Understanding Unit Economics: Why On-Demand Startups Like Homejoy and Zirtual Failed

Jason Lemkin analyzes the shutdowns of on-demand companies Homejoy and Zirtual, highlighting that many founders lack understanding of their unit economics and margins. The critical difference between software (80%+ gross margins) and on-demand services becomes apparent when labor costs increase due to employee conversion and associated overhead. Startups must rigorously understand whether their business model can sustain profitability as operational costs rise.