Vagaro Founder and CEO Fred Helou on How Embedding Payments into Vertical Software Led to Outsized Growth

Small and medium-sized businesses are not just the backbone of the global economy, they are early adopters of the latest technologies – always innovating to stay ahead of the competition. With Vagaro’s cloud-based platform, over 75,000 beauty, fitness and wellness businesses in four countries have grown and expanded. The Vagaro platform offers mobile and web business management software, payments infrastructure, card readers and a marketplace. SMBs use it to book appointments, manage inventory, run payroll and employee scheduling, facilitate marketing to acquire new customers, collect rent and streamline back-office operations. 

FTV led Vagaro’s first institutional fundraising of $63 million in 2018, impressed by the company’s unique business model combining vertical business management software and embedded payments, an intersection where FTV has built significant expertise. As the company grew, we reinvested in 2021. Vagaro is headed for more growth, planning expansion in multiple locations around the world and growing its roster of enterprise customers.

We recently sat down with Founder and CEO Fred Helou to learn why he predicted embedded fintech nearly a decade ago, and how he bootstrapped Vagaro through a nothing-is-impossible hacker mindset. 

QUESTION 1

You founded Vagaro in 2009. What burning problem drove you to start the company?

The seeds of Vagaro were planted back in 1999 when I was on a trip to Korea. I looked in the mirror and realized I needed a haircut and wanted to book one for the following week when I’d return home. But I couldn’t call the hairdresser as it would have been over $2 a minute to do so. I thought, too bad I can’t log onto a website (this was before smartphones) to book the appointment. So this idea was in the back of my mind for years, and in December 2008, I got laid off from a director of software development job. It was then or never, so I wrote up a business plan and three months later formed Vagaro in April 2009. 

QUESTION 2

Today, Vagaro has booked over 600 million appointments and processed over $15 billion in payments. What is one early decision you made that set the company on this growth trajectory?

If I could pick one thing, it would be developing a mobile app for the first generation of iPhones. We saw that many hairdressers who rented chairs in salons, didn’t have their own websites and had no access to cash registers. They mostly made appointments by phone and often required payment in cash. We clearly saw how it would be game-changing if customers could use a mobile app to search for hairdressers nearby, read reviews from other customers about their services and then book and pay for appointments by credit card using that same app. So, we launched the very first iPhone app that allowed consumers to do all that. And it took off like wildfire.

QUESTION 3

Vagaro plays in both vertical business management software and digital payments. FTV has deep expertise investing in companies that marry these two aspects to deliver value to business owners, just as Vagaro has done. Why did you take this approach?

From day one, we knew payments would be a huge part of our offering. Our platform would not have caught on with providers if it was just a way for them to book appointments, market their services and manage their back-office processes; they also need to get paid. So about seven years ago, we began building a full end-to-end payments system ourselves – from the software and back-end connections, to banking systems and the card readers themselves. Owning the entire payments tech stack has been invaluable to our growth as a company, because payments now represent half of our revenue. FTV really understood how critical payments were to our business management software and that’s one of the main reasons we chose FTV to be our first outside investor.

QUESTION 4

Your platform enables bookings, payments, inventory management, payroll and more – requiring integration with third-party software platforms. What is unique about the technical infrastructure that underpins your product?

I think the most unique thing is how simple we’ve kept the platform. It’s super easy to use for our customers and the end-consumer. In the beginning, we were just four engineers doing a lot of super-hacking. We were building an early cloud app, but there wasn’t yet a mature AWS or Azure, so we had to build a lot of core capabilities ourselves. Because we had so much to build, we focused on keeping our platform very simple. We didn’t add too many bells and whistles. Today, we have over 200 developers but we are still all united in our vision to keep the product super simple to use. Sometimes, the smallest upgrades have led to the most growth. For example, some of our customers were asking for embedded forms. For med-spas, physical therapists and other wellness businesses, customers have to fill out health questionnaires ahead of their appointments. When we launched a forms capability, our business in the wellness space exploded. It was such a simple feature, but it brought us thousands of new customers.

QUESTION 5

What is one unique aspect of Vagaro’s culture that you’ve purposefully cultivated and why is it important to you as a leader?

As a leader, I don’t believe in creating a top-down culture. I’m not one to force people to conform to a pre-set mold. But one core value I do hold is that “nothing is impossible.” So I try to foster that sense of possibility in every one of our 400 employees every day. We’ve always had this mindset from the very beginning. The cloud doesn’t exist yet? We’ll just build it. We know nothing about payments? We’ll learn and design the best infrastructure out there. Nothing is harder than anything else; you just have to keep trying. So I would say everyone at Vagaro, no matter what team they’re on, gets a sense of euphoria when they hit a high bar they’ve set for themselves.