One of the hottest spaces worldwide in the past three years has been the laundry service: The app that allows you to order laundry pickup and delivers the clothes back to you. New York and Washington, D.C. have Cleanly; Singapore has My Laundry Box. But there have been high-profile failures in the space, too. Washio, for instance, shut down in August.
The startups offer what has been the purview of the wealthy — laundry service — at cheaper prices. Those kinds of business, whether they are in the on-demand economy or elsewhere, typically must operate on thin margins: Their success relies on being able to deliver their services cheaper than other alternatives, while they still grow. India’s Doormint, for instance, couldn’t compete with the low-priced workers who do laundry.
I asked Washmen, one of the leading startups in Flat6Labs, what makes them different when I visited a few weeks ago. For one thing, the startup, which works in Dubai, is already profitable on an operating basis, said co-founder and COO Jad Halaoui. It only has four employees, has 1,400 monthly users, and charges $2.25 per item, about a third, he said, what the highest-priced laundry services charge.
“Our tech-focus has enabled us to achieve healthy unit economics that allow to double down on growth. It has also created time for our team to further focus on the small details that matter. We are always thinking of a small tweak, a better algorithm, a new tool that will create more time for our team and improve our efficiency,” said Halaoui by email.
Flat6Labs, is the Middle East’s largest and arguably most successful accelerator. Its location in Abu Dhabi is a bright, airy space in one of the huge skyscrapers that line Sheikh Mohamed bin Zayed Road. It has has a presence in three cities, including Cairo, Abu Dhabi and Jeddah, with three more opening by year’s end in Tunis, Beirut and one in an undisclosed third location.
The International Finance Corp. has just announced that it is investing $30 million in accelerators worldwide and picked Flat6’s Cairo location and the VC fund connected to it, Sawari Ventures, for one of its $2 million investments. Each city that has a Flat6Labs has a fund of $10-$20 million connected to it.
Flat6Labs, which has graduated 100 startups, invests in startups with a total of $70,000 – $90,000, with $30,000 – $50,000 of that in cash and the rest in support such as licenses and business services, according to managing director Victor Kiriakos.
The startups work in a big open room surrounded by a hive of small conference areas. The Washmen, which has four employees so far and had raised $500,000, has been in business for just over a year in development for about a half-year longer than that.
It was interesting to hear Halaoui talk about why he’d turned to entrepreneurship. An electrical engineer, he’d first worked at a big corporation. He had mixed feelings about it — and then watched as the company started using software to replace 5-6 engineers.
When his school friend, Rami Shaar, called about investing in and then joining a laundry startup, he jumped at the chance. Shaar had spent time at a private equity firm, and then a year at the local office of Uber. He found himself, he said, wanting to solve the problems in his portfolio companies himself. “Over time the fear of being an entrepreneur faded,” said Shaar.
The unique thing about the Washmen algorithm is that it runs on the happy hour concept: Prices go down when its busiest, giving customers an incentive to get their laundry picked up at the same time others in their vicinity are. It’s actually the opposite of Uber, which prices higher when there is more demand.
Operating in Dubai, it already faces competition in that city, but with 2,400 customers and 55-60% customer retention, the duo are feeling good. It contracts with three laundromats to do the laundry and when there’s a dispute about a damaged good, sends the item to the Clean Laundry Institute for a $25 adjudication.
Halaoui said his mood fluctuates based on the complaints he gets and the number of customers — more than 75%, he said — who return despite having had a damaged item.
In a crowded space like the laundry services, success seems to rely on two things, the geography and execution:
The geography: In Dubai, household help is relatively expensive; the city is also dense, which is a key for efficient delivery. Execution is probably the hardest and most important element, but in the case of the Washmen their algorithm is an interesting advantage. And, Shaar argues, they have obtained the services of very high quality laundromats — which makes the service not platform business, like Uber, but a simple service, which should make the business model more stable. From my perspective, at least, they seemed to be paying a lot of attention to execution. Halaoui said by email that the key is “know thy customer, know thy customer, know thy customer.” He also suggested that the startup won’t expand to other cities — Abu Dhabi is on its radar — until it sees a path to sustainable operations in that city.
Finding the right target markets is probably a key as well. It’s interesting that most — or maybe all — of the laundry services are targeting young millennials, when the bulk of the laundry in any geography is done by families.
This story and others on New Builders Dispatch are made possible by a sponsorship from the Ewing Marion Kauffman Foundation. The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that provides access to opportunities that help people achieve financial stability, upward mobility, and economic prosperity – regardless of race, gender, or geography. The Kansas City, Mo.-based foundation uses its grantmaking, research, programs, and initiatives to support the start and growth of new businesses, a more prepared workforce, and stronger communities. For more information, visit www.kauffman.org and connect with www.twitter.com/kauffmanfdn and www.facebook.com/kauffmanfdn.