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Interview with Dmitri Leonov and Constantine Suychmez, Ulevate

Our interview today is with Dmitri Leonov and Constantine Suychmez of Ulevate (www.ulevate.com), a startup which is combining technology with the beauty and spa industry. Constantine is CEO of Ulevate, and Dmitri is an advisor, and also is known as the co-founder of email management and filtering software developer SaneBox.

What is Ulevate?

Dmitri Leonov: We built a distribution business for equipment for the spa industry, and have had 10,000 client over that time, but in the last few years, we've really focused on talking to spa customers about their needs in the market. It turns out, the size of the spa market is double the size of the global taxi market, and the market dynamics and unit economies of this are incredible. At the same time, it's been completely overlooked by innovation. Our solution was to build a new device, which is the only smart device on the market, which incorporates all the things customers are asking for. Essentially, the customer wants natural and organic ingredients. We have a device which is a machine with different hoses and handles which you use for different procedures. You apply it to a client's face, and what you are doing is pushing different serums, cosmetics and such, and combines them with oxygen. It's a new concept, and most people aren't doing that. Most people don't want injectsion, radio frequency, or ultrasounds, and it helps that we can work with pregnant women. We're the first on the market, and it's completely insane that in 2020, everything is organic and this segment of the market is not.

This seems very different from your background on software, how did you get into this?

Dmitri Leonov: It's the Russian connection. I got involved talking with Constantine, to see if I could poke as many holes as I could in the business, and found that it is completely bullet proof. After talking with Constantine and the team, I was amazed at the market dynamics, and how well we are positioned to capitalize on it.

Do users buy or rent these?

Dmitri Leonov: Currently, the way we do this is there's an app built into this. Normally, in this industry, you buy a device which costs $30,000 to $50,000. Instead, we give it to them for free. The reason we can do that, is we have figured out how to manufacture them very cheaply. Our cost is very low, which allows us a key, competitive advantage. We give them the devices for free, and charge them a per-minute fee. Eighteen to twenty percent of the revenue is services. Most of the money in the space space, all the big players, sell cosmetics and things like Botox, and there are a bunch of companies manufacturing equipment which they sell from $30,000 to $50,0000. $250 billion is made by the little spas. What's different about our business model is to bring them customers. None of the small businesses, these spas, have the expertise or the budget to actually understand lead generation, SEM or SEO, or even know how to manage retention, referrals, expertise, or how to customize or streamline their processes. We not only give them these devices and cosmetics, we also help them run retention and referral campaigns. All we do is take a small percentage of their fees, like Uber.

Constantine, what's your background?

Constantine Suychmez: I've been in this business for 8 years. We started as a seller of equipment in Europe. Then, we started to build our brand, and then we felt confident, we moved to the U.S. market. We ran our business for three years, and last year we sold around 1,000 machines to clients. We then started to help clients switch to marketing using our own machines. We figured out that the clients did not so much care about the machines, but the services we were providing with them, including marketing, printing materials, and templates, and because we were generating leads for the clients. We decided to apply the same model of lead generation as we have now, and upgrade that to a wider market. We figured out that by doing all of that, we were bringing more clients to our providers by providing in-house marketing, printed materials, videos, templates for social media, email templates, sentiment campaigns, and even helping them build their website and appointment systems, and direct mail campaigns, Google search campaigns, Facebook, and and all of that combined together.

Do you run into any issues with regulatory approvals with your device?

Constantine Suychmez: The equipment is registered with the FDA, and licensed professionals can use it. We are in the process of getting certified for the European Union and the UK. For us, this was just a process. We did it before, maybe ten times, but it's not that complicated. We created the machine from the knowledge we gained from the last eight year. This is the best machine that we have ever created in our business. We worked on it from May 2018 up until December, and built the first machine on December 13th, and built our first five machines to test with providers for a pilot project. We now have two loactions in San Diego, one location in Newport Beach, and one in Rodeo Drive, in Beverly Hills.

If providers are going with you because of the marketing and other services, why even have hardware involved at all?

Constantine Suychmez: Great question. What happened before, is people had tried to launch those as a service, but weren't able to tie those revenues to payments that clients made after a service. For example, someone would book an appointment or service with an application, and the idea was that application would take a payment for that lead as their monthly payment. However, there was no guarantee that the client would get the payment, because it was not directly connected to revenues. The second that client was connected to the aesthetician, they would no longer use the website or app for the appointment, they'd just text message or call them for an appointment instead. They never came back to that marketplace for the second treatment for the same provider. The retention rates were low, which mean they could not invest in marketing like we can. Our average retention is 70 percent.

Dmitri Leonov: There's a couple of other things, too. The main thing, in addition to the hardware, is it solves a major pain point for the customers. The additional benefit, that we can manufacture this very cheaply, enables us to have the margin and unit economics to offer it for free, which is a huge win for the spa. Spas have to purchase nw equipment frequently, and $30,000 to $50,000 is a massive investment. That makes this a no-brainer.. The last piece, which is really interesting, is because we're building this on Android, we can do amazing things with software that no one has considered doing before. We take a picture before and after treatments, let people send that to their friends, and suggest a referral.

Constantine Suychmez: The app also allows us to update our application any time. Each machine is connected to Wi-Fi, and if you have an issue with the machine, we can track it. We can track how many clients per day are being served, and we know when we need to open up a second provider or ask that provider to open up a second room or second facility to use our machine. We also have a CRM in it, an appoint system, inventory tracking, analytics, training, all build into the application.

Thanks!