Pressbox and Tide Cleaners: Vijen Patel. The $1.99 Gamble That Built a National Brand

Wondery Plus subscribers can listen to how I built this early and add free right now join Wondery Plus in the Wondery app or on Apple podcasts. It was a night in Nashville was raining and I was walking to an event to sell dry cleaning. And I remember realizing I don't want to do this when I'm 45 years old. We had been working for about 1000 days in a row. We were open 24/7 and there was just such a toll that had taken on us from bootstrapping this. You were burned out. Incredibly. And guy I made $40,000. I had friends in private equity who were at this point making a partner and making $1 million plus per year. I'm at one point calling my dad and saying "Hey dad, when this doesn't work out, if this doesn't work out, can I borrow some money so I can start again?" Like not a business but a start life again. Welcome to how I built this, a show about innovators, entrepreneurs, idealists and the stories behind the movements they built. I'm Guy Raaz and on the show today, how Vigen Patel spun Dirty Laundry into a tidy business with press box, a dry cleaner that grew to hundreds of locations before selling to Proctor and Gamble. You know how some prices kind of get burned into your brain? Like a $2 cup of coffee or a $10 movie? Or if you grew up like me, a $1.99 to get a dress shirt cleaned at the dry cleaner. That number really stuck even when shirts haven't actually cost a $1.99 to clean for a long time. And in a way, that number tells you almost everything you need to know about the dry cleaning business. Razer thin margins, mom and pop shops struggling to compete and customers like me racing to drop their shirts off on a Saturday morning and scrambling midweek to pick them up before the place closes at 6. In 2013, Vigen Patel looked at that $1.99 shirt and saw an opportunity. Not because he loved dry cleaning but because he loved the numbers. Vigen actually trained as an actuary, then worked in consulting and private equity. And when he set out to build his first company, he didn't chase a passion project or a dream. He chased what he called the least worst idea. That idea was Laundry. But instead of storefronts, Vigen and his co-founder Drew McKenna put lockers in apartment buildings in Chicago. Places where young professionals could drop their clothes anytime, day or night, and then picked them up a few days later, cleaned and folded. On paper, the margins suddenly looked a whole lot better without the cost of storefronts. But in practice, the work was grueling. Vigen and Drew spent years running pickup routes, pitching building managers, and hustling to win over skeptical investors. But their company, Pressbox, eventually expanded to other states. And a few years later, it caught the attention of one of its biggest competitors, Proctor and Gamble. PNG bought Pressbox, folded it into tied cleaners, and today, it's in nearly 1200 locations nationwide. Now, one of the main reasons this story caught our attention is that, like Spot Hero and Kinko's copies, also brands we featured on the show, Pressbox is part of a so-called boring industry. It's not a new tech product or a flashy beverage brand, it's dry cleaning and Laundry. And as you'll hear, Vigen is such a champion of boring startups that he actually started his own VC fund in Chicago to support them. Vigen Patel grew up in Chicago in the 1990s. After he graduated from Notre Dame, he took a job as a consultant with McKinsey. But the year was 2008, and the financial crisis changed everything for Vigen's cohort of newer recruits. And it was interesting because we were the 2008 class, and everyone said, hey, you're going to be able to do these case studies with the NBA or do all these amazing things, travel around the world, and everyone got there. And the economy had shifted, and everyone was doing cost cut in in Iowa. Or whatever it might be, and being from the Midwest, I was just incredibly thankful to have a job. But I think, even to this day, our satisfaction level of a cohort of business analysts was probably one of the lowest you ever had. And so we had, among us, 55 people, I think, 30 of the 55 became entrepreneurs, something around that number. But at the end of the day, the end of our work always culminated in a PowerPoint presentation. And so it just felt like there was something left to be desired. So you're there for like three years or something, almost three years, and then you moved to San Francisco to join a private equity firm. Tell me about one of your jobs as I'm assuming you're an analyst there. Correct and associate to that potential acquisitions, right? You're just going through looking at all these opportunities that they might be interested in acquiring. That's correct. And I focused on consumer. And I'll never forget there were some of these brands, like kind of if you recall, like Brookside, Sahale Nuts. And we had the opportunity to put investments in. And ultimately, we didn't get there because we were so analytical about everything. And the problem with consumer is that there's a bit of a gut feel relative to other areas that you can invest in. And so I end up over two years not being able to do any deals. But I think sometimes about all those companies we could have backed in that basket. And it's probably north of worth more than five billion today. Wow. And I realized, I mean, I was mediocre at private equity at best. Because you know, a good private equity analyst just needs to sit in front of a computer all day and just crank on models and decks. And I was here and I needed to be with people and create change and change the world. And that was the aha of like, oh, my, I need to go put my money where I'm out there. It's like, I need to go be myself. I mean, when you are in San Francisco, I mean, this is like, you know, that time, I mean, it's like Uber starting to make waves. And obviously Airbnb is already, you know, really starting to have an impact. And Slack is coming out. And I mean, there are all of these things. Were you following those trends? Were you cognizant of them? Or was that sort of front and center in your mind? You know, I would think the answer is yes, but it wasn't. And the reason why I was like, I was in this private equity bubble. You know, all the private equity firms in San Francisco were in one building in one maritime plaza. And then I kind of looked at starting a company as like a private equity guy. And I was like, all right, let me think through what would be a good opportunity. And there was literally zero to no dream. It was all right. I need to find a highly fragmented industry, one that has low technology and no branding. And so like, by the way, the irony is that if you pick those three things up, you actually should result in taxis. But as you know, I ended up with dry cleaning. Right. And so it was a different path altogether. Well, taxis were obviously, there were, there was some fierce competition, right, between Uber and Lyft at the time. But you're, I mean, you were convinced by this point, because you're there from 2011, 2013. By the end of your time in San Francisco that you wanted to start a business time, I'm trying, I'm imagining that part of that was because you were vetting so many businesses. And you were listening to all kinds of pitches already in your mind, you're thinking, I'm going to do this and I've got to find something. And you had access to all kinds of tools, right, and analytics tools. And so how did you start to search for what that could be? I looked at what I had a passion for moderately, right, which was consumer and retail. And I had some edge on that just because I'd spent five years on it. And then it was like, pick the least worst idea. And I'm a right idea of creating chai packets from India. And that probably would have been a better idea. Another one was dentures. But at the end of the day, there was something about dry cleaning that got us excited. And actually, to be clear, actually, now that I look back at it, our private equity firm was business formal. Like I still, to this day, have all these suits and ties and shirts, you had to dress formally. And I remember, you know, we worked long hours. And it was a pain point to go to the dry cleaner. And again, think back to 2012-11. So the dry cleaner was often frequently visited. And I remember the only time I'd be able to drop it off would be a Saturday. And that was like, I don't want to go to the dry cleaner on Saturday. I want to go see my friends. And then combine that with like this analytical finance math background I have. And one of the best things you ever did is over those six months, over that six month process. My eventual co-founder would fly out to San Francisco. And guy, we just, I just made an investment deck on it. Like it wasn't even a startup deck. It was like, hey, how would I grade this startup? And it was like a 12-page deck, but we put this idea in front of anyone we could talk to. And you could imagine, you know, I think we talked to probably a hundred people over the course of the six months. And 90% of them said this is an awful idea. Alright, let's break this down a bit because this is 2013. And you are, you have this idea. Let's talk about the idea first. For the most part, when you drop your clothes off at a dry cleaner, they do not do the laundering of the dry cleaning on site. They are just a storefront. And there's usually central facilities that service all these dry cleaners. So when people say, oh, my dry cleaner is the best, it's actually not true necessarily because they're all getting it cleaned at the same central place. What was the opportunity you saw to quote unquote disrupt that model? From the consumer side, the biggest one was the 24/7 access. And could you create something? And actually there was like a little company at the time called laundry locker that kind of tried this out a bit in San Francisco. And the idea was to, hey, you know, go here 24/7. I think he's like, he's like a fob to try to get into the building, but you could then access a 24/7. But then as we dug in, we realized, oh my, not just could we create something that's more convenient, but this had actually allowed us to eliminate half the cost. Because dry cleaners operate 15% margin businesses. And by the way, when you take out the salary of the owner operator, it's like 0%. And so, you know, everyone said, hey, why are you doing this? This is a low margin industry. But what we realize is that if we could get some 24/7 access or depot, you can get rid of rent and labor onsite. And that all of a sudden allows you to operate up 40% margins. It wasn't that you were going to be any different from a traditional dry cleaner. It was just that access to dropping your clothes off would be, because most dry cleaners would be closed after 5 or 6 p.m. on a weekday, right? And so the idea is you could go there two in the morning and drop your stuff off and I guess pick it up from the locker. That's correct. And we thought our ideal customers would be bankers and doctors and people just who had longer hours that couldn't meet the dry cleaner hours. But this was going to be a assuming a tech enabled company, right? Was tech going to be part of it? It was, but it was 20% and by tech guy, we were referring to SMS. I mean, it's funny. We, one of the biggest pieces of feedback we would get is actually from people who say they love going to their dry cleaner. And we ask why? And the simplest response back, we like pointing out where stains are and any specific detailed request. And so our solution to that was actually not even tech. It ultimately became tech, but at the time it was actually put a pen and paper on the side of our locations and a sticker roll. And so tech was actually not part of our DNA. All right, we're going to get back to that because that comes later when you actually set up the lockers. But before that, you're in San Francisco and you're talking to people about this idea. You're just trying to get feedback. And most people are telling you this is not a good business to pursue. I would say overwhelming, you know, every night out of 10 people would say, hey, why are you doing this? And in fact, I remember calling the mom and telling her I was going to start this. And she cried. And she said, you're doing what? Like, you're leaving private equity to go start a dry cleaner. And it's not something that like any, you know, traditional private equity firm would ever look at doing or a venture capital firm. You know, they would have looked at ways, actually, your ideas. But what was fun about that experienced guy was that by being so vulnerable and telling everyone about it and telling all the reasons we'd fail. We actually sat on that feedback and then just started thinking proactively about how to mitigate those failures. Okay, let's go back to San Francisco for a moment because at this time, right, when you come up with this idea as, as is the case with so many different kinds of startups, there were other people working on similar ideas. There was a brand called Washio. There was another one called Rinse, which is still around. Were you aware of those other companies? Those are the brands. So funny enough, Ajay, who is the CEO of Rinse, we both approached and created dry clean businesses in the same month and had many common friends who said to each other to talk to each other. And so we actually, and he's still a friend, we actually got coffee in 2013 to talk about it. And it was great because we made a connection. We didn't talk again for three or four years, but he went down a different path, which is pick up and drop off. And I went down the hardware path. Yeah, but yes, we did research. And to your point, Washio was the big one, but we never made contact with them because they were, you didn't, they didn't have a locker model. You would just put your clothes in a bag and these drivers would drive it to all these houses. So it's not a great model. I mean, it's a less efficient model. Exactly. It's a less efficient model and our solution was more convenient relative to them having to wait for a driver to come. They could just go down, throw it into a locker, text us and go on with their day. But tell me about this person that you started it with, who his name is Drew, right? Correct. Drew McKenna, tell me about Drew and who is he and why did you start it with him? So Drew and I went to Notre Dame together. And when I was going to start this, one of the biggest issues in this, in this idea was just how hard it was going to be. Yes. It's a giant flaw. And how is some private equity guy going to all of a sudden turn into a dry cleaner? And so we knew that I needed a co-founder period and quickly through some conversations with friends, I realized Drew could be that person. Literally, we did an MBTI test early on and we were the exact opposites, which I loved, because we were different personalities, but we had a common kind of similar value system. And then we dated, right? We dated, like, we were friends, but we weren't the closest of friends. Yeah. And getting into known over three or four months, I realized we would have different strengths that could complement each other. Okay. So you guys start working. So he moves to Chicago to work on this with you. So he was in Chicago, actually, and this is hysterical. I'm probably the only founder ever who moved from San Francisco to Chicago. Right. We decided to start this in Chicago. And why? Why in Chicago? Well, we had advantages there. Drew is from Chicago. I am as well. We had some relationships with real estate owners. Drew specifically did. That would help us get some early wins. But this was a hard business. And as we thought about who to hire, who we could surround ourselves with, we had a tribe. We had a community in Chicago that we didn't have in San Francisco. So, all right. You moved to Chicago to really start to work on this. And when you were telling people about it, how were you describing this? Was it going to be a, like, Uber for dry cleaning? Like, what, how is it going to work for a consumer? So at that time, the Uber for X movement was wild. There was Uber for everything. Right. And that was the Washio pitch. That was the rinse pitch. And it was our. That was how they pitched VCs. This is Uber for, you know, ice cream, whatever, you know, whatever it might be. I think that was an actual startup. Flour is everything. I mean, it was that. And ours was as well, except the difference was that we realized. Because we had our four profit, like, we just were so focused on our private equity lines. Like, hey, we need to make profit. And so we were just dogmatic about what we eventually call the Uniconomics. And we put the math on, like, a rinse model, or some of these other models, like Washio. Like, how are they going to make money? And we did the math. And the max transactions you could do with a pickup and drop-off service, which have been the true Uber model, was four to six transactions per hour. And then we realized with our model, we could do 26. And so that was the real, like, unlock as you're, you know, pitching these investors, like, hey, like this thing will make money. So you actually, in Chicago, started to pitch investors to raise money to do this. And tell me about that experience. So, moved back to Chicago, 2013, and was so excited to be back home. And I think at the time, they were like five to seven VCs. And we pitched them all. And the general feedback was like, hey, you're building a nice small business, like lifestyle business. I think was the right word, which, like, still hurts my soul when I hear that. And so all of them passed. All of them passed. But ultimately guy, I was having so much fun. It was the first time in my career where I was just having eight blast. And I think Drew and I can find each other and said, hey, there's something here. And it was a lot of belief, like, this is worth it. But it was incredibly discouraging. In fact, it got to the point where after we actually launch an investor came back and said, we do want to invest with you. But at that point, we were just so sick of, you know, hearing no, we're like, we're not going to take on any investment. One of the things that I'm curious about is the is like how you validated why this would work, right? Like what did, I mean, you want to be an actuary, right? And so I guess you put on your actuary hat and started crunching numbers and discovered that if you, if you got a certain number of customers, you would be profitable quickly. Explain how you, how you sort of figure that out. So to me, this is a math equation. You're exactly right. We did research and we said, hey, the average person spends about $40 per month. So how many people do we need to get to use our service so that we can just make money. And actually before that even guy, we set up a table on sidewalks. And before we spent any dollars on actually any of the piece of equipment, we would just survey people. Sidewalks where in front of buildings in Chicago. No, we did it at like main intersections and we said, hey, if we were to put a location at your office, would you use it? If we were to put one near your home, would you use it? And our initial hypothesis guy was that offices were actually the place to go. And we, we did the math that if we just get half a percent of people to use our service, we would have taken home two or three thousand dollars a month. From each location. So what were your, I mean, so your upfront costs were going to be the lockers, right? And let's, let's kind of break this down. First of all, you couldn't raise any money. So how much money did you have to work with? We put all of our lives savings into it. I had about a hundred twenty thousand dollars say from McKinsey and private equity. And my co founder did as well. And we're fortunate we raised like a hundred thousand dollars of debt from our parents. Okay, so the idea what would be there be lockers initially in office buildings. And let's talk about the locker first. Like I'm imagining an Amazon locker today that's digital and you know, but this is 2013. So what, what were those lockers going to be and how would people access them? So you're exactly right. They were simple. We actually called them dumb lockers, but they were done by design because that brought costs low. They had a digital lock on them. And you would just type of four digit code and you turn it. And then the only other thing that would make it special was we put a number at the top. So each person, so say a certain building would have eight lockers, yeah, four on the top, four on the bottom. Each of those would be number one through eight. You'd go guy drop off your laundry in this, you know, hypothetically office building. And you would just send us a text. And it would just be this this one number. And you would just say the number three. And that would give us the signal to go pick it up. And we want to keep us as simple as possible got it. Okay. And then SMS message would go to your phone or to you or to Drew. Correct. It would go to us. And we use like at the time it was called Twilio. Yep. Still around. And that was it. And what if all the lockers were locked? There was there was no availability. That would be a giant issue. And we would add lockers right away because that would be the best issue we could have. So when you would if you were ready to drop your stuff off, you first have to go to the website, set up an account, put your credit card details in. And then you could leave your clothes in a locker and send a text. Correct. It's funny because today like you look at a model like that and somebody would say, oh, there's just so much friction. But I guess at that time in 2013, 2014 people were willing to do all those things. Yeah, I think at the end of the day, you know, you say all that that does sound painful, but it was still less painful than the alternative. And what about price? I mean, was price the thing that mattered or was it convenience? It was more important. It was convenience, but it was price on one item. And ultimately, I still think to this day, I don't know if people know how much they pay to dry clean a sweater. But everyone knows how much it costs to dry clean a shirt, $1.99. Exactly. And that was the price we were incredibly focused on. All of our marketing said, $1.99 a shirt. And actually, I think we started at $1.79 guy because we wanted to undercut to just get volume in. And I believe we had $5 for a dress. And that was the, that was enough justification on the price for people to take a leap of faith. So let's talk about getting there. So you had to buy lockers. That's right. So we had $340,000 to our name in this company. 80% of a guy went to lockers. And how did you get any building to agree to let you install lockers in the lobby? This is where the edge in Chicago help. But we, and actually, before that, we also started a storefront. So we needed a place to work. And we put lockers in the front. And we used the back two-thirds of our office. And so that was actually our first location. And so it was in Lakeview, Lincoln Park. And then we started talking to office buildings and gyms. And we tried to get into as many office buildings as we could. And we completely failed. When we come back in just a moment, Vigen and Drew figure out the lockers situation and learn the basic math of laundry business, which includes a massive pay cut for themselves. Stay with us. I'm Guy Ross, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Ross. So it's 2013. And Vigen has just joined his co-founder Drew in Chicago to launch their new laundry business press box. They're going to use lockers to pick up and drop off the clothes. And they want to put those lockers in office buildings. To start, we would just call family members and be like, "Hey, do we know anyone who's in real estate and has an office building?" And we'd get one meeting and be like, "All right, this isn't going to work, but you should meet my friend." And actually another favor we asked was actually at Notre Dame. But we actually asked at the time they had the endowment to say, "Hey, we're going to go do this idea." And he so kindly sent 10 emails to owners and developers in Chicago who were Notre Dame alums. They were actually the endowment had invested into their companies. Okay, wow. And so again, it was like some of these favors were like, "All right, we got 10 leads from this engine, 10 from our family, 10 from like our friends." Specifically, guys, we thought offices were like where we were going to clean up. And we were completely wrong. Why? People were not like lawyers and finance people weren't leaving their stuff in lockers. We quickly found out that no one wanted to bring their dry cleaning to work. Right. And that was when the light bulb went off, where we need to find the path of least resistance. And it ended up being, we soon found out, proximity to someone's wardrobe. In terms of not even in the buildings of apartment buildings, but also in terms of where we'd go in the apartment building. If we can be close to someone's wardrobe, we had a higher ability for them to become customers. So you had to be in the buildings. And where they lived. We had to be in the buildings. And our big breakthrough movement moment guy was around the month eight mark. And I'll never forget this building. It's called 1225 Old Town. And at the time, this was the hottest property to be in. It had the highest rent per square foot. It had a bunch of users who were around the 20 to 35 mark. And we knew if we could get them, we could get any residential building in Chicago. And they said, no, for five months. And ultimately, we were lucky. But we ended up having a lot of friends or friends or friends who lived in that building. And we actually had them incessantly email the property manager. And I think at the time of like the ninth email, she's like, all right, I'll meet. And guy, once you got 1225 Old Town, that's when the model started working. How many lockers did you put in there? Ten. So five on the top, five at the bottom. And was there a big sign that said, get your dry cleaning done here. Or I mean, how did you catch people's attention? We did a lot of gorilla marketing. So that same idea we had where we sat at a storefront and put a table down and talk to people. We did the exact same thing in the lobbies. Because what we realized in all the work we did up front is that the reason I ever wanted to drop off their clothes with a known person is because they're dropping off what they love to wear. And that gives them confidence. And so ultimately, when we realized that best tactic is it's not the lockers. But it was actually us setting up tables in the lobbies of apartment buildings and offices to say, hey, we're a dry cleaner. And this was really, I mean, guy, I think over the course of our entire entrepreneurship, I think I might have hosted a thousand events in lobbies of buildings. And that would be really where we convert. Let's talk about the unit economics for a moment because you knew that even with 15% margins, well, you could increase those margins because you weren't paying rent for a storefront. And did you have to pay rent for the lockers? The buildings charge you? No, this was the huge benefit, but we were called in amenity. And so as a result, our pitch to all these buildings was you will now be able to charge higher and rent. Or keep people right longer in their buildings. And that was enough for these owners to take a chance. Because they could say on-site dry cleaning, correct, in their advertising. So basically you got into these buildings rent-free, rent-free. To the unit economics, it cost us $5,000 to set up a location. That's it. And the cost was the locker and then the install. And doing the math, if the average person spends $40 a month on dry cleaning, and you get 25 users, that's it. We realized you generate $1,000 a revenue. You have to spend about half of it to actually get it cleaned. And most of your costs were to pay for the dry cleaning, right? That's right. 50% of it. And there's transport cost. And then the other one was actually parking tickets. We ended up on our P&L, having a line item which was parking tickets. You know, I've been to all of Chicago's tow yards. Drew's been to more of them. But the end of the arm marketing was a flyer. That's it. And so we realized our break-even mark was around that 26 mark, 26 customers. And so if we can just get 26 customers to use us. In one location. In one location. We'll make money. And by the way, that's every month. So over the course of a year, we were going to be casual positive. And this is when it clicked. And this is when we really found what we'd call product market fit. It was that 1225 old time moment where we broke even guy in six weeks. And six, once you got that apartment building. You broke even six weeks. In six weeks. So you were profitable within the first year. In the first year, I'll never forget when we hit the $80,000 mark per month. Because 80 times 12 was roughly a million dollars. And we got there at the round, around like the 15 month mark after starting. And how did you identify? How did you find a place that was willing to work with you to clean the stuff? Because I imagine dry cleaners like taxis are, you know, there's probably some. They're represented by maybe some lobbying groups. I don't know. I don't know how it works. But was there any resistance from the sort of the central dry cleaning facility that was going to clean the stuff? Was there any resistance to working with you guys? So in general with all these facilities, they have a big fixed cost component, right, which is labor. People ironing, washing clothes all day. And so they were open to working together with other dry cleaners to process more volume. But to your point, our work would always be secondary. So they always wanted to care of their own customers. And then if they had capacity, they would then entertain our items. And so to start off with, we actually used three or four different cleaners. And ultimately we realized is like that was an operational headache. And this is where again, maybe call it a break, but we realized there was a cleaner in this city that did a lot of hotels. And they had capacity to take. And so around again, the one year mark we started using this facility on Goose Island. And they became our ultimate supplier for ultimately a lot of Chicago as we scaled. So in the first like 12 months, let's say, when you get a text, hey, I'm in locker one or whatever, who's picking up the stuff, who was driving the cars and dropping the clothes off of the dry cleaners and making sure that you didn't lose clothing. And I mean, who was doing all that stuff? So we, it was Drew and I doing a lot of it, but we ended up hiring two people. And these were a third and fourth employees. And David came on to work with Drew. And Ariana helped me on the marketing and sales side. Drew would be in charge of ops. I would be in charge of sales. And so the team of the four of us did this work. We operated seven days a week. One of the worst decisions we ever made. But we did it seven days a week. Drew and I would always do the routes on the weekends and David would do it on Saturday. I'm on Monday through Friday. All right, so you've got this. And now, I mean, as you begin to see more traction, did it become easier and easier to get into other buildings? This is why 1225 whole town is so, you know, clear in my mind is that we then could go to any building in Chicago and say we work with 1225 whole town. And in real estate, it's so critical you are matching the amenities of the building across the street. And once we were in 1225 whole town, the snowball started to form. And we ended up adding eight new locations a month. And then ultimately guy, we gridded 250 locations in Chicago over the course of, call it three years. And, you know, I go back to this idea of like 15% gross margins, right, for a dry cleaner. What kind of margins were you guys able to hit? 20 to 25%. Roughly was our EBITDA margin if you want to call it that? And how much money were you paying yourself? $40,000. So you went from probably making over 100 grand a year in San Francisco to 40 grand? Yeah, I was making almost $300,000 and I was what, 27? Wow. And threw it all away to make $40,000 for five years and drew the same. So as it was growing and you start to get some significant numbers, you must have also been keeping an eye on competitors that were popping up at other cities, right? Did that worry you or stress you out at any point? It did and the big gorilla in the room was Washoe. Because Washoe had raised like $18 million or something. Yeah, enormous amount. They had Ashton Kutcher. Like just, it was the boat he was an investor, okay? And he was an investor and it was the one that we were terrified of. And again, I'll remember this moment. It was around the year two mark. They decided to come to Chicago as their third market. And guy, I don't think I slept that month. And I'll never forget just the paranoia Drew and I had to be like, we don't have nearly as much money as them. You know, how are we going to compete with these guys? And then I never will also forget feeling as good as I felt one month after they launched. And we looked at our revenue and it had only gone down by 2%. And that was the moment where I was like, oh my god, it actually does not matter how much money you've raised. I mean, it's wild because Washoe doesn't exist anymore. I don't know the exact story, but it checked down in 2016 and then its assets were purchased as what I've seen. So clearly something must have happened. Maybe they expanded to quickly who knows. But that was a real threat to your business. I mean, that was a potential threat. It was an incredible threat. And by the way, you know, they had the funding to go down to a dollar per shirt. And we didn't have that. And all of these customers, users, buildings, they could have switched. But they didn't. They were happy with our service and they kept using us. Yeah. Let me ask you about the expansion because you're doing well enough in Chicago so you decide to go to Washington DC next. Correct. And I'm assuming because DC is a dry cleaning heavy town. Yes. And they also had a lot of new construction coming up. But there are two pieces of data that we miss completely. One is that no building in DC could be higher than the capital statue. Yep. And our entire model is built off of density. And two is that we didn't realize how hard it would be to staff our facilities because we were competing versus versus the government for hourly labor. Our cost for a driver was 60% higher than Chicago. Wow. And also, they wouldn't stick around. We ended up turning through people in DC at two times the rate that we did Chicago. So was the DC market profitable? It was, luckily, we were incredibly frugal. But we never saw the lift off like we did in Chicago. All right. So back to Chicago. You've got your own, I mean, at a certain point, I think like two and a half, almost three years in, you guys decide that you don't outsource this anymore. You actually want to control, you want to be vertically integrated. You want to clean your own clothing with a plant that you own. And you decide to explore this idea. That's right. So the big trick we realized in our business model, was that take 1225, there's 220 units. If we lost a customer guy in that building, our serviceable addressable market now is 219 people. And so it was so critical that we nailed quality because we couldn't just replace someone. Right. We kind of had a smaller audience. And so for us, quality is what really kept me up at night. And we ended up with our wholesaler and our supplier. We ended up just building this friction where at times, you know, they might, they might have a, a staff shortage. And so all of a sudden, you know, they're deleting all of our cleaning by six hours, which then means lower quality cleaning, which means that we then take the hit on our user base. And we did the math guide. We realized that the difference between 98% retention and 96% retention. Even though it sounds small, when you compound that every month, it's astronomical. The difference, I think, is between having 55% of your customers at the end of two years versus 78. Well, and so we realized that it was so critical for us to be at 98% retention or higher. 98%. It had to be that high. When we come back in just a moment, press box guards its customer base by building its own laundry facility. And then winds up competing with one of the biggest companies in the world. Stay with us. I'm Guy Roz and you're listening to How I Built This. I'm Guy Roz. So it's 2016 and Vigen and Drew are taking on a massive project, building their own laundry facility just north of Chicago. But to do it, they need cash. So at this point, we probably should have race adventure funding. We should have raised something. Guy, our bank account, I'd get to call every two weeks from our banker, because our bank account would go from positive to 300,000 to negative 400,000. And the driver of it was payroll. But how many employees did you have to pay? So I think around this three year mark, we were in DC and then also Nashville. And so I want to say at this point, we probably had 45 to 50 employees. And so we had a huge transportation team. We had a team that would inventory all the items. At this point, we had a marketing team that would set up these events. We had a sales team. And when we decided to insource this, this is where the issue with the business model up front became our asset later on, because this opened us up for debt financing. And so we were able to buy all this equipment. We bought some of it used, some of it new. But we were able to finance about 80% of our plant using debt and asset back lending. And you just needed a warehouse that was relatively inexpensive. Did you buy the warehouse or did you lease it? We leased it. And it was really hard to build this plant. And you know, we had to get all these licenses and utilities figured out. We even had to get an architect because we were the first dry cleaner that was in this facility. But once we were up and running, we ended up realizing that we could all of a sudden get rid of this middleman. And so instead of 50% of our costs, all of a sudden going away, all we had to do was pay for our own people and rent. And so again, you know, our margin was typically around 25% of the bottom line, 50% at the gross margin level. Both of those went up by 10 percentage points. Even though now these are your employees running the facility. There are employees. And this was probably a guy though the hardest part is that it's one thing to hire a driver. Or someone who's the, you know, can sit in front of a lobby at a table. It's harder to staff a presser. You know, I thought we would at the time indeed was out Craigslist. You know, we'd post these roles and we got no hits. People literally pressing shirts and trousers like you couldn't find people to do those shops. Where would I, I didn't know where to go. And you know, we asked our suppliers if they would work for us and they would say no. And then we finally this light bulb went off that we were looking in the wrong place. You know, instead of looking at it indeed, we decided we just started advertising in Spanish newspapers. And so there's a newspaper in Chicago called Oi. And so all of a sudden we posted these jobs of this new facility open up in Skokie. And my phone wouldn't stop raining. And we ended up staffing this entire plan in two or three months with incredible people all through the Spanish newspaper Oi. All right. So now you've got your own facility, a bunch of new employees. And tell me a little bit about how you were, I mean, just growing. Was it organic or did you, I mean, were you constantly? Because now you've got Waschio and other potential competitors coming in. I mean, when you would go into a building, for example, in Chicago or even in Washington, DC, presumably they might push back and say, well, you know, we've been approached by Waschio and they're offering us this incentive. That's right. And you know, timing plays such a huge role in everything. But one thing that we got right was that we were on the front end of not just the amenity war, but also the new construction development in all these major cities. But I think the year was 2016 and I believe there were 55 new buildings coming up in Chicago. And guy, I think we were in 53 of the 55. And it was because we just, we just skipped the game overall. We didn't pitch any prop manager. We didn't go to any of their customers. We talked to the owners and we said, hey, we're in three of your buildings. We notice your building, this other building. Can we just go ahead and spec these lockers into your architectural drawings now? And then the best part was, as we got into new construction buildings in Chicago, DC, national was our third market, not just did we get these lockers in a great location where they'd be highly visible. We ended up being able to create behavior instead of change behavior. So someone would move into their building and as they walk into their apartment, we'd have a gift box. This cost us like $7. But it would be a bag, a water bottle, a handwritten note, and a flyer with our pricing. Those four things. And we would drop off 200 of these at every one of our new buildings. And we slowly realized that we would track this KPI called revenue per unit. And revenue per unit was twice as high at a new construction building versus an existing building. Because people move in, and it's part of the welcome package, and they're like, great, when you set this up while I'm setting up my phone or my internet. Exactly. And we realized that people are just really reluctant to change behavior. So if you can find them during these moments of change, then you get them, they're set in their ways. Yeah. And then wash, you can come to them, any of these problems, they're like, no, I'm good. I'm kind of into my habit. I'm going to use press box. All right. I think around 2016, you've got another fire to put out, maybe a fire to battle, which is Procter and Gamble, right? One of the biggest multinationals in the world. They launched their own version of this, a competitor called Tide Spin. And I guess they launched in Chicago. And so tell me about how you reacted, at least in your mind when you first heard about Procter and Gamble coming to this space. So luckily we were used to competition. And as Tide Spin started to get going, we kind of, we saw them coming, but it wasn't like we had a different level of fear. It was like, all right, same old, same old. Tide Spin followed the wash amount of, they start with pickup and drop off. And around the year mark, I think for them, they realized that they were not going to make money off of this. Because again, the UN economics just don't work, where if you're just doing four transactions per hour for a driver, and you then take up into account this 50% gross margin guy, you're taking home like $5. And funny enough, their order sizes were bigger. I think for that model, you generally have like $80 per order instead of like $40 for us. But still, it was really hard to make money. And the good part guy at this point for our journey was we had 250 buildings in Chicago. And so we'd go to one building, we'd pick up four orders, drop off six, then we'd drive half a block down the road, and pick up three orders and drop off five, then we'd take a left turn, do that all over again. We could do 26 transactions per hour, where all of our competitors are doing four. And so it's the same cost where everyone has to send a driver on the road. And by the way, because it's 24/7, we got our drivers on the road at like 5am, and they were done with their routes at 9am. And what was the average cost per order? So the average cost per order for us was around $26. What I'm curious about was you would think that Tide, the PNG with their tide branding, would just switch to your model, would just say, "All right, this doesn't work. We need lockers like press box has." And that's exactly what they did. And so they ended up realizing that pickup and drop off was not the path, and then they went on the locker path. And for about three to six months, they competed with us head to head. They would, what would they do? They would go and try to get into the same buildings you were in. They get into the same buildings, they would try to pitch the new construction. And every time we would win, because we would have this track record, we've also oftentimes worked with these developers and owners. And if it was an existing building, it's like, why would I take out these lockers and put your lockers in? Like, that's the same thing. And again, press box has done a great job. So I'm not here in complaints, so why would I create my own headache? So I'm wondering now, I mean, by the way, you've got, you've experienced a Nashville, your DC Nashville Chicago anywhere else yet. Yeah, so 2016, we were in Philly, and I believe we were just getting going on Dallas. And what was exciting is around that 2016 mark, partly why we went to DC is that four of our developers in Chicago said, Hey, we're going to go build in DC. Do you want to come with us? And then those same developers did that in Denver, and this became our expansion plan is that we kind of just followed our customers. And then that would always lower how much we need to get in revenue for us to break even because we would have a head start versus any competition. And this is still without any outside capital, right? You're doing this all through cash flow. So you must have been thinking this is going to be a national brand. We're going to expand this all over the country. That's our goal. No, even back then, we were just focused on execution. I mean, we had enough confidence that DC was going well, but still it was like death by thousand cuts. Like it was just barely starting to stay afloat. And so we just had this tension throughout our company's history of like grow, but also be paranoid about quality. And so yeah, there were probably some in cleans of like, you know, we could be a national company, but it didn't feel like it. And did it feel like there was going to be one winner? Like there was the Uber lift wars right going on at that time. Did you feel like one of these companies is going to is ultimately going to win or were you not even focused on that because you didn't see yourself competing with those other competitors? Our view was that if we just capture three percent market share, we're going to be millionaires. And so we didn't view this as a winner take all market because again, we could only sell into high rises. And so if you're in some small building and, you know, Marina and S.F. or Bucktown and Chicago or, you know, Brooklyn in New York, we can't serve you. And so our view is that we knew exactly what our product was for, which was these 25 to 45 year olds and high rises. And if we could just capture that across the country, that would be our model. And you only needed what percentage of those residents to use your service? 10% to break even. Wow. So the numbers were on your side. The numbers were on our side and it was because we were so frugal. We didn't have any money to spend to make any of the upfront cost. Like we would have love to have invested more upfront to make the lockers and get QR codes and to do all this signage, but we didn't have the money. Did you hire PR firm? Never. Never. So all of the, I mean, because there were every time you go to a new city, there were articles, right, written about. And so all this was just earned media, earned media. All right. So it's 2017 and Procter and Gamble is really going head to head trying to get into the same buildings you guys are in at least in Chicago. And I'm wondering and as you're sort of expanding, you're going to move into Philadelphia and, you know, you're in DC and Nashville. I'm wondering why you didn't the two of you you injured and at that point say, all right, we have got to do a fundraise. We've got to go out and raise money because now you're profitable, right? You've got a nice business going. You've got, I mean, you could really raise money on pretty good terms at that point. So why didn't you or did you start to explore this? So I think two things. One, I think we were still, you know, of a view of like these guys were never, they were never there for us. You had a chip on your shoulder. We had a huge chip on our shoulder. You know, we tried to be vulnerable and expose ourselves and let people invest and they all said no. And so we had a huge chip on our shoulder. And probably too much of a chip on our shoulder because at that point, you know, we talked about we have a few regrets, but one of them is that we should have raised because at that point, like my homepage for our computer was my bank account. And I only now realize how unhealthy that was because we were so focused in our business that we never actually got time to split on our business. And so this was a, this was a huge issue and it was a, it was an issue that we never fixed, but it was around that 2017 mark where we started to realize also like what are we going to do with this thing, right? Because as you know, we were not looking at this as like we were passionate about dry cleaning, you know, one of the first things we did guy in that 12 page deck early on, that investment deck. One of the biggest issues was who are you going to sell this to and we knew you never IPO it, you would not really be able to sell the private equity because we had come from that world. And so it was always quite logical that we would want to get a strategic buyer. And we actually viewed as a really good sign that PNG was doing work here. And so we were always just actually quite proactive about I always kept our competitors close. And it was, you know, we'd always be guards up, not tell them everything, but we would always have a relationship. And so around 2017 mark, we actually got to know the tight spin team and we just said, hey, what are you guys doing here? Like I remember they actually wanted to come to our plant and Drew said, yeah, I come and I was like, absolutely no way you're coming in. But we were, we wanted to make sure we knew all of our competitors because either we were going to buy them or they would buy us. Yeah. And so because we were just off front about that, whenever there was a PNG conversation, we would be there. And we'd say, yeah, we'll make the time for this, let's make it happen. Because from their end guy, they were, they were thinking through, all right, they're at 52% market share of tide. And they can't push that much further. And so they've always organically had this journey where if they can't provide the goods for laundry, can they just do your laundry? And so they were more curious to meet with us because of how we built press box. And then guy, we ultimately around 2017 realized like, hey, we will have no negotiating power with PNG if we don't have anything else on the table. And so this is when we did then start having some conversations for additional funding. So you started to go around and now you've got some private equity firms who are interested in raising. You guys were trying to raise about, I think, $5 million. That's correct. And this is where multiple things happen at the same time, but we then ultimately got some, some term sheets. And for PNG, they started offering capital to owners to switch from press box to tide spin. And how much were they offering? You know, we don't have it know, they also have numbers, but I think it was anywhere between 10 to $25,000. They were going to pay these buildings 10 grand to bring on the tide blockers. Yep. And switch from us. And it makes a ton of sense because from them, their math they're doing is again, build or buy. Do we should just give tide spin more money or should we buy? Is there something special here? And ultimately, all of our partners, except for one, said no thanks. And that meant an incredible amount to us. And still, I get emotional thinking about it because we had this trust that was embedded with all of these partners that have been compounding over five or six years. So while you're doing that, you get a, from what I've read, you get an offer from PNG. They basically could say, all right, we want to acquire you. But I think their initial offer was like a low ball offer. Yeah, we, we ended up with a couple term sheets for funding and PNG had expressed interest. And they lowballed us a couple times. And I remember the third time Drew was a little bit fired up and upset. And I think within 20 minutes of the response had her dacted a term sheet and sent it back to them and said, we're going to go ahead and sign this term sheet. We look forward to competing head to head. And I'll never forget. I was next to my wife and she's like, don't you just want to talk about this maybe for a second? And she was right because it would have been life changing money. But what I value so much about Drew is how principal he was, about how we had built something of value. And yeah, maybe we should have taken longer than 20 minutes to respond to it, but we didn't. And I think a few hours later, PNG, they said, give us 24 hours and we'll come back with something. And we ultimately decided to sell. And you and Drew go work for for PNG. We'd go work for PNG and they would rebrand press box the tide cleaners. It was a short debate about seven minutes of which brand name was taught was stronger. Yeah, tide one. And the tide spent team would work for us and we would end up running the urban division of tide cleaners in which they wanted our model to go national. From every end, I mean, it sounds like from virtually any perspective, it made sense because they were aggressive and they had certainly had the money to pull into this if they really wanted to go after this business. You saw that there were opportunities, but there are also potential pitfalls. And so partnering with the big one of the biggest multi-nationals in the world would enable you guys to really super scale this business too. 100% and we know we wanted a home, right? I think what kept us up at night guy was, it was a night in Nashville was raining and I was walking to an event to sell dry cleaning. And I remember realizing I don't want to do this when I'm 45 years old like we need to find a home for this and it doesn't have to be now, but there has to be some longer vision here. Why did you say that to yourself? What was it about? What were you feeling that gave you that that impetus to say I don't want to be doing this at 45? You know, at this point we had been working for about 1,000 days in a row and I'm not joking like we we worked seven days a week. We were open 24/7. I had missed friends weddings, I stopped getting invited to friends birthday parties because I would just be no show. And this path of us building just took a huge toll on our life. You know every night my wife would come home and on the weekends and she was a resident in med school and you had no kids yet, right? No kids, no kids and she say, hey, let's go out on Saturday night and like I want to see my friends and I'd be like, I am so exhausted that I can't do that. And there was just such a toll that had taken on us from bootstrap in this that we just wanted to make sure that this wasn't our permanent state. You were burned out. Incredibly. And guy, I made $40,000. I had friends in private equity who were at this point making a partner and making a million dollars plus per year. I'm at one point calling my dad and saying, hey dad, when this doesn't work out, if this doesn't work out, can I borrow some money so I can start again? Like not a business, but to start life again. My wife and I are first trip. We, we were, she was a resident. I was this dry cleaner. We wanted to trip and so we went to Kansas City because it was where we could find spirit airlines flights and we found a hotel on like some website and like the altogether trip cost us $500. That was our life. And I just didn't know what the end state would be and we were incredibly burned out. So the deal with tide wasn't just, obviously, wouldn't just change your life financially, but it was a real, it was a lifeline. Yeah, like I think we would have, we would have probably, you know, found another purchaser, another dry cleaner to sell to, but they never would have matched the terms or the capital available. And it was an incredible alignment that led us to that opportunity. How long, because you were required in July of 2018. So when you now transition becoming a PNG and play, how long did you stay with the company? We stayed for two years and in fact they wanted me to stay longer and I had a great experience. Not just that we have capital, but Drew and I could shine. I could finally for the first time I made a PowerPoint slide again. And all of our employees who were making $15, $20, $25 an hour because we didn't have more capital, also they got a pay raise. We made some actual salary, we didn't make a lot, but we had a real salary where I could pay rent, not from savings. Yeah, so we had this, this two year experience under PNG, it was great. And finally, like our earn out had ended and around then there was also this thing called COVID. And we got guy our last earn out check March of 2020. And so the world was following apart our business, right? You could think about dry convalumes, our business had had a wall and was starting to see some real head in terms of what people were wearing. And I was somehow in this sanctuary in Chicago, with capital and with free time. And it was a wild world to be in. Yeah, but I mean, I guess after this time around this time, you took some time off like quite a few months off just to take a break from all that. And then you eventually kind of jumped back into things, you found a venture firm called the 81 collection. And I guess you're focusing on something pretty specific, which is investing in companies like press box, basically, like boring industries, right? Companies that don't get a lot of attention from VCs, right? Yep, we did some math on this recently guy and there's about 3,400 early stage or early investing firms. And about 90% focus on software. Yeah, leaving only 10 to 20% to fund things that are quite critical to our society. And even in that group, half are not of an active anymore. And I noticed that everyone in this technology world was continuing to look for the same thing. They were all looking for the next asset light, employee light, cloud-based unicorn. And then I look back at my own experience guy and I'm like, wait, we built the opposite. You know, we built this plant up in Skokie. We ended up having these assets all across the walls of America bolted into the walls of all these buildings. And we also built a good company, but in a completely different way. You know, a lot of our employees who originally started making $15, $20 an hour as the business grew. They started making $50K a year, $75K a year. And having gone to their weddings and seen them by homes and in many cases even start their own businesses, we moved people from lower class into middle class. Yeah, and I realized this is a giant hole in our economy. You know, we're in the greatest economic period in global history. But the profits are going to 10,000 people. And so that was the inception of the 81 collection. Yeah, I mean, when I think of like boring businesses or businesses that are unsexy, like I think about in high school, there was a brother and sister in their family owned a mortuary. And they were like the richest kids in town and some mortuary. But it's a, I think funeral homes are profitable businesses. Mortuaries are profitable. Like, am I right about that? We just recently did an investment in pet cremation and we were blown away 80% EBITDA margins. Wow. And I have to imagine there was a similar profile with the end of life space. Yeah. So now you're looking at these sort of quote unquote boring businesses, right? Like, what are some other, I mean, I think of like car washes or laundromats or like, are you, are you looking at industries, you're looking at specific businesses? Like, how do you evaluate where you want to deploy your capital? You know, we've realized these opportunities are everywhere, you know, from dentistry, you know, we looked at read something recently in property tax appeals. We've looked at pediatric services like if there's all of these industries that are. Frankly, they're over subscribed from private equity and buyouts, but they're completely under subscribed from technology and innovation. And, you know, when was the last time you went to a doctor's office and it was newer or, you know, a mortician and it was newer. They're integral, but they're 40 years behind best practices. And so if we think about some stuff that's going on right now, it's important that we lift these industries, which then will lift these economies. Yeah, Vigen, when you think about the journey you took and the outcome, how much of it do you attribute to the work you put on the grind and how much you think had to do with luck and timing? I think a lot plays a huge role in our life in timing and luck played a huge influence and not just the exit timing, but the multifamily wave, the new construction wave. And so I think there were a lot of forces that we benefited from. I used to think 80% of it was hard work, smarts, great. I now think 80% of it was luck. That's Vigen Patel, co-founder of Pressbox, now known as Tide Cleaners. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And also, if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at gyros.com or on Substack. This episode was produced by Alex Chung with music composed by Ramteen Erblui. It was edited by Niva Grant with research help from Olivia Rockman. Our engineers were Patrick Murray and Maggie Luthar. Production staff also includes Casey Herman, Chris Messini, Sam Paulson, Carrie Thompson, Catherine Cipher, Norgill, Ramell Wood, Andrea Bruce, and Elaine Coates. I'm Guy Raaz and you've been listening to How I Built This. If you like How I Built This, you can listen early and add free right now by joining Wundery Plus in the Wundery app or on Apple podcasts. Prime members can listen and add free on Amazon music before you go tell us about yourself by filling out a short survey at Wundery.com/survey.