$50M infusion sets stage for Mindbody IPO
San Luis Obispo-based software firm Mindbody has raised $50 million in fresh venture capital, bringing its total funds raised to date to $98 million and positioning the company for a possible initial public offering this year or next.
With a total of 830 employees and 665 of them on the Central Coast, Mindbody has become San Luis Obispo County’s 11th-largest employer and its fourth-largest private-sector job creator. The company makes an all-in-one software package to run small businesses in the beauty, health and wellness sectors, handling tasks such as appointment booking and payment processing.
“We intend to be ready for an IPO before the end of the year,” CEO Rick Stollmeyer told the Business Times. “Whether we go out or not depends on a lot of factors. It depends on the conditions in the market and how we’re doing operationally. The company is on a great trajectory. The heavy lifting we’ve done in the past couple of years was to fundamentally improve the usability of our software and migrate our functionality to mobile platforms.”
Mindbody has a diverse clientele, with customers such as salons, yoga studios and gyms. The company said 500,000 practitioners at 33,000 businesses in 92 countries are among its users. Mindbody said it will use the new capital to expand its international reach and make product improvements, including a version of the software that won’t require a desktop computer after an initial setup and ways for employers to connect their workers to wellness services.
One of Mindbody’s major goals is to make wellness activities a regular part of the employer-based health-care regime. Last year, it rolled out a product called Mindbody Exchange, which gives companies a platform through which their employees can connect with health and wellness providers in Mindbody’s extensive network.
“There’s huge demand for it,” Stollmeyer said. “What we’re building, though, is fairly complex and has lots of moving parts. The only thing holding us back is completing the various components. We have had about a dozen early-adopter corporate clients that are trying it. There’s considerable enthusiasm. We need to build out the tools they need for their HR departments and accounting departments to manage it, and that’s all happening in the next few months.”
Mindbody is also offering access to its tens of thousands of clients directly. The firm has introduced Mindbody Connect, which allows the public to search for and book appointments with any of the businesses in the Mindbody system. Within three months of its release, the app has been downloaded more than half a million times and is consistently among the top 20 free health and fitness apps in the iTunes store.
“We are now doing something that is addressing consumers directly and helping to drive demand to our clients,” Stollmeyer said. “Doing that is capital intensive.”
Meanwhile, the company has also been migrating its online software to mobile devices. Many of its customers are massage therapists, yoga instructors or hair stylists who work at different stations at different times. Stollmeyer said Mindbody is working on a new product that will allow those customers to go strictly mobile after an initial setup on a desktop computer.
Though the move toward mobile devices may sound like a simple matter of reformatting screens, it’s actually a complicated engineering feat for Mindbody because its software handles so many tasks, including booking appointments, processing payments and generating bookkeeping reports.
“The back-end engineering to support the [application programming interfaces] for massive amounts of traffic from multiple sources is not trivial. Most of that work is stuff the public doesn’t see,” Stollmeyer said.
With the new capital, Mindbody brought on two new investors, W Capital Partners and Montreux Equity Partners. Also joining the round were current investors Bessemer Venture Partners, Institutional Venture Partners and Catalyst Investors. The company had $32.5 million in revenue in 2012. While Mindbody is not making its exact valuation public, Stollmeyer said a $450 million estimate floated in a recent Wall Street Journal report was “pretty close.”
Mindbody is among a number of successful Internet technology companies in San Luis Obispo that have become engines for job creation. Shopatron, LeftLane Sports and Rosetta are all either at the 100-employee mark or planning to pass it this year. Rosetta, in particular, was a success story of a company founded on the Central Coast that was acquired by national and then international owners. Instead of moving the company, Rosetta’s owners doubled down, constructed a flagship building and named longtime leader Tom Adamski as chief executive.
With one solid merger under its belt, the Central Coast needs a successful IPO to cement its place on the map as a tech hub between L.A. and San Francisco, said Jo Anne Miller, a venture capital investor with Brown Dog Partners and an active investor in several San Luis Obispo companies.
“Having a company go public here and stay here is sort of a graduation ceremony for the SLO ecosystem,” she said.