Melody McCloskey, Founder, StyleSeat
Melody McCloskey is the founder of StyleSeat, a San Francisco-based SaaS company that has raised $40 million in funding, powers billions in transactions and is recognized in 82% of American cities. StyleSeat provides tools for beauty professionals, which lets them run their entire business with just one piece of software.
If StyleSeat sounds like your typical booming, industry-disrupting tech startup, don’t be fooled. McCloskey is dedicated to running her company in very atypical ways, and in today’s interview, she shares how bucking Silicon Valley norms can help you achieve tremendous success—on your own terms.
For example, her startup is led overwhelmingly by women, a rarity in an industry with persistent gender gaps. The company has also chosen to stop raising money, and without a marketing or sales team, it barely invests in marketing.
McCloskey loves what she does and her business decisions are not solely driven by a pursuit of revenue and growth like many of her peers. Her goal is to empower badass female business owners with amazing products so they can do what they love as well. When they win, she wins.
Check out the interview to learn McCloskey’s unique approaches to funding, growth, and staffing, along with other priceless lessons.
- Why McCloskey, against popular opinion, is not interested in raising any more money
- The primary engine behind StyleSeat’s exponential growth
- Why the startup walked away from a billion-dollar business model
- Why McCloskey keeps her team smaller than most comparable startups
Full Transcript of Podcast with Melody McCloskey
Nathan: Hello and welcome to another episode of the Foundr podcast. My name is Nathan Chan, and I’m coming to you from Melbourne, Australia, hometown, homegrown. First of all I just want to apologise for this recording. Maybe this sounds a little off, a little ghetto. I don’t know what happened, I bought one of those new IMAX, and I don’t know. It just all of a sudden today just died. And now it won’t come back on. I’m actually stuck using my laptop, because you know with Mac, there’s so many different connections and stuff, I can’t seem to connect my special professional microphone to my laptop, and I’ve got to record this so I can get this to you guys on time. We’re closing in on 200 episodes, and we’ve release a new episode every single Thursday – Thursday night, Australia time to you guys for a long time right? Every single week, and I can’t miss this obviously. So I hope that this sounds okay. I’m going to keep it short and sweet.Working on some big stuff at the moment. Just really going deep – we’re really going deep on optimizing what we’ve kind of produced right now. Our existing content, our existing products, and as I said to you guys, we’re launching 12 courses this year, so we’ve got a lot to do. But the focus of this quarter is just optimizing and taking stock with what we have. We’ve got a lot of cool stuff in store for you guys right now, we’re pitching teachers for courses which is really really exciting. You can probably expect some sort of announcement if you are in our email newsletter. We’ll probably be looking for some certain teachers for certain things but – anyways guys, let’s talk about today’s guest.
Her name’s Melody McCloskey and she’s the founder of a company called StyleSeat. What I find interesting is this is a massive massive company. What I find interesting is essentially how she had to make a pivot and change the business model of the brand where she kind of opted I guess for – she’s based in Silicon Valley and she kind of opted for the more unconventional approach to building a business. Because she was looking at building a massive kind of marketplace, but then kind of decided to make it a really interesting pivot. So you know, lots of gold were shared around acquisition, business models, validation. One thing we don’t really talk about, it’s very difficult to find that ultimate scalable business model. Even at Foundr to be honest, we haven’t a hundred percent locked it down, we will. We have a strong hypothesis and vision and focus. We’re working towards building this course platform with eventually hundreds of courses like next level several courses kind of like the Lynda for entrepreneurs. Lynda.com, or Coursera.com, purely focused on founders. Really high level next level courses. But we haven’t hit that yet. We’re still kind of seeking and been running the business for almost five years, which is crazy right?
This is now another adjacent product that we look to add, but it’s going to be a very very cool part of Foundr. So let’s not digress. Melody shares a ton of gold around her unconventional approach to building her business and StyleSeat’s success. If you want to learn more on how to make sure you’re the right track, really understanding your business model, or really understanding how to make those hard calls, you’re going to love this episode. So that’s it for me, now let’s jump on the show.
The first question that I ask everyone that we speak to is how did you get your job?
Melody: That’s a great question. I got my job because I hired myself. I had a regular job at a regular company. I worked at a television network that was started by Al Gore, vey very small called Current TV. While I was there I was working on things like deals with partners, and growing the department, and hiring, and growing revenue, and driving growth, and putting really long hours. One day I realised “wait a second, I’m working until 11PM everyday for someone else. I should be doing this for myself”. After I made that realisation, I spent a long time thinking about starting a company and what I wanted to do, and I actually started StyleSeat in my spare time and on weekends.
Nathan: Yeah wow. StlyeSeat. Like it’s a – how can I say this, it’s a very very large marketplace. Can you kind of give our audience – for those of everyone listening that hasn’t heard of StyleSeat and the market traction. Are you able to give some numbers and share just how far you’ve grown it?
Melody: Sure. So quickly we do two things: we are business tools for independent TV professionals. Hairstylist, makeup artists, nail artists. We give them software to run their entire business, and let them focus on their clients. And then on the other side, we’re also a destination for consumers. Choose, search, book appointments and pay for professionals. We powered – we launched in 2011, and since then we powered over three and a half billion dollars in revenue for our businesses. We booked over 75 million appointments, and we’re in 82% of the US. I think the most interesting part of that is that we are hundred percent organic. We don’t really have a marketing team, we have no sales. It’s a matter of professionals coming to us, hearing about our products from other professionals, signing up and the same thing on the consumer side. It’s been really incredible to see such growth come out of our love for the product.
Nathan: Yeah wow. That’s crazy. So how big is your team right now? And what does it mainly consist of? Developers? And support?
Melody: We are small because I have learned that I really love a small company a lot more than I like bigger companies. We’re about 50% developers, and 50% product and support, and social media. We have a teenee tiny marketing element, but it’s mostly engineers.
Nathan: Got you. When you say small, can you tell us – like I’m curious because you guys are based in San Francisco, like small could be a hundred people. Yeah I’m curious.
Melody: We have around 40 people.
Nathan: Yeah okay. When you say – I just want to delve a little deeper on that, when you say you prefer smaller teams, can you tell us more about that?
Melody: Well our revenue could support a bigger team, but what I’ve learned is that bigger teams are not necessarily better. I mean it really comes down to preference as the founder. I think it’s really been a habit in Silicon Valley to sort of say “oh yeah my company, we have this many people that’s sort of measure of how good your company is”, right? How big you’ve been able to grow the head count, and what I’ve realised is there are huge benefits to having really small teams. It’s a preference of mine. I like being able to know every single person and run over to them and have a really great personal relationship with everyone on my team. I find that the closer relationship the CEO has with the different people, the more honesty and transparency you can have, the more efficient communication is. I mean there’s so many so many benefits. As you get bigger, you’re dealing less of the people stuff, and you’re sort of much more separated from the product and the decisions, and HR becomes a bigger issue and legal and things like that, and I’ve just found I really like to spend my time focusing on the product and our customers, and working hands on with the team.
Nathan: Okay that makes sense. Because yeah, it’s an interesting statement. I never really heard anyone say that before. Because usually you think to yourself – I don’t know if this is just me from my own experiences that you usually think to yourself you know growth, you want to grow and if you don’t want to hire more people, you want to keep the team relatively small, it’s usually by choice because of limitations of capital or growth limitations at that point in time. But you’re saying that you strategically tried to keep the team relatively contained and small and it’s small in your eyes right? You know your perception and for the specific reason around operations, right? Like operationally and just how the kind of I guess the kind of way that you want to lead and grow the company yourself.
Melody: Yeah. You know, from a strategic standpoint, I think that smaller teams are more efficient and we’re able to do a lot with a very small team. Growing a team, growing your engineers for example does not mean that you’re going to get more product out the door. So I really like deeply challenging my team to be more efficient on a regular basis. We do a lot of things that are very different from other companies in Silicon Valley. We are 50% female, I have an all female executive team, most of the people on my board are female. And I think because we are different than what is standard, we think about things completely differently. We do things differently. And it’s more important to be really efficient and super close to our customer and to have a lot more money in the bank that sort of spend it on people and sort of feel like we have a big business. I don’t think that there’s any right or wrong by the way, I think it really comes down to preference and team and culture, and this just happens to be ours.
Nathan: Yeah no. That’s interesting. I’d love for you to share like what are some other things that you guys are doing different to I guess traditional Silicon Valley that’s working for you guys, out of you know preferences of culture, team, strategy, I’m really curious.
Melody: It’s hard to say because I don’t spend too much time looking at what other people are doing. People are always like “oh what are the hottest companies that are coming out?” And I’m like “I am having so much fun running my business. I know it incredibly deeply and anything relating to it, I’m there and our customer, but I’m not like hanging out on tech crunch for example”. I would also say it’s funny because I’ll talk to other people in Silicon Valley and they’ll say things like “Oh you haven’t” – you know it’s been a couple years since our last fund raise. And people will say “oh you’re doing okay” you know because of that. And my response is “we’re doing really well, growth is extremely strong, our product is in a great place, our customers are happy, we don’t have to raise”. And so while other would say “if you could raise, why don’t you go do that?” my response is “because I don’t want to take more delusion, I don’t want to bring on new partners necessarily, things are really good right now, and our growth is great, and sort of everyone is really happy.” So I don’t know, I feel like there are sort of pressure that Silicon Valley puts on you if you really pay attention, and you’re having off the conversations, and if you filter that stuff out and just say “what is that for my business, for our culture, for our product, and our community”, you might make different decisions.
Nathan: So are you sacrificing product for growth right now?
Melody: No. What I’m saying is, if you raise another round, you take more delusions to business. It means that you then have to exit for let’s say 2 to 3x what you would to pre round. The tendency in Silicon Valley is to raise as much as you possibly can, and to grow as fast as you possibly can. The challenge though is that if you raise a bunch of money you have to go spend that money. You experiment with a new number of different marketing challenge. You sort o – there’s this pressure to kind of throw money around to grow more quickly, and I have been very happy adamant around – you know we’ve raised 40 million dollars. It’s not like we haven’t raised very much, but I’ve been very adamant around not falling into that. We have a board with very sort of people. They work at Etsy, they work at Minted, they work at a number of big companies, and our philosophy is we will grow when we feel confident in the channel, we’re going to spend money when we feel confident that we’re going to return it, we’re going to grow in scalable ways, and we are going to be sustainable, and we are going to make the capital work for us as opposed to sort of burning through tens of millions of dollars and hoping that you spend enough of it in the right place to grow.
Nathan: Yeah no. I understand. So you’re really focusing on controlled scalable growth?
Melody: Exactly. And profitable growth.
Nathan: yes. Got you. Are you guys profitable right now?
Melody: We are. Yes
Nathan: Awesome. I’m really curious as well, when it comes to the tools that you provide and the marketplace, is that difficult? Because you don’t have a singular product focus?
Melody: Do you mean because we are a market place so we don’t have a singular focus?
Nathan: Yeah. But you also provide the tools right? For hairdressers and beauty places and stuff like that for them to run a business.
Melody: Yeah. So it’s interesting. I mean as far as the public is concerned, StyleSeat is a consumer facing product where anyone can go and search for haircut in their city, they can find dozens of hundreds of professionals, they can book and pay form their phone. But actually our DNA is only at least 95% around the professionals. So we consider ourselves to be a business tool for beauty professionals. We live and breathe their needs, and all we are trying to do every single day is provide them with value so that they can be more successful, and be better business owners. While it might seem like we do a lot of things, the DNA of the business, the thing that we think everyday when we come into the office is how can we help more professionals in the beauty space run and grow their business.
Nathan: Got you. From the two sided marketplace side, you’re mainly focused on – or you’re saying like your biggest focus is looking after the hairstylist and beauty professionals, more than the consumer. In terms of the focus on products.
Melody: Absolutely. And I’ll tell you, our community is 75% women. So they are female business owners. They are very much – you know one of the reasons why I started this company, is because I love helping the underdog. When you think about people that choose to start their own company, it’s risky. There’s obvious things that are barriers, and there’s so many reasons why not to do that, but they want to build their lives around doing something that they love, and they want to help other people. That is the DNA of StyleSeat. It’s how can we help people this incredible people be more successful, and that’s by providing business tools, it’s by connecting them with customers, through marketing, through payments, of a lot of stuff. That’s truly the DNA of who we are.
Nathan: One thing I would tell you is it’s hard for local businesses. Like this local brick-and-mortar stores and business, they’re doing it tough. Do you agree? or what are your thoughts?
Melody: It is incredibly hard. Because if you think about a beauty professional, number one they’re artists. They are creative to heart, they love their customers, they love their art, they’re incredibly talented. But starting a company, 95% of it is business fundamentals. It’s finding an accountant, building a website, it’s about marketing, what’s your referral program, how do you price your services, what’s your marketing to growth philosophy. It’s things that are not creative innately. It is incredibly hard for someone who is on the creative side to also do that other stuff, which is why we’re automating all of that. We’re letting the robot deal with so much of that, and allowing them to just think about their customers, and what they do best. I think there’s tremendous freedom that’s created in that, and there’s also – our professionals double their revenue in the first 15 months of being on the platform.
Nathan: Yeah wow. And that’s because of the tools that you guys provide, and connecting people through the marketplace.
Melody: Yeah exactly. I mean so many small business in America are still being run via pen and paper. They’re tracking their client information, their schedules. We do really basic things that have tremendous impact. We remind our clients when it’s time to book again. Over 50% of appointments our booked outside of office hours. They’re booked in the middle of the night. And if you miss those appointments, that client might not call back again for another week or two, right? Which means over the course of the year, you’re missing out on 4 to 6 appointments, which is significant revenue for customers. If it’s things like just making it seamless for new businesses to connect with their customers to grow, to do their taxes, to understand their business metrics, and to market to new customers, and all of that stuff has tremendous impact.
Nathan: I’d like to switch gears. Talk to me around the internals of running a company the size of a StyleSeat and the traction that you guys have. What are some of the challenges that you’re facing right now around just growing it?
Melody: That’s a really great question. I feel like – I mean the vision for the business and the overall vision for the product has almost not changed since we’ve started. It really haven’t, which has been very interesting. So I didn’t think that would be the case. I feel though like the biggest challenge for the business changes every month. I’ll give you an example. We for a little while work very much with business models, this was before we really scaled revenue. We are making revenue, but it was trying to sort of double down on a certain level, and we were experimenting with a view. For example we could charge a monthly fee to our stylists, we could charge a transaction fee for all the dollars that are crossing our platform, which are over a billion and a half dollars per year. And then we could charge a fee to get the new customers, which was – our stylist’s biggest challenge is that they want new customers and they are willing to pay a lot for that, and that was a service we wanted to provide. So we’re thinking about the stuff. So the biggest challenge at that time was how can we run enough experiment to be able to feel really confident about taking a business model, because those business models are all very different. Growth is different, opportunity is different, the risks around execution are different. It was like we have to figure this out, we have to feel really great about the results of the test that we’re running. And then we picked one, and it was like “okay now the biggest goal that we have is we have to scale the business model”. We have to turn it on, we have to make sure that our customers are happy, and that was the biggest challenge. Once we did that, the biggest challenge became “okay well now we have to think about onboarding”. How do we improve that experience. We haven’t thought about this in a while because we’ve grown a hundred percent organically and it’s been so strong that we haven’t really had to, and so we fixed that, and then it becomes okay. Well how do we think about growth, and really meaningfully growing, like doubling, tripling, quadrupling the growth of the business. That’s kind of what were thinking about now. It feels like every quarter maybe there’s a huge initiative that we’re running, I mean there’s so many more than I can think of, but it changes constantly, and I think as a CEO, you have to really focus on understanding your business deeply, and focusing yourself in the team on the right challenges, and addressing them in the right way.
Nathan: And when it comes to those quarterly focuses, is that more reactive? Or is it planned?
Melody: I know I’m making it sound really reactive.It is planned. You have to react to things as they come if the data isn’t what you thought it was, if one thing doesn’t go as planned, you have to react to that, but generally my job is to understand the state of the union, and to predict and drive the team where we need things to go. So I’ll layout for the year – series the teams for each of the quarters, we’re going to kick this off into one, we’re going to really scale it and grow that initiative in Q2, Q3 we’re going to move on to the next phase. That’s what I really love actually, planning and predicting, and I love being proven wrong with very very data-driving organization, but yeahy, all of this stuff is my most favorite things.
Nathan: Awesome. You got me really curious around how you said you were testing different business models. That is scary. You’ve got all these people using your platform, I’m really curious, how did you know which was the right one? Which would be the right pathway? And how much data – like what kind of rule of thumb did you use to say yes “alright this is the model. This is the perfect model. This is what’s going to make the business work the best for us, what we’re looking for”. How did you know?
Melody: That’s a great question. I think it’s a combination of gut and data. In some cases – sleepless nights. Because you know a couple of years ago we were in a point where our scale was so large, and we were for the most part free for the majority of our customers. So I always knew that we would be able to identify the business model, it’s more of betting which ones are the right ones, but there’s also tremendous “fear” isn’t the right word. But have to really be mesotical about identifying and feeling good about what choice you make, because that’s a decision that takes the company to the right or to the left. And there’s tremendous ramifications for your team, for your ambassadors, for your community, for the future of the company. So these are things you have to take very very seriously. For example, I wanted to in the beginning, what I was so excited about with this industry is that I wanted to think through is there an opportunity for us to really fill the schedule of our stylists, to drive them new customers through creative ways and to help them grow their business that way. We ran a number of experiments, and we found “yes we could do this sustainably, yes this is their biggest need, yes we can spill it”, and we had a really unique product to help do that, but what I realized is if we want to scale this, it’s going to take significant capital, and I’m going to go have to raise a lot of money. We want to be the sort of – crucial marketplaces in America are like Uber, there are Postmates, there’s a number of Airbnb, and all of those companies have raised significant capital because that’s how much it costs to scale. I realized this is a multi-billion dollar opportunity, and the data shows that there is very very real potential for us, but I sort of had to take a step back and say “do I want to go raise a hundred million dollars, do I want to scale this company like those other company”, and I realised, actually I don’t. What I’d rather do is focus on our customer and just build an incredible product for them. We ended up going with the saas business model, and charging them a monthly fee which means that we are not making that billion dollars immediately, but it means that we are able to really focus on the product to acquire customers to drive them tremendous value, and that other option is there if we want it down the road. So when I talk about it now, it’s like simple, but at the time these are big things that I wrestled with the board. And i’m happy with the decision with made, but they are challenging especially at the time.
Nathan: Yeah no. It is interesting because you guys are like a two-sided marketplace like an Uber, like an Airbnb, but they don’t have have a recurring subscription, and I am at that camp. Ii love recurring and it breathes predictability, I think it lowers risk in many aspects, or especially around cash. So that’s really interesting that you made that decision, but i think fundamentally it’s a smart one. Just I think for you to sleep easier at night, right?
Melody. Totally. It was very much but the none sexy decision, right against Silicon Valley. There’s a lot of folks that are like “go big, go bigger” and what I realised is we can absolutely do that, or we can turn on this other red new stream and become profitable immediately and we can have the time to do all that other stuff when we should. That to me was what I really cared about, and my board supported me and my team supported me and we’re all very happy that that’s where we ended up. Either challenging decisions to make it a triumph.
Nathan: I appreciate your honesty and transparency. We have to work towards wrapping up, I’m super mindful of your time. Last two more questions, first one is any final words of wisdom that you would like to share for aspiring female founders, or any kind of aspiring founders or novice staged founders that are really in the depths of just launching their company and trying to grow it, and then also the best place people can find out more about yourself and StyleSeat.
Melody: I would say number one, find amazing mentors. Go there and find people who have built companies, who are true operators who raised money, who run businesses. Because there’s a lot of folks out there and especially investors who have not done that, but want to make decisions or be involved, and I think the smartest decisions I’ve ever made have come in support of with the help of amazing mentors who have done it and have been in the trenches. I would say especially go mentors who are women, who are operators, because this industry – starting a company is challenging. Starting a company as a woman embrace his own unique challenges. Go find bad assess who are supportive of you and are going to help you ani really rooting for your success and keep you on it and kick your ass a little bit, but they’ll give you the best possible advice. And then I think the third thing is do something that you love. I get to spend my day building products for female business owners who are all over America and living crazy different lives, and I love it, it builds me. That makes all the late nights and the hard decisions, and the crazy things you have to do worth it if you love what you do. Make sure you deeply deeply love whatever it is that your building your business around.
Nathan: Awesome. And best place that people can find out more about yourself and StyleSeat?
Melody: Right. StyleSeat styleseat.com, you can also go and download our app in appstore. Then for me, my instagram is @melody probably the best place to find information about me. I don’t really use twitter that much anymore. So that’s probably where the the good stuff is at.
Nathan: Awesome. Well look, thank you so much for your time Melody. It was great chatting with you. Hope you have a fantastic new year.
Melody: Thank you. You too. Gosh, I hope 2018 is great. I think it’s going to be great.
Nathan: Yeah me too.
Key Resources From Our Interview With Melody McCloskey
- Learn more about StyleSeat
- Connect with Melody McCloskey on Linkedin
- Connect with Melody McCloskey on Twitter