Bellevue-headquartered SaaS startup Zenoti has raised $50 Mn in a Series C funding round led by Tiger Global Management. The round also saw the participation of Norwest Venture Partners and Accel Partners.
Talking to Inc42, Sudheer Koneru, cofounder and CEO said that the funds will help the company expand into the UK and Europe. It will also invest heavily in research and development as well as sales and marketing in the US and the UK. As part of the transaction in which Avendus acted as a financial advisor, Tiger Global partner Scott Shleifer will join the Zenoti board of directors.
Founded in 2010 by Sudheer Koneru and Dheeraj Koneru, Zenoti is an all-in-one, cloud-based software for salons, spas, and medi-spas. It boasts of rich capabilities across appointment scheduling, online booking, billing, built in marketing, inventory management, CRM, and loyalty features. With this round, the company’s total funding has reached $71 Mn.
1.5 Years Of Struggle Led To Start Zenoti
Koneru started his career in Seattle at Microsoft. After eight-year-stint dabbling in enterprise software, he founded an integrated HR solutions firm SumTotal Systems. Later, he happened to invest in a luxury brand that was a chain of spas, salons and fitness centres. In a couple of years, due to unexpected circumstances, he had to take on the role of managing the business.
In his 1.5 years experience at the company, his top challenge was to manage six outlets while sitting at one location. The discomfort made him search for SaaS solutions in the market, but he didn’t find any.
“Folding industry knowledge with the depth expertise in building enterprise software is why we were able to launch such a strong and customer focused solution, starting from Zenoti’s first release,” Koneru recalls in a blog post.
In its initial days, the team had to go back to learn the nuances of each business model. To understand the challenges better, key managers went out to experience each of its target customers as customers.
Through the years of experience, the company and its 320-member team are focused on scaling its business across the many niche verticals in the beauty and wellness industry.
India Makes 20% Market For Zenoti
Zenoti leverages A.I., predictive analytics and mobile solutions to help its clients better attract, engage and retain customers by eliminating long front desk lines providing them with a single platform for omnichannel booking and contactless payments for seamless check-outs. In terms of back-office operations, it provides clients with reporting, analytics, inventory management, marketing, and employee management solutions.
The company claims to have helped salon and spa raise their revenues by five to ten percent week over week.
“With tremendous momentum of more than 100% growth in the past year and on target to achieve 130% growth in 2019, we’re excited to be leading the transition of this industry to the cloud,” said Koneru.
At present, the average cost for Zenoti products is $500 per month per store to its over 5K clients with more than 6500 stores. However, in India, the cost is $120 per month per store. The company emphasises this difference is because of the difference in demand in these key markets.
According to the company, India makes only 20% of its market, however, the US makes it up to 50%. Some of its major clients include Waxing the City, Massage Heights, Mario Tricoci, Prose Boutiques, Sono Bello and Rudy’s Barbershop. It also recently expanded into the resort space adding MGM Resorts and Taj Hotels to its customer mix.
Beauty And Wellness Market In India
A report claimed that the Indian beauty industry was looking towards a market value of $12.4 Bn (INR 80,000 Cr) by 2017-2018 and is expected to grow at the rate of 15% to 20%. Confirming this, RedSeer Consulting also published a report suggesting that the domestic online beauty and personal care market was expected to cross $3.5 Bn by 2022 from the present figure of $300 Mn.
The beauty and wellness market in India is going through a phase of online dependency as ecommerce marketplaces such as Nykaa and Purplle pick up the growth pace. While at the same time, home-based salon services through players such as Urbanclap and YesMadam give more reach to the offline services market.
SaaS Industry In India
Inc42 DataLabs suggests that in the period between January 2014 and June 2018, Indian SaaS startups raised $2.79 Bn across 520 deals.
Chennai has been called SaaS hub of India. It started with Sridhar Vembu-led Zoho, which led an impressive growth with 21 years of profitability and no external VC funding raised so far. Zoho is now a unicorn.
The unprecedented growth of Zoho opened up the road for SaaS-based startups such as Freshworks, Indix, and Ramco on the international platform. This has made Chennai the primary contender for becoming the SaaS hub of India.Another unicorn, Freshworks is walking in Zoho’s footsteps and has become another inspiration for SaaS startups based in the city.
Expected to reach $1 Bn by 2020, the Indian SaaS/enterprise software market currently accounts for 9% of all software sales. It is expected to cross $50 Bn in the next 10 years, according to a report by Google and Accel Partners in 2016. In such broadbased SaaS industry, Zenoti’s effort to keep its focus on the spas and salon range is an example of next generation of tech leveraging niche areas for growth.