Deal To Watch: The Uber For Nails

Key Stats:

Summary

Cherry App has been selected as a “Deal To Watch” by KingsCrowd. This distinction is reserved for deals selected into the ​top 10%-20% of our deal diligence funnel​. If you have questions regarding our deal diligence and selection methodology, please reach out to ​hello@kingscrowd.com​.

Summary

20.03 million Americans got manicures 4 or more times in 2019. For most women in particular, this is an essential component to a beauty regimen. But for many women this is a luxury, purely for the amount of time it requires to carve out of the day. Pedicures, for example, can take from 30 to 90 minutes, a block of time many working professionals or parents cannot afford to give up on a regular basis.

In addition, an increase in labor force within nail services has democratized the industry and made nail care more accessible—at the cost of workers. Manicurists often face severe wage violations and work long hours without adequate compensation.

Solution

Cherry App offers mobile, on-demand nail care. Through the app, users can schedule services anywhere, any time. To date, Cherry App is active in Dallas and Houston with plans to expand to Austin, Nashville, Atlanta, San Antonio, Tampa Bay, and Orlando within the year. Services currently include gel, dip, and classic manicures and pedicures. Since launching in 2017, Cherry App has a 4.9-star app rating.

By entering the space, Cherry App aims to disrupt the $5.24 billion beauty salon industry within the United States. 15.9% of this market is dedicated to nail care and $8.36 billion are spent on nail services in the US annually.

In addition, by offering a socially conscious alternative for nail service workers, CherryApp is tapping into the rapidly-growing gig economy. In fact, this trend is becoming popularized by technology like Cherry App, so much so that the gig economy is now comprised of approximately 36% of US workers, around 57 million people. And benefits like flexibility and independence are drawing more and more workers to this style for offering their services.

The Team

Co-founder and chairman, Amber Venz Box, previously founded rewardStyle, an invite-only content monetization platform still active today. She was named a Forbes’ 30 Under 30, Inc. Magazine’s Most Influential Millennials, is a member of the Business of Fashion’s 500, and one of Entrepreneur Magazine’s “15 Female Entrepreneurs to Watch.” She holds a degree in Corporate Communications and Public Affairs from Southern Methodist University.

Co-founder and CEO, Aaron Coats, has spent time as a Manager at Accenture. He previously founded alan + warren, a socially-conscious clothing company. He holds an M.B.A from Southern Methodist University.

Whitney Wolfe Herd, CEO of Bumble, the popular dating app, helped found the company and continues to act as an advisor. Jamie O’Banion, CEO of BeautyBio also advises the company and is listed as a founder.

Business Model

Cherry App averages $76 in revenue per booking and operates on 30% commision. Technicians earn 2.5x revenue with Cherry App vs. the national average, eliminating wage violations and offering a more socially-conscious alternative than going to the salon.

At the end of the most recent fiscal year, Cherry App had $66076.00 in revenue. Cost of goods sold was $53814.00. The current cost of customer acquisition sits around $58.76.

Competition

The Glam App, Glamsquad, and Priv, are a few of the many new startups vying to become “the uber for beauty.” Many of these on-demand beauty services are cropping up in US cities, suggesting that carving out time for beauty regimens is a problem many Americans face. However, few, if any of these companies have a focus on nails, as most operate as mobile hair salons.

Why We Like it

• Strong Product Differentiators in an Established Market: The push for the beauty industry to enter the gig economy is clearly evident. However, much of the expansion into this space is specific to hairstyling. Nair care makes up another significant portion of this market and as such it is natural that the nail care segment follow suite.
• Impressive Team and Advisory Board: Not only do the co-founders and CEO have extensive entrepreneurial experience, they have on board some big name advisors. Having the backing of Whitney Wolfe Herd, founder of Bumble, is particularly notable. Though Bumble remains private, its current estimated revenue sits around $175M. Wolfe, paired with other serial entrepreneurs on the team comprise of a deep network of industry experts.
• Strong Reviews: Cherry App boasts impressive early customer feedback with close to 1000 reviews and an overall app rating of 4.9 out of 5 stars.
• Utilizing the Gig Economy: Not only is the gig economy paradigm appealing to customers for its flexibility (think Uber and Lyft), it draws in workers looking to receive adequate compensation for their services on their own time. This offers a more socially-conscious alternative for a cohort of workers, specifically nail technicians, that are historically underpaid and overworked.

The Rating: Deal To Watch

Cherry App is a Deal To Watch. Though the product is still in its early stages and has only been deployed in two cities, early customer feedback has been overwhelmingly positive, suggesting that the team has identified and filled a market pain point. This demonstrated product market fit is encouraging, and the team that backs the product is impressive. This is definitely a company to keep an eye out for as it continues to expand. And it already has a clear plan for geographic growth, with several new cities laid out in phases.

In addition, the gig economy model is becoming more and more popular as skilled workers are given the tools and technology to work on their time for their desired compensation. Not only is this appealing to provider and customer, it is a progessive and socially-conscious alternative to the existing model that often leaves employees underpaid and overworked.

Though the on-demand beauty service industry is growing, little to no companies strictly focus on nail care, a core element of many Americans’ beauty routines. This demonstrates a growing market with a gap for Cherry App to fit right in. And there is movement in the space.

CityMani, one closely overlapping competitor also in the on-demand nail space, was recently acquired by Elizabeth Arden Red Door Spa in an effort to expand its services. A similar exit would not be out of the question for Cherry App. With an experienced management team already rolling in one city, its plans to scale across cities seems more than reasonable creating a large addressable market opportunity for Cherry App to both grow into and own. Our major hesitation on this one is the fact that the geographic scope is still so limited. Once we see the team is actually able to roll out into multiple cities across a larger geographic expanse with similar levels of success we will feel more confident in its long term prospects.