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Data Sheet—Sunday, September 4, 2016

Turns out that demolishing laundry isn’t all that easy.

Earlier this week, on-demand laundry startup Washio told its customers that it was shutting down its service. Founded in 2013, the Los Angeles-based startup provided laundry and dry cleaning services to customers in six U.S. cities. At first, customers had to schedule the pickup and drop-off ahead of time, but in 2015, Washio added the option of a pickup within 30 minutes.

But all that “innovation” didn’t prove sufficient, despite the nearly $17 million Washio raised from investors like Sherpa Capital, Canaan Partners, and actor Ashton Kutcher.

Washio is far from the first startup in the so-called “on-demand” economy to call it quits. Last year, Homejoy, a service that dispatched house cleaners with the tap of an app shut down after it couldn’t raise additional funds, was slapped with a labor lawsuit, and generally failed to create a sustainable business, as Backchannel detailed in a lengthy report. Valet parking apps Caarbon and Vatler folded last year, and “Uber for kids” startup Shuddle shut down in April.

And we’re only going to see more of them die. Why?

Because despite their fancy mobile apps and funding from technology-focused investors, these startups are in the business of providing a consumer service. They must build complex operations that involve customer interactions and delivery staff while competing in low-margin, labor-intensive businesses.

Ask anyone in the service sector and they’ll surely tell you it’s no walk in the park. Even supposedly “mature” companies like Uber, which now offers rides and food delivery, still struggle with things like customer service, managing drivers, and providing consistent service to customers.

It doesn’t matter how shiny your app is, if you lose my laundry or burrito, make me pay a small fortune, and still can’t deliver it on time, it’s game over.

Kia Kokalitcheva


This is the Startup Sunday edition of Data Sheet, Fortune’s daily tech newsletter, edited by reporter Kia Kokalitcheva. You may reach me via Twitter, email, or an entirely new platform that your startup developed. Feedback welcome.

Everyone’s Talking About

DraftKings. The daily fantasy sports site has had a rough year thanks to regulatory complications in several states and an inquiry in New York into an employee’s potential use of insider information. But all hope is not lost: The company has reportedly raised $153 million in new funding, albeit at a lower valuation than it had after its previous round of funding. (Fortune)

Unicorn Watch

Uber poaches senior Target exec. The ride-hailing company has hired Target’s marketing chief, Jeff Jones, as president of its core business. Jones will be responsible for worldwide marketing and operations. (Fortune)

Uber-Didi Chuxing merger is under antitrust scrutiny in China. China’s Ministry of Commerce has opened an investigation into the merger of the two ride-hailing companies. (Fortune)

Alphabet exec stepped down from Uber’s board. David Drummond, Alphabet’s senior VP of corporate development, revealed he stepped down from Uber’s board several weeks ago amid growing conflicts of interest. (Wall Street Journal)

The Week in Startups

How Farmers Business Network Is Helping Farmers Do Better Business (Fortune)

Glint Uses Artificial Intelligence to Tell What Your Employees Think (Fortune) Is Using Deep Learning to Make Self-Driving Cars More Like Humans (Fortune)

Ed-Tech Startup Coursera Launches Online Learning for Companies (Fortune)

John Sculley’s Zeta Interactive Nabs $45M, Gears Up for More Acquisitions, IPO (TechCrunch)

At Pear Demo Day, 13 Companies to Watch (TechCrunch)

Tech Billionaire’s Data Startup C3 IoT Raises $70 Million (Bloomberg)

A Silicon Valley Dream Collapses in Allegations of Fraud (New York Times) (Medium)

India’s Financial Giant Paytm Nabs $60 Million at $4.83 Billion Valuation (TechCrunch)

Video App Maker Flipagram Is Trying to Find a Buyer (Recode)

Words of Wisdom

“I think launching a consumer focused mobile app and getting sustained traction (>1mm MAUs for six straight months), is almost impossible right now.”—Union Square Ventures partner Fred Wilson, commenting on the challenges of building a consumer mobile app. (Wilson’s blog)