Linear #173.5: Hardware as a Moat (& $100M+ Round to Prove it) with Alex Jekowsky, Founder & CEO @ Cents
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Alex Jekowsky built one of the most defensible companies in vertical SaaS by doing what most investors told him not to do: he went all-in on hardware.
What if the best moat in software isn’t software at all...?
This Weeks Titan: Alex Jekowsky (Founder & CEO of Cents) & His Laundromat SaaS Empire
Alex Jekowsky is the co-founder and CEO of Cents, and he’s just pulled off one of the most impressive rounds I’ve seen in vertical SaaS this year: A $140 million Series C.
The numbers tell the story: Cents today powers over 4,500 locations, processes over $1 billion in payments annually, and operates in nearly 1 in 6 laundromats across the United States. In an industry that most tech investors wouldn’t even look at, Alex has captured massive market share by doing something most founders are afraid to do: betting on hardware, going deep on operations, and building for the long game.
The journey started after Alex sold his previous company, Ulyngo, in the higher ed tech space back in 2019. During his earnout period, he started looking into buying laundromats as a side investment and discovered something wild: 70-80% of the laundry industry was still coin-operated.
While dozens of venture-backed consumer laundry apps were trying to be the “Uber for laundry” and failing spectacularly, Alex saw the real opportunity. Those delivery companies were just bringing orders to laundromats anyway—the operators were the backbone with a 99% success rate. Alex made a different bet entirely: build for the operators, not the consumers.
What I admire most about Alex’s journey is the conviction to make contrarian bets when everyone said he was wrong. Going deep on laundromats when consumer apps were hot. Betting on hardware when every VC said it would kill his margins. Burning over $1 million per month in the early days—double what software-only peers were spending—because he knew hardware was the foundation.
The result? A $140 million war chest, dominant market share, and a business model that gets stronger with every customer. The hardware moat that VCs laughed at five years ago is now what makes Cents nearly impossible to disrupt in the AI era. That’s vertical SaaS done right.
Playbook #1: Should You Build Hardware? Alex’s Selection Framework
The answer depends on whether hardware solves the core problem in your vertical. For Alex, hardware wasn’t optional—it was the only way to get laundromats off coins and onto digital payments. But building hardware as a startup is expensive and full of landmines. Here’s how Alex did it without destroying his burn rate.
Bring Hardware Development In-House
Almost all founders outsource hardware development to contract manufacturers or agencies. You’ll get taken for a ride, find out about problems too late, and burn capital you can’t afford. Alex brought hardware development fully in-house from day one.
But how do you hire world-class hardware engineers when you’re pre-revenue? Alex’s solution: hire recent graduates from top hardware companies, give them meaningful equity, and let them build from scratch. He found Cents’s head of hardware through a mutual friend—a recent Apple grad. Tiny contractor fee, meaningful equity stake.
Here’s the recruiting framework: Don’t try to poach senior engineers from Apple or Google. Instead, make friends with those senior engineers and ask them to refer junior talent they’ve worked with. Junior engineers at great companies are well-trained, hungry for equity, and want the zero-to-one experience. Alex used this to build his entire early hardware team.
Accept the 2x Burn (And Fundraise Accordingly)
Hardware will burn roughly double what software-only peers burn. Cents was burning over $1 million monthly while comparable startups burned $400K-$600K. Why? Industrial design, supply chain infrastructure, QA testing, inventory management, PCI compliance, field testing—these costs are unavoidable.
But not all burn is equal. Alex framed hardware investment as the foundation of everything else. Without controlling the payment terminal, you can’t capture transaction data. Without transaction data, you can’t build the operating system. Without the operating system, you’re just another POS system that gets ripped out.
Investors who understood deep vertical SaaS got it. Investors looking for software-only multiples passed. That’s fine—you want investors who understand your strategy.
Use M&A to Accelerate (Not Pivot)
By Series B, Alex had deployed thousands of devices. But hardware development cycles are long, and the market opportunity was NOW. So after 16 months of relationship-building, he acquired Laundry Works in January 2023—a company with proven hardware in thousands of locations.
This wasn’t a pivot. It was strategic acceleration to de-risk execution on a pre-existing roadmap. Building equivalent scale organically would have taken 36 months. He didn’t have that time.
Alex’s M&A framework:
Does this accelerate our existing roadmap or distract from it?
What would it cost to build this organically in time and capital?
Can we integrate quickly without a multi-year nightmare?
Does this de-risk a critical part of our strategy?
Most investors push back on early M&A. Alex countered: “We’re not changing strategy—we’re accelerating what we already sold you on.”
Hardware as Your AI-Era Moat
Five years ago, VCs told Alex hardware would hurt his valuation. Today, in the AI era where software features can be replicated instantly, hardware is physical defensibility. You can’t ChatGPT your way to controlling payment terminals or building supply chains.
Software is infinitely replicable. Hardware is not. Even if competitors build identical software, they can’t easily steal customers. Switching requires ripping out terminals FROM EVERY Laundry machine, installing new hardware, retraining staff, migrating data, and dealing with downtime. That’s massive friction that software-only products don’t have.
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Playbook #2: The Distributor-Led GTM That Scales
Early on, Cents tried the traditional SaaS playbook: hire salespeople, run ads, do outbound. It worked for initial traction but didn’t scale. Laundromat owners aren’t on LinkedIn or browsing SaaS directories. They’re busy operators running cash businesses.
Then Alex had a revelation: In hyper-verticalized markets, the person your customer already buys from is their most trusted advisor. For laundromats, that’s the equipment distributor. These distributors have decades-long relationships with store owners. They sold them their equipment, service it when it breaks, provide financing, give business advice. They’re consultants, advisors, friends. When a distributor recommends something, operators act on it.
Partner With the Channel, Don’t Disrupt It
Most tech companies see distributors as legacy middlemen to disrupt. Alex made them his core GTM strategy. Today, Cents’s hardware is often sold through laundry equipment distributors. The distributors are a massive sales force. Cents provides product, training, marketing materials, and support.
This gives you instant access to every operator without building a massive sales team. It leverages trust distributors spent decades building. It aligns incentives—distributors make money when operators upgrade. It creates geographic density organically.
But you can’t just show up with a product and expect distributors to care. They’ve seen startups come and go. You have to prove you’re committed for the long haul.
So Alex did something extreme: his team attended 60 distributor trade shows in 2 months. Constantly on the road, setting up booths, doing demos, answering questions, shaking hands. The goal was proving Cents wasn’t some fly-by-night tech company.
It worked. Distributors started seeing them everywhere. Today, the distributor network is one of Cents’s primary growth engines, scaling in a way direct sales never could.
The CAC vs. Channel Economics Trade-Off
Yes, you share economics with distributors. They take margin on hardware sales and sometimes small rev share on software or payments. But here’s what Alex understood: the alternative to paying distributor margins is a brutal CAC.
If you’re doing direct sales in fragmented SMB markets, your CAC might be $5K-$15K per customer. Plus you’re paying sales rep salaries, benefits, tools, travel. With distributors, you’re essentially outsourcing that entire function to people who already have the relationships and trust. Your “CAC” becomes the margin you share, but it’s variable (only when deals close) and you get instant scale.
This is why Cents has a larger Customer Success team than Sales team. The distributors handle acquisition. CS handles retention and expansion across multiple locations. In low-churn verticals, growth comes from expansion, not just new logos.
Playbook #3: The Fundraising Framework That Eliminates Negotiation
Alex’s Series C fundraising strategy is one of the smartest approaches I’ve heard. Most fundraising turns into negotiation about valuation. You justify why you’re worth X, investors try to knock you to Y. Alex flipped the script.
The “Non-Negotiable” Valuation Model
Instead of negotiating, Alex did the math FOR investors. He built a sum-of-the-parts valuation model projecting monthly out to 2031. Cents has three revenue streams: Software (SaaS), Payments (transaction processing), Hardware (equipment sales). He applied market multiples to each, added them up for total enterprise value, then built a Share Price Calculator showing exactly what investors get at a given price and their expected 5-7 year return. He also included every possible company comp in the model to drive the average multiple for each category.
Then he picked a price delivering a 3-5x return for growth equity investors—the standard expectation for that asset class.
When he walked into investor meetings, he walked them through the math. “Here’s our model. Here’s the market data. Here’s the formula. Here’s the price. We’re not negotiating valuation—we’re looking for the right partner.”
He eliminated negotiation and focused on fit. Investors either got it or didn’t. The ones who got it moved fast.
Why This Works
You look sophisticated. Investors respect founders who understand their numbers. You set the tone—you’re not begging for capital, you’re offering a calculated opportunity. You save time—no months of back-and-forth on valuation.
Pro tip: This only works if your numbers are rock-solid. Alex learned this the hard way. Early on, he reported “cARR” (Contracted Annual Revenue). Later, he switched to “Recognized GAAP SaaS Revenue”—the most conservative metric possible.
The Employee Tender Strategy
Here’s a killer recruiting hack: As part of the Series C, Cents ran an employee tender where employees with 2+ years tenure could sell up to 25% of their vested equity. This was $30 million of the $140 million round.
Why? Because Alex competes for talent with AI startups and Big Tech offering $500K+ packages. By offering early liquidity, he can tell recruits: “You don’t have to wait 10 years for life-changing money. If we hit milestones, you can take chips off the table in 2-3 years.”
It rewards early team members who took risk. And it’s a massive recruiting tool when competing with companies that offer higher cash comp but no near-term liquidity.
To Close It Out…
Alex’s journey with Cents is one of the best examples of contrarian thinking in vSaaS. He went into an unsexy vertical. He bet on hardware when everyone said don’t. He partnered with distributors instead of disrupting them.
The result? $140M Series C, 1-in-6 market share, over $1 billion in annual payment processing, and a business that’s nearly impossible to disrupt.
Here’s what is worth taking away:
Hardware can be your moat. If customers have a physical pain point, solve it with hardware and own the value chain.
Partner with the channel, don’t disrupt it. In hyper-verticalized markets, the existing trusted advisors are your best GTM.
Do the math for investors. In later-stage rounds, stop selling vision and start showing math.
You’ve got this. Now back to building!!!
Thanks for reading LINEAR. I reply to every email…
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