How about restaurants? Why should people eat out when it's cheaper to cook at home?
If founders listen to people like you, nothing will be built.
This is not a case of a new product being upmarket before working its way downmarket. It's a case where something that exists at rock-bottom prices everywhere else is being introduced to the Valley at a premium, because for some crazy reason the SF/Bay hasn't figured out laundry by now.
This feels like a business that solves a Bay Area Problem. The question is how many other geographies are there where there is sufficient demand, insufficient development of local alternatives, and the income level to support this kind of pricing.
I think it's safe to say that this sort of service doesn't stand a stone cold chance in hell in a place like NYC, where laundromats are everywhere, pick-up-drop-off services a dime a dozen, competition fierce, prices low, and being VC-funded with a cool mobile app doesn't earn you many (if any) points.