Sudheer Koneru had spent years working at Microsoft and SumTotal Systems and was planning a retirement in mid 2008. As he travelled and participated in various yoga programmes and also wellness workshops, he was suddenly roped back into work as one of the companies that he had invested in that ran a chain of spas, health clubs and saloons in India, underwent a management change. What the veteran software engineer did not know was his time working in the spa and salon world would bring him back to the tech scene and serve as the catalysts for a company that has become one of the top Pacific Northwest startups.
Zenoti’s spa-management software was designed around mobile devices. (Zenoti Photo)
Koneru is CEO of Zenoti, a Seattle company that sells an enterprise software platform for the fitness and beauty industries. The startup had just announced a US $20 million investment round from Steadview Capital. It comes on the heels of a US $50 million round Zenoti raised in May 2019 led by Tiger Global Management, a New York-based firm known globally for making long-term investments in companies including Spotify, Facebook, LinkedIn, Flipkart, and other tech giants.
Zenoti has now raised more than $92 million in its nine years of inception. The company is ranked No. 20 on the list of the top Pacific Northwest startups.
Zenoti was not looking for additional capital, but Steadview’s proposal was a strong one. Zenoti will use the funds to further expand into the U.K., possibly by acquiring smaller spa and salon technology providers there. Koneru added that Zenoti still has a lot of work to do to accomplish its goal to own the entire backbone of the industry.
Back in 2010 while helping run the spa and salon business, Latitude Pro, with his brother Dheeraj, Koneru learned the ins and outs of the industry.One of his biggest takeaways was the industry lacked quality software for managing scheduling, marketing, inventory and operations. Like any enterprising engineer, Koneru identified this problem and sought to fix it. That led him and his brother to sell off their stakes in the spa and salon chain and start Zenoti.
In addition to the cash infusion, Zenoti also announced a major new customer: Hand & Stone Massage and Facial Spas. The deal brings more than 420 stores in America and Canada on to Zenoti’s platform as the new technology partner for point-of-sale, digital marketing and analytics. With this new alliance, Zenoti now has more than 1,200 companies using its platform with a combined 7,500 stores.
The key metric that Zenoti uses to measure the health of its business is not the number of stores on it’s platform but it’s annual recurring revenue. Koneru wouldn’t give a dollar figure, but he did say that annual recurring revenue grew roughly 125 percent last year.
Zenoti has roughly 350 employees. The management team is based in Seattle, and the company has about 60 people in the U.S. Another 250 people are based in India. Zenoti just hired Guy Weismantel to serve as senior vice president of marketing. Weismantel last worked as chief marketing officer at PushPay. His resume also includes big names such as Microsoft and Egencia, the corporate travel division of Expedia.
Koneru attributed the company’s continued rapid growth to a lack of true competition. There are a lot of software tools to help standalone health clubs and salons manage their business. But there are not a lot of options for bigger chains to manage hundreds or even thousands of stores easily through one platform.
Koneru used Starbucks as a model for what Zenoti wants to accomplish. Starbucks has a unified solution with its app that works across all its stores globally and makes it easier for the company to learn more about the business. With Zenoti, there is only one card on file; there is only one menu across the business; and you can go pay anywhere and get your points anywhere You are treated as one integrated customer for the brand, as opposed to a customer at ten different outfits. Zenotti is also looking at launching its Asia Pacific Operations and is considering Thailand and Vietnam as possible sites.