Case studies

“If the business model works, you can solve everything else”

Deyan Dimitrov launched an on-demand laundry company in 2014. Six years later, Laundryheap is the UK’s largest provider, serving thousands of customers across the country and beyond.

The service is super-easy to use. Customers book a collection slot, then someone picks up their clothes and returns them back clean within 24 hours. 

So far, they’ve dry-cleaned over 10 million pieces of clothing and seen active users grow 450 percent annually.

Recently, Laundryheap expanded to New York, the Middle East, and Singapore, with plans to open 12 additional cities in 2020.

Their growth in the last years didn’t go unnoticed. Deloitte ranked Laundryheap as 18th fastest growing tech company in the UK. Financial Times made a similar European-wide list, placing Deyan’s firm in the 73rd place.

Deyan is a pragmatic and straightforward entrepreneur. He successfully bootstrapped the company for three years and developed a strong business model until he finally let in the venture investors.  In 2017, as Laundryheap became profitable, they’ve raised 2.9 million pounds from a combination of angel and VC backed funds.

In the meantime, d.labs has also been part of Deyan’s success story. We helped Laundryheap with scaling his technology from an early-prototype version with lots of “duct-tape” to a robust and scalable product it is today. After years of working together, we invited Deyan to reminisce a bit and share his learnings from the early days.

Deyan Dimitrov - Founder @ Laundryheap

Deciding between babysitting, floristry, and laundry

So how did it all start in the first place? “I looked at markets that were underserved and inefficient. I was interested in services where customers would benefit from digitalization,” he explains the decision-making process. On his shortlist were babysitting, floristry, and laundry services.

The latter has been especially attractive. At the time, a completely offline industry, much of the laundry was served by mom and pops companies, often with inconsistent opening hours.

“Some ran the machines only twice per week as their volumes were too low. Of course, this was bad for the customers. They had to wait longer to get the laundry clean or adjust to the opening hours,” Deyan explains.

These early learnings reinforced his confidence that there was indeed room for improvement. “We could become a premium service and charge more.” 

Spending hours at the dry cleaners

Deyan took the customer discovery “get out of the building” phase as literally as it gets. “I used to spend hours at the dry cleaners, watching the people coming in. I realised they were the same customers who would order food online: mostly single professionals with higher income and short on time,” he describes the customer personas.

Because of the initial focus on the end-consumer, however, he underestimated the actual size of the market. “After a month since we launched, I’ve got a call from an agency. They’ve used Airbnb to rent out 300 apartments. I’ve realised how big the potential actually was – especially if you take into account many smaller shops and offices that also need laundry services,” he remembers. 

“I’ve underestimated a lot of things” 

Laundryheap’s first office has also been its warehouse. They didn’t stay there long though; the team changed offices five times in three years, reminding us that start-up beginnings are hard and stressful. “Looking back, I’ve underestimated a lot of things. Almost everything has gone wrong. I’ve wrongly calculated the number of orders they’ve needed to cover the expected costs, for instance,” he admits. 

Regardless of these false assumptions, he was never wrong about what gives Laundryheap a decisive competitive edge.  

“We’ve been, and still are, the only on-demand laundry business that offers a guaranteed 24-hour turnaround,” he points out. They’ve served customers nights and weekends, aligning with the expectation of the modern consumers and retaining their loyalty. 

In comparison to the early competitors – first of them emerged only two months after the launch – Laundryheap also positioned themselves close to the customers. “Competition passed orders to the dry cleaners. We’ve never done that. I always thought we should deliver the orders by ourselves. This way, we were more efficient, reliable and were able to offer additional cleaning slots,” Deyan explains while admitting that the strategy made the business less scalable.

You make money, you live

Exponential growth has never been Deyan’s priority anyway. Instead of raising capital, he invested his own money and bootstrapped the business for the first three years. As he says, this allowed them to grow more steadily. “We now got a much stronger business model as a result,” he believes.

As a numbers guy, his financing strategy has also been pragmatic and centered around one key metric: average order value which ultimately defined the gross margin - or what the company needs to survive on its own. 

“The business model should work on a small scale and you should generate revenue from the beginning,”

he insists on the important lesson that many start-ups fail to accept. 

“If the business model works and the money comes in, you can solve everything else.” 

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