Zenoti, a 10-year-old startup that develops services for the spa and salon industry, is the latest entrant to the coveted unicorn list.
The Bellevue, Washington-headquartered SaaS startup has raised $160 million in its Series D financing round that valued it at “well past $1 billion,” said Sudheer Koneru, founder and chief executive of Zenoti, in an interview with TechCrunch earlier this week. The round was led by Advent International with participation from Tiger Global and Steadview Partners. The startup has raised about $251 million to date.
Zenoti, which started its journey in India, has built a cloud management solution for health and wellness industries. The startup’s platform allows customers to pay directly from a mobile app after their appointment. It also checks them in when they walk into the store and notifies the providers.
For their clients, Zenoti allows them to accept bookings, accept digital payments, handle payroll, manage backend inventory and transfer the tip from customers directly to a staff member’s bank account. The startup was founded in 2010, but it wasn’t until 2012 when it had built this complete stack and went to the market.
Zenoti’s platform combines both the ERP and CRM tools. And that’s what this industry, which had surprisingly been underserved prior to Zenoti’s entry, needed, explained Shekhar Kirani, partner at Accel, in an interview with TechCrunch.
Accel was the first investor to back Zenoti. Unlike offerings from companies such as Microsoft and Notion, for instance, that have built “horizontal” services that people across the industries use, the spa and salon industry needed a “vertical” player that just looked at solving the issues they were facing, he explained. Zenoti did just that.
It became very clear early on that Zenoti could pursue customers beyond India. That early bet has proven right for the startup, for which the U.S. now accounts for 60% of the revenue, followed by the U.K. More than 12,000 businesses, including Hand & Stone and Gene Juarez, in more than 50 countries today use Zenoti’s offering. The startup works with higher-end businesses.
Kirani described the success of Zenoti as a growing SaaS movement in India, which has produced scores of startups such as Freshworks, Zoho, MindTickle and Chargebee that started in the world’s second-largest internet market but now have most of their customers outside of the country.
Zenoti’s offerings have proven even more useful in recent months as the pandemic prompted firms to move several aspects of their businesses digital. An increasingly growing number of spa and salon chains that previously did not adopt digital offerings are now embracing mobile apps and ways to cut reliance on paper bills.
“We are seeing businesses embrace Zenoti’s technology to help pivot and strengthen their offering, and we are impressed by the company’s growth over the last year, particularly among some of the most established brands in the industry,” said Eric Wei, Managing Director of Advent International, in a statement.
Despite the pandemic, the startup has grown by 100% this year, its best to date, and has a large backlog of businesses who want to become customers, said Koneru, who is hopeful to maintain this growth momentum next year. (Zenoti employees also donated $250,000 to help the workers in the industry they serve.)
Zenoti, which employs about 550 people, does not make money from end-customers and instead charges a subscription fee to businesses. Koneru, who previously worked at Microsoft and invested in offline spa businesses, said that while the startup is currently not turning a profit, its margin has improved and the revenue growth has accelerated. He declined to share figures.
The startup plans to deploy the fresh capital to expand to some additional categories such as grooming. In recent months, it has started to serve gyms and other fitness centres. Zenoti is also open to exploring M&A opportunities, Koneru said, adding that these acquisitions would ideally fuel the startup’s customer growth instead of broadening the technology stack.