Advice for Disrupting an Industry and Starting Your First Business with Ajay Prakash

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3:15It's Morgan, the EP of the show, filling in this week for Nicole while she's out on mat leave. A few weeks ago, Nicole did an episode about old school businesses that are finally having their day in the sun and getting real props for their recurring revenue. Businesses like plumbing companies, pest control, and laundry. According to data from PitchBook, private equity investors have bought over 800 plumbing, electrical, and HVAC companies since 2022. Today, I'm talking to someone who saw this potential long ago, Ajay Prakash, co-founder and CEO of Rinse, a company that is building the first national brand in laundry and dry cleaning.

3:53And you might be thinking, how excited could someone really get about running a laundry business? The answer will surprise you. My college with some of his friends. One of his partners in that business, Eitan, hi Eitan, went to work at, you guessed it, Rinse after college. And you should see how excited Jack and Eitan get when they talk about laundry even now. So in my conversation with Ajay, I wanted to see what all the fuss was about. And I have to admit, I'm kind of excited about laundry now. Ajay and I chat about how to find, test, and scale these old school businesses that are ripe for innovation, but we also go beyond that.

4:32Ajay is a really excellent leader. You can tell that just by listening to how thoughtful he is about how he manages his company and team. And as we're staring down at the final days of 2024, I wanted to get some advice. Ajay gives a framework for founders on how to set goals for your company in a meaningful and achievable way, and also advice for anyone who's thinking 2025 might be the year they finally take the leap and start their own company. Here's our conversation. Ajay Prakash, welcome to Money Rehab. Thanks for having me. So happy to have you here. Of course, we have to start with the origin story of Rinse.

5:08Can you take us through it? Yeah, sure. So I started Rinse with one of my best friends from college in early 2013. So it's been almost 12 years now. Wow. At that time, I knew I was going to start a company. And so I was looking at various trends that got me excited. And I kind of narrowed in on bringing technology to old school industries and looking at existing customer experiences that were full of friction. And so I was exploring a bunch of different ideas of my own and nothing that got me excited enough to take the leap. And then one day I was getting breakfast with James, my co-founder, and we had kind of been acting as each other's sounding board, talking about entrepreneurial ideas.

5:47And he's a healthcare guy, so I'd been putting on my healthcare hat, trying to give him feedback. And he actually kicked off the breakfast and said, hey, hey, before we talk about any healthcare ideas, I can't get this idea out of my mind about doing something in dry cleaning. And it was just one of those moments where all of the kind of bells went off in my head. And I thought, well, dry cleaning is actually perfect for the trends I'm looking at. James was always someone I viewed as a potential co-founder, just didn't have an interest in healthcare. And then the fact that he had grown up in dry cleaning, actually, his parents were dry cleaners, his aunts and uncles were dry cleaners, gave him that unique kind of unfair advantage of understanding how the supply side of this equation would work.

6:24And so we got really excited about it and just spent that entire breakfast talking about what we could do here. He lived in New York at the time. I lived in San Francisco. He actually flew back to New York and then a week or two later came back to San Francisco and we set up a test. We picked 11 of our friends. We said, we are going to just try to pick up their dry cleaning and laundry, clean it, bring it back and see what we learn. James was driving the car. I was in the passenger seat. I'd run up to the door as the valet and get their clothes and special instructions. We took them back to James's parent shop, cleaned the clothes and brought them back.

7:01And every one of our friends said, Hey, that was awesome. When are you guys coming back? And so we hadn't thought that far ahead. We just wanted to see if anyone would respond positively. And so that kind of gave us the excitement and incentive to keep going. And so we then spent a couple of months just talking to as many people as we could about the last time they did dry cleaning, the last time they did laundry. And what we heard in those conversations, it's effectively the same thing we've heard for the last 11 or 12 years as we built Rint. It's just the existing experiences are so full of friction.

7:33And it's not one big point of friction. It's all these little points of friction. We call it death by a thousand cuts. But what we realized was there's an opportunity to kind of systematically remove all of those points of friction to create a seamless experience from start to finish, a customer-centric experience, a technology-first experience. And so we worked for a few months and kind of put a circle around three zip codes in San Francisco. And then we launched the service officially in May 2013. So you knew that you wanted to apply innovation and disruption to an old school business. And we actually did an episode about this on the show a couple of weeks ago, because we've been seeing a lot of business media recently really glorifying some of those kind of more traditional businesses.

8:14Like there's a lot of reporting around is the plumber your millionaire next door type of thing, but businesses like plumbing, pest control, laundromats. And I think part of the reason why there's this glorification happening in the media is because there's more PE activity around these types of businesses. So is this what you were seeing 11, almost 12 years ago that made you excited about an idea like Rinse? Well, you know, my approach is a little bit different. So when I knew I was going to start something, my exploration was in looking at the intersection of three things, right? One was the, where am I an expert?

8:48One was, where's there a market opportunity? And one was, where am I passionate or really excited about it? And the expertise thing, you know, sometimes people will say, oh, you know, you have to work in an industry and you have to have this domain expertise for a long time before you can actually start something. And for me, the expertise that I brought to the table was someone who had always worked really long hours, was always really busy, and never had enough time to do the things I needed to do. And so all of the ideas I was exploring on my own were around removing that friction that a busy consumer has.

9:20And at the time, you know, if you think about when you start a company, people will always look and say, hey, why me? Why now? The why now at the time was less about, you know, PE thinking about old school industries and more about it was when Uber and Lyft were really exploding and people were looking at their phone as the remote control for their lives. And the iPhone had become ubiquitous. And so there were on-demand companies in every vertical, on-demand car washes, on-demand shipping, on-demand house can name, you name it. And I think, you know, for me, the idea of pressing a button and having something happen was really compelling as a busy professional.

9:57And so, you know, I was looking, doing my research And I got great advice early on from another founder who said, hey, as you're working on things, check and see how excited you are. And then a week later, check and see how excited you are. And then a week later, check and see how excited you are. And if in the early days you can't maintain that level of excitement when you have to do research on the industry or have people tell you that's a dumb idea or whatever it might be early on, then there's no way you can maintain that conviction for the 10 or 15 plus years it takes to build a real company.

10:30that's durable. And that was great advice for me because I would dive into different ideas and nothing really got me that excited. And I think it was a combination of didn't feel like the right space and I didn't have the co-founder because I think I knew that I wanted someone to do it with me. So dry cleaning and laundry was not necessarily in my sights, but James grew up in dry cleaning. And so when he brought it up, all of the pieces kind of fell into place. And then we started working on it. And I just kept getting more and more excited as we were building. And I'm glad I did because now it's almost 12 years later and I'm still excited, but you really have to maintain a lot of excitement and conviction to weather all the storms in the journey.

11:07I love that, that sort of check-in of, are you still excited about this? Are you still excited about this? And so you went through that process of saying, what am I good at? And then you mentioned another question you asked yourself, which is so important. And it's that question of like, is this something that's needed? Like, what do people need? And I think that that That can be an easy trap for entrepreneurs to fall into if they're just really excited about an idea. They feel like they want to do something, but actually testing whether or not something is needed. Their ideal customer profile is somebody who actually needs this service.

11:40And so you did a test with 11 friends. Was there anything about that test that surprised you? Well, I mean, first, it was a critical piece of understanding whether we want to take the leap. And there's a lot of people who will kind of build the product and they don't want to show it till it's perfect. What you need when you start a company, especially consumer facing is velocity to insights. You got to move as fast as possible to figure out if anyone cares. I don't know if anything surprised us. The biggest thing overall was people were really excited. And so we knew we were striking a chord. And there was something there where people actually cared about what we were building.

12:14And I remember James saying for him, one of the big aha moments was people actually paid us. We didn't do this for free. We charged them at cost. So we didn't make money, but they actually paid us for the service that we literally took a week or two to kind of get set up. But what we did is we learned a lot in the process. We tested morning. We tested evening. We tested during the day. And as an example there, if you're five minutes late in the morning, you're ruining someone's day because they've got to get out the door. If you're five minutes late in the evening, nobody cares. And so there were little insights like that that were really helpful.

12:50But the biggest thing was, do people want this? Is this actually solving a pain point? And then kind of learning in that testing, what are some of the things we need to really nail? Like, oh, that experience at the door for the valet is important. Oh, when you take, like I found, we had a bunch of random laundry bags. And we picked up people's clothes. And we wrote their name on a piece of paper and the service type. And we threw it in there. And I found after two or three customers, I couldn't remember whose bag was who. So it gave us the sense of like, wow, this is operationally going to become really complicated.

13:21And so you got to build the systems to be able to manage that. And those were little nuggets we learned early on. But the biggest thing was, hey, people really want this. This is exciting. And so that kind of led us into that need finding and the journey to say, okay, let's go build this. Yeah. Yeah. Debatably one of the more important steps. Was Rinse always called Rinse? Or was there another idea for the name of the business that you tossed around? It has been rinse since after that test. And I'll tell you, I had experience at the time with consumer startups, with the last startup I was at, and also with a lot of the on-demand companies that were coming out.

13:56What we found was there were companies that were either spelling a word wrong, like Lyft with a Y. That's the only company I think that survived that. But there was a company called Shift with a Y, and there was a bunch of those. or there was a lot of.io's or.ly's. The vision here has always been to build a household name, to build a national brand, to build a durable company. And I had spent years in consulting and private equity working with great companies and I had seen that. And so it was really important for us to find a word that worked. And so we did the search around, what's gonna be the core root word?

14:32Is it wash? Is it press? Is it fold? And we found that actually, there were a lot of domain names available with Rinse at the time. Rinse.com was not yet available. But what we did was we, in the test, we called it Rinse Me. That was just like a placeholder. And we got feedback from people that that wasn't a very good name. The URL originally when we launched in May, 2013 was rinsenow.com. That's where we put a landing page up. But we were really, after we knew we were going to do this, James and I went back and forth a lot on this. Could we create the name without the domain name, but it was all in service of this brand that could become a national brand and a household name.

15:10So we were very intentional about calling it Rinse, about making it a word, about making it something that actually made sense. And then shortly after we launched, we actually were able to acquire Rinse.com. And that was an investment where we said, hey, that's a no brainer because we're not trying to be the biggest dry cleaner or laundromat in Pacific Heights. We're trying to be a national or global brand. And so we got to make those investments up front. That makes so much sense. And I'm so glad that you did that. And I love that you brought up Lyft because I was wondering if this story would go like, we considered rinse with a Y, we considered rinse without an I, we considered rinse with no E at the end.

15:45So that's the origin story. Fast forward 11, almost 12 years. I'd love for you to sort of paint a picture for the listeners about what the service actually looks like. So I'm in a room where I can see my laundry hamper right now. I have a puppy. We went to the dog park today. We both came back muddy and disgusting. If I want to use Rinse, can you tell me about the journey that my now muddy pair of jeans will go on? Yeah, absolutely. You can sign up at Rinse.com. You can download the mobile app. If you're an existing customer, you press one button on the mobile app or you text the letter Y. And then our valets who are all W2 employees will come to your door between 8 p.m.

16:26and 10 p.m. And they will pick up your clothes. If you're a new customer, you get personalized rinse bags. And if you're an existing customer, you already have those bags. We'll pick them up. We'll take them. We'll do a bunch of stuff with them. And I'll tell you about that in a second. But then the plan is we'll just bring them back to you. If it's laundry, it's next day. If you pay for next day service, otherwise it's in a few days and it's folded. If it's laundry, if it's hanging and pressed, if it's dry cleaning. On the operation side, it's pretty complex. I think the way we look at this space and this industry is that getting started, the barriers to entry, pretty easy, right?

16:56James and I did it within the first week or two of talking about it. But the barriers to scale are very high because there's so much complexity. So what our valets will do is they'll pick it up. They'll bring it back. We have a central hub in all of our markets. We're in 10 major markets across the country right now. And then we work with local cleaners to clean the clothes. And for us, there's always been an element here of wanting to help local cleaners grow their business and being very thorough and saying, hey, there are good cleaners out there and bad cleaners out there. We're going to work with the best cleaners and let them do what they do best, which is clean the clothes.

17:32And then we'll take care of everything else. We're going to help them grow their business. So we get them the clothes to clean. They have rinse technology and rinse processes in their facilities. They'll clean the clothes, bring them back to us, and then our valets will deliver them when the clothes are ready. That's something that really does sort of serve as a heartbeat through Rinse, the consideration of the people along that are involved in the processes. Like the fact that your valets are W2 employees and the fact that you actually are supporting local mom and shop businesses. Because especially like you think about the time and the influences, you mentioned Uber and Lyft.

18:10Around the same time, people are getting really interested in marketplaces like Airbnb. and B. And so I could see a world in which Rince is a marketplace that helps people find those mom and pop shops. Or you could have decided we're going to have Rince facilities and we'll own the space and the machines and things like that. But I love that you've kept this through line of just really considering the industry at large and the people involved to pull it off. It really shows. Yeah, thank you. I mean, it's been critical since the beginning. I mean, it started with James's upbringing and growing up in the space and wanting to really being on a mission to help the industry.

18:43And as we got started, you know, we wrote our core values in March 2013. And the main core value was make mom proud, which is really an ode to James's mom who helped us out a lot as we got started. But the idea there was, you know, whatever you do as you represent yourself and you represent the brand, you know, you should be proud to tell your mom about not not not just okay that your mom found out about it, but proud to tell them about it. And that's a big distinction for us, because that's how we want to treat our cleaning partners when we work with them. That's why when we brought on valets, we knew that, you know, having valets be W2 employees was not only is it better for the customer, because they get a better experience, but way better for the valet, they get protection as employees.

19:24And frankly, it's been better for rinse, because we deliver a better experience to the customer. And we've actually found a lot of our valets have become operators within rinse, and they've taken full time jobs within rinse. So, you know, I think that idea of doing the right thing has always been pretty, pretty important since the beginning. Yeah, that's great. Make mom proud. That's going to be our KPR, our key performance indicator for next year. I love that. Yeah, I love it. Hold onto your wallets. Money Rehab will be right back. And now for some more Money Rehab.

20:01speaking of kpis for for next year we're approaching the end of 2024 this is a time where people businesses are making their goals for next year can you talk a little bit about how you set goals as a company and use what your goals are for 2025 as an example of that decision making process yeah absolutely i mean it's certainly evolved over time i think you know when we started early on calendar year was less important and it was more about just continuous progress and always doing better. And the way we used to do it was we would say we did 50 stops in a night. We would sit in a room and say, okay, what breaks when we get to 100?

20:38Okay, what breaks when we get to 200 or 500? And so early on, you're really just trying to manage the complexity and make sure you can navigate it while maintaining an amazing customer experience. We've grown up a lot since then. And so now we're at a stage where what we do is we try to keep it simple. I think there's so many things we could be doing. And something I say internally sometimes is there's a lot to do, but we don't have to do a lot. And what that means is that there's only a few things we have to really get right to have a successful year. And so what we have evolved to is at the beginning of the year, we start with a one-page strategy.

21:13And on that one-page strategy, we'll have an overarching company goal. We'll have a couple areas where there are key initiatives. and I like to work in frameworks, there'll be two or three pillars at most, and then some core metrics. What we want to do is have kind of this overall overarching alignment across the company. You know what we're working towards. Everyone has a job to do, and it's in service of this broader goal. And so, you know, last year in 2024, there was a lot of focus on unlocking efficient growth while achieving profitability. That was sort of the overarching company goal or demonstrating profitability.

21:51And our pillars were around growth, profitability, and operational excellence. And so it was very clear, if you're working on something, it should be in service of one of those. And one of the frameworks I've learned in the past is called this even over framework. When we talk about growth and profitability, they're both really important, but what's more important? And so last year, the internal conversation and the way I described it was profitability even over growth, right? If we have the opportunity to be more profitable, have the business be stronger, We're going to take that over trying to achieve more on the growth side.

22:24As we transition to 2025, we're still putting the final touches in place. And we have all hands next week to start talking about the year and all that. But there'll be a slight change where now it's going to be growth even over profitability. We've demonstrated profitability. We know we're in a good spot, but we still have a lot to do to become that household name and the national brand and really to kind of power all of laundry. And so there's work to be done and we want to make sure that we're focusing on the right things, but it'll always be kind of, you know, buttoned up into this very simple, easy to digest one page strategy that allows everyone to sort of know, hey, this is what we're going after.

23:02I love how you take the sort of there's a lot to do, but we don't have to do a lot and give people a framework that they can always sort of do a gut check of like, does this support the overarching goal? And we had the co-founder of Club Penguin come on the show a while ago, and he said that they had a similar framework where, you know, the company was big and they were selling to Disney and they were getting invited to all of these conferences. And they were like, would an eight year old care about this? And that was sort of their their pillar. And so if an eight-year-old wouldn't care about it, they just sort of didn't do it.

23:31And that was how they filtered, like, there's a lot to do, but what are the things that we're actually going to do and what should we be putting our focus on? And I know for 2025, in fact, you may be announcing it today as we're talking, but you're doing a partnership with Barrier Free Living. Can you talk a little bit about what that is? Yeah, absolutely. We've always been focused on social impact. We've always focused on doing the right thing. We already talked a little bit about helping local cleaners and W2 Valets, but we've also taken clothing donations since the beginning. We've donated several tons of clothes over the years.