were running an Airbnb. Its goal is to get the first renters in within 10 days of taking on a property.

The new funding will help Zeus expand to more neighborhoods and cities while retaining a focus on breadth within each market so clients have plenty of homes to pick from. The startup will be revamping its booking and invoicing tools for enterprise partners, and improving how it sources real estate. Meanwhile it will be investing in customer care to maintain its high 70s NPS scores so relocated workers brag to their colleagues about how nice their new place is.

“Finding housing is stressful and time-consuming for both individuals and employers. As someone who has moved countries four times, I’ve lived through that tension” says Taggar. Zeus Living has built technology to remove complexity from housing, turning it into a service that enables a more mobile world.”

Taggar had gotten into the real estate business early, remortgaging his mom’s house to buy a condo in Mumbai to rent out. After moving to the US, he built and sold Y Combinator-backed auction tool Auctomatic with co-founder and future Stripe starter Patrick Collison. It was while working on NFC-triggered task launcher Tagstand that Taggar recognized the hassle of both finding new corporate housing and reliably renting out one’s home. With Uber, Stripe, and more startups growing huge by simplifying processes that move a lot of money around, he was inspired to do the same with Zeus Living.

“Modern professionals travel more frequently, stay longer, and seek accommodations that feel like home. As more companies look to Airbnb for Work for extended-stay and relocation solutions, this segment remains a key focus for Airbnb,” says David Holyoke, Global Head of Airbnb For Work. “We have great alignment with the Airbnb team in terms of serving the changing needs of business travelers that want the comforts of home when traveling for extended 30-day stays for work or a project” Taggar follows.

Zeus Living’s co-founders

Zeus’ biggest threat is that it could get overextended, misjudge demand, and end up on the hook to pay rent for two-year leases it can’t fill. And now with more funding, there will be added scrutiny regarding its margins, especially in the wake of the WeWork implosion.

Taggar recognizes these threats. “This is a business where we have to be focused on maximizing the gross profit we generate for the investments we make, with the least amount of risk. At Zeus Living, we’re continuously improving the ways we predict and secure demand.” He’s also building out teams on the ground in different markets to ensure regulatory compliance and push for more conducive laws around 30+ day rental stays.

Property tech has become a heated space, though, so Zeus will have heavy competition. There are traditional corporate housing providers, pure marketplaces that don’t deal with logistics, and direct competitors like $66 million-funded Domio, and juggernaut Sonder which has raised a whopping $360 million. Zeus might also see its model copied abroad before it can get there.

At least with Airbnb as an investor, Zeus won’t have to fear a bitter battle with the tech giant over corporate housing. Instead, Airbnb could keep investing to coin off this adjacent market while listing Zeus properties, or potentially acquired the startup one day. For now though, Taggar just wants to prove startups can be accountable in the real world, acknowledging that taking over people’s homes is “a lot of responsibility! Our homes represent hundreds of millions of dollars of assets we manage and we take that very seriously.”

Lessons from M-Pesa for Africa’s new VC-rich fintech startups

In African fintech, the fourth quarter of 2019 brought big money to new entrants.

Chinese investors put $220 million into OPay and PalmPay — two fledgling startups with plans to scale in Nigeria and the broader continent. Several sources told me the big bucks had created anxiety for more than few payments ventures in Nigeria with similar strategies and smaller coffers. They may not need to fret just yet, however: lessons from Africa’s most successful mobile-money case study, M-Pesa, suggest that VC alone won’t buy scale in digital finance.

Startups and fintech in Africa

Over the last decade, Africa has been in the midst of a startup boom accompanied by big growth in VC and improvements in internet and mobile penetration.

Some definitive country centers for company formation, tech hubs and investment have emerged; Nigeria, South Africa and Kenya lead the continent in numbers for all those categories. Additional strong and emerging points for innovation and startups across Africa’s 54 countries and 1.2 billion people include Ghana, Tanzania, Ethiopia, and Senegal.

The continent surpassed $1 billion in VC to startups in 2018 and per research done by Partech and WeeTracker, fintech is the focus of the bulk of capital and deal-flow.

By several estimates,  Africa is home to the largest share of the world’s unbanked and underbanked population.

This runs parallel to the region’s off-the-grid SME’s and economic activity — on display and in commercial motion through the street traders, roadside kiosks and open-air markets common from Nairobi to Lagos.

IMF estimates have pegged Africa’s informal economy as one of the largest in the world. Thousands of fintech startups have descended onto this large pool of unbanked and underbranked citizens and SMEs looking to grow digital finance products and market share.

In this race, the West African nation of Nigeria — home to Africa’s largest economy and population — is becoming an epicenter for VC. Many fintech-related companies are adopting a strategy of scaling there first before expanding outward.

Enter PalmPay and OPay

That includes new entrants OPay and PalmPay, which raised so much capital in fourth quarter 2019. It’s notable that both were founded in 2019 and largely incubated by Chinese actors.

PalmPay, a consumer-oriented payments product, went live in November with a $40 million seed-round (one of the largest in Africa in 2019) led by Africa’s biggest mobile-phones seller — China’s Transsion. The startup was upfront about its ambitions, stating its goals to become “Africa’s largest financial services platform,” in a company statement.

To that end, PalmPay conveniently entered a strategic partnership with its lead investor. The startup’s payment app will come pre-installed on Transsion’s mobile device brands, such as Tecno, in Africa — for an estimated reach of 20 million phones in 2020.

PalmPay also launched in Ghana in November and its U.K. and Africa-based CEO, Greg Reeve, confirmed plans to expand to additional African countries in 2020.

If PalmPay’s $40 million seed round got founders’ attention, OPay’s $120 million Series B created shock-waves, coming just months after the mobile-based fintech venture raised $50 million — making OPay’s $170 million capital haul equivalent to roughly a fifth of all VC raised in Africa in 2018.

Founded by Chinese owned consumer internet company Opera — and backed by 9 Chinese investors — OPay is the payment utility for a suite of Opera -developed internet based commercial products in Nigeria that include ride-hail apps ORide and OCar and food delivery service OFood.

With its latest Series A, OPay announced it would expand in Kenya, South Africa, and Ghana.

In Nigeria, OPay’s $170 million Series A and B announced in the span of months dwarfs just about anything raised by new and existing fintech players, with the exception of Interswitch.

The homegrown payments processing company — which pioneered much of Nigeria’s digital finance infrastructure — reached unicorn status in November when Visa took a reported $200 million minority stake in the venture.

A sampling of more common funding amounts for payments ventures in Nigeria includes established fintech company Paga’s $10 million Series B. Recent market entrant Chipper Cash’s May 2019 seed-round was $2.4 million.

There is a large disparity between fintech startups in Nigeria with capital raises in ones and tens of millions vs. OPay and PalmPay’s $40 and $120 million rounds. Conventional wisdom could be that the big-capital, big spending firms have an unmistakable advantage in scaling digital payments in Nigeria and other markets.

A look at Kenya’s M-Pesa may prove otherwise.

Omni storage & rentals fails, shutters, sells engineers to Coinbase

$35 million-funded Omni is packing up and shutting down after struggling to make the economics of equipment rentals and physical on-demand storage work out. It’s another victim of a venture capital-subsidized business offering a convenient service at an unsustainable price.

The startup fought for a second wind after selling off its physical storage operations to competitor Clutter in May. Then sources tell me it tried to build a whitelabel software platform for letting brick-and-mortar merchants rent stuff like drills or tents as well as sell them so Omni could get out of hands-on logistics. But now the whole company is folding, with Coinbase hiring roughly 10 of Omni’s engineers.

“They realized that the core business was just challenging as architected” a source close to Omni tells TechCrunch. “The service was really great for the consumer but when they looked at what it would take to scale, that would be difficult and expensive.” Another source says Omni’s peak headcount was around 70.

The news follows TechCrunch’s report in October that Omni had laid off operations teams members and was in talks to sell its engineering team to Coinbase. Omni had internally discussed informing its retail rental partners ahead of time that it would be shutting down. Meanwhile, it frantically worked to stop team members from contacting the press about the startup’s internal troubles.

We’ll be winding down operations at Omni and closing the platform by the end of this year. We are proud of what we built and incredibl y thankful for everyone who supported our vision over the past five and a half years” an Omni spokesperson says. Omni CEO Tom McLeod did not respond to multiple requests for comment. Oddly, Omni was still allowing renters to pay for items as of this morning, though it’s already shut down its blog and hasn’t made a public announcement about its shut down.

Coinbase has reached an agreement with Omni to hire members of its engineering team. We’re always looking for top-tier engineering talent and look forward to welcoming these new team members to Coinbase” a Coinbase spokesperson tells us. The team was looking for more highly skilled engineers they could efficiently hire as a group, though it’s too early to say what they’ll be working on.

Omni originaly launched in 2015, offering to send a van to your house to pick up and index any of your possession, drive them to a nearby warehouse, store them, and bring them back to you whenever you needed for just a few dollars per month. It seemed too good to be true and ended up being just that.

Eventually Omni pivoted towards letting you rent out what you were storing so you and it could earn some extra cash in 2017. Sensing a better business model there, it sold its storage business to Softbank-funded Clutter and moved to helping retail stores run rental programs. But that simply required too big of a shift in behavior for merchants and users, while also relying on slim margins.

Omni Rentals

One major question is whether investors will get any cash back. Omni raised $25 million from cryptocurrency company Ripple in early 2018. Major investors include Flybridge, Highland, Allen & Company, and Founders Fund, plus a slew of angels.

The implosion of Omni comes as investors are re-examining business fundamentals of startups in the wake of Uber’s valuation getting cut in half in the public markets and the chaos at WeWork ahead of its planned IPO. VCs and their LPs want growth, but not at the cost of burning endless sums of money to subsidize prices just to lure customers to a platform.

It’s one thing if the value of the service is so high that people will stick with a startup as prices rise to sustainable levels, as many have with ride hailing. But for Omni, ballooning storage prices pissed off users as on-demand became less afforable than a traditional storage unit. Rentals were a hassle, especially considering users had to pick-up and return items themselves when they could just buy the items and get instant delivery from Amazon.

Startups that need a ton of cash for operations and marketing but don’t have a clear path to ultra-high lifetime value they can earn from customers may find their streams of capital running dry.

Splice teaches AI to sell Similar Sounds as users double

Splice is blowing up like a hit song. The audio sample marketplace has doubled revenue and user count in a year, and now reaches 3 million musicians. Many pay $7.99 for unlimited access, and 70% of subscribers visit weekly to hunt down the freshest and trendiest sounds to give their tracks that special something.

But words can’t always describe music. Searching by genre and subjective tags can take forever and leave artists frustrated when the sounds they find they don’t resonate right. So Splice has taught a machine learning algorithm to draw connections between samples. That allows it for the first time to recommend Similar Sounds to one a musician is currently listening to, based on their pitch, melody, rhythm, and harmonic profile. Sometimes the similarities are surprising — something only a machine could hear.

Splice co-founder and CEO Steve Martocci

It’s an express lane down sonic rabbit hole. Splice is seeing a double-digit increase in artists successfully finding and downloading a sample after a search. That means more subscribers, and more creators relying on Splice to power their artistic process. No wonder Splice was able to raise a $57.5 million Series C from Union Square in March.

“Like with Google Reverse Image Search…now you can do that for any sound” says Splice co-founder and CEO Steve Martocci. “Lots of companies do machine learning that might help them on the backend but this is a real user feature that’s providing value.”

Splice Similar Sounds

Prioritizing where to provide value next is Splice’s biggest challenge amidst hyper growth. The startup launched in 2013 as sort of a Github for music production that saved between every change so artists could revert to old versions and easily coordinate with collaborators. More recently it fought rampant digital instrument piracy by letting users pay a fee per month for access to popular but pricey synthesizers and plug-ins with a rent-to-own model.

Its breakout product has been the Splice Sounds marketplace where musicians preview 60 million audio samples per week from keyboard flourishes to snare drum hits. The snippets are royalty-free to use, leading many sourced from Splice to end up in chart-topping songs like Demi Lovato’s Billboard #1 “Sorry Not Sorry”. The platform charges $7.99 for unlimited access and splits the revenue with artists who create the sounds, to which Splice has paid out $20 million to date.

Yet once musicians narrow their search with keywords and genres based on tagging by Splice’s human staff, they still often have to scan through tons of sounds to find what feels right.

“People tell me their production process changed so much” Martocci says. “I know there’s one sound that’s close enough if I just keep pressing down on Splice.” With AI able to scan sounds to augment human tagging, and find the similarities to suggest related ones, “Now you might have to just press down once.” I hope to see Splice build new ways to browse Sounds beyond search so you can just follow your ears. It could also offer more ways for sound creators to stay in touch with their fans, as DJs are discovering some concert attendees love their samples more than their sets.

“My job is to keep as many people inspired to create as possible” beams Martocci, who famously sold his TechCrunch Disrupt Hackathon chat app Group.Me to Skype for $85 million just a year after launching. Others want in to the sample business too, though. Music hardware maker Native Instruments launched a competing Sounds.com marketplace last year, while there’s another called Blend.

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But Martocci is differentiating with new label deals like one with Spinnin’ Records that sees its artists specially producing sound packs for Splice. It’s not actually other startups that are the biggest limiting factor for Splice. “My biggest competition is people giving up on themselves or thinking they’re not musical” says Martocci.

A big part of maintaining that momentum for artists is making sure they get paid. Stem, Kobalt, Dubset, and more startups have emerged to clean up the messy royalties distribution process. Martocci admits he’s eyeing the space too. “Full disclosure: I think there’s a long-term future for Splice to play a part in doing it right across the board” he tells me. “The royalty-free ecosystem has been a great start for us to get people opening up the creative process and it’s just the beginning of making sense of the whole space.”

After a decade of musictech being a graveyard, Spotify’s success and its direct listing entrance to the stock market have reinvigorated the industry. Streaming grew to $4.3 billion in the first half of the year to make up 80% of US recorded music business. Payouts from streaming are convincing artists the age of the CD is gone and they need to embrace technology and new revenue streams.

That certainly seems to have emboldened Martocci. “We want to build a multi-generational business here. We want to build the most iconic company in music history!” That passion has attracted tons of part-time DJ / full-time techies to work at Splice, including Ale Koretzky, who previously invented AI music scanning tool tuneSplit, and former Patreon director of product Tim Wood. “We have our in-office studio that’s used every night by an employe. We have DJ equipment team members can rent out and use for their gigs” Martocci notes. “You need to have a team who understands the problems.”

Placement is the much-needed talent agent for jobseekers

“We’re giving away money to strangers on the internet” is a pretty cavalier pitch for a new startup. But the more I learned about Placement, the smarter it sounded. In exchange for 10% of your income for 18 to 36 months, Placement will find you a much higher paying job, prep you for the interview and help you move to your new city of employment.

Actors, athletes and musicians have talent agents. Why shouldn’t office workers? That’s co-founder and CEO Sean Linehan’s vision for Placement. The former VP of product at Flexport thinks he can consistently get people a 30% raise on their cost of living-adjusted income if they’re willing to relocate from either their sleepy hometown or an overpriced metropolis.

“We think you can transform your life without becoming an engineer. You just have to be in the right place,” says Linehan. Not everyone is going to learn to code, and Placement isn’t a school. “We’re not in the business of training people to do jobs. We’re in training people to get jobs.”

Placement sits at the lucrative center of a slew of megatrends. People switching jobs more often. The desperate need to pay off crushing student loan debt. The rise of mid-size cities as rent gets out of control in San Francisco and New York. Social apps keeping people in touch from afar. The search for deeper fulfillment going mainstream.

Placement co-founder and CEO Sean Linehan

Through the normalization of income sharing agreements, Placement has found a way to powerfully monetize these societal shifts. That potential has attracted a $3 million seed round led by Founders Fund and backed by Coatue’s new seed fund, XYZ Ventures, The House Fund, plus angels like Flexport CEO Ryan Petersen, Eventbrite founders Julia and Kevin Hartz, DoorDash CEO Tony Xu, 137 Ventures MD Elizabeth Weil and her husband Facebook Calibra VP of Product Kevin.

With the cash to build out its jobseeker’s software toolkit, Placement could grow far beyond the Jerry Maguire-style boutique talent agency into a scalable way to put millions on a better career track. “The number one problem that I see in the American economy right now is the lack of income mobility,” Linehan says. “There are so many services for making rich people get richer, but what about services to help low-income people to get to the middle, or help those in the middle to improve?”

“If I stayed home, there’s just no way”

The CEO’s own rise was “a tried and true American tale,” he tells me. “I grew up in a pretty low-income neighborhood in San Bernardino . . . below the poverty line.” But a chance to attend UC Berkeley brought him to Silicon Valley, and the economic powerhouse city of San Francisco (before the housing crisis made it so expensive). “I don’t think I could have been as successful if I went to another place. If I had stayed in my home town, there’s just no way.”

Yet after college, when friends moved away and he broke up with his girlfriend, Linehan found himself living in a bunkbed by himself with extra space. “I called a friend back home working a minimum wage job, still living at home, and said ‘Your life kinda sucks. Come crash with me!,’ ” Linehan recalls. “He was super smart — smarter than most of the people I went to Berkeley with, but he never got on the train out of town.”

In the following years, Linehan coached his friend through becoming a professional and navigating interviews. “Now he’s tripled his income on a cost of living adjusted basis. He went from minimum wage to $70,000 to $80,000.” That ignited the idea for Placement. “How do you take that process of tapping people who are special and just need economic opportunity, and bring it to more people?” But Linehan needed a co-founder who could execute on getting these up-and-comers jobs.

That’s where Katie Kent came in. Also from the product team at Flexport, Kent had helped start Zipfian Academy as the first data science bootcamp in America. The 12-week crash course had been placing 93% of graduates into full-time roles when Zipfian was acquired by Galvanize, where Kent became director of outcomes with the mandate to get students great jobs. The right idea, experience and the track record of turning Flexport into a $3.2 billion freight forwarding unicorn led investors to jump at the chance to fund Placement.

Share me the money

So how exactly do Placement’s income sharing agreements work? “They only pay us if they make more money on a cost of living adjusted basis” Linehan explains.

First, the startup recruits through targeted advertising and word of mouth referrals, which the company says 100% of clients have provided. Primarily, it’s seeking business professionals with a skill mismatched to their city, such as sales, human resources or operations in a place without companies competing to hire for those roles. They might have never left their hometown or returned after school at a mid-tier college, suppressing their earning potential. But lack of knowledge about jobseeking, fears of leaving their support network or a lack of funds to finance a move keep them stuck there.

“There are two moments when society puts a gentle hand on your shoulder saying its okay to move away: when you go to college and when you graduate college,” says Linehan. “We’re trying to engineer a third moment. We give people the permission and space to have that conversation with their family by providing that forcing function.” Placement serves the same utility the CEO did for his friend, revealing that if they seize the opportunity of moving to a growing but still affordable city like Denver, Austin, Raleigh or Seattle, “people’s lives would be so much better.”

The other demographic Placement seeks is the 10 million-plus workers who’ve gotten in over their heads in some of the country’s priciest cities. “If you’re ambitious and talented but not an engineer in SF, this is a hard life. The costs are exceeding the benefits at this point.” Placement looks for cheaper cities where their skills are still relevant and they might even earn the same or a little less, but they can fetch a huge increase in income on a cost of living-adjusted basis and they have a path to buying a house. Linehan declares that “Our controversial opinion is that more important than reskilling people is getting them to the right place where the work is happening in the first place.”

Placement then evaluates the prospective client in what is currently an extremely selective process to determine if they’re undervalued based on their skills, qualifications, shortfalls and redflags. If they’re already being adequately or overpaid, it won’t accept them. Those eligible are offered access to Placement’s research on all the optimal salary and location/hirer pairs for their role, which most people wouldn’t or couldn’t do themselves. Linehan says, “We run their job search for them. We’re kind of like a concierge.”

Once they’ve selected some targets, Placement quarterbacks their preparation process, helping them to improve their LinkedIn and resume, practice telling their story and offering mock interviews with experts in their field. As they progress through interviews Placement sets up and requires hirers offer remotely, it teaches clients to negotiate to get their best possible compensation.

“If you’re a normal person who didn’t go to an elite institution or are a couple years out of school, there’s no resources,” Linehan laments. While some top coding schools and other bootcamps place graduates, and some startups like Pathrise are also working on interview prep, most seeking a new employer end up relying on mediocre job hunting tips they find online. That’s in part because it was hard to get people to fork over significant cash in exchange for instruction that wasn’t guaranteed to help.

How Placement income sharing agreements work

The Placement income sharing agreement is designed to align incentives, though. It’s vested in getting clients not only the best job and salary, but one they’ll want to stick with. As long as the startup nets them a higher adjusted income, clients pay 10% of their earnings. That lasts for 18 months, or 36 months if they receive Placement’s $5,000 relocation stipend and human support. There are also caps on the total Placement can get paid back, and the agreement dissolves after five years so clients aren’t locked in if things don’t work out.

For example, Placement aims to help someone earning $40,000 per year pre-taxes reach $52,000 on a cost of living adjusted basis. They’d end up paying Placement $7,794 over the course of 18 months, or $433 per month. After the bill, they’d still be earning $3,900 per month, or $567 more than they used to. If they take the $5,000 relocation stipend and extra assistance, their ISA extends to 36 months and they’ll end up paying back $15,588 total, including the stipend.

Clients are likely to keep growing their compensation after their Placement ISA ends, so they’ll start reaping all the added proceeds. The startup has worked with fewer than 1,000 clients to date, but is supposedly growing quickly.

Eventually, Placement could move into working with programmers and designers, but it sees a big gap in assistance for business roles. Linehan notes that “We’re providing an option that will be available to a lot more people than a Lambda School or Galvanize coding bootcamp. Not everyone’s going to be software engineers.”

Making America anti-fragile

The biggest hurdle for Placement will be scaling what can be quite a hands-on, relationship-driven process of matching clients with the right hirers. “It’s one thing to get one person a job. It’s another to get 10,000 people a job,” Linehan admits. But he conquered the same problem at Flexport, which was moving 1,000 shipping containers across the ocean but had to figure out “how the hell do you move 1 million?”

Placement co-founders (from left): Katie Kent and Sean Linehan

That requires Placement to pour product know-how into building tools that equip clients to take more initiative to match themselves with hirers and teach themselves interview skills. It also must automate more of its marketing outreach, client screening and connections to recruiters while retaining a human element worth a four to five-figure price.

Right now, the startup’s team numbers just four, and though it will expand to seven soon, it may need to raise a bunch more to chase this dream. Some investors have been understandably skeptical about the whole “handing out $5,000” model without onerous ISAs.

For comparison, the one-year MissionU school for business and data jobs that was acquired and shut down by WeWork asked for 15% of income for three years without a relocation stipend, or $23,400 on a $52,000 per year job. ISAs for General Assembly’s tech job education cost 10% for 48 months, even if students don’t earn more than in their old job. Pathrise’s slimmer offering costs just 7% for one year. Colleges are jumping on the trend too, with some working with startup Leif to run their ISAs.

Placement has plans to cover prickly edge cases. If someone gets laid off from their new job, the startup will help them find another. “We’re on the hook to make sure they’re successful,” Linehan insists. It only won’t step in if an employee is fired for an ethical problem like sexual harassment or committing fraud. And if someone simply gets lonely in their unfamiliar city, they’re not required to stay, though moving home could hurt their earnings and Placement’s take. That’s why the startup is working to help its clients find community, even amongst each other, so they don’t feel isolated, and prefers sending workers to cities where they know someone.

Meanwhile, Placement must resist the temptation to become a hiring agency paid by employers and instead work fully on behalf of its clients. “When you’re aligned economically with the employer, you’re just chasing dollars from bigger and bigger whales of companies, and at one point you figure out you’re a recruiting firm for the Gap,” Linehan says with a shudder. The complexity of dealing with the U.S. Internal Revenue Service is enough hassle, so Placement doesn’t intend to work with jobseekers abroad or those that need visas, as “it’s not good for startups if you’re at the mercy of the government.”

Luckily, U.S. salaries total $8.6 trillion per year, Linehan claims, so it’s got enough of a domestic market. “The American economy is so huge that I don’t see other people tackling problems like that being competitive.” Placement does have potential to use its data to recommend and teach specific skills. “If you just make this change, if you learn Excel, you could totally get this job in a different industry that pays more and that you’ll like more,” Linehan says. He also dreams of one day improving urban planning by suggesting cities build music venues or parks that jobseekers say would soften the landing of moving there.

Zooming out, there’s also chance for Placement make the country more stable and resistant to strong-man populism promising financial security. “A two-tier society is fragile. I don’t want to live in a democracy where there’s a bunch of hay waiting for a matchstick to set it on fire,” Linehan concludes. “There doesn’t have to be a have and a have-not class, and you don’t need the government to do forced redistribution to make everything fair. You just need people that care about getting on the right track, and that to me is a worthy cause to dedicate a life to.”