In this article, Osita Kirti Ranjan who is currently pursuing Diploma in Entrepreneurship Administration and Business Law from NUJS, Kolkata, discusses How did Bengaluru based online laundry startup, Laundry Anna raised 1 Cr?
Introduction
Now, these days’ startups have become a powerful tool for those who want to do something different in business field by applying creative and innovative ideas. Just a few years ago, we had to go to the laundry by oneself or a person came to us to pick our dirty garments. This scenario is changing slowly but steadily as there are some startups are being developed by new entrepreneurs. Pratik Rana is among those entrepreneurs who thought to bring something new in this laundry sector. He established Laundry Anna in Bengaluru in the year 2015. It has done a tremendous job in a short span of time since raising funds is the very herculean task for the new startup.
Laundry market in India
In 2015, the approximate size of the laundry market was Rs. 2,20,000 crore, with the unorganised market (which includes dhobis, maid servants, and mom-and-pop stores) valued at Rs. 5,000 crores. The sector is fragmented with 7,67,000 establishments, 98% of which are micro-sized laundries with fewer than 10 workers, says a report by Euromonitor International. Hence, we can say that there is the best chance to grow in this sector as it is the blue ocean.[1] Started in 2015 with a capacity of just 300 garments per day, LaundryAnna now processes over 3,000 garments every day.
Social commitment of Laundry Anna
Besides being a business model, it undoubtedly put emphasis on building a good relationship with its customers. It is just not a work to pick up dirty clothes and deliver to washed and ironed clothes at the doorstep. They are very committed to their job. A business can only flourish if it will have trust and goodwill among its people. Trust and goodwill are the key factors that not only attract customers but also investors too. More customers mean more profit and more investors mean more funds. Eventually, this motto helps in raising funds from the investors because it takes them in their hands and lowers the risk by developing safe commitments.
Service Quality and their plans
If we talk about the service being provided by the Laundry Anna is very convenient and user friendly, you are just a click away from the laundry services. All processes like picking up, delivery of the clothes or ironing are done within 48 hours. They are not only providing good services but also have demolished the bad tags on the washer man’s professions. By collecting them in a group and using their skill has provided a dignified life to them.
This startup works on a full stack show and claims finish inventory network from coordination to piece of clothing preparing. They have the arrangement to extend to different territories in the city with a blend of center point and talked display and physical stores. Attributable to the stringent concentrate on quality and turnaround time, they are not considering diversifying model. They will keep on having in-house preparing and overhaul the current foundation to adapt up to the extended operations.
Fund-raising strategy of Laundry Anna
On November 2016, Laundry Anna raised 1 Cr. Through seed funding from angel round after PickMyLaundry raised $200K in angel round. Seed funding and investment through angel investors have become very important for fund-raising especially for startups. So, we should first know about seed funding and angel investors because without knowing these two things we cannot get success in raising funds. These are pivotal for standing and starting a new business.
What is seed funding?
When a startup raises fund for the first time is known as seed round. It is also considered as angel round or HNI round. Sometimes it is called as pre-Series-A round. It is an exercise for small interim fundraising. It often comes from owner’s assets, family and friends for meeting initial operating expenses. It is done to attract venture capitalist as they consider it as a risk holding investments. It encourages and convinces them to invest in the startups. It is the phase where the owner dilutes his or her equity. The amount which is being given is the function of the quantum which is needed to be raised, where the startup is in terms of traction and also where the business will be in future after this funding.
Prateek Rana, Founder of LaundryAnna, is a very experienced businessman as brought rich experience in the service industry with companies like ITC Sheraton, Kingfisher Airlines and Biocon and also served for a social enterprise HouseMaidForYou, working on upliftment of domestic workers with his spouse Rathi Rana. His till life span experience helped him a lot in raising 1 Cr. LaundryAnna operates as the exclusive partner for many apartments and hostels like Symbiosis Institute, Serenity Group of hostels, IIITB among a few. These all were added positive points in getting support and trust of the investors.
An investor considers following things in the management of the startup before putting his/her financial assets into it: a) business owner’s skills, b) business capabilities and track record, c) the product’s or service’s benefits.[2] He holds all these 3 key points which helped him in being successful laundry startup in South India. The seed round that raises sector specific bets for which larger investors keen to make, get 20-25% of the equity.
Diluting 15% of the owner’s equity is an ideal scenario but it must be diluted as such limit that the business could be as such level in easily raising $2-5 million (the more the merrier) in the Series-A round. The typical quantum of the capital that an organization can hope to raise for this sort of weakening would be in the scope of $250-500k. Exemptions exist on either side of these reaches, yet they are case particular.
There are also many professional angel investors who want to put their money for new entrepreneurs. They play a vital role in fund-raising as they are very familiar with the initial problematic conditions of the startups and they are always ready to take risk in investing in new businesses by using their expertise. They either buy equity or give loans to the entrepreneurs. They provide a good platform for pooling resources and growing startups. For example Google is giving seed cash to the Center for Resource Solutions for setting up sustainable power source affirmation programs in Asia. The Center’s objective is helping organizations purchase control from clean sources. The program was set to start in Taiwan by setting up authentications for the sustainable power source.
When raising more than $1 million, professional angel investors normally use seed value. Seed value includes the financial specialists acquiring favoured stock with voting rights and getting to be co-proprietors of the startup. Seed value exchanges are more mind boggling and costly than those of seed advances, yet might be seen as more advantageous to financial specialists when more seed cash is required.
Founders of Laundry Anna are very smart and intelligent. They know which business model is appropriate for laundry startups. They suggest using a combo of B2B and B2C model. B2B (Business to Business) – means that you are selling a product or service to other businesses. For example: Selling CRM Software “Customer relationship management” to organizations so they can keep track of their sales leads, manage their sales cycles and determine a cold-calling schedule.
Business to consumer (B2C) is business or transactions conducted directly between a company and consumers who are the end-users of its products or services. For example: B2C referred to mall shopping, eating out at restaurants, pay-per-view and infomercials. However, the rise of the internet created a whole new B2C business channel in the form of e-commerce or selling goods and services over the internet.
Laundry sector requires both the model because, in the former section, you will have to gather professional washer-men who have the skill and working capacity and efficiency. It must be taken into the consideration that the consumer can get his/her washed outfits as promised time limit i.e. within 48 hours. But it does not mean that they are to be overloaded with the dirty garments. Everything should be scheduled and managed properly. On the other hand, the end service is given in the hands of consumers directly, so it must be kept in mind that consumers must be satisfied with the laundry’s service. They should not have any complaint of having staining or discoloring or burning due to iron of the clothes. Customer’s satisfaction must have the great concern.
Conclusion
Startup means new idea which is differing from other existing traditional ideas. We never even think about online laundry services but it has become reality now. There ares a few online laundry services and Laundry Anna is one of them. According to its founder, there are ample chances to grow in the laundry sector. This said laundry set an example by raising 1 Cr just after its establishment. It happens due strong managerial experience and proper planning and having good reputation among its customers
References
[1] https://yourstory.com/2015/12/online-laundry-startups/
[2] http://www.investopedia.com/terms/s/seedcapital.asp
