Dan Laufer vowed to ever start a startup again after selling apartment rental platform RentLingo in 2021, but Laufer also couldn't ignore the potential to solve a problem he saw emerging as head of growth and product marketing at Nextdoor.
“Nextdoor is most commonly used by people searching for providers, particularly HVAC,” Laufer told TechCrunch. “There were these gaps on the consumer side, satisfaction with the experience, it didn’t feel modern. The other big trend I saw was the silver tsunami. All these baby boomers who own these and don’t necessarily have an exit plan.”
The result was PipeDreams, a startup that acquires small and large HVAC and plumbing companies and scales them using its software that helps with planning and marketing. PipeDreams allows business owners to retire when necessary without losing their employees, name or brand, or simply become part of a larger company with more resources, Laufer told TechCrunch.
PipeDreams just raised a $25.5 million Series A led by Canvas Ventures and Plural with additional funding from DoorDash founder Tony Xu and former OpenTable CEO Thomas Layton. PipeDreams has acquired nine companies to date and currently operates in the San Francisco Bay Area, Tucson and Denver with plans to expand.
“The beauty of this industry is that it’s huge. There are over 100,000 plumbing and heating, ventilation and air conditioning companies,” Laufer said of the U.S. market. “We intend to keep their brand. A lot of these people have their names on the truck, it’s very personal.”
PipeDreams' strategy is a variation of the private equity roll-up model, in which PE firms buy smaller companies in a niche (private schools, dentistry, healthcare) and combine them into a larger company with the intent of becoming the larger Selling companies to make profits for investors.
PipeDreams also uses debt to fully acquire the companies, but is not tied to a tight lifecycle timetable to generate returns or exit, such as the four to six years expected with PE. The company has a $15 million credit facility that will be used to purchase businesses and will use the equity raised to improve its software. Laufer said he expects future rounds will need to raise more debt than equity.
Roll-up strategies are not common for venture capital-backed startups. The best comparison for this is Amazon aggregator startups like Perch and Thrasio, which have recently had financial problems. But unlike those aggregators, the underlying companies that PipeDreams buys are not at the mercy of a company like Amazon, which can change the rules at will, and the companies that PipeDreams buys have stronger relationships with its customers than Amazon brands.
However, PipeDreams could face the same growth hurdles that Amazon aggregators face, such as if a new entrant wins more business or if a local plumber improves its SEO or digital marketing strategy.
Laufer said taking over the HVAC companies completely sets PipeDreams apart from other competitors that only want to connect consumers with professionals like Angie and Thumbtack. He said that, like many of its competitors, the marketplace model is not rigid because consumers can search for professionals directly after finding them through a marketplace. Because PipeDreams integrates its technology into each provider's website, it is part of the process every time someone books with that professional.
PipeDreams also addresses the skills shortage in the HVAC and plumbing industries, as Generation Z is less interested in learning trades than the generations before them. The company launched an apprenticeship program in the fourth quarter to provide employees with on-the-job training. So far there have been five students with plans to expand.
While the company still has a long way to go to flesh out its HVAC-focused business, Laufer expects to expand into other categories in the future, including electricians.
“We bought [a company] When the owner had a celebratory dinner a few weeks ago, he described it as: “My company is going to college,” Laufer said. “'I grew it up and it's on its way to the next chapter.' I love this description. We do it like this.”
