Sudheer Koneru thought he was pretty much done working. After stints at Microsoft and SumTotal Systems, Koneru considered himself semi-retired, or at least on a break, in mid-2008. He travelled and participated in yoga and wellness workshops. But about a year later, he was thrust back into duty after a company he invested in several years earlier that ran a chain of health clubs, spas and salons in India underwent a management change. He thought taking on a more active role in the company “would be a fun thing to do” and didn’t treat it as a career move.
What the veteran software engineer didn’t know was his time working in the spa and salon world would bring him back to the tech scene and serve as the genesis for a company that has become one of the top Pacific Northwest startups.
Koneru is CEO of Zenoti, a Seattle company that sells an enterprise software platform for the fitness and beauty industries. The startup announced a $20 million investment round today from Steadview Capital. It comes on the heels of a $50 million round Zenoti raised in May 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 $91 million in its nine years of existence. The company is ranked No. 20 on the 200 list of the top Pacific Northwest startups. Zenoti wasn’t 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.”
From Microsoft to the Beauty 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. “I was pretty hands on to the extent of knowing the life of a personal trainer, knowing the life of a receptionist, how the spa employees worked,” Koneru said. “It was almost like an alternative lifestyle from what I had done before.” 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 today announced a major new customer: Hand & Stone Massage and Facial Spas. The deal brings more than 400 stores in the U.S. 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 1,000 companies using its platform with a combined 7,000 stores.
The key metric that Zenoti uses to measure the health of its business isn’t the number of stores on it’s platform — it’s annual recurring revenue. Koneru wouldn’t give a dollar figure, but he did say that annual recurring revenue grew roughly 120 percent last year, an impressive figure for a 9-year-old company. 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 aren’t a lot of options for bigger chains to manage hundreds or even thousands of stores easily through one platform. That’s where Zenoti comes in. Koneru used Starbucks as a model for what Zenoti wants to accomplish. The coffee giant has a unified solution with its app that works across all its stores and makes it easier for the company to learn more about the business.
“With Zenoti, there is only one card on file; there’s only one menu across the business; and you can go pay anywhere and get your points anywhere,” Koneru said. “You’re treated as one integrated customer for the brand, as opposed to a customer at ten different outfits.”