Free Software, Zero Venture Capital, Half a Billion Dollar Company

What if the secret to building a half-billion-dollar company wasn't raising millions in venture capital, but instead getting your hands dirty and obsessing over customers who didn't even pay you yet?

Danielle Cohen-Shohet, founder and CEO of GlossGenius, took an unconventional path to success. While most tech founders rush to raise capital, she spent a year giving away her scheduling software for free to beauty professionals, learning to code herself, and building every department from scratch. Today, GlossGenius processes billions of dollars for tens of thousands of beauty and wellness businesses.

In this interview, Danielle reveals why she chose revenue over venture capital in the early days, how she turned 5 beta users into a thriving business empire, and the counterintuitive hiring lessons that shaped her company culture.

Danielle: I'm Danielle Cohen-Shohet, the founder and CEO of GlossGenius. GlossGenius helps business owners in the beauty and wellness space manage critical parts of their back office and front office, whether it's things like scheduling, booking, client relationship management, payments, marketing, and more. When you put all that together, the problem we're actually solving is that it's really hard to succeed as a small business owner given the many things on their plates every single day.

So I grew up in Florida. My father ran a small business. I saw firsthand the experience that he had starting and running a small business. I would just consume a bunch of different business publications and magazines. I was always really interested in entrepreneurship. When I was in college, I loved doing makeup artistry, got really interested in the beauty industry, learned so much about it. I had initially started my career at Goldman. I was also interested in finance and how businesses work and there were always these things that were on my mind, especially given the interest I had in the beauty industry. It was basically about 2 years in that I got ready to make the leap, and I did.

Danielle: If you look at a lot of businesses like the owner of a salon or a spa, they're basically first and foremost managing a lot of different things related to helping clients, improving the client experience and getting them back in. They're most of the time very small operations trying to do the work of what we see in a lot of other larger companies, everything from managing the number of clients that come in, the top of funnel, how are they getting new folks to experience the services that they offer on down to, once they've gotten new folks booking and scheduling with them, how are they bringing in the best experience for them and how are they enabling any one of these clients to interact with their business in seamless ways wherever these clients are whether online or offline.

And now once they're in the chair, how do they remember certain details about clients and improve the client experience when they're in seat in person? How do they manage all of the different operations related to staff or scheduling or resource management where clients sit or who helps them? So there's a big chunk of time management too that many of them are doing most of it actually manually.

Danielle: We started first with scheduling because we knew that everything revolved around scheduling. If you could understand someone's schedule and how they were managing their time, you also could help them manage other things such as reporting and analytics around that or how to connect that later to something like payments or marketing to bring clients back to land back on their schedule. So that was the first place that I really focused on for the MVP.

I designed and built the MVP myself, designed for UX and UI building and thinking about JSON APIs and a front end and a back end, and I did that because I thought it was really useful for me to really understand the product that I was building because it also helped me build the best product and the best product quickly too because I kind of would be the source of information to understand how this was built and then what customers wanted if I could also be the person making changes on it really quickly. I thought that would unlock a whole bunch of opportunity to be moving really quickly, which is necessary.

So there is a period of time where I did nothing but just eat, sleep, and code and I really focused on for the MVP in terms of what it looked like. It's fun to think back to what it was and what it looked like and how much it's evolved because we've come a far way.

Danielle: So I had a few relationships with business owners that worked in the industry. I reached out to them and I said I'm working on this thing. I thought that they would tell me something was great and use it because they had a relationship with me. So I had actually asked them, let me know of people you know that I don't know that I can give this to. So I'd basically be getting unbiased feedback from people who had no obligation to tell me something was great. That was where I started, so it was really a small group of early users.

All of the users that were in this beta, 5 of them at the time, starting point, they would all write back to the support email address and they'd ask, I know someone else that wants to use this. I was talking about this with them. What ended up happening was 5 customers, users at the time, because they weren't paying customers, would turn into 7, 10, 12 that got us an early group of really engaged early beta users that were very helpful for understanding how to build the product, which things to prioritize, and what to think about next.

The beta went on for about a year and then we released our first revenue generating product which gave us the opportunity to turn many users now the time into paying customers.

Danielle: There were so many challenges. I mean there was so much to do and there was not enough time to do it all. I learned a lot about marketing. I learned a lot about setting up systems and operations for the company. I built the finance department and there were just all these areas that were required to move the startup forward that I was learning for the first time operationally. There was just so much to do and so little time and all of it was important.

I think a lot of people say, oh, you have to prioritize. I think the realization was that all of it mattered and so I couldn't just pick one thing to do versus another specifically because there wasn't really a big team of folks that I had to support a lot of these different operations. We had raised a very tiny amount of capital just to kind of start this first push and launch and so there really wasn't a lot of opportunity for us to start and hire right away and build out certain functions. It was like drinking from a fire hose.

Danielle: On the hiring side, I remember there was a person that we hired who just wasn't right for the business at the time, wasn't able to get their hands dirty. The business was so early. Everything was all hands on deck and roll up your sleeves and this hire had kind of walked into the office one day and asked about the IT department getting set up with a laptop and we were still figuring out even how to set up our customer experience ticketing desk, let alone internal operations of the company, and you just kind of figure out that that it was a mistake to have hired someone for the business at the time, given the stage that the company was at.

Early stage startups should hire folks who can roll up their sleeves and get their hands dirty and maybe are folks that would tend to be more like the builder mentality type of person versus someone who's used to a little bit more structure and process. There's so much ambiguity in the early days and folks who generally like building maybe can navigate ambiguity better than folks that would like a more structured environment.

Danielle: The business was sustainable. The focus was just going out and delighting customers, obsessing about what it would take to do that really well. Initially we were largely revenue financed because it was very important for me to focus on a business that could stand on its own and have a model that had strong unit economics from the very beginning.

I always believed that institutional capital is something that can help you scale and do something that's already working faster and I had seen a lot of different examples of companies out there that I believe took institutional capital too early before they even really figured out the model and so what that kind of helped them do was falsely scale something was never working from the beginning versus our experience the opposite one was that we had something that was working from the beginning and then we took institutional capital later and then that was the time to scale it and so that was pretty much the reason why I had waited to take some capital which is that I just wanted to make sure that all the fundamentals were really solid and only then scale.

I think capital raising is an incredible milestone for any business and I think it's a very enabling milestone for businesses too, but you also can use this to do so much more when you're thinking about the intentional use of it and using it for things that you want to scale that are already working and so I think that's kind of why I've always thought that capital raising is not necessarily equal to success.

Danielle: To date we've grown to serve tens of thousands of businesses, process billions of dollars in activity for these business owners, and when I put all that together, the biggest achievement that we've accomplished so far is that we're impacting the lives of tens of thousands of people who rely on our business infrastructure every single day.

When I think about why we exist, it's because of our customers. Their success is our success, and no matter how much capital we have, if we're not making them successful, we're just not going to succeed.

So there's 5 values at the company. All of them really matter when it comes to customer obsession, but one particularly is really focused on this, and the value is make others successful. There is one metric that will always start with sharing during all of our company's town halls, and this is the number of businesses that we're empowering, and we really care about this because this is a way for us to understand how we're doing on our mission of empowering entrepreneurship.

Danielle: There's a lot of things we do like voice of the customer programs. We'll interview customers during town halls. We'll do Q&As, panels. We'll take transcripts from different customer calls and share them across the organization during onboarding. Any person joining the team, no matter what role you're in, can sign up for customer interviews and being a part of different teams that are maybe a little bit more closely on the front lines with customers.

And what this helps us do is drive a whole bunch of customer awareness and obsession across every part of the organization, not just one that gets to talk to them every day and that's really important for creating a product that is helping customers and also imagining the future for them.

Danielle: If you want to build a company, probably the first piece of advice I would say is just go get your hands dirty. I think that the idea is really 1% and execution is 99% of it. Learn about every area of your business. I see a lot of founders who have a strong suit in a certain area of the business and that's amazing, but when it comes time to them unlocking other areas and understanding holistically what needs to happen across the business, the more you know about other parts of the business, the easier it will be for you to hire wonderful people who can help you scale them because you'll know what good looks like and you'll develop this muscle of understanding the business and how it operates that will become so intuitive to you over time and will be like a superpower.

And then the second piece of advice is understand what customers love about your product but more importantly understand what they don't love about your product. I see a lot of founders who want to celebrate this amazing part of their product and how much customers love it and it's so exciting for us to do that too when we release something and customers love it and it's so exciting but what I think is actually more useful is how do you lean into understanding things that customers are not saying customers don't like there are reasons why they don't come back to your product and in some way it's kind of like getting really good at knowing what your blind spots are and focusing on that a lot in the early days.

Danielle: I take a step back and I look at what we're doing - we're enabling entrepreneurship and we're helping business owners succeed and improve their livelihoods every single day and when I think about the long term we're in a big industry made up of small businesses. I think we have the opportunity to impact significantly more of the market and become a gateway for entrepreneurship where anyone can come into the product and press a few buttons and suddenly their livelihoods are transformed.