How I Built This with Guy Raz - How I Built Resilience: Ajay Prakash and James Joun of Rinse

Episode Date: August 27, 2020

Rinse is a laundry and dry-cleaning app started by college friends Ajay Prakash and James Joun in 2013. Since March, Rinse's dry cleaning service has seen a drop in orders, but their laundry arm has remained steady, allowing them to avoid layoffs during the COVID-19 crisis. These conversations are excerpts from our How I Built Resilience series, where Guy talks online with founders and entrepreneurs about how they're navigating turbulent times.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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It had tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.com slash host. Hello everyone and welcome to how I built this resilience edition. On these episodes, we're talking with entrepreneurs and other business leaders about how they're thinking creatively during such a disruptive time. And today we're going to hear from the co-founders of Rince, Ajay Prakash and James June.

Rinse is a laundry and dry cleaning service that picks up, cleans, and delivers clothes right to their customers' doorsteps. Rince was founded in 2013 when AJ wanted to start a business, so he approached his college friend James, who'd worked at his parents' dry cleaning shop as a kid. This year, Rince has seen a drop in dry cleaning orders, but their laundry service has stayed stable. steady, and they've been able to avoid layoffs so far. I spoke with a Jay and James from their office where they're practicing social distancing in order to keep their essential business running. To explain what is rinse, how does it work? Yeah, I mean, rinse in its simplest form is pickup and delivery of dry cleaning and laundry. We started in 2013 to give you a little bit of the

background. At the time, I was looking to start a company, and I was excited about a couple trends. One was the idea of bringing technology to old school industries. And then James actually came to me with the idea of doing something in dry cleaning. You guys are college friends, right? Yeah, exactly. I know Jay for 20 years. And, you know, my background was more in health care. But my first job in life was helping out my parents in the dry cleaner store. So they put me to work when I was young. My uncles and aunts are also in the industry. And so for as long as I can remember during family gatherings, we would talk shop. We would talk dry cleaning, you know, all the time. More recently, the discussion is really focused on why is business so slow?

You know, why isn't there as much business as there used to be? And so in 2013, you know, Jay and I were meeting up for breakfast to discuss, you know, ideas to start out businesses. I had just come back from my parent store. And it's one thing to hear that business is slow. And then to see it in person is just stark. And so I was prepared to see customers and machines running and it was silence. And so that image stuck with me. And so when I was going to eat breakfast with the Jay, I asked a Jay, you know, what can we do to help dry cleaners?

Yeah. And that was a moment for me where the bells kind of went off. And I thought dry cleaning was perfect for the trends I was looking at. I'd always view James as a potential co-founder. But, you know, I think it was too good to pass up the unique advantage we brought to the table with him understanding the dry cleaning side of the equation. And so we ran out a week later, did a test with 11 of our friends. We picked up their clothes. We cleaned them at James's parent shop.

We delivered them back. And from all of them, we got this unanimous response of, hey, this is awesome. When are you guys coming back? Wow. I mean, I love that because the business model, right, for dry cleaning has been more or less the same. It's been small mom and pop shops like James, like your parents. Or maybe they've got, you know, some people have a few dry cleaning shops. And there's like zips and some of these small chains.

But really, it was an industry ripe for a completely new approach. Absolutely. And I think the biggest thing is that as consumer behavior has shifted, what's become very clear in dry cleaning is that it's just, it's full of a ton of friction. And it's not one big point of friction. It's a lot of little points of friction along the way. So if you think about the dry cleaning experience historically, you don't know who's a good dry cleaner. So you just go to the nearest one. You're held hostage to proximity. You can't assess quality until after the clothes come back. So it's a bit of a crapshoot for us as customers. The model is very vendor-centric in the sense that they're open nine to five closed on. weekends, which doesn't work if you're actually at work during that time. And there's limited technology, limited customer service, limited transparency. We call that internally death by a thousand cuts. And when we were getting rins started, our idea was let's systematically create a seamless experience from start to finish, work with the best cleaners out there who are struggling. They don't know how to give volume. Let them do what they do best, which is clean the clothes,

and then manage everything else. And so that's how rinse got started. So essentially, I mean, you get an app and you put in your order and then somebody comes, it up and then you partner with different dry cleaners to clean it. You don't, you don't own your own facilities, your own cleaning facilities. That's right. Yeah. So you schedule a pickup. We only serve the customer and we continue to serve the customer between 8 p.m. and 10 p.m. because that's more in line with the customer schedule. It's more customer-centric. We send our valets to come pick it up. They're all W-2 employees. You know, they're the front lines of the customer experience and they'll come get your clothes, answer any questions,

similar to what a counterperson might do at a cleaner. And then we bring it back to our facility and then our cleaners will clean it. And our goal is to work with the best cleaners. The reality in the industry is that all cleaners are underutilized. They all have excess capacity and they don't, one, know how to get volume. And then two, because of that vendor-centric approach, their world tends to be very spiky during the week. You know, they'll get that Monday morning rush and then the rest of the week is kind of quiet. What we've done is built a model where we're going to send our cleaning partners a predictable, steady stream of volume, allow them to clean the clothes, filled their capacity, but then also allow them to grow and actually be able to plan for growth

because we're sending volume seven days a week. You know, a lot of dry cleaning shops don't clean on site. They just collect the clothing and then send it off to a central, you know, location that dry cleans for, you know, a hundred different shops. I'm curious, James. I mean, I mean, did your parents initially say, hey, you know, this idea might put people like us out of business? You know, for them, they almost had the opposite reaction in the sense that they're

Their generation, as the Jay mentioned, they're very good at cleaning clothes. Customer acquisition has totally transformed. So there's a whole class of entrepreneurs who don't understand that customer discovery has gone online. And so what's happening is that volume has declined because people are searching for companies and services online. So we found that as a need that we could help fill. So it's our job to partner with the best dry cleaners and then give them volume.

You know, we're good at acquisition. we want to partner with those who are really good at cleaning and make that a win-win situation. So you don't, I mean, really, you don't need your own facility. You don't need to build a cleaning plant or a processing center for clothing at all, right? No, and I think when we started rins, the idea here was to really build a process and technology layer on top of an existing infrastructure. You know, dry cleaning has been around for a long time. There are some cleaners out there that aren't very good, but there are a lot of very good cleaners out there, and they just need help. getting volume. And that's really where we stepped in. Yeah, I note that you made a point of saying that your drivers are W-2 employees. You're in California. Obviously, California, state legislature passed a

law, clearly targeting Uber and Lyft that so-called gig workers need to be W-2 employees. Those companies are challenging that law. But you decided to make your drivers employees of the company. It sounds to me like that was a conscious decision that you were very intentional in deciding on that, because it's more expensive. Absolutely. They've been W, two since the beginning, since 2013, you know, as I said, they're effectively replacing the counterperson. And if you as a customer are using RINC and you have a totally normal service experience, the only person you should ever see is your valet. And so for us, we wanted to make sure we were able to hire the best people, train them, develop them, invest in them. And certainly,

it's more expensive to employ valets, but it's better for them. It's better for rent. It's better for the customers. So it was a no-brainer decision up front. I know, I believe you've raised close to $24 million since you launched in 2013. And then here we are in this really odd, unusual, challenging situation. I have not done any dry cleaning since March. I've been doing my own laundry. And I imagine lots of other people have. So I imagine you've also seen a drop in your business.

Yeah. At a high level, we're holding up okay. And I think the key thing to understand is that we offer dry cleaning and laundry. and the way those two services have behaved during the pandemic are a little bit different. So dry cleaning has certainly taken a hit. You have less people going to the office, less people traveling, you know, weddings and graduations and formal events aren't happening. But laundry on the other side has remained pretty stable. And we have a subscription laundry service as well, which has actually been growing a little bit during the pandemic.

So, you know, there's all things considered. We're holding up okay. We've been able to ensure financial stability, ensure job security for the whole team. And I think, you know, even more importantly, when all of this hit in early March, we, you know, sent our, anyone who could work from home, work from home starting March 5th. We're an essential service. We've remained open this entire time. The first thing we had to do was really take a hard look at our operations and make sure that every step of the way was maximized for safety and reducing the risk of transmission. And so we basically, you know, day one started to look at every piece of it. Just to curiosity, James, how is your parents' business doing right now?

You know, I think they're holding up. You know, it's similar to what a Jay said. It's definitely down. They're in a position where they're, you know, wanted to retire for a while, but rather keep the routine, even though there's not really customers coming in just for routine's sake. Yeah. Like many other dry cleaners, they're probably running their machines once a week. Wow.

You know, it's definitely take a hit, especially in the Bay Area where we've had shelter in place longer than most parts of the country. And so, yeah, you know, it's tough. And we've done a lot as a company, though, with the cleaning partners that we have, providing them with relief resources, directing them to programs that can help them out because we have cleaning partners, not all of them are fluent in English. You know, there's a lot of information out there changing every single day. So we've spent a lot of time directing them towards relief programs and so that that's helped. Yeah, and the cleaners, we work with most of the cleaners, it's not easy for them just to say, hey, I'm going to start

doing delivery or, hey, I'm going to start offering laundry. They're totally different businesses. And so for us when we were looking at our cleaning partners, we weren't sending them as much volume on the dry cleaning side. And on our cleaning partners, we have partners that are specifically for dry cleaning and specifically for laundry. So one thing we did starting in April was we actually spun up the production of reusable cloth masks. We ordered them from our cleaning partners for our own team and then decided to extend production to sell to customers. And we found, you know, for at least for a couple of months, we were able to offset the decline in dry cleaning revenue with the sale of masks. And that helps our cleaning partners continue.

you operating. When we come back in just a moment, Ajay and James tell us what to look for in a business partner and how they've been ready for this moment since 2013. Stay with us. I'm Guy Raz, and you're listening to How I Built This Resilience Edition from NPR. Hey, welcome back to how I built this Resilience Edition. I'm talking with Ajay Prakash and James June, the co-founders of Rince, about the big lessons they've learned from building their startup. Let me get to this question from Simo on YouTube. This is a good question. How did you guys attract customers at first? This is a question that we always deal with on the show, the chicken and egg problem, right? Like, you're going to dry cleaners and you're saying, hey, we want to partner with you. We're going to bring you a lot of

customers, but you don't have any customers. And then you're going to customers and saying, we're going to get you the best cleaning, but you're any cleaner. So how did you start? I mean, James, you had an advantage and your family had a family business. But how did you get customers at first? Yeah. I mean, we did have an advantage because one thing you do want to do is you need to get the supply side up and running before you start bringing demand in. And we actually chose not to work with James's family to start. It was more finding business partners. And we got a lot of skeptical looks at the time. But the credibility that James brought to the table allowed us to sign up some early partners. And then in May 2013, we signed up 10 of our friends. And then we started just testing out the

operations. We put a circle around three zip codes in San Francisco and said, hey, let's prove it out here before we prove it out anywhere. And then in June and July, we got more friends or their friends and it was all very much word of mouth early on. And then we really started kind of added zip code by zip code. But it's important to remember in 2013, it was a very novel concept. The second we introduced the fact that we were going to do pickup and delivery of dry cleaning and laundry and you could do it with some form of technology, it was, we had a large email list right away. And that was part of the early signals that we were striking a court and it was worth continuing to pursue this. I'm curious, I mean, now that we're in this sort of COVID period, and it's likely we're going to be in this place for a while, right?

I mean, presumably you probably cut things like marketing and I know you didn't lay anybody off. So what other things are you doing, like to kind of steal yourself for a, you know, a period of time where your growth may not be what you had projected it to be in January of 2020? You know, the path of a startup, I think builds resilience the whole time. And the past 12 months, we as a company prior to the pandemic, we're focusing on getting to profitability, right? We were working on reducing our expenses, improving our margins, taking those steps you need to reduce cash burn. And we made a lot of progress. So going into the pandemic, we were actually well suited from a financial stability standpoint to weather the storm and dry cleaning take a hit, but laundry is held up. And that certainly helps.

So relative to companies maybe in travel or live events, it's a different impact. I think for us the big question, you know, it's not if dry cleaning will come back. We know it's going to come back. The question is when. And so what we're doing is we have as a very operationally complex business, we have a mantra of always be paranoid, never be complacent. It couldn't be more important than right now. And so even though we operating in COVID is kind of normal for us now, we need to continue to maintain that vigilance. And then I think it's just taking various steps to reduce costs, continue to drive growth where we can so that we're extending runway as long as possible. I'm curious about the competitive landscape, right? I mean, there are other businesses that are offering a similar service. And is there a world where we're heading towards a DoorDash versus Grubhub versus Caviar? Like, is there a world where there's sort of a race to, I don't want to say the race to the bottom, but a race where you're constantly undercutting other competitors to offer the best price to keep your customers, where it becomes very difficult to become profitable? We don't think that there's a world like that in our space. I think the one thing, we found. I mean, we started when Uber and Lyft where the arms race was going. And I think we recognized early on that this isn't a land grab opportunity. It's really about providing a high quality service. The second you use us, if you don't have a good experience, you're not going to stick around and come back a bunch of times. And so for us, it's really about nailing the execution. At the end of the day, this is an industry where the barriers to entry are super low, but the barriers

to scale are incredibly high because there's so much operational complexity. And so for us, you know, we spent the last seven years really mastering that operational complexity, implementing technology to be the most digitally advanced company in the space, and really focusing on as we scale, how do you scale quality? How do you scale the customer experience? So right now from a competitive landscape standpoint, a lot of the startups that maybe started around the same time as we did are no longer around. And the interesting dynamic we might see in this space is less about of arms race and more that there are a lot of dry cleaners that don't want to continue dry cleaning. You have a lot of people who want to retire. You have kids who don't necessarily want to take

over. So there's a lack of generational transfer. And, you know, there is some opportunity potentially for consolidation, but it's not an easy path. Let me ask you guys to put on your entrepreneur hat. I think a lot of people will consider starting a business right now, especially people who have lost their jobs or people who are kind of looking at the world and saying, what do I have to lose? Do you think actually now is a good time to start a business in the midst of a financial and economic crisis? And secondly, if so, what should somebody thinking about starting a business look for in a potential co-founder? Yeah, it's a great question. I mean, on the first part, I would say, I think when you look at starting a company, you have to ask the question,

why me, why now? You know, why am I the one who should be starting a company in this industry and solving this problem and why is this the right time. So for rents, you know, I've been focused on consumer startups. James grew up in dry cleaning. There was a good story for us to do it. And the why now was that Uber and Lyft had basically made the consumers realize they could use the mobile phone as a remote control for their life. And I think being excited about it is really important. And then when you start working on your idea, if you're excited the next week, keep going. And if you're excited the next week, keep going. What you have to do is you have to be excited, not just by like the, hey, the glamour of what starting a company might be, but then like doing the research and building the

model and looking at the numbers and all the stuff that's not as fun. If you're still excited, it's certainly worth trying regardless of the macro environment. It's, and it's a grind, as you have alluded to. James, what do you think, when you think, thinking about finding a partner, I mean, clearly you guys have a strong partnership. And from what I, from what I'm, I deduce, AJ, you sort of focus more on operations and, and business, the business item, James, focus more on product and development. Is that, is that fair? You know, the way I think about it is, you know, for my parents' shop, my mom focused sort of the front of the house, and I'm more of the back of the house. So I'm in the operation guts. Okay, I got you. Okay. So I reversed it, right.

Okay. You know, and I think that was, you know, fortuitous, you know, for two reasons. One is a Jay's a repeat founder. For me, I had this deathly fear of leaving my job and taking the leap, and I'm fortunate to have found a Jay because he's kind of done it before. Yeah. And And that was comforting and, you know, really building my confidence to actually make that lead. Secondly, you know, in terms of finding a good co-founder, one exercise that we did early in 2013, which I didn't really understand at the time, you know, the wisdom of a J made us do this is that we went through a set of questions to really align their expectations and values. You know, why are we doing this?

What are your goals? How do you work together? And those have now translated into our core values, which got our company until this day. And so if you're trying to co-found a company with someone else, go through that exercise. It could be with a friend. It could be with someone you don't know that well, but you really need to align on your values and what your goals are. I think that is a critical step because a lot of people don't have that conversation and say, hey, you know what? This is my friend. I'm going to trust him or her. It may not work out that way. And just, I mean, it is like a marriage. We've been in this now for seven years and there's still hopefully a lot more years ahead of us. And I've known James for 21 years now. We're very good friends, but we still went through that exercise to say, like, what do you want out of this? What are your expectations? You know, what is your working style? All that. that sort of stuff. I think having a lot of those conversations up front are incredibly important because you need to have aligned values, just like a marriage. You need to have aligned expectations.

But then also, I think there's an important factor of if you can have implicit trust in the individual, that's really important because you want to make sure that the people beside you are going to be rocks and they're going to be there with you as you go through it. Really quick before I let you guys go, when you look back at this moment in five years from now, what are some ideas or values or approaches that you want to take with you into the future of the business? Yeah, you know, it's certainly been a challenging time. Just like the second time you start a company or the second kid you have, it becomes easier. I imagine the next time we have to go through this, we'll make fewer mistakes and we'll do everything better and faster. But I think, you know,

you can't predict what's going to happen tomorrow, right? In February, there's no way our plan factored in navigating COVID and doing what we're doing. And so it's really important to have guiding principles that help you during the good times and the bad. times. And for us, you know, we wrote our core values in March 2013, and they've been the same core values for the last seven years. And two of them that we've used are, number one, make mom proud, which is an ode to James' mom, who helped us so much at the beginning. But really, you know, whatever action you take, you need to be proud to tell your mom about. And then the other is embrace change and ambiguity. And that one is really, it applies to every day of a startup's

life, but certainly applies and is even more pronounced during this time period. So the important of having core values, the importance of having guiding principles so that when you get into situations like this where things can get blurry, you can stay rock solid and focus on the goal, I think, is a really important takeaway. Awesome. Guys, thank you so much for joining us. Awesome. Thanks for having us.

Thank you. That's an excerpt for my conversation with Jay Prakash and James June, the co-founders of Rince. To see our full interview, you can go to Facebook.com slash how I built this. And if you want to see all of our past live interviews, you can find. find them there or at YouTube.com slash NPR. This episode was produced by Candice Limb, with help from Will Mitchell, Tyra Lockhart, Matt Adams, Gianna Capadona, John Isabella, Julia Carney, Neva Grant, and Jeff Rogers. Thanks for listening. Stay safe and I'll see you in a few days.

I'm Guy Raz and you've been listening to How I Built This.