S4E4: Danielle Cohen-Shohet on the future of beauty and disrupting tech for hyper-local businesses

Welcome to The Room Podcast. My name is Madison McIlwain and I'm a partner for seed stage investments at DefyVC.

And I'm Claudia Laurie, a co-founder of Pryve. We're a founder and funder who are in the room where it happens. If you're a first-time founder or an emerging venture capitalist, we're glad you found us. We share inspiring, authentic, and insightful stories from founders, funders, and operators who have been in the room and provide tactical feedback on their early aha moments and learnings along the way. Before we dive into this week's episode, we have a short message from our partners.

Support for The Room comes from Silicon Valley Bank.

What's next? What if?

Now what?

Silicon Valley Bank understands these questions can keep founders up at night like Claudia. For over 35 years, Silicon Valley Bank has helped high-growth companies through scalable financial solutions, plus insights and expertise that many other banks just can't, which could be why 50% of US-based venture-backed tech and life science companies bank with SVB. Learn more at svb.com/next. Silicon Valley Bank, built for what's next.

Cooley is a global law firm built around startups and venture capital. The firm has been devoted to entrepreneurs and investors, partnering with both to transform breakthrough ideas into successful companies. Cooley works with thousands of entrepreneurs and newly formed companies to ensure that they are structured for growth and long-term success. Since 2005, Cooley has been ranked the number one most active law firm. Representing VC-backed companies going public. Learn more about the firm at cooley.com and also at cooleygo.com, Cooley's award-winning free legal resource for startups. This week on The Room Podcast, we are so excited to share our conversation with Danielle Cohen Schoett, co-founder and CEO of GlossGenius. GlossGenius was started when Danielle, a freelance hobbyist makeup artist, knew that there had to be a better way to manage business and engage with clients from scheduling to booking to payments. She and her co-founder had worked on several fun projects before Gloss Genius, but both became obsessed with building a platform that meaningfully helped freelancers and small businesses truly level up their business. After their initial launch, even though the product was in its early stages, independent beauty professionals loved the platform and couldn't stop using it, which then took them down the path of finding product-market fit. On this episode, Danielle talks about building for a specific need, something you know and are passionate about, developing a tech platform for hyper-local businesses, and where the beauty industry is going next. Let's open the door. Thank you so much, Danielle, for joining us on The Room today.

Thanks for having me.

Danielle, you're the CEO and founder of GlossGenius, a leading software platform for small businesses across the US salon and studio space. The Gloss Genius product has been in the market since the middle of 2017, so it's been a few years. Did you always think you were going to become an entrepreneur?

If you were to ask my parents this, they'd say yes, I knew I was always going to become one. My dad was a doctor. It was his dream for me to be one too. But when I was very young, maybe even 6 years old, my parents would ask me what I wanted to do when I would grow up and I'd answer that I wanted to run a company and they'd pry me a little bit and they'd say it takes a long time to do that. And I'd answer, well, I will start my own company. And I thought it was interesting and a lot I laugh when they talk about this now, but back then entrepreneurship wasn't as much of a household term as it is now. But for whatever reason, I had that answer when they asked me. And I think it was probably because I would grab my parents' Forbes magazines or Barron's and read them. So it just stuck. But fast forwarding a little bit, and I think wanting to be an entrepreneur for me was more so about having a strong idea in my head of how something should be, what it should look like and how it should feel. And I've always really liked building things. So I guess it just really made sense.

What was the first business that you had built? Was there a lemonade stand or anything while you were in school?

Very first, I would clarify that and describe the following as the very first model of what I would consider repeatedly earning revenue. And so I was in middle school and I was in Hallmark Cards with my grandma. She was so old-fashioned. She'd always write handwritten notes and send them out to friends or family members. And I heard her ask the sales associate, they're at the store and she said, "Excuse me, I'm looking for cards that someone hasn't seen before that are unique and what would you point me to?" And ultimately she didn't really find what she was looking for, but we left the store, she didn't really think too much of it. Well, I loved painting and shortly thereafter I proceeded to make her a packet of hand-painted greeting cards and I sent 10 of them to her as a gift. And she called me and said, "Can you send more to me?" If I buy them and without even thinking, I just was like, yes. And to make a long story short, I would make them. She'd keep buying them. This grew. She had other old-fashioned friends that would contact me. I would sell cards too. And it turned into something quite meaningful for me, especially as an experience at a very young age. And later at other businesses like a tutoring company and a digital receipts app company when I was in college. So I've always been into building things.

It is clear from Hallmark to today, you've had a very entrepreneurial journey in many different sectors, and that's incredible. Actually, Madison is another one who actually paints written cards and sends them to her friends, and every time I get one, it's an incredible experience. So I can attest to the delight of a custom handwritten card. Let's rewind a little bit. You went to Princeton for undergrad and you studied economics there, and then right after graduation, you started in banking in Goldman Sachs. How did you jump from Goldman to founder?

Yeah, when I was in college, there was this digital receipts app company that I was working on right before I started at Goldman, and ultimately I let that go because I really wanted to get the most out of my time at Goldman since it's truly a great experience and launchpad to be a part of. But I guess given I had let that go, I had always had this itch while I was there to build things and, and have a big impact and After thinking carefully about my decision to leave, I just went for it. I had picked up programming skills along the way. There were some courses at Princeton I took that helped me know enough to be dangerous, and I started doing some freelance consulting work for clients right after I left Goldman, building apps and doing other for them on the technology side. And once I got into a better rhythm with that, there was this concept that later evolves into now what Gloss Venus is, and I just kept working on it, and ultimately I just I started focusing on it full-time.

How did you stumble across this aha moment that really became what Gloss Genius is today?

Yeah, it's a fun story. I had done a lot of previous work with service professionals, given some of the gigs I did when I was at Princeton. And as I was starting this company, I knew that managing any of those, and even from a full-time perspective, being a small business owner really wasn't easy. Several years ago, this was before What we see is the consumerization of the enterprise, and a lot of small businesses were running workflows off of terribly archaic measures. All their data, everything about their business was either on a piece of paper, in their heads, or stuck in some clunky legacy software system. And running small business, you're often a one-man show. You have a lot of client data. You're not even really using it to further your business. You don't even really dive in and make sense of it to understand where you are and where you're going as a business owner. And there's no one there really helping you or telling you what to do, and it's lonely. And I had this idea. This idea in my head that running a small business, particularly in this industry I cared a lot about, should be fun, and your day should be bright, and your journey should be full of help. And I coming to market with these core beliefs, the more I worked on it, I knew there was this obvious opportunity not only to help small business owners with technology in the beauty wellness space, but also change how they felt about their businesses. And that's really how we got started and why we got started.

So you uncovered both through your own experiences of being a small business owner and getting to know people you interacted with on a regular basis, how they had these unique pain points. What was the first product that you delivered to these individuals? What was the most salient part of the things that weren't bringing them joy in their job that you felt like you uniquely could help unlock?

The very first product, and that was the beta product that we had gotten out at a very early stage of the company's history, was very simple client CRM. And it was basically just a way to track clients, understand more about them, and put information either in a freeform or more structured data format type of way. We, we allowed them to do both. And that was coming from a perspective that we wanted to be able to serve a few different types of businesses and a few different types of client relationships that business owners would have. And The more we got working on it, the more we had wanted to focus on a specific industry, given a lot of the changes that we had seen in that industry, a lot of the specific pain points and nuances and complexities with the workflow for professionals in the beauty and wellness space. And so we then took a step back and built a really expansive product with a lot more surface area based off of some of the things we learned from that very early beta.

So taking a step back for our listeners who might be wondering, okay, what exactly do we mean by beauty and wellness? Is this hair, hair salons? Is this nail salons? Who is your target customer base when you narrow down your focus to this certain sector of small business owners?

Yeah, we serve a lot of different types of customers in this space, and you could think of them like hair salons or barbershops or businesses in the wellness space, whether it's massage therapists or other holistic wellness coaches. Many of the spaces have become more niche here, and, and there's a lot There's many more categories of professionals out there, but I would say anything under the broad umbrella of a beauty and wellness small business, that's who we serve.

Thinking through, you have this product that you know is going to help and support these small businesses that you've spoken to. How did you go from having a product to having a customer?

So our very first customer was a very talented makeup artist by the name of— we actually found her through professionals that I knew. I had relationships with other service professionals and I had said to them, look, I know you know me and like me. So if I give this to you to use, you'll be biased. So can you share this with people that don't me, don't know me, they have no interest in giving feedback that's nothing but honest. And so they did. And that was how we got early customers, particularly the first customer. And from there it started growing.

And going from that first customer or someone who says, you know what, this is actually really useful, I'd like to pay for this, thank you, to 100 or 1,000, how did you grow that not having come from a marketing or growth background yourself?

Yes, every new customer felt like a big deal and, and in some part each one was because the patterns we saw confirmed we were onto something and we had this early beta and, and while it wasn't perfect, we knew it was working. Because users did two things normally. Number one, they kept coming back, and number two, they would write into the support@ email address and ask if they could share this with someone else that wasn't in the beta. And seeing users that were excited to share this and would go out of their way to write into the support@ email to ask if they could share this, for us, was very meaningful. And that was certainly how we scaled to the first 100 customers.

It's always a good sign when your own customers say, I want to refer you to other people because this is making my life so much better. So that is an incredible milestone to hit early on in your product market fit and definitely a sign, I'm sure, that you were on to something. Did you initially start to raise capital when you really hit this moment of inflection of people love this. Was that your thought to go and initially raise venture capital then?

Back then we had understood that people were loving this, but the next step for us was understanding what were the fundamentals of the business going to be like. And it was really important for me to nail down the idea that we had awesome fundamentals and we could be a business that would stand by itself. And it took a bit of time before we went and raised an institutional round. And I would say when we ultimately did, It was more so just to pour a lot more fuel on the fire of what was already working in what we deemed to be an already pretty meaningful, big way. When we raised capital, we were already serving a pretty hefty number of customers. And it was, again, just to accelerate what it was we were already doing and what it was we already had a deep amount of conviction in.

I'll just say, like, first off, congratulations so much on taking that leap into going through an institutional investment round. Rumor has it you've raised around $20 million from incredible venture partners. Like Bessemer. What was the process for you in starting and kicking off that institutional raise?

I feel so fortunate to have involved an incredible roster of investors to date, and the process for us was really understanding certain things we had done in the past that lent a whole lot of conviction for us in terms of what it was we wanted to be able to do with the next milestones. That we socialize with investors. And I suppose that when we sought raising and fundraising, it was more so from the approach of, well, what we're doing is already really working. And this is an incredible business that is growing by itself. And it was more so from the point of how can we accelerate and how can we further the mission that we have to serve small business owners in this space and help them on their paths to entrepreneurial success. When I thought about the opportunity to use fundraising to accelerate how we could achieve that mission, it made a lot of sense and it was extremely exciting to be able to work with investors that shared the mission with us and would be very valuable long-term partners for us in thinking through that too.

Thank you for sharing that decision point, and we're excited to see how GlossGenius continues to scale. And I think what's really interesting about your business is that it is a technology solution that inherently scales well, but it's servicing physical businesses, salon, various storefronts that are like actually in person. And this past year has been pretty interesting from that perspective. Let's talk a little bit about distribution and finding customers throughout the country. How many states is Gloss Genius in today?

We serve business owners across all 50 states.

That's incredible. Could you share a little bit more about growing a hyperlocal business across the country? What strategies worked well for you?

Yeah. So growing a hyperlocal business across the country is hard, but it's much easier when you can offer a tool such as we do that can provide value to a business owner, no matter who else in their periphery is using it. And taking a step back, I think this is where many companies struggle. There's a critical mass required before users get value from the product. And we see this in a lot of marketplace-type companies. And for me, understanding that this is a point where many companies struggle, It was important to design the product from the beginning to avoid having to rely on a critical mass. And even more so, I think designing the product around creating value for business owners no matter where they are or no matter who around them is using it helped us create an incredible community of business owners across every state once we had a lot of them in the network and using the product. Go-to-market strategies, in terms of what it is that's worked the best for us, I would say the best one for us has been word of mouth. And I hope that continues. And I, I think word of mouth, looking at channel distribution, it's still the largest channel for us. And so in a sense, what it comes down to with word of mouth is a good product and a product that people care a lot about in a community they feel like they're a part of. And so that's been one of the most effective go-to-market strategies for us, just designing a solid product and customer experience.

So I'm hearing that having a good product that people love is really the precursor to any kind of growth. Could you Could you chat a little bit or describe one of those features that people just fell in love with?

Yeah, so business owners fell in love with the idea that everything they needed was on GlossGenius, and particularly for the segment of business owners that we were serving, many of these features weren't accessible, or if they were available in other software platforms, they were very expensive for them to use. And business owners really valued the idea that they could act and think like a business owner of a very big business, even though they were running a small business. With very powerful holistic solution that's also helped business owners do more for their own business. And it has removed barriers to success. And the idea that we care so much about encouraging entrepreneurship and helping any one of these small business owners achieve entrepreneurial success is also in some part what customers really love about the company because they know that we get them.

Incredibly clear that sort of keeping the customer at the forefront your mission and your product and your strategy and really solving their needs is core to your business. And personally, it's been an interesting 2020 and even 2021. I went to my local salon for the first time in a year and a half just the other month, and it was— they were reflecting on how hard of a year it had been, and a few faces that I had seen in the past were no longer there. And I'm sure that is something that really has affected the beauty and wellness industry nationwide. COVID has really kicked off a meaningful dialogue around empowering local businesses. How has this past year impacted your customers?

Great question. Well, COVID-19 has presented many challenges to our customers. I think we've seen some of the most extreme examples of resilience, and on the whole, I think it's been a very wonderful thing to see with small business owners and resilience. We— this is a value we have inside the company, and so what better way deliver values than to also be in a field where we're servicing customers that also are living those values too. And specifically in the beauty wellness industry where many of our customers are, the shutdowns were challenging, but we saw many owners navigate and shift and think outside the box and start selling things online and service clients virtually and in ways that they probably didn't even contemplate ever at all when they opened their business. And moving out of the shutdowns and as we moved into the reopenings, I think it on the whole was generally good in terms of progress that a lot of small businesses were making compared to the shutdowns. Consumer demand for services as the reopenings began was pretty strong. And even as more of the world has become vaccinated, consumer demand for services continues to grow. And it's interesting where we sit as a company because some of the data that we have, in some ways we have a look into the future, right, with scheduling activity and also a look into the past. And what I see is many businesses right now, just from a fundamental perspective, are better positioned than they ever were. And I think that's on the whole a very positive thing that we've seen business owners adapt. And we've also seen them use this time to strengthen their own businesses and improve how they think about their own operations and finances. And so while it's been very challenging, it has also been used in a constructive way for many business owners across the country.

You mentioned having a look into the future, and that prompted a train of thought for me, a little bit more of a fun question, but based on your platform and also your customers, what are some of the big sort of beauty and wellness trends that you expect to blow up over the next year?

Oh, wow. We're even seeing this right now with data specifically that we look at clients. The average ticket value is increasing, and it seems to be the case that maybe there is some pent-up demand and clients are willing to spend more. It seems like more kind of service add-ons and services are getting bundled together. And even from our purview, we're seeing some clients start to get services done that have never been done on them for the very first time. And so people are feeling a little bit more experimental, which is interesting to see, especially in the data. And then other things that I think are very reassuring to see in the data is like average gratuity is up. And maybe there is this idea that this idea of gratitude that's circulating as clients visit service professionals. And maybe to your comment earlier, in many ways, clients really now value and understand the importance of local and really value businesses around them.

You've had incredible success building a meaningfully— a meaningful technology solution that is empowering tens of thousands of small business owners. And I know from personal experience experience that building a company is not always up and to the right. There's definitely some hard moments along the way. Can you share about a time where things didn't go as planned?

Oh man, there's always a bunch of setbacks. And even when COVID-19 happened, it was a big setback. There was so much that we didn't know. There was a lot of initiatives we had to make decisions on. And I always think a true measure of success is how one would respond in the face of adversity. And, and while the onset of the pandemic Certainly didn't go as planned. I think what we were able to do as we navigated that went better than I could have ever anticipated. And for me as a CEO, it's a really proud moment. We tell our customers to be resilient and the fact that we live that too, it's important and meaningful as well. And diving into even how we navigated that overnight, we struck up relationships with lenders. We facilitated tens of millions of dollars of loans in days. We took the stance that we wanted to support customers not only when things were going well, but also in times of need and across every area of the company, whether it was the support team thinking about how to become the knowledge experts for business owners across financing or budgeting, or thinking about applications, or whether it was the product and engineering team shortening down timelines successfully to deploy features that would have taken weeks, months to deploy, and they got them out in days. We really just did what it took to overcome setbacks. And, you know, I think it's a really interesting period of time to reflect back on and understand and really come to the conclusion that when you're motivated to help others and when everyone on the ship is so passionate about it, as the whole team at the company was, there was no limit to what we could have achieved during that time. And passion is the most important thing for navigating setbacks. And when you do what you care about and when you live it and you care who you serve, you'll figure it out.

I love that framework. I think that's our quote for the episode and how you've really just built a business around an ecosystem of sometimes underserved business owners and entrepreneurs who maybe aren't the shiny entrepreneur who's on the COVID of Forbes, but they've put their life's work into building this passion business for them. And you've built Gloss Genius to support them on keeping that business alive and being something that supports them. So keeping that framework alive for us who live in Silicon Valley, or maybe you're thinking about the only way to start a business is to start a technology company. You can go start a technology company to empower other types of entrepreneurs. And I think that is such a cool way to look at Gloss Genius. And as we think about the landscape of small businesses and what technology tools they need to keep thriving and growing into the next decade of how they are both online and offline, this kind of landscape has changed quite a bit since you initially started building products for small business owners back in 2015. And Claudia touched a little bit on beauty and wellness trends for the end users that you've been seeing through the data on GlossGenius. But I'm curious about what are other pain points? Where are there other opportunities for technology tools to continue supporting small business owners as we look forward?

There's so much opportunity to use technology to continue to support and further small business owners that it keeps me up at night. And it's one of those things, so much to do and so little time. I think there's really big areas around making it easier and easier for small business owners to do what they do best with more and more automation. I think that's a really big area that's exciting and there's a lot of opportunity. More and more community, right? It's a lonely, hard journey and the list goes on. And I think one of the most important things for us at the company is to keep thinking very big about our mission and also use the right framework and structure for prioritization because there really truly is a lot to do.

You have this interesting network of small business owners and there's no consumer-facing version of Gloss Genius today, but conceivably as you continue to grow, you might have the most comprehensive database of the best waxing places in San Francisco. Have you ever thought about changing your model from being B2B to C?

We have. It's interesting. And I think there's opportunities for that in the future. But I also go back to the question of, well, what will really move the needle for putting any small business owner in our industry on the path to success and long-term sustainable success? And I think that's really helping them with their operations. Stand Strong and encouraging small business owners to get to the next step of knowledge and operations and planning and customer relationship management for their business. And I think there's so much more for us to do on that front than on the consumer front. And I'm excited to continue to double down on our commitment to making them more and more successful.

Incredible. Well, on today's conversation, we've talked about your early entrepreneurial roots and how from your early years you saw problems that people like your grandmother saw in the world and tried to solve them, all the way through to your recent successful fundraise and the tens of thousands of Small business owners, you've been helping throughout the pandemic and really for the past 6 years. You're not all about, you're not just your company. Who is Danielle outside of work and what's next for you?

The company certainly takes a lot of my time. Outside of work, I'm someone, every minute I enjoy doing things and learning things. And there's so much about this world that I live in to learn that I don't know. And so whether it's reading or thinking about design or cooking or exercising or meeting new interesting people doing very exciting things. I think that would probably consume the little time I have outside of work. And what's next for me specifically with regards to the company, I think we're at one of the most exciting stages of our company's history, and I can't wait to continue to grow the company into one that will leave a mark on service professionals and business owners around us. And so I'm continually excited to grow as a leader on this journey.

Well, we're excited to witness that journey, and it's been such a pleasure to have you on and to learn a little bit more about what the early days were like and the problems that you're solving. As we come up on time, we like to ask our hero question for the podcast. And who is a woman in your life that has had a profound impact on you and your career?

So many women have had incredible impact on my career, but one specifically was the academy leader of the magnet program I was in at high school. And I think she had a very profound impact on my career because she advocated for me to be a part of classes that I technically, because of age requirements, shouldn't have been a part of, and silly things like that that were old rules with the school administration. And I think underpinning all of that was this idea that I could do anything and this true belief in thinking outside the box and never taking no for an answer. And so I think that's had a really profound impact on my career.

Thank you so much for sharing that. And we hope that many of our listeners to the podcast can identify and find those people in their lives to tell them that and help them really believe that you can really do anything. So thank you so much, Danielle.

Thank you.

Thank you for listening to this episode of The Room Podcast. Cast. We hope you enjoyed our conversation with Danielle of Gloss Genius. Please reach out to us via Twitter, LinkedIn, Instagram, Clubhouse. We'd love to hear from you. Join us for another exciting conversation next Tuesday, September 14th at 7 AM Pacific, 10 AM Eastern. See you soon. All opinions expressed by Claudia Madison and podcast guests are solely their own opinions and do not reflect the opinion of the 5EC. This podcast is for informational for entertainment purposes only and should not be relied upon as a basis for investment decisions.

Support for The Room comes from Silicon Valley Bank.

What's next? What if? Now what?

Silicon Valley Bank understands these questions can keep founders up at night like Claudia. For over 35 years, Silicon Valley Bank has helped high-growth companies through scalable financial solutions, plus insights and expertise that many other banks just can't, which could be why 50% of US-based venture-backed tech and life science companies bank with SVB. Learn more at svb.com/next. Silicon Valley Bank. Built for what's next.

Cooley is a global law firm built around startups and venture capital. The firm has been devoted to entrepreneurs and investors, partnering with both to transform breakthrough ideas into successful companies. Cooley works with thousands of entrepreneurs and newly formed companies to ensure that they are structured for growth and long-term success. Since 2005, Cooley has been ranked the number one most active law firm representing VC-backed companies going public. Learn more about the firm at cooley.com and also at cooleygo.com, Cooley's award-winning free legal resource for startups.