SaaS Interviews with CEOs, Startups, Founders
15 year old launches unique app, breaks $1m revenue, raises $10m
29 May 2022
Chapter 1: What is the market potential for laundry services in the US?
There's 125 million households producing 50 pounds of nonstop laundry every single week. If you do the math at a dollar per pound, which is what we charge, it's a $300 billion market in the US alone. You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hey, folks. My guest today is Mort Fortel.
He's a serial entrepreneur who started his first business at 18 years old.
Chapter 2: How did Mort Fortel's son come up with the idea for Sudshare?
He has a private equity portfolio that consists of Sudshare, two other businesses, and real estate holdings. Sudshare is basically Uber for laundry. We're going to jump into it today. Mort, you ready to take us to the top? Yes, let's do it. All right. So how did you get in? Is this just a space that's sort of unsexy, no one's thinking about, and you said there's an opportunity here? Sort of.
It started in 2017 with one comment my wife made. She was home with five kids buried in laundry, and she's like, this is crazy. I can tap an app and get to the airport, FaceTime someone on the other side of the world, but I'm still doing laundry like my grandmother. And she was right.
Technology's made everything so fast and easy, except for this chore that we hate the most, and it takes the longest, laundry. It's actually shocking. There's been no innovation in this space since the washer and dryer almost a century ago. So my son was in the laundry room at the time and he's a typical teenager. He was 16 years old.
He's like, look, I'm not helping you with the laundry, mom, but I can solve this problem for you. I'll build you an app. So we thought he was kidding, but we homeschooled our kids and we taught them you could do anything. And he believed us. And so he looked at what Uber was doing and he went and built this business. And it launched in Baltimore in 2018. And we haven't looked back.
It's been growing like crazy ever since. And I've been helping him with the business. So what is growth? How do you measure growth here? Is it pounds of laundry clean per week or what? Well, we've been growing at about 10% to 30% a month every single month for a couple of years now. Mm-hmm. What I'm asking is, how do you measure growth? Is it revenue? Is it pounds of laundry done?
Is it number of trips to the laundromat? What is it? We have multiple KPIs that we monitor on a monthly basis. Of course, GMV, which is fancy terminology, marketplace terminology for revenue. Also, new customer acquisition. Those are two key KPIs that we look at. Interesting. Okay.
So are you focused full-time on helping your son with SudShare or are you managing a larger portfolio of companies as well? When it started a few years ago, it was mostly him because it was mostly creating the technology, building the apps, all the technology in the background. I can't write a line of code. So he was working over all that.
But after we launched and as we started to grow and the apps really got traction, so then it really became a business. And we became, I mean, we were always partners and co-founders, but I became much more active in the business at that point. I mean, now it's to the point where I spend 99% of my time on SunShare. Fascinating. And how old is your son today? He was 16 when it started. He's now 21.
How much equity did you were able to get out of him? We both have a substantial portion of equity. But did he say, dad, I'm keeping more of it. You're taking less than me. No, I always had controlling interest. Okay. So what, did you write sort of a check up front to help him sort of have some money to build the thing or what sort of gave you that ability to command more equity?
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Chapter 3: What metrics do they use to measure growth at Sudshare?
And what does that convert to? How many loads of laundry is that, I guess? Well, it's about, I mean, they get paid 75 cents per pound. So I guess that's what, about 7,000 pounds of laundry. 7,000 pounds. What's, I don't even know. What's the average, what's the average round of laundry measure in pounds? You mean the average load of laundry? Yeah. Sorry. Average load of laundry. Yeah.
So a typical washer dryer load is about seven or eight pounds. Interesting. Okay. She's doing it full-time. Now, a lot of our sudsters don't do it full-time. A lot of them do it part-time. Yep. Yep. Yep. Yep. And everything in between, they're really their own boss. They can work whenever they want, take whatever orders they want, you know, let the orders that they don't want pass.
If they want to go on vacation, not work a day, they're in control of their own schedule. No, no. I think that's great. I guess, how many sudsters have made at least a dollar on the platform? Have they all done at least one load? That's an interesting question. I actually don't know the answer to that question. I'm sorry. Isn't that a key thing in a marketplace?
Uber knows how many drivers did at least one ride per month. Shouldn't you know how many of these 90,000 did at least one load in April? Well, I know. Oh, so you didn't say in April. So I do know how many active youngsters we had last month, about 3,000. And so I don't know in your space, is that, I don't know if that's 3,000 out of 90,000, is that a high activation rate or low activation rate?
Are you happy with that? We're happy with it because we're not supply constrained. We have plenty of sudsters. Unlike most marketplaces, most marketplaces are supply constrained. So Uber needs more drivers, Airbnb needs more hosts, et cetera. We're more demand constrained than supply constrained. So we're very happy with the situation on our sudster side.
We've got plenty of sudsters and they're doing really well and making enough money and we're and we're trying to really grow the demand side. We shouldn't skip over that success. How did you manage to go to market and sign up 90,000 Sudsters? So I'll tell you, it's because SudShare solves a second problem, which is fascinating. The first problem is obvious, which is people hate to do laundry.
But we solve a second problem, which is that unskilled workers, people who don't sit behind a desk for a living, people who work at factories, restaurants, Amazon's fulfillment center, they want to work from home, too. but they can't, they don't have the skills. But what they do have is an underutilized washer and dryer.
And so you combine that with the SudShare app and voila, you have the first ever manual labor work from home gig in the world. And so at a time when Uber, Lyft, DoorDash, Instacart, et cetera, they're spending a gazillion dollars trying to recruit workers and they're losing them. We're spending like nothing and they're coming in droves.
Thousands and thousands of sudsters are onboarding every single month. And it's because they have this unique opportunity they've never had in their life, which is to work from home. How do you find them though, right? You still have to find people that have a washer dryer at home. Like do you sector by average household income?
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Chapter 4: What challenges does Sudshare face in urban markets?
I mean, obviously, they're sort of number one in the app store for these sorts of search terms. That's a different business model. Rinse is in about 17 markets and they're a substantial company, but they're bogged down in the dry cleaning business. They also have a very CapEx-intensive business model. They raised $20 million, $25 million a decade ago. They
And they're still only in like 17 markets. And again, I think it's for two reasons. One, it's very capex intensive. It'll be nearly impossible for them to really scale nationally like we have. Just educate me more. I don't know. What makes that capital intensive? They have their own plants. Ah, wow. Okay. Got it. It's not a peer-to-peer marketplace model. Interesting.
The bigger thing is they're also bogged down in the dry cleaning business, which is a completely different business. The company that wins this space is the company that's going to focus and be great at laundry. It's a totally different business. Interesting. Now, did you guys raise the pre-seed round as well, or is 10 million the first external capital in? First external capital. First external.
Okay. Got it. So 10 million raised here, 25 folks on the team, four engineers. Where's most of that money going to get spent outside of paid ads? Building the marketing and tech team. Okay. So you hire more engineers. I mean, marketing obviously would be more ad spend, but tech team, more engineers? The tech team is more engineers, but marketing is not just more ad spend.
It's really building the marketing team. Okay. So, so what might that role look like? Are you going to have people with like a quota in terms of onboarding new, new sudsters or is this someone doing managing paid ad spend? What do those roles look like? Yeah. Head of performance marketing, director of retention marketing, VP of marketing. Yep. Very cool.
And then how do you mention, I mean, how do you measure marketplace churn, right? So me, a homeowner requests, someone does a sudster, does my laundry in April. Then I don't do it in, in, in May, right? Do you, do you look at that as churn or how do you, how do you measure activation? Yeah, we definitely do track attrition and we track attrition. When you say how, it's just using our data.
Okay, I understand that. But what would you consider a good attrition rate or market standard? 5%. Okay. So if a thousand homeowners require a subs to do their laundry last month, and that decreases to whatever, 950 this month, you're okay with that amount of attrition? Yeah. I mean, pretty much most SaaS companies, no matter what you do, a 5% churn is pretty sort of a natural churn.
It's considered a strong churn rate. Well, in the SaaS space, 5% churn per month would not be acceptable. You would get killed on your valuation. In the marketplace, that might be different. Okay. 5% monthly churn in SaaS would mean you're turning over 60% of your user base annually. That's unacceptable. You wouldn't be able to raise any capital. Your growth would stall very, very quickly.
Marketplace, though, I don't know marketplace metrics like you do. 5% could be totally fine in the marketplace world. Yeah, it would be. Yeah. Do you have expansion opportunities? Are you capped at 50 pounds per month per household? Well, we can't do more laundry than people produce. We plan to expand internationally in 2023. So that's an opportunity for growth.
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