Embedded Finance

Embedding financial services in SMB verticals: 5 questions with GlossGenius CEO Danielle Cohen-Shohet

  • GlossGenius brought fintech to the beauty and wellness industry, embedding financial services like real-time payments, deposits, loans and business management tools all in one app.
  • Tearsheet caught up with CEO Danielle Cohen-Shohet ahead of her appearance at the upcoming edition of The Big Bank Theory, to see what the company's been up to.

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Embedding financial services in SMB verticals: 5 questions with GlossGenius CEO Danielle Cohen-Shohet

Business management app GlossGenius is changing the way SMBs in the beauty and wellness industry run their business. This means integrating bookings, marketing, payments, and other types of financial services, all under one roof. 

In 2021, GlossGenius surpassed $1 billion in gross merchandise value (GMV), working with tens of thousands of customers, two-thirds of which are women-owned small businesses. 

It raised $16.4 million in a Series A funding round led by Bessemer Venture Partners. Participants included Shopify co-founder and CEO Tobias Lütke, Toast CEO Chris Comparato, Toast co-founder Aman Narang, Mindbody co-founder Robert Murphy, Yelp executives as well as former Venmo executives.

This year, the company generated $2 billion in GMV, helping salons and studios serve over 14 million clients. Given all this traction, it was timely to raise a Series B, according to CEO Danielle Cohen-Shohet. GlossGenius received $25 million in a financing round led by Imaginary Ventures and Bessemer Venture Partners with participation from Left Lane Capital. 

This brings the firm's total funding at over $44 million since inception in 2016. While not disclosing its valuation, Cohen-Shohet noted that "it's impressive at hundreds of millions of dollars" and that it's up 3x since the last Series A round. 

Tearsheet caught up with Danielle ahead of her appearance at the upcoming edition of The Big Bank Theory, to see what the company's been up to and what this new capital injection means for the company. RSVP for free to catch Danielle speaking on Friday December 9 at 11:55am ET. 

Hi Danielle, congrats on the recent capital raise, excited to see the company thriving. What is the strategy going forward?

It's really accelerating what's already working. We have a really strong aspect of having been revenue financed in the beginning, and I think that DNA has always stayed with us. 

If I look at our growth over the last year, we've been increasing our workforce pretty substantially, probably about 2.5x. And looking at the additional funding, we're definitely focused on being able to accelerate the delivery of new products and services. Obviously with the focus on vertical-specific functionality. 

I think we have only just hit the tip of the iceberg in terms of what we can centralize for business owners. Considering the ongoing tech stack consolidation for small businesses, I think there's just so much upside here, given the needs of our industry. 

GlossGenius is at the center of its customers' financial lives because that's how they make their income. That means financial education, money management, maybe accounting. How are you thinking of integrating further those types of aspects into a business owner's mindset or even day-to-day operations? 

That's a great question, and I think that's also a good foreshadowing in terms of what we're really excited about next. When I think about what it takes to make business owners successful, it's a lot of economic mobility, and I'd like to peel back the onion on this. There's a lot that technology can be doing, particularly on the finance side, to help on this front. 

I think we're getting really focused on more and more integrations that help business owners save a lot of time and kind of reduce the manual overhead with some of these administrative things that keep them away from really enjoying what they do. Whether it's looking at some of the recent integrations such as deposits or tap to pay or this end-to-end, fully integrated stack of functionality, it's really looking at how we can use fintech and integrate it into some of the biggest areas of pain points right now for businesses. 

One of the biggest areas of pain for a lot of businesses is reducing no shows and protecting their time. Looking at the recent success we've had with our focus on solving those problems, how we use fintech to solve areas of big pain for customers, I think there's still a lot more to keep focusing on and we'll make sure that we're first covering the basis in their professional work lives. 

In the long term, there's just so much we can do as we look at different kinds of applications that we could be helping business owners, starting from the relationship we have with their businesses. 

Do you think going out for a specific vertical is better when it comes to serving small businesses? How does that compare to how other fintechs are trying to serve the SMB sector by going broadly?

I think it really depends on the use case. When I look at a lot of the horizontal players, they're well suited for specific point solutions. But I really think that point solutions can only extend so far within a business because of the importance of specific workflows for verticals and how nuanced they can be. And so I'm a really big believer in the power of vertical software technology. 

There's just a lot of important nuances in certain industries that I don't really think a horizontal product can capture as much of. And as a result, I think the multi product functionality that horizontal companies have may be somewhat limited, but the market they're serving is somewhat different. So I think there's two sides of a coin here. 

But I'm biased with the vertical specific functionality. I talk to customers constantly and it's clear to me how powerful vertical specific functionality is for customers in their minds too. 

As technology gets more sophisticated, we saw a lot of horizontal business providers and this was kind of like some of the earlier waves of SaaS. Business owners have more choice and they're going to want to expect more products that are tailored and customized to them. And I think to the extent that business owners can access vertical specific functionality, they're much better off for doing so, for sure. 

Why do you think the small business space is relatively ignored by traditional finance?

When I think about financial institutions and how they still make up the bulk of these types of interactions with business owners and the local economy, that to me looks pretty unchanged. It's still the early days for how business owners could be interacting with technology. 

To unpack this a little bit more off the top of my head, I know that twice as many business owners still apply for loans at banks than apply to online lenders. Three quarters of business owners still buy insurance through a live agent. Half of businesses with less than 20 employees still use paper Excel. 

When you look at all those stats and know how technology can make their experience much more delightful, there's still a lot more to change and a lot more opportunity for business owners to start to adopt technology. The power of technology is that you can be much more innovative, much faster, which is an advantage over some of these traditional financial institutions. I think it's easy to see how that type of product velocity coming from a fintech company can compound and start to offer a much more delightful experience faster. 

It's crazy to still see the disconnect between small business owners and the finance space, and yet it's very exciting at the same time to see the promise of fintech and the opportunity given. It's insanely early. Software companies are growing faster than ever. They're shipping faster than ever. The infrastructure for building that software and building delightful experiences is getting much better with a lot of the micro service infrastructure, API services, different advances in database architecture, front end tooling improvements. All that has come together to make it much more possible for software companies like ours to be building better infrastructure and make the experience for business owners much more delightful right now.

What are your thoughts on embedded finance and integrating financial products into places that we might not be used to? 

When I look at the power of embedded finance and I guess why software can win, I think it comes down to a few reasons. The first is if you look at software companies today, they're all built on access to an enormous amount of information. That information can be analyzed immediately with a lot of modern data tools that were not available five years ago, ten years ago. And so when you take that together, what ends up being the case is that software companies today have far better insights on their customers than any other previous generation of financial products. 

An example here is Toast, a vertical software company we all know about. If you look at Toast, it tracks the number of orders, the types of orders, the levels of inventory, types of customers, number of employees, and the same thing for a lot of other restaurants within the same kind of square radius of a certain restaurant. And you think about all that information, understanding that business through the lens of someone like Toast in a way that any other financial service provider wouldn't have been able to do several years ago, it's pretty powerful. And it's easy to see why software companies today have a lot stronger and better customer insights than any other previous kind of generation of financial offerings. 

The second reason, I think, is that if you look at software companies today, they have a really strong but simple advantage in distribution. And namely, I think that advantage comes down to the ability that they have to basically just bundle a financial product into an offering without having to re-acquire the customer. What is remarkable about that is that it comes down to relationships, and there's an existing relationship that software companies have with customers that they can deepen even more and make the experience that customers have with the product even better. And I think looking at the opportunity for embedded finance, that's why embedded finance with today's software companies is so powerful, because there's a simple but strong advantage they have with bundling in existing software companies that I think other companies don't necessarily have. 

And then the third thing, and this is kind of related to one of the points I mentioned in the second space of the distribution advantage, but I think when you look at the simple advantage of distribution, I think the importance of relationships can be underestimated. And when I think about modern software companies right now and embedded finance solutions with some of these companies, I think the opportunity for them to establish even better, even deeper relationships with their customers is stronger than ever. And I think that's what's going to make any of these it's like a virtuous loop, right? If you think about these embedded finance solutions, the virtuous loop is that relationships get better as a result. Customers use more of these tools and functionality on the finance side, and as a result, relationships get even better. 

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