An open letter to laundry entrepreneurs and investors from a fellow founder
I introduce myself as Bala, a fellow entrepreneur in the laundry sector. I had co-founded and now run Wassup, a six-year-old startup in this space.
We were one of the early organised players in this sector, when laundry was not so 'cool'. But we were happy to see tremendous interest and startup activity in this space in the last couple of years, with more than 80 laundry startups opening up across India, making the sector a hotbed of startup opportunities.
Naturally, every time there is a new laundry brand launched I get messages from friends and observers. But, of late, I seem to be getting more messages saying, 'hey this guy has shut down', 'that guy has been acqui-hired/acquired. What's your take?'
The last few months have been exceptionally eventful for the laundry space in the country.
Big names like Washio, Mywash(bit earlier) Doormint (more recently) and few other laundry startups have unfortunately shut down operations, after having created quite an impact and disruption, and having used up $25-30 million of investor funds in total.
Failures and shutdown of startups are painful for entrepreneurs, employees and investors. Most of all for the entrepreneur who puts in his or her blood, sweat, toil and time and risks everything in life to live a passion and build a vision. My heart goes out to the teams behind these startups.
These events have also, and rightly so, led to the loss of entrepreneur and investor confidence in our industry, which is pegged at $34 billion in India alone.
So, what's wrong with laundry startups? Is the market size wrong? Is something wrong with the consumers or laundry industry or the startup world? Have we got something grossly wrong as an industry?
Naturally, all these questions kept crossing my mind. However pessimistic these questions may be, I am quite optimistic and confident of the future of this industry provided we get the model right as laundry startups.
This open letter is a thought on 10 things we as laundry entrepreneurs must keep in mind to get our model right and avoid burning investor funds and possibly a shutdown situation:
- Think long term - It's a marathon, not a 100-metre sprint! It's a long-haul game; hence your personal plans, company growth plans, funding strategy, investor commitments should be based on a five to 10-year horizon.
- Backend conundrum- In India, with the absence of quality and standardised backend vendors, if you aggregate, you aggregate mediocrity. Be fully integrated or a managed hybrid model. if you carefully look at people who have shut down 90 percent of them have been aggregators. This proves the thesis that an e-commerce marketplace aggregator model might not work for daily laundry value segment.
- Retail is a long gestation business - Go for a combo of B2C and B2B. B2B is not an as easy a business as it seems, but it is totally complementary to a B2C model and helps achieve earlier breakeven and lowers cash burn.
- It's not online vs offline - It's omni channel. It is going to be difficult for a pure-play online or purely offline player to survive in the next decade. Consumer convenience and technology will take over and blend to result in success of omni-channel-enabled players.
- Patience - No one company can change behaviour. Wait as Indian consumer evolves to accept the concept of outsourced washing from self-wash or maid-washing.
- Don't discount - This category does not need discounting for fast growth and hockey-stick models. It is easy to sell on price but difficult to sustain. Don't undercut the dhobi. Labour is never going to be cheap in India and unless large automation innovation kicks in the laundry sector, prices cannot go down. Customer is willing to pay a fair price for a standard quality - why mess with that equation?
- Unit economics - Focus on unit economics and find your answer for logistics costs - logistics costs for on-demand laundries are 40 percent or more as it has reverse logistics too. Work on models that reduce this and keep costs under control.
- Focus on dry cleaning too - This yields better margins and brings in a quality customer base, which will reap its own rewards.
- Co-opt - Work with your competition, share costs, share expertise, learn from each other and grow the industry together. Coopt - cooperate with competition and synergise. There are a lot of things we need to do together for the betterment of the industry, which is not the objective of this piece. Maybe I would write another one for that alone, but at individual company levels we can gain a lot by working together to start with.
- Get your hands dirty - Laundry is an operationally-intensive industry. Pure-play tech skills might not help us survive and create disruption. Please don't forget to get your hands dirty.
Of course, other startup mantras and rules of complementary co-founder, frugality approach, managing customer acquisition costs and retention, right team, quality mentors apply here too.
As a laundry entrepreneur myself, I have made my fair share of mistakes, paid the price and had learnings in the last five years. After approximately 56,000 hours of thinking only laundry business, having established presence in eight cities and having washed 50 million items over these six years, these are some learnings from Wassup to share, which I hope would be of help to you.
I am sharing this with an intention and hope that we all as an industry should come together, work together, consolidate and grow together, and in the hope that my learnings and insights would help current and future laundry entrepreneurs to rethink on their business models to minimise risk of failure.
Just because a few big names have shut down, please don't lose heart. You are in the right industry, which has a tremendous future in the coming decade in India.
Request to investors
Please don't give up on us but please back the right lambi race ka ghoda (long race horse). Please understand it's a longer gestation investment and plan your exits accordingly. There's nothing wrong with the laundry sector, just that you need to tell the entrepreneurs to find their right model and not copy e-commerce business models and scale-up strategies.
Is there a potential for a hockey stick model? Yes, but the winning model will not be a global model adapted for India. It will be a Made for India model that will win.
Currently, the organised laundry sector and startups don't even account for five percent of the $34-billion market size in India. We as an industry need to work together to ensure that we improve the complete ecosystem, get organised, give better value to employees, consumers and investors.
There is a potential to create 20 million jobs in the laundry sector, at least 1,000 startups over $1 million in revenue per annum and at least three unicorns in this space in the next decade in India alone. My gut feel is we will have one big player who will create an Amul equivalent for the laundry sector. Remember, laundry in India is not just a story of the 100 startup entrepreneurs but the story of the 11.2 million unorganised dhobis who need to be elevated to industry status.
The need of the hour for the industry is to get the right entrepreneurs inspired, get talented professionals motivated and quality investors interested in our sector.
Let us work towards making the industry a preferred choice for entrepreneurs, employees and investors alike and continue to inspire success stories.