The culture of MindBody

Ash Rexford, front, and Sharelle Harms work in the introduction team helping new users with the software.
Ash Rexford, front, and Sharelle Harms work in the introduction team helping new users with the software.

With its contemporary spa-like atmosphere — complete with a café where employees can grab a bite to eat — MindBody is the type of business that could easily be in Silicon Valley, known for a dynamic culture that promotes innovation and prides itself on social interaction.

It’s the type of place where employees, many of them 20- and 30-somethings, exude energy, whether they’re sitting in a cubicle or standing near one, juggling and working simultaneously. MindBody encourages workers to maintain a healthy and active lifestyle, and they can do so by signing up for free onsite fitness classes or massages, which are subsidized by the company.

It seems fitting given its mission to provide entrepreneurs in the beauty, health and wellness industry — salons and spas, yoga, Pilates, music and dance studios — the tools they need to improve their operations.

MindBody’s product is online business management software (Software as a Service, or SaaS) that offers one Web-based system for business owners to perform a range of functions, from scheduling appointments and managing staff to processing customer payments, all accessible to business owners and clients on the Web and mobile apps.

The appetite for MindBody’s software is increasing rapidly and has catapulted what had been a startup in Chief Executive Officer Rick Stollmeyer’s garage, to one of the largest private employers in San Luis Obispo County — and one of the fastest growing companies in North America.

The company boasts 599 employees worldwide, including 494 at the San Luis Obispo headquarters off Broad Street near Tank Farm Road. It serves thousands of wellness and beauty-based businesses in 80 countries around the world, and on average, 900 new businesses are added to its network every month. Salons and day spas represent the fastest-growing category of business.

Local clients include Bluebird salon, Sycamore Mineral Springs, Madonna Inn and the spa at The Cliffs Resort.

MindBody, which experienced 471 percent revenue growth from 2007 to 2011, is growing so fast that it needs more capital to expand and develop its business on an international scale.

In October, the company, with projected 2012 revenues of $33 million, raised $35 million in a partnership with Institutional Venture Partners — a later-stage venture capital and private equity firm with $4 billion in committed capital — and its existing investors Catalyst and Bessemer Venture Partners.

The company’s goal is to be capable of going public by the end of 2014, Stollmeyer noted, recently saying only “we will go public when it’s time.”

Stollmeyer, 47, is thrilled by what he sees as a “vast blue ocean of opportunity,” but he acknowledged that seizing those opportunities requires MindBody to be a step ahead in this fast-moving, ever-changing technological marketplace that “demands and rewards scale.”

While the company declined to provide specifics on how much it is investing in its own business, it has done so in a variety of areas, including engineering to ensure security and reliability of the product to research on user experiences and development of its software.

“You need the resources to develop software and make it better,” Stollmeyer said. “To pay back the R&D, you need scale.”

It’s Stollmeyer’s intention to make MindBody’s product “easier, more intuitive and delightful to use.” That’s important because there’s a “renaissance” of designing quality user experiences happening in this new age of tech, he said.

“The iPhone has changed everything,” said Stollmeyer, using Apple’s ubiquitous device as an example. “Our expectations of technology now are higher than it was.”

Humble beginnings, high expectations

From the outset, Stollmeyer set the bar high for the company he co-founded.

A former naval submarine officer and corporate engineer, Stollmeyer, who comes from a family of business owners, decided he wanted to be an entrepreneur, too.

First, he had to find his passion. As it turned out, it was the marriage of technology and the fitness industry that made sense to him.

In 2000, he hooked up with Blake Beltram, a high school friend who had been writing software to help boutique fitness studios like Mari Winsor — a big name in Pilates — to move from using old-fashioned recipe boxes and punch cards as a booking tool to a computer desktop solution.

They formed HardBody Software, but recognized the company needed re-branding, and so the name was changed in 2001 to MindBody Software.

MindBody first offered businesses desktop software, linked to a Web scheduler that allowed consumers to book and pay online. While Stollmeyer said the innovation broke new ground at the time, he realized that as their client list grew beyond a few hundred locations that the model was not “scalable.”

Beltram, who has since returned to MindBody, left the company in 2003, and Stollmeyer, whose expertise was in building organizations, marketing to customers and dealing with sales and support, brought on Bob Murphy, an early New York City yoga studio client, a year later. Together, they developed a subscription-based business model built around Web-based software.

In 2005, MindBody Online was released, which Stollmeyer said was the wellness industry’s “first cloud-based software as a service business management solution,” despite the fact that neither SaaS nor “cloud” existed yet.

“The shift in technology was unexpected,” Stollmeyer recalled. “I come from a mechanical engineering background, and there were too many moving parts; we were not able to scale ourselves. We had to go to a Web platform because there was no locally controlled software able to maintain it. It was a software innovation, and we didn’t know it.”

But the innovation worked, and clients adopted it quickly.

That same year, Stollmeyer moved out of his garage to an office in San Luis Obispo and obtained $1 million in angel financing from Pasadena Angels and Tech Coast Angels. Two years later, the company moved to its location on Broad Street and received another $1.7 million from a group of independent investors.

In 2009, it received its first institutional investment — $5.6 million — from Catalyst Investors in New York, and those funds boosted MindBody during the recession.

This year, MindBody, which released MindBody Express, its first business-facing mobile app with credit card swiping and bar code scanning, topped 22,000 subscribers.

Stollmeyer is confident his business will continue to grow, noting that there are hundreds of small companies and a “few big ones” left trying to make the move to SaaS. But he views MindBody as the biggest player, by far.

“That’s why we went out and raised money,” he said.

Investors see opportunity

Institutional Venture Partners decided to invest in MindBody because it had developed a business and product with a large and growing market that’s meeting a significant need, said Norman Fogelsong, general partner with the later-state venture capital and growth equity firm.

The Menlo Park-based firm has seen more and more businesses develop automated management and reservation tools, but MindBody, which targets the wellness industry, impressed IVP with a product Fogelsong called “robust.”

“It seemed to us like a perfect story,” he said. “It’s like the next Intuit (developer of small business and accounting software) on the financial side and Open Table for dining reservations. We want to see the types of patterns that look successful and where there’s opportunity and a big market that’s unpenetrated.”In addition, he liked the ability of MindBody to bring mobility to the wellness industry it serves, integrating what can be done on a desktop with the cellphone, whether it’s making an appointment in a barber or beauty shop or martial arts studio, Fogelsong said.

In a recent conversation with Stollmeyer, Fogelsong learned that the company was up to 24,000 customers. When the firm invested about six months ago, it had about 20,000.

“They have a lot of market in front of them,” he said. “There are 2 million establishments around the world that could be using this technology,” he said. MindBody already sells in 80 countries around the world, and in the next 12 to 18 months it plans to further penetrate the overseas market with native language versions of their product.

The firm was also impressed with the enjoyable work atmosphere at MindBody and its management team, namely the “solid duo” of Stollmeyer and his co-founder Murphy. Fogelsong said the two are analogous with teams such as Hewlett and Packard or Page and Brin, the co-founders of Google.

IVP, which has been in business since 1980, has “always looked for the best and brightest CEOs,” Fogelsong said. The firm’s portfolio includes NetFlix, Twitter and Vonage. A total of 93 of the companies it has invested in have gone public, and MindBody, of which IVP owns a small portion, will be no exception, he said.

MindBody could go public in about three years, but IVP’s plan is to remain for several years after it goes IPO, continuing to provide counsel and ensuring that everything runs smoothly, Fogelsong said.

Firm’s growth benefits region

As MindBody becomes a greater force in San Luis Obispo, local business leaders are aware that the city, and the county as a whole, stands to benefit from encouraging similar enterprises to set up shop here and stay local.

“MindBody is a company that generates revenue from clients all over the world and imports it into our county,” said Ermina Karim, president and CEO of the San Luis Obispo Chamber of Commerce.

“It provides skilled jobs in a clean industry that pays well, creating great opportunity for people to work in this community. Companies like MindBody — and we have a growing cluster of high-growth, market-leading companies that bring tremendous revenue into the local economy — could operate anywhere, but they choose San Luis Obispo.”

Karim added that the growth of such market-leading companies attracts greater talent to the region.

“That’s how we grow our local pie of opportunity and strengthen our region,” she said.

The overall health of the county’s economy depends on companies such as MindBody, and the community must do what it can to ensure that it retains them, said Mike Manchak, president and CEO of the Economic Vitality Corporation of San Luis Obispo County.

“Our county and cities must be vigilant that our regulatory environment remains competitive, or we run the risk as a community of losing such employers that our communities view as a good fit here,” he said.

“Now that we have great companies like MindBody located in SLO County, there is a saying that companies “go to where they are welcomed, but stay where they are wanted.’”

Committed to SLO, company culture

As someone who co-founded a company in San Luis Obispo and built a life here with his children and wife, Jill, Stollmeyer, who anticipates remaining at the helm of the company “for many more years,” is committed to staying in San Luis Obispo, a town he considers ripe with creative and talented people.

Even if the company is sold at some point, Stollmeyer expects that MindBody will be “anchored here for decades to come.”

“The only candidate areas MindBody might be moved to — Bay Area, Los Angeles, Orange County, San Diego to name a few — are more expensive than the Central Coast and can’t match our quality of life,” he said. “It’s about the entrepreneurial — high-tech ecosystem that enables companies like MindBody to attract and retain the most talented professionals.”

By the end of this year, the company expects to reach 600 employees and has plans for a 60,000-square-foot campus near its current location. The plans call for a two-story office building, large outdoor plaza and four-level parking structure on a 3.5-acre site.

Its new campus will be even more spa-like, Stollmeyer said, and will feature large meeting rooms, a cafeteria, a child-care center and an entire floor dedicated to customer service. As well, it will have a fitness studio and massage therapy rooms. Construction should be complete by late 2014.

But as excited as Stollmeyer is about the expansion, he is focused on ensuring the company’s seven core values remain intact.

MindBody employees are expected to follow a culture that is “purpose driven, humble and helpful, caring and happy, committed to wellness, environmentally conscious, committed to three C leadership — competence, character and compassion — and continuously evolving.”

On the company’s website is a quote from Stollmeyer, which reads: “The success of any great company stems from its culture.”

While Stollmeyer acknowledged that it’s never been his goal to “run a small business,” he believes that it’s far more important for businesses to have a purpose beyond making money.

“It’s to have a vision bigger than yourself,” he said.