Salonkee: Business software empowering the beauty and wellness industry. Why we invested.
Entrepreneurs often wonder how Venture Capitalists choose which companies to invest in. And while every firm is different, we try to be as clear as we can in our own venture capital approach. We also try to show you our approach in practice, as in this case study of Salonkee, a Luxemburg-based tech company that provides a one-stop-shop SaaS offering to hair, beauty, and wellness businesses.
Salonkee’s €6.2m Series A round was co-led by Fortino Capital and Newion and marks our first investment in Luxemburg. And as you’ll see here, our decision to invest was centred around our belief in Salonkee’s founding team, value proposition, and market dynamics.
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The founding team: 5 ambitious tech entrepreneurs with an international and customer-centric mindset
When your home market is as small as Luxemburg – which holds only 800 salons – you had better adopt an international mindset from the start. Together, founders Tom Michels, Andre Stehle, Alexandre J. Claro, Samuel Faber, and Gilberto Fernandes speak 7 languages and have shown they hold that vital comfort with cultural differences, clearly necessary when your ambition is to build a European champion. And the Salonkee team has proven early on that they can effectively expand into new markets, spreading their reach to more than 1200 salons in Luxemburg, Switzerland, and Belgium in 2 years. With that, they have a crystal-clear strategic plan for what’s ahead.
Salonkee’s customers, being hair salon or beauty centre owners, are easy to approach. For an investor like us that’s great, as we could easily visit and cold-call dozens of customers to collect the usual references. An important quality we identified during these discussions was Salonkee’s customer centricity: With a very lean development team and a short feedback loop, the company has been efficient in building a product their users love. Their availability during the sales and onboarding processes has also made a real difference for customers, followed by a delightful customer support. After all, hairdressers, being artists first and foremost, are themselves very relational with their clients.
Finally, we were impressed by the team’s ambition and ability to navigate and grow their business in the midst of a pandemic. When successive lockdowns hit Europe and salons were forced to close – either permanently or temporarily – Salonkee showed that they could adapt to change and reinvent themselves, all the while showing remarkable traction and an ability to deliver on their promise.
The value proposition: A one-stop-shop solution, monetised in a compelling pricing model
Salonkee’s offering consists of both a B2B SaaS solution (for salon operations) and a B2C marketplace (the booking platform). Salon owners rely on an elaborate all-in-one B2B solution for its ease of use, its time- and cost-saving benefits, and embedded suite of features to nurture customer relationships and grow sales. The suite of functionalities includes bookings, digital marketing, customer relationship, and payments, all of which integrate strongly and are topped by detailed business statistics. In the meantime, end-consumers enjoy a premium online booking and online/in-store payment experience.
Most competitors position themselves as a client acquisition tool, choosing to monetise the B2C marketplace by taking a commission on new clients brought to salons. This is a strategy that we, at Fortino, don’t believe in: A commission-based model does not promote platform adoption, nor does it breed end-customer loyalty. Ultimately, it creates a conflicting situation in which software companies make money first by attracting end-customers to their booking platform but then also by converting them from one salon to another. End-clients also tend to be loyal and recurring customers (for example, you don’t venture out into a new hair salon as you do in a restaurant), limiting the revenue opportunity from new client fees.
Salonkee’s model, however, is distinctive from most competitors: It only monetises the B2B software product, while the B2C marketplace is entirely free. Salonkee does not aim to be an acquisition tool but an ERP for this specific vertical. The company offers a fixed monthly subscription with no hidden fees, and through a more virtuous business model, encourages salon owners to transfer their entire customer base to the booking platform.
The market dynamics: a wave of digital transformation in the hair and beauty market, effectively accelerated as a result of the pandemic
The European market comprises over 800k salons, the majority of which still work with paper diaries and phone calls or with outdated software solutions. While we believe today that almost every salon could benefit from a solution like Salonkee’s, only 12% of beauty salons are digitalised in continental Europe. This means that the opportunity is colossal. And while the salon industry may not be the fastest growing market, it is a future-proof industry in which people tend to spend more and more money on beauty services and products.
We are therefore confident that there is a market momentum. Players that entered the market over the past decade have done their share of evangelising and the pandemic has created a paradigm shift for walk-in salons by obliging consumers to book appointments. In turn, these consumers have become accustomed to the ease and convenience of online booking, a new normal from which we believe there is no turning back.
From a very high level, our decision could be summarised as being consistently based on the team, the product, and the market. Salonkee helped make that decision easy and very exciting for us with the right mindset, track record, scalability, and traction.
As investors, however, we realise that we are primarily enablers, and are therefore grateful to Tom, Andre, Alex, Samuel, and Gilberto for providing us the opportunity to prove ourselves as a partner.
If you’re a Europe-based B2B SaaS company looking for advice and potential investment, we can help. Get in touch, and let’s get the conversation started.