Experience is a great teacher – John Legend
And most times, the best. At least it was true in Sudheer Koneru’s case. Sudheer started his career in Seattle at Microsoft. After an eight-year-stint dabbling in enterprise software, he founded an integrated HR solutions firm SumTotal Systems. In nine years, he grew it to a $100 Mn business.
It was in 2004 that he, along with his brother Dheeraj Koneru, ventured out from the comfort zone of their respective software development careers into something totally unrelated i.e. to establish and run Latitudes Health Club and Tangerine Spas – a chain of fitness centres, spas, and salons, in Hyderabad.
Or so they thought.
With six large outlets to their credit, the duo experienced first-hand, the complexity, pain, and challenges involved in managing operations for a wellness business without having the right software. The industry lacked reliable and easy-to-use software that supported the whole ecosystem of operational tasks in spas and salons, especially the needs of a multi-location chain.
Begins Sudheer, “This experience gave me an intimate understanding of the challenges in this industry.”
And that’s when the two went back to leverage their experience in enterprise software to build a solution that supported the needs of a multi-location beauty/wellness chain.
Thus, Zenoti (known as ManageMySpa till September 2015) was born in Hyderabad in 2010 and presently headquartered in Seattle (Washington). It is an all-in-one, cloud-based software for salons, spas, and medi-spas with rich capabilities across appointment scheduling, online booking, billing, built in marketing, inventory management, CRM, and loyalty features.
Becoming The Backbone For Operating Businesses
Zenoti currently powers thousands of salons in over 30 countries. It enables salons to seamlessly manage every aspect of business – from online appointment bookings, to billing through a PoS, CRM, employee scheduling and payroll, inventory management, building and deploying marketing promotional and sales campaigns and more. It also offers a web store where clients can offer online booking as well as sell retail products and gift cards.
Zenoti-powered salons are able to increase customer retention, customer spend, and cut down on costs. It enables salons to deliver a world class customer experience by automating operational and business processes.
Says Sudheer, “Simply put, we are the backbone on which our customers completely depend on to operate their businesses.”
5K Customers, 30 Countries, Growing 200% Y-O-Y
Zenoti now claims to have 5,000 paying customers on its books spread across 30 countries. Of these, 50% are in the US and 30% in Southeast Asia. While Sudheer did not disclose the actual revenues, they are estimated to be somewhere between $7 Mn-$10 Mn. However,he did disclose that Zenoti has been growing at more than 200% year-on-year, in terms of ARR.
In the last couple of years, especially, it has managed to add a whole bunch of marquee customers. Brands like Massage Heights, Waxing the City, Sothys, Kaya, and Lakme have adopted Zenoti in the last 18 months. Also, the startup has expanded into multiple international regions with offices in Seattle, Dubai, Melbourne, Kuala Lumpur, Jakarta, and Manila besides the US and India. It now boasts of a 200+ strong team.
The startup monetises from the monthly subscription that customers sign up for. However, it has other avenues as well such as selling consumables like SMS and emails that integrate with Zenoti. Reveals Sudheer, “In North America, we also have our own credit card processing platform that customers can use for processing customer payments. We focus primarily on businesses which have multiple outlets and are high-end businesses in the industry.”
Besides, for some of its larger enterprise customers, Zenoti also sells add-on solutions like customer mobile app and a web store to enable end consumers to book their appointments online without having to call the front desk.
Over the years, it has raised about $21 Mn in funding. These include a $6 Mn Series A round from Accel Partners in July 2015, followed by $15 Mn in Series B funding from Accel Partners and Norwest Venture Partners in September last year. The Series B funding will specifically be used to further expand operations in the US and Europe, along with an attempt to increase the client base, develop new products, and workforce.
Building A Category Leader, Targeting $100 Mn In Three Years
This aggressive expansion has only one end goal – turning Zenoti into a category leader.
Says Sudheer, “In India we have become the de facto leader in the wellness software market. There is no other player in the Indian market that has a customer list of marquee brands like we do.”
However, in North America, Zenoti faces competition from companies like Mindbody Online, Booker and Millenium. He feels that none of these companies have features that can fully support all the business aspects of an enterprise class wellness chain. In that specific category, he believes Zenoti has an edge and is unique in its overall offering.
And that’s exactly what is powering his ambitions to turn Zenoti into a $100 Mn company by 2020. Over the next few months, more features are expected to be added to the product to make it ready for all kinds of gyms, fitness, and yoga centres. In the pipeline are also many other extensions to the business, as Zenoti aims to take a bigger slice of the global wellness industry-related software opportunity towards the end of this year, – projected to be more than $10 Bn as per Sudheer.
Product-wise, Zenoti is in the process of releasing a comprehensive Point of Sale solution using a tablet so that a spa/salon no longer needs a formal reception and can engage with their customers through tablets at any point in the outlet. Much like an Apple Store which does not greet you with a front desk and a computer, spas/salons can be designed without such a front desk with a computer on it. These “reception-less spas” will be enabled through various mobile solutions.
India, SaaS, And Going Global
While 60% of Zenoti’s client base is outside India, Sudheer believes that India also offers a huge SaaS play because of the many spa and salon chains. What will further help the Indian SaaS market is the government’s push to bring Internet to the forefront all across India. He adds, “The key will also be to provide mobile-based SaaS solutions as mobile penetration is much more than computer penetration, especially in the rural areas. That is part of our strategy later this year.”
However, when questioned if Zenoti ever faced any problem selling from India, he reveals that was never the case as the company had a sales team both in the US and Southeast Asia which helped in selling to businesses abroad. In fact, the product also did not face much resistance in India and saw greater adoption by Indian spas and salon industry.
There are a few things such as lack of proper infrastructure especially in Tier II and Tier III cities and the change in mindset – from paying a one-time fee for desktop-based solutions to a monthly fee for SaaS-based software solutions – that holds back greater adoption in India.
For startups looking to go global, Sudheer advocates focussing on one niche of the market. He also believes that one cannot reach global customers, especially, big B2B enterprises remotely; hence, at some point sales presence in foreign markets is a must as part of one’s strategy of going global. But, ultimately, he believes in the one golden mantra – building a founder-centric company, a viable product, and getting the first few customers than worrying about metrics.
With these in place, SaaS startups can fearlessly chart any global territory they wish to – be it spas or SMBs.
[This article is part of Inc42’s SaaS series where we will be covering different aspects of SaaS in India and abroad.]