4 Minutes to Read
By Han Yang Lim
Lopo Champalimaud is the Founder and CEO of Treatwell (previously Wahanda), Europe’s leading online booking platform for hair and beauty. Raised in Lisbon and Montreal, Lopo studied at McGill University before moving into banking and private equity with Pictet and Wand Investments. Prior to founding Wahanda in 2008, Lopo was MD of Lifestyle at Lastminute.com, and the founder of two successful data and CRM start-ups in NYC. While working at Lastminute.com, Lopo realised the potential disruption to be made within the €100bn health, wellness and beauty industry, which to that point had largely failed to join the Internet revolution. Armed with a passion for wellness and experience working for high-growth technology firms, Lopo has since turned Wahanda into the biggest online beauty booking platform in Europe. I was fortunate to secure half an hour of Lopo’s time to ask him a few questions our members had for him. His answers below have been summarised for brevity but the substance remains very much the same.
Han Yang: Thank you for speaking with me today. Let’s jump to it. Why did you start Treatwell when you did, instead of working for someone else?
Lopo: I’ve been in the tech space since 1994 and I’ve always had a passion for growing and building businesses. It’s in my DNA. I launched Treatwell in 2008 but had already built two start-ups when I was living in New York, before I then moved to London. The idea first came to me when I was running the non-travel part of Lastminute.com. I noticed that the site enabled visitors to book pretty much everything online - except for hair and beauty appointments. When I started digging around, I found that the hair and beauty market was a large fragmented market that no one had really touched. I knew there was an opportunity to do something about that - to create a marketplace that would bring this space into the digital age. I hit a bit of a T-junction at the time – I had to decide whether to work for someone else, having just received three really big job offers from other companies, or to start up my own business again. I decided on the latter because that is was where my heart lay, what I felt most passionate about and what makes me happiest - and so Treatwell was born.’
Han Yang: So is Treatwell kind of like Uber and the taxi market?
Lopo: Yes and no. Digital marketplaces can be very different from one another. The hair and beauty market is a large, hyper-fragmented market. The majority of which – 95% are single owner operated businesses – don’t have another channel for marketing and have very low utilization rates, so they need help in fulfilling their business. Customers have terrible booking experiences, they have no ability to choose, and no visibility of what’s good or bad in terms of price or availability. So we created a tool that helps the merchant’s business.
Han Yang: Was that how you pitched your first round of seed funding?
Lopo: The pitch has changed a great deal over the years. But I still remember the first slide from my first pitch, it said; we are the “OpenTable for spas and salons.”
Han Yang: How has it changed since then?
Lopo: We launched in 2008, which wasn’t a great time to start a business, but we had some money in the bank so we felt lucky.
We knew the market was really fragmented but the challenge was that we were really premature. I thought it would be really hard to convince spas and salons to use our software to make bookings. So instead of going down the transaction payment model, we got salons to pay us a monthly fee in exchange for us feeding them business leads. But we found that didn’t work that well because many salons didn’t value those kinds of leads, plus it didn’t address the bad customer experience problem. You still couldn’t book an appointment when you wanted to.
At that time we also noticed that 40-50% of what Groupon was doing in the US was focused on hair and beauty, and we thought ‘we’re the hair and beauty experts, we can’t let them take us over!’. So we launched our own version of ‘Daily Deals’ for spa/salons in 2010 and grew very rapidly from there. We were the 3rd largest ‘Daily Deals’ business in the UK. And all we did was sell hair and beauty.
By 2012, I realized a number of problems still existed that the ‘Daily Deals’ model wasn’t addressing. Firstly, it doesn’t solve the consumer problem - if you’re a consumer, you don’t want to wait for an offer to come through, you want it on demand, to chose the place you want to go to and for when it is convenient for you. ‘Daily Deals’ are impulse purchases but people don’t really buy their regular hair and beauty services on impulse. And, secondly, ‘Daily Deals’ do not help businesses increase their yield and maximise utilisation rates. ‘Daily Deals’ puts a cheap price at primetime and everyone wants to go there, which is exactly the opposite of what businesses want. As a business, you want people to fill your off-peak or quieter time slots. So how do you control where the demand sits and lands? In 2012, we returned to the original business of on demand hair/beauty service booking. And that’s the beginning of Treatwell as it is today.
Han Yang: Treatwell seems to be growing by acquisition of similar companies in other overseas markets. How did that come about?
Lopo: We did an initial seed round, we then did a round to finance the daily deal venture and then another round as part of this transition phase. As soon as we pivoted in 2012, I turned to my board and said the daily deal venture isn’t going to scale. Let’s focus on the ‘Real Time’ booking platform, so we did an acqui-hire of a small software booking business. By Sept 2012, I had shut off our daily deal business. It went from 80% of our business to zero. But the booking business took off, growing at 200%+ year-on-year for 3 years, which was all organic growth. Last year however, we felt we understood our business well, proved it had worked, knew the UK market well and so we decided it was time to expand into Europe. Our business is very localized and I realised we needed strong local teams as part of that expansion plan for it to work. We acquired 5 businesses over a short period of time and we are now in 10 countries. These acquisitions though weren’t about acquiring revenue or market share but rather about getting the right people on-board who understood the business and what we were trying to build. It wasn’t a strategy for growth but a strategy for building up the footprint very quickly. In a space of 10 months, we went from 100 people in 1 country to being 500 people in 10 countries. It would have been hard to do that if we hadn’t made those acquisitions.
Han Yang: During such a period of intense acquisitions, companies may face an issue of corporate culture assimilation. How did you manage that?
Before we make any deals, we look at whether the people are aligned in terms of vision/strategy and whether we like them and could sit down at dinner with them. Fortunately, we found a group of entrepreneurs and people we liked, which was the basis of it, and culturally that’s worked. As expected with these kind of situations, not everyone’s going to be on the same page. At those times – and we’ve only really had one – you just have to try and be open and talk it through, where the relationship is working and where it’s not working. And ultimately at some point you have to decide whether that’s working or not and decide if you want to keep trying or go your separate ways. You can’t do 5 acquisitions and not have challenges. On the whole though, our acquisitions have been really successful.
Han Yang: On your most recent round of funding being acquired by Recruit Holdings, could you walk me through the thought process behind that?
Lopo: Recruit acquired us for about $240m in May last year, although they had first invested a small amount in us back in 2014. Recruit operates over 200 businesses and one of those does exactly what we do in Japan, which is huge. I remember being really blown away by that when they first approached us. Last year when we were about to do a big fundraising round they told us they would like to take greater control. By that point, my other investors, some of who had been with us for a while, told us that they were happy with how we were doing and what we had achieved and that they were happy to accept a deal if it was at the right price. So all my other investors exited. The team and I felt however we weren’t ready to sell, that we had more to do and we were still really enjoying this growth. Recruit gave us the structure, the autonomy, freedom and the capital to do it. There is a lot of trust between us and I’m not sure I would have done that deal if that level of trust didn’t exist.
Han Yang: So I also spoke with one of your early seed investors and she mentioned that when everyone exited it was a good round where everyone made a profit?
Lopo: My biggest investor was Fidelity who didn’t need the returns right away and they were very happy to keep going. Several investors were like that. Other investors were early stage investors, so their requirements are slightly different, which can then make things tricky. You’re also trading against your management team and employees. We all sold about 50% of our shares then, which is important because that’s a meaningful amount of money to them. You’re balancing personal requirements, team requirements, different investor and also strategic requirements. In this case. I recognised that Recruit was a strategic investor who could be a great partner for us, but also could be a very tough competitor if we didn’t do something about it. The deal turned out to be great all round.
Han Yang: Yeah, that’s the thing. I was wondering about drag-along rights, and was potentially concerned that some investors may have been unwilling to sell if it had been a down round where they had to take a loss.
Lopo: Well that’s your lawyer side coming in! You’re usually in trouble if you’re going back to drag along rides and other legal technicalities. But in our case, it was a huge up round, all the investors exited at a profit. Everyone understood. At one point in time, we talked about it. Management didn’t sell 100%, we still own about 20% of the business. After discussing it with them we thought that it was too complicated to see how arrangements would be if some kept a stake while others did not. We were lucky to have a great group of investors that understood what we were trying to do and supported us in that way.
Han Yang: When were you doing these deals, how did the option pool factor into the equation?
Lopo: We used to only have an option pool for a select group of people. But we’ve expanded on that and now every employee is a shareholder. It’s important for employees to feel part of the business and to think about the business from an ownership perspective. The culture of the business is giving them freedom and responsibility. Part of that is giving them ownership.
Han Yang: So when you were raising money, did you also have open communication with your employees on these issues?
Lopo: Well it was difficult because we were bound by confidentiality not to discuss the on-going deals so it came as sort of a surprise. Only a very small number of people knew about it. Employees have certain rights to information that we fulfilled. Also, several non-investor shareholders were not informed due to our disclosure requirements. That’s because Recruit is a public company and there are limitations on what they can say. It’s unfortunate, but that’s how these deals work. But I do try to be as open as I can, when and where I’m able to do so - I call a company meeting every month and we discuss what’s going on with Treatwell, including financials. What’s most important to me is that everyone trusts that I am looking out for our best interests when these deals go through. Back in 2008/09, some employees gave up some salary to get stock and the best thing about those kind of deals and situations is being able to turn to them years later and tell them this arrangement worked out really well for them.
Han Yang: Generally speaking, how do you go about finding investors?
Lopo: My first round was done mostly through people we knew. In the beginning, this is especially about relationship driven investments. There’s nothing to back other than an entrepreneur and his team. The only basis is whether you know and trust this person. Investors are smart and they knew it’s not going to be a smooth ride. They have to trust that we will fix problems as we grow the business and as they arise.
For me, personal relationships are really important in the beginning – so I got friends and family involved, and previous investors from previous businesses that I had. Trust and relationships are huge. As you develop, this becomes less important in a way, but even in late stage fundraising, it comes down to trust and people. The reason Recruit happened was because we built this relationship 12-18 months beforehand. This was the same with Fidelity where we were having conversations as far back as 2008. It’s like marriage – you don’t get married on your first date. You date; get to know each other etc. That’s exactly what most fundraising is like.
Han Yang: So a lot of work goes into this before anything formal happens?
Lopo: Yes. You don’t approach investors only after you realise you need money. You need to be talking to them and warming them up about your business so when you do actually need the money it’s a lot easier. A reason why Treatwell’s worked so well is because our investors have very good relationships with us. It’s a two-way street. I actually turned down a major VC fund in my first round because I knew it just wasn’t right. You’ve got to pick the right people around you.
Han Yang: Unless you have no choice…
Lopo: Yeah. But it’s part of your job as an entrepreneur to try and create as much opportunity as you can.
Han Yang: So lastly, looking into the future, how much autonomy did Recruit give you to set Treatwell’s future strategy and how do you see any future collaborations between you two?
Lopo: First off, it’s great having an investor on the other side of the world! They believe in the team and what we do and so they’ve given us all the freedom required to make the choices we need to build the business. They’ve given us the capital to do that and we wouldn’t have been able to enter this many markets or expand as quickly as we have without them. It comes down to sharing the same long-term vision and the importance of alignment between the investors. We are very lucky. I’d like us to expand and I think we have a great chance of becoming the global leader in our space.
Han Yang: I think that’s all from me. Thank you so much for your time and for sitting with me on this.
Lopo: No problem at all. Thank you!