Prim: Anatomy of a folded startupJanuary 22, 2014: 5:00 AM ET
The YCombinator-backed laundry pick-up and delivery business barely lasted seven months. One of its founders walks Fortune through the postmortem.
FORTUNE – Can technology disrupt even the most mundane chores?
That's the question Yin Yin Wu and Xuwen Cao tackled for seven months with the YCombinator-backed startup Prim before closing for good on Jan. 10.
Prim tried to be the Uber for people with dirty clothes: It was a marketplace that enabled easy payments, pick-ups, processing and delivery. Go online, and choose a pick-up and delivery time. Throw your clothes in a bag -- $25 for the first bag, $15 for each additional -- hand them off to a driver recruited by the local delivery startup Rickshaw, and expect everything back washed and folded later that evening or early the following day. Like Uber, no cash changed hands -- everything was deducted from a card on file. Simple, easy, and convenient.
When Prim shuttered, it was seeing 1,000 pounds of clothes from 40 clients a day -- and growing. "Things were pointing in the right direction for them," argues Garry Tan, a partner with YCombinator, the popular startup incubator that has shepherded businesses like Airbnb and Dropbox through its three-month startup bootcamp. (Prim passed through YC during summer 2013.)
But once you handed off your bag of clothes, the business went from forward-looking disruptor to familiar-seeming commodity. In Prim's case, the weakest link in its supply chain was the washing itself. Prim would take your bundle to a laundromat in San Francisco, and utilize their wash-and-fold services. Prim negotiated a discounted rate for volume, but partnership with laundromats was merely a "verbal deal" and not in writing. Laundromats were paid on a weekly basis at the end of the week, based on that week's volume of clothes, via check or credit card.
While laundromats were initially receptive to working with Wu and Cao, what the two didn't count on was the partnership eventually going sour. Laundromat owners eventually saw Prim as siphoning possible incremental revenues from their own in-house delivery services, especially once Prim began offering same-day delivery. During Prim's short lifespan, it churned through at least three laundromats.
"You're in this awkward position where you're competing against your own supplier," Wu admits.
With that in mind, Wu and Cao were ultimately faced with a decision: either seek out other wash-and-fold services to use -- a potentially endless process -- or operate their own laundromat. The latter seemed a better solution in the long term, but involved funneling hundreds of thousands of dollars into leasing or buying a facility and staffing it. And for every new market it entered, the process of building such an infrastructure was essentially rinse and repeat. According to Wu, that would have slowed down company growth.
So after two months of deliberation, they pulled the plug on Prim. Wu insists running their own laundromats still would have made their startup a profitable business in five to 10 years, with revenues of $10 million to $15 million, but it was a direction the co-founders didn't want to go. Having studied computer science at Stanford, Wu and Cao held few skills for operating laundry facilities. And doing so would also take them away from their original goal of being a marketplace. "They didn't want to actually have to wash the laundry -- they wanted to be the connector," explains Tan.
Far from being disappointed over Prim's outcome, Wu says she and Cao are excited to tackle their next startup. In fact, they claim they've already raised an undisclosed amount of seed money from undisclosed investors and are batting around ideas involving online-to-offline. Says Wu: "Once you realize it doesn't work, you want to do something that can be one of those unicorn companies that can have hyper-growth."
And the startup cycle spins again ...