6 lessons from building Booksy — my perspective as investor and COO
The merger with Versum in December and the last investment round of USD 70 million made Booksy one of the most valuable Polish startups. On behalf of Inovo, I have supported Stefan from the very beginning — initially as the first VC investor, then as the company’s COO for nearly two years, and currently as a Board Observer. Recent developments are a good opportunity for me to reflect on what we’ve accomplished. So what are the key lessons in building the largest marketplace of the beauty industry?
Your first investor matters
Stefan and I knew each other from times when he was building iTaxi. He sent me his deck for a review when he started raising Booksy’s pre-Seed round. After seeing the presentation, we quickly invited him to a meeting and together with Tomek Swieboda and Maciek Malysz, other partners at Inovo, we decided that we must be part of the deal.
We convinced Stefan to partner with us with a presentation, in which we described what we would bring to the table and how we saw our role in the company’s development. In July 2015, together with the German fund Müller Medien and the British VC fund Piton Capital, we closed the first round. Inovo was the lead investor.
The fact of Inovo’s involvement was crucial in raising Booksy’s first investment round. Piton made the decision to join after having one short call with Stefan. Our strong conviction gave other investors the courage to join at the early stage. As a rule, having a lead investor early on makes it easier to attract others. They often rely on due diligence prepared by the lead investor, which significantly speeds up the process. Additionally, it is basically certain that the round will happen, so time is not wasted.
The investment gave Booksy the momentum they needed. The ambitious goal agreed on during the round was achieved in 6 instead of 9 months. They also “burned” our investment at an equally rapid pace…
When it works, act fast. When it doesn’t, act faster
Part of the arrangements made between Booksy and Inovo included … me. As a gentlemen’s agreement, we decided that I would dedicate 20% of my time to Booksy. We used my experience in FoodPanda, where I was in charge of development in Central and Eastern Europe and was part of the management board, to establish analytics and reporting.
After just 6 months of operations, it was clear that Booksy was working great. We had made a decision that the business needed to be scaled to new markets fast. Inovo decided to lead the next round. The round was joined by the RTA Ventures fund. After seeing Booksy’s impressive results, Piton and Müller Medien decided to co-invest again.
In January 2016, five Country Managers from Brazil, Argentina, Singapore, Great Britain, and South Africa were recruited. We also launched operations in India. Back then Booksy began to strengthen itself with experienced managers, hiring Tomasz Odrobiński to coordinate foreign expansion. He is still with the company today and is currently responsible for the UK market.
The expansion turned out to be premature. Six markets in several time zones and many sales models translated into a significant decrease in efficiency. Growth was too slow and cashburn faster than expected. The situation no longer looked rosy. The average customer acquisition cost, taking into account new markets, was approximately 50% higher compared to the previous year, and CLV was nearly 30% lower. Booksy had to act fast, otherwise, the prospect of another round was in doubt.
It was exactly at that moment when Stefan and Konrad took me for a beer and made an offer that I couldn’t refuse — to join the company with four months of runway and a few markets, almost none of which were functioning well. I was going to be the COO. The fundamentals of Booksy were still very strong — two markets with good results, very fast growth, and a really huge market. From the perspective of the portfolio of Inovo, Booksy was already worth a lot back then. Naturally, I agreed to take up the challenge.
Despite the troubles, Booksy was still growing more than 3x year on year and was approaching USD 1M in ARR, which made us think of a nice investment round ahead. To prepare, we took quick decisions — we closed four markets, made the necessary cuts, and optimized marketing.
A valuable investor is not necessarily the one with the deepest pockets
Our decisive actions in bad markets and results in the high-performing ones were appreciated by OpenOcean fund, which quickly put a compelling term sheet on the table. This was not the highest offer Booksy had received at the time, but the team and the valuable experience of OpenOcean contributed to the final decision. The founder-friendly approach was very important, which is the common denominator of all investors. Even today, it translates into great comfort for the Booksy team, which enjoys great independence in action and the trust of its shareholders.
In the long run, it was a great decision. OpenOcean helped, among other things, in buying the booksy.com domain and negotiating the inclusion of Booksy in integration programs with Facebook and Instagram. Once again, Booksy had chosen an investor who brought not the most money, but most value.
The biggest challenge for a fast-growing startup? Team.
With a capital of USD 4M and a restructured company, we decided to build a team in the USA — our key market.
May 2018 — Booksy is the most used beauty app in any market
Up to this point, Booksy had a dispersed, remote sales team managed from Poland which was cost-effective but difficult to scale. We faced the challenge of how to convince a person with the right experience from the United States to join a startup from Eastern Europe (pierogi!), with financing high by European standards, but not as high for American ones.
Instead of employing an expensive headhunting company, we used a local consultant who knew the specifics of Polish companies, and at the same time was well established in the American market. Mark helped us create a profile and pitch for the right candidates. After a few months, we found Bo Hurd — one of Groupon’s first employees, who is still responsible for Booksy’s US sales. The support of a local consultant was of great value — understanding the local context and designing an appropriate onboarding process was an irreplaceable help.
I love the so-called “A-ha moments”. By analyzing data from Polish cities in which we had the most businesses using Booksy, we realized that our product organically generates new leads for existing businesses. Although we have been working in the SaaS model so far, our platform has helped our customers reach new clients. In addition, the larger Booksy’s scale in a given city, the more leads appeared.
We noticed classic network effects in Wrocław, which, thanks to a great local team (here, great respect for Karolina, Patrycja, and Adrian), was the most advanced market in terms of cities. A-ha! We got it — we had a marketplace generating true value, with real marketplace dynamics. Now we “only” needed to build and implement a new business model and scale it to several markets.
The choice fell to Marcin Szałek. Marcin created several marketplaces, including Groupon, Dawanda, eBay, and Docplanner. Although he was working on his own project, we managed to convince him to join, and his experience turned out to be critical in the next stages of Booksy’s marketplace development.
In 2018, after another financing round, Booksy reached out to two more very experienced managers — Adam Górniak (ex-Google) and Marcin Borowiecki (ex-eBay, -Wonga) — who are now responsible for the business operations and helped Booksy make the leap from the culture of a startup to a well-organized company. Recently, Booksy also attracted a very strong financial director, Małgorzata Szturmowicz. This was one of the decisions that Booksy made too late, in my opinion (this is mainly my mistake and a very important lesson).
It is worth betting on people who have experience in strategically important areas for you. It’s usually hard to convince them, but it’s worth it.
When you stand on the edge of the cliff, take one more step forward
End of September 2017. The fundraising process is very advanced, the first term sheets have been discussed, and… the money in the account is running
low. We are faced with a difficult decision of potentially reducing sales and marketing expenses in order to extend the runway and have a chance to break even. Stefan, with full conviction, rejects this option and… asks to accelerate spending. If we don’t finish the round in October, in November we will be out of business.
Of course, a last-minute decrease in growth may have deterred investors. The risk was high, but we finished the round. Piton Capital became the lead investor, making a better offer compared to external ones. Piton Capital is a top marketplace investor in Europe and an early Booksy investor. Their large investment was just another confirmation that we found our product-market fit. At the same time, the fact that they had been with Booksy for over two years allowed them to build a strong conviction to involve really large capital in the company.
Stefan’s decision to accelerate spending was obvious from the business point of view but, emotionally, a difficult one. It was a choice between the practically certain survival of a company operating only in the SaaS model and growing 30–50% annually, and an opportunity to build the #1 marketplace in the world with a high probability of bankruptcy. For Inovo and Stefan the decision that was made was the only way out — after all, one of our values is “Go big, or die trying”.
At Inovo, we believe that data beats opinion. Stefan’s decision in 2017 was a perfect example of this — we knew from the database what was possible. Despite our decision to take a risk, we did it with the conviction of success.
Act quickly — the lesson done, but repeated
The next year and a half of activities translated into significant progress on the American market with marketplace results similar to the Polish ones. Everything was proceeding according to plan until the outbreak of the pandemic.
Booksy was suddenly in an extremely difficult situation. We started fundraising, so we had capital for the next 6–7 months of operation. Under normal conditions, this would allow us to build the next round without hassle. But when your entire market closes overnight, it means you have to make firm decisions.
Booksy’s management successfully led the company through a potentially deadly crisis. Some of the decisions were not easy, but they were necessary. As soon as the markets opened, Booksy achieved the best results in the company’s history, and in the summer of 2020, Booksy was on the offensive again. The result of this was the takeover of goPanache, the merger with Versum, and the round announced last week.
Into the wild!
Booksy is still the most valuable company in Inovo’s portfolio. Of course, today’s round is not the end, it is just the beginning. The game has started and Booksy is in a race not for unicorn but a decacorn status. Who’s first?
Stefan, Konrad — thanks for your trust at the very beginning and over the last five years. Being part of your success and being able to help at every stage is a great honor for the entire Inovo team. We are raising a toast today — not to the last five years, but to the next ten! #GoBooksy #BooksyxInovo.
Inovo Venture Partners backs early-stage, post-traction startups that can grow 100x. We partner up with ambitious founders like Stefan from Booksy, Maja from Zowie, or Piotr from Infermedica. We invest between €0.5–2M in startups from Poland and the region.
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