Porch CEO on rough year: 'We got distracted'

SAN FRANCISCO – Matt Ehrlichman is in a confessional mood.

“I’ve proven that I’m a great entrepreneur, but the question is can I shift to being potentially a great CEO, because those are two different things,” says Porch founder and CEO Ehrlichman, who in 2007 sold online registration company Thriva for $60 million. “You have to be consistent as a leader, and I wasn’t great at this.”

Ehrlichman’s introspection during a recent visit to USA TODAY’s offices is a result of the rocky road traveled by Seattle-based Porch, a platform that promised to revolutionize home renovations by pairing consumers with vetted contractors.

In a conversation rife with optimism but anchored in reality, Ehrlichman, 36, lays out a cautionary tale aimed at any start-up hoping to make it through what promises to be a coming year of corrections for public and private tech companies alike.

Stocks of even high-flying giants such as Facebook and Alphabet are falling of late, and valuation realignments are imminent for $1 billion-plus unicorn start-ups. If the tech bubble hasn’t popped, then it certainly has developed a hissing leak.

“The fear of missing the next Facebook rocket ship is being replaced by the fear of losing money,” Accel Partners’ Rich Wong said in a recent USA TODAY podcast, adding that while many start-ups are innovative they need to begin focusing on revenue. “The discipline around unit economics is starting to re-enter the dialog in a more visible and fierce way.”

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Twitter co-founder and Medium CEO Ev Williams observed in a recent blog post that while “it’s easier to start a company than ever before, it’s harder to compete.”

Porch found all that out the hard way.

“We were as high flying as they come, but after some big bets with new products not working out and with the financing markets changing as they are, we decided let’s take some early action and focus on the most important things,” says Ehrlichman. “Building a company is hard. It's all about focus. And we got a little bit distracted.”

CONTEMPLATING A SALE

At one point, Ehrlichman even considered tossing in the towel and selling.

“I would be lying if I said the thought didn’t cross my mind,” he says, adding that his energy was suddenly lacking and he was no longer “engaged with every employee and customer. You’re thinking about short term versus long term, fear and uncertainly creeps into your mind.”

Porch’s rise was typical of many 2014 tech meteors. By leveraging his start-up track record, Ehrlichman had little trouble raising $100 million and landing both financing from and an in-store partnership with Lowe’s. A small basement office was swapped for downtown Seattle digs, and employees shot from two to 490.

Ehrlichman, the grandson of Nixon White House aide John Ehrlichman, seemed to have the golden touch. Although Porch never released sales data, it claimed to have steered $1.8 billion in “potential” business to some 100,000 contractors between September 2014 and 2015. The company’s quick rise brought a range of regional and national media recognition that included being named USA TODAY’s 2014 Entrepreneur of the Year.

But soon dark clouds gathered.

Porch was pushing a number of initiatives that were not gaining traction. Its Home and Neighborhood Report, a teaming with Realtor.com, was meant as a platform for homeowners to tell their renovation stories. But it didn't take off due in part to the fact that renovation data was sourced from permit requests even though many home projects happen without permits.

Meanwhile, Porch's Home Assistant service, which provided experts to serve as links between customers and contractors, ultimately failed to generate anticipated business opportunities. And there were questions about the Lowe's in-store partnership; sales opportunities were lost due to a reliance on Lowe’s staffers who weren’t always well versed in Porch’s mission.

The pressure mounted fast. Although Porch had raised $65 million in its Series B round in January 2015, Ehrlichman grew concerned about the company’s burn rate. In late October, he laid off 90 employees. Others soon left of their own accord.

Today, Porch has 350 staffers and a significantly narrowed focus that Ehrlichman insists will help the company move forward despite tech industry headwinds.

“Before we earn the right to do big things, we want to do basics really well,” he says.

The changes at Porch include dropping the Home and Neighborhood Report and Home Assistant programs. Instead, it is pursuing a video-chat based approach to home repair anchored to Porch’s fall acquisition of online help site Fountain. The company also is doubling down on its Lowe’s connection. But instead of relying on in-store staffers at 1,700 locations who are busy with a range of chores, Porch is deploying its own employees in a few dozen select Lowe's locations to handle all consumer interactions with its service.

PORCH PROBLEMS 'NOT UNUSUAL'

“I’ve invested in many companies and what happened at Porch is not unusual,” says Antonio Gracias, a Tesla board member and founder of Chicago-based Valor Equity Partners, which led Porch’s Series B round.

“When the economy is going great, you feel you can do anything, but when you hit turbulence you need to shift to a maniacal focus on a core product,” says Gracias. “Everyone’s talking about the stock market and the economy now, but we identified this six to eight months ago. I think great companies get built right now (in tough times).”

Ehrlichman says the Porch team is evenly split between engineers focused on improving the Porch experience and those interfacing with consumers and the home improvement professionals whose monthly fees generate Porch’s revenue.

On the latter front, Porch is aiming to expand its Porch Guarantee program to more cities this year. Contractors who pay higher premiums are vetted for Guarantee status, which includes a commitment by Porch to both mediate any work-related disputes and if necessary pay a contractor up to $1,000 to resolve them.

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Ehrlichman says that after those bleak layoff days last fall, he is eager to energize his remaining troops in part by staying out of their way. "I want to make sure everyone is clear on what they’re doing and how it impacts the business," he says. "So every single team owns one primary set of metrics, I’m empowering them to take a part of the business, and that feeling of ownership was a bit of a breath of fresh air.”

As for his challenge to himself, Ehrlichman says it’s make or break time.

“If Porch is going to be what we hope it can be, it needs a great CEO,” he says. “It’s an incredible challenge and learning opportunity for me.”

Follow USA TODAY tech reporter Marco della Cava on Twitter @marcodellacava.