The Seattle startup ecosystem has a new unicorn.
Zenoti just reeled in a $160 million Series D round to help supercharge its enterprise software product used by more than 12,000 spas, salons, and other wellness businesses across the globe.
The Bellevue, Wash-based company joins an elite group of Seattle-area startups valued at more than $1 billion, including six — Convoy, Auth0, Outreach, Qumulo, Remitly, Icertis — that reached “unicorn” status over the past two years.
Zenoti has flown somewhat under-the-radar since two brothers came up with the idea for the business back in 2011.
Co-founder and CEO Sudheer Koneru spent more than seven years at Microsoft as a director and product unit manager within the Windows division. He went on to launch an e-learning startup that eventually morphed into an HR software company called SumTotal Systems.
In 2008, he took a break from work.
“I didn’t think I would have started a company doing spa salon software, for sure,” Koneru told GeekWire last week.
But Koneru had invested in a chain of health clubs, spas and salons in India. That exposed him to the outdated back-end systems used to help keep the businesses running.
“There was software, but nobody built the software from an enterprise perspective,” he said.
Koneru teamed up with his brother, Dheeraj Koneru, another longtime tech industry leader and former Microsoftie. The pair sold their stakes in the spa and salon company and launched Zenoti, betting on a much larger opportunity.
That decision paid off. Zenoti now serves chains including European Wax Center, Hand & Stone, Massage Heights, Toni&Guy, Gene Juarez, and more that use its software for everything from scheduling to payments to inventory.
The company makes money by charging a subscription fee per store; it also has a fast-growing payments arm. Revenue has doubled this year and is expected to grow 120% in 2021. Koneru declined to provide specific figures.
The pandemic closed many of its customers’ locations temporarily. But it has also helped shine a spotlight on Zenoti’s technology that can enable touchless experiences such as payments from a phone or self-check-ins — convenient features that might stick in a post-pandemic world.
“It’s turned out to be a great window for us,” Koneru said.
In a blog post about beauty and wellness in a post-COVID world, Koneru details a “tectonic transformation” that he anticipates in the beauty and wellness industry in the wake of COVID-19 due in large part to the personal and physical nature of the work.
“Cloud-based, always-on, device-independent software has already transformed many other industries like transportation, media and communication,” he wrote. “While the beauty & wellness industry has been gradually migrating to such platforms over the last decade, the current crisis may be the catalyst to accelerate this adoption.”
With the fresh cash, Zenoti plans on expanding to pet grooming and fitness.
“There is no good enterprise-class software in these verticals,” Koneru noted. We think there’s a huge opportunity to be the category leader in this space.
Koneru estimates the total market opportunity at around $14 billion. Zenoti is looking to own a large chunk of that. Most of its competitors offer desktop-based solutions or single-store options, Koneru said. Others selling software to salons and spas include Vagaro, Fresha, Mindbody, and others.
“We think there’s a huge opportunity to be the category leader in this space,” Koneru added.
Zenoti employs 550 people, with around 100 in the Seattle region and nearly 400 in India. It went through a small round of job cuts earlier this year. Total funding to date is $250 million.
Advent International led the Series D round. Tiger Global and Steadview Partners also participated.
“The wellness industry is ripe for disruption, particularly as COVID-19 has made it more important than ever to eliminate unnecessary face-to-face interactions wherever possible,” Eric Wei, a managing director on Advent’s technology team in Palo Alto, Calif., said in a statement.
Zenoti is ranked No. 20 on the GeekWire 200 list of top Pacific Northwest tech startups,
Despite the pandemic, venture capitalists are pouring money into Pacific Northwest tech companies at record levels. Investors sunk $1.1 billion across 65 deals during the third quarter, according to GeekWire’s tally, derived from our running list of Pacific Northwest startup investments. Funding totals from July and August eclipsed last year’s levels. The investment activity follows a strong first half of 2020 for Seattle and the broader Pacific Northwest startup ecosystem.