When they launched an online household services platform, Abhinav Agarwal and Naman Lahoty were confident to scale the business fast. Soon the duo realised that scaling an Internet business in a highly competitive and price-sensitive market like India was hard.
So they decided to go vertical-focussed and pivoted to a laundry-only platform. But their calculations went wrong once again.
And eventually, the company shut down.
Doormint, an online laundry services platform, has shut shop exactly a year after it secured VC funding from two leading VCs. And the reason? Huge customer acquisition cost and cash burn.
According to the co-founders, Doormint had a truly scalable and profitable business model, but then the costs of processing clothes, pick-up and drop logistics, and packaging were difficult to recover through prices.
The startup was founded in early 2015 to provide doorstep home solutions at affordable prices. It was aiming to resolve household grievances of the always-mobile metropolitan populace through its mobile app and online platforms. The services offered were plumbing, appliance repairing, carpentry, pest control and laundry, among others.
In its quest to scale fast, the company raised US$3 million in August. The round was co-led by Helion Venture Partners and Kalaari Capital, two prominent VC funds in India. Previously, in April 2015, it had received US$90,000 from Powai Lake Ventures and angel investor Utsav Somani.
Around the same time, between 2014 and 2015, almost 70 startups emerged in on-demand home services vertical. But Doormint stayed afloat. It was growing well and expanded into multiple cities.
In October, CEO Agarwal told e27 that the biggest challenge faced by them was balancing quality with quantity. “It gets imperative to pay meticulous attention on being consistent and moving at a super-high pace at the same time. As a startup, we don’t just want to be heard and shown, we want to be trusted and known,” he said then.
But then unable to compete with other massively funded startups like Amazon-backed Housejoy, Doormint pivoted to a laundry-only service.
Doormint was part of Google Launchpad programme started in January this year.
The size of the Indian laundry market is estimated at US$1 billion in the organised sector, and a whopping US$30 billion in the unorganised sector! And there are quite a few players, large and small, operating in this space.
However, with very small space for differentiation, players are resorting to discounts and price cuts. To attract customers, some are giving free credits and some free first wash. Seeing that unit economics look far-fetched to achieve, people are trying to disrupt the market in order to gain market share and hence higher valuation.
According to Sameer Jain, Co-founder and CEO at The Moustache Laundry, it is a difficult task to explain to the customer the value that they get from outsourcing their laundry versus washing clothes at home. “After all, the efforts of providing convenience, affordability and quick turnaround time, the customer still ends up comparing the prices with a local dhobi. The customers still think that these startups make huge profits at INR 7 per piece as against a local dhobi who charges INR 5 (US$0.1).”