When on-demand laundry service Washio replaced the fresh baked cookies it included with customers' clean laundry delivery with flax crostini, it might have signaled the beginning of the end.

Once an optimistic contender among a crowd of similar services, boasting angel investors like Ashton Kutcher and the rapper Nas, Washio shut down this week. In an open letter, it cited no reason other than "sometimes you make it, sometimes you don't." Founders Jordan Metzner, Juan Dulanto, and Bob Wall were reportedly wooing competitors for a takeover, but so far no news of an acquisition has been reported.

While laundry, like navigating rush hour traffic, is a dreaded task that many are willing to outsource with the tap of their smartphone, Washio made some missteps that could be easy for any on-demand company to relive. Here are some lessons the next "Uber-of-somethings" can learn from its demise.

Control the value chain

Like many on-demand app companies, Washio itself didn't perform the tasks most core to its business. Instead, it contracted out the washing, drying, and folding of customers' clothes, bumping up the cost of each transaction.

While scaling up improves the margin made on each sale, true profitability is key in today's economic climate. Investors aren't as willing to fund on-demand models in which companies lose money on every transaction, in the hopes that scale will at some point put them in the black, says Nikhil Krishnan, tech industry analyst at New York City-based tech research firm CB Insights. It will only get more difficult for smaller companies to raise money on the merit of promised growth, and Krishnan says we should expect to see more shutdowns of this kind.

"Not to mention, there are potential competitors," says Krishnan. "Uber and Amazon, who have the cash and the scale to provide a service like laundry, even at a very low margin, if they ever decided to enter this business."

Faster isn't always better

When Washio first launched, it promised customers a quick pickup--often within 24 hours. But in 2015, it sped things up even more, promising pickup within the hour and clean laundry back in your home within 24 hours.

But Rick Rome, founder of Brooklyn-based laundry service WashClub, argues his industry doesn't need to promise such instant gratification. Unlike, say, the Chinese restaurant around the corner, laundry services have a little more leeway to complete the service. He estimates 60 percent of Washio's costs went to outsourcing the actual washing, drying, and folding work, so faster service means higher production costs in an industry with already thin margins.

Workers make up your culture--even if they're contractors

In a 2014 New York magazine article, Dulanto referred to the laundry and dry-cleaning industry as "like, old people." Unfortunately, these were the people to whom Washio ended up contracting out the core tasks of washing, drying, and folding customers' clothes.

On the other hand, the customer-facing group of workers at Washio--drivers--were carefully chosen for their looks and cars. Called "Ninjas," their headshots were tacked up in the break room, and every month the company threw them a party--open bar, BBQ, or bowling--according to New York. But guess who wasn't invited: the men and women, mostly immigrants, working in the washing facilities.

In Rome's eyes, this lack of inclusion among the company was a crucial mistake. "You get your best ideas from your own personnel," he says. "Washio didn't understand the culture of the laundry operator. They depended heavily on them, so it's important to identify with them."

Published on: Sep 2, 2016