Deal to Watch: Cleanly On-Demand Dry Cleaning?

Summary

The Next Cleaners team has been selected as a “Deal To Watch” by KingsCrowd. This distinction is reserved for deals selected into the top 10-20% of our deal diligence funnel. If you have questions regarding our deal diligence and selection methodology please reach out to hello@kingscrowd.com.

Problem

Want to hear something surprising? The dry-cleaning industry is infact not all that clean. At least not as it relates to utilizing environmentally and frankly human friendly chemicals. Most methods being used by dry-cleaning businesses are not clean, green or sustainable.

Approximately 90% of the dry cleaners use perchloroethylene (Perc) as the solvent of choice. Perc happens to be a volatile carcinogen which is harmful not just for the users but also for the environment. Workers and customers of current dry-cleaning providers are constantly exposed to harmful chemicals and are at the risk of developing health problems.

Bottom line: hazardous chemicals used in the dry-cleaning industry pose serious threats to the environment and to the health of workers and users. Health and environmental concerns aside, the modern dry cleaning industry is still largely stuck in its old ways.

We will give dry cleaners credit for somehow keeping all our clothes organized with a an escalator for clothes and print receipts that were invented in the mid-20th century. So perhaps a more sustainable and tech-enabled process that more resembles our current day lives is needed.

Solution

Enter NextCleaners, bringing a clean, green solution to the present-day problems of the dry cleaning and home cleaning industry. The company believes in green cleaning and uses environment-friendly products and processes to ensure the good health and safety of the customers and the environment.

 The U.S. laundry facilities and dry-cleaning service market size was valued at $10.2B in 2016, with demand for clean and green cleaning services at an all time high. This bodes well for the market growth prospects of the business, which to date have focused on New York and New Jersey.

NextCleaners uses two modern and efficient forms of cleaning: (1) Wet Cleaning and (2) GreenEarth Cleaning.

Put simply, these are EPA certified eco-friendly solutions for dry cleaning clothes and other materials in a sustainable manner. What NextCleaners has done really well is not only serve the B2C segment with their solution, but they have also worked well with the B2B segment too.

Infact, in New York alone NextCleaners works with organizations such as the New York Knicks, MSG, Versace, Chanel and more providing on-premise care on material items such as linens, retail store surfaces, turn over cleaning (such as in hotels) and more.

Yes, there are organizations that service the B2C segment with tech enabled solutions such as Rinse, which has raised $23M to provide a tech-enabled B2C solution for dry cleaning and laundry, but even this leading provider hasn’t thought to expand to the B2B segment to date. We think this is a unique market positioning for NextCleaners.  

Summary

1. On Trend – Environmentally Conscious: The most unique offering of NextCleaners is their green solutions. The dry cleaning and home cleaning services provided by the company are environment-friendly and not harmful to the health of the workers, users, and customers, which is highly valued by customers.

 2. Tech-Enabled Solution: For an industry that is still largely antiquated, NextCleaners provides a state-of-the-art technology and cleaning infrastructure. With an e-commerce platform to manage sales across web, mobile, and retail shops, this team has created a seamless omni-channel dry cleaning purchase solution.

NextCleaners has been able to bring tech-enabled efficiencies to the modern dry-cleaning industry through process automation and integration, consumer-facing technology, and scalable equipment platforms.
3. The Team: NextCleaners was founded by Kam Saifi in 2012 who has successfully run several other businesses and spent time at Morgan Stanley as a VP as far back as 1996 in the Venture arm of the business. This is to say, he is a well seasoned executive, who had proven an ability to run this organization effectively to date with 3M+ orders to date.

4. Early Successes: Since its launch in 2012, NextCleaners has grown to a multimillion-dollar company. It has about 20K+ active customers and has served ~80K+ retail customers to date. NextCleaners has already processed more than 3 million orders, has taken about 20K home cleaning bookings in the last 18 months, and has succeeded in building a deep lineup of large B2B clients.

NextCleaners generated revenues of $9 million in 2017, with an average 30%-40% growth year-over-year. It already has a 40K square feet eco-friendly processing facility and has the capacity to scale to 4X current revenue, which is useful in serving big-name clients, which include:

The company has also expanded its market share through acquisitions including Boomerang NYC in 2016.

Summary

Next Cleaners has done an impressive job of driving significant revenues over the past 6 years in one key market, Manhattan. They have also successfully established a differentiated B2B service that will set them apart from highly VC backed startups like Rinse. And their eco-friendly approach is very much on-trend.   

Regardless, the reason we are assigning a Deal to Watch Rating to the business is because they continue to seem heavily focused on slow expansion within familiar markets. Additionally, it is a space that is heating up with VC dollars as it becomes more intriguing.

The founder, though effective at building legitimate cashflow positive businesses has not show a significant desire to build a national / international business. This concerns us that the upside from the current day business could be limited.