You hope that, if you build it,

they will come. That's really

where you start out in the early

days, but without having the

APIs and having that capability,

nobody's ever going to come.

Nobody wants to partner with

somebody that has a closed

ecosystem and is really

difficult to interface with.

That's Josh McCarter, CEO of

Mindbody, a leading technology

platform that powers tens of

thousands of wellness businesses,

including brands such as OTF,

F45, and Dry Bar. In 2019,

Mindbody was acquired by Vista

Equity Partners at a valuation

of almost $2 billion. Josh

became Mindbody's CEO in 2020.

He has more than two decades of

experience in wellness and

technology. In 2010, he founded

Booker Software, which grew to

be the largest B2B SaaS

marketing and management

platform, servicing the wellness

industry. Across his career,

Josh has had a front-row seat to

how technology can disrupt an

entire industry, changing where

and how people exercise and how

they understand fitness as a

whole. In this episode, Josh

talks about ecosystem in

particular are revolutionizing

wellness and how strong

partnerships can help companies

grow quickly. This is Daniel

Saks, co-CEO of AppDirect, and

it's time to decode vertical

ecosystems. Welcome to "Decoding

Digital," a podcast for

innovators looking to thrive in

the digital economy. I'm your

host, Daniel Saks, and I'll sit

down with other founders, CEOs,

and change-makers to decode the

trends that are transforming the

way we work. Let's decode. Josh,

welcome to Decoding Digital.

Right on, Dan. Thanks for having

me.

I think the last time we met in

person was in 2014. You were CEO

and founder of Booker, and

you've been busy since. Man,

sold the company for $150

million, became Chief Strategy

Officer at Mindbody, and now,

CEO. So excited to touch base.

Yeah, thanks, Dan. It's

definitely been a wild ride,

especially coming to helm at

Mindbody as a CEO during the

middle of the COVID pandemic.

A lot going on in your life, but

congratulations. It's truly an

amazing story to be following.

Maybe we could start by you

sharing a little bit more about

Mindbody, but also some of the

examples of the customers that

you're enabling to operate.

Yeah, absolutely. Just taking a

step back, Mindbody was founded

in the early 2000s, so we've

been around for a while. The

core purpose of the business is

really helping lead healthier

and happier lives by connecting

the world to wellness. We start

off by doing that through

offering a B2B software platform,

and we have tens of thousands of

wellness businesses around the

world that are using that

platform to really run, market,

and grow their business. Then

we connect those businesses to

millions of consumers that are

using the Mindbody app. They use

that to discover and book in-

person and now virtual wellness

services around the world. I

know AppDirect's been around for

a long time, and similar to you,

we were one of the pioneers in

our industry. We focused on

four particular verticals, so

fitness, integrated health, spa,

and salon. Now, I think we've

got more locations running on

our software than most of our

competitors combined. We work

with customers that are really

of all sizes. It could be a

small mom and pop, all the way

up to the largest chains like

Orangetheory Fitness or an F45

or WellBiz Brands.

You must see so many shifts in

terms of innovative, new fitness

and wellness startups and

companies. What are some of the

new trends that you've seen,

particularly as the world's

opening up, in terms of new

wellness ideas and concepts?

I think the big headline from

COVID and coming out of COVID is

virtual. Everybody knows the

Pelotons and the Mirrors, but we

really think that the local and

authentic experiences that are

delivered by our customers is

really where the industry is

going to go, and what call

really a hybrid future. We

leaned in during the early days

of COVID back in March and April

and pivoted some of our

development teams to build what

we call our Virtual Wellness

Platform, or what I'm going to

refer to as VWP. This was

really way that we wanted to

enable our customers to either

do live stream or on-demand, but

have it be a much more custom

and bespoke experience versus

doing something by Zoom or

Instagram live, or something

like that, and have it highly

coupled with our core platform.

So that if you had a membership,

you could then get rights to

access this through your

membership, or if you wanted to

buy five classes, you could been

able to do that. The CRM would

know that it's you. It would

know that it's you when it logs

in. You get your confirmation

messages just like you do. The

payments processing is all run

through the core platform. We

saw thousands of our customers,

and really tens of thousands of

customers in the early days

adopt it. Now, hundreds of

thousands of customers are using

it. As we look at the future,

we think it's going to be hybrid,

where people are going to want

to do things in person, but

they're also going to want to

supplement with some type of a

virtual component. In our

research, about 50 percent of

consumers say they want to do

exactly that. "I'll go back to

class for three days a week, but

I'm going to add one day a week

with virtual." The other thing

that we saw that virtual did is

it exposed people to classes and

modalities that they might not

have experienced before. Maybe

you were really into yoga, but

then you started trying spin at

home, or you started trying

Pilates. Another 50 percent of

those people are saying, "Hey,

I'm going to go do that in

person." Again, we think that

there is this kind of driving

from virtual into location, as

well as location back to virtual

components.

Got it. On Decoding Digital, we

really want to focus on the

transformative change that is

ongoing. What I've noticed is

not only has there been

transformative change in the

fitness and wellness vertical,

but Mindbody itself has really

evolved in the way that you've

positioned and spoke in market.

I think when I was first

connected with Mindbody, it was

very much so a B2B technology

platform. Now, you speak to

broader mission, that connects

everyone around the world around

wellness. Can you speak to the

evolution of going from B2B

technology to thinking about

broader messaging and how to

tell the story in a way that

resonates with so many around

the world?

Yeah. One of our core values is

consciously evolving. As part of

that, you really have to assess,

where's the market? Where are

consumers? Where are businesses?

We really pride ourselves on

seeing where the market's going

and then investing ahead of

where the market's at today and

driving that kind of innovation.

From a B2B standpoint, we

started out with a core software

that was really focused on

scheduling, CRM, the point of

sale, and payments. Then over

time, we expanded that with

other features that were focused

on marketing or other type of

client engagement. Then also,

as we started going upmarket,

the needs of larger businesses

whether it's a corporate-owned

location or it's a franchisor,

have really different needs than

the smaller businesses. We've

had to pivot and extend the

product in certain areas. Now,

as you think about what we do,

we're the ERP system, or the

operating system of these

businesses. Within that, we have

access to their inventory. We

see what classes or appointments

are available. There's always

been this view, whether it was

Mindbody or Booker, that we

envision connecting all of these

business users on our platform

with consumers that were looking

to book wellness services, much

like an OpenTable does for

restaurants. Now, our SaaS

solution is a lot more

comprehensive in terms of really

running end-to-end the business

than OpenTable, but at the core,

it's a scheduling component.

That manages the classes and the

appointments. You've got to

think of that effectively as the

inventory that these businesses

sell, and it's perishable

inventory. Meaning that, if that

three o'clock class isn't filled,

or there's a massage at 10:00 AM

that doesn't get fulfilled, that

inventory's gone. These

businesses are constantly

looking for ways to capture

customers. Most of the marketing

channels that are available to

them just frankly aren't that

great. With that in mind, we

said, "Hey, let's build a

marketplace where wellness-

seekers can come. They can view

inventory, classes, and

appointments across tens of

thousands of businesses around

the world." Then we can enable

them to either book a single

class, to buy a membership, or

buy a series or a package. Now,

as that product has matured over

the last five or six years,

we're literally processing

millions of bookings per month,

even in the COVID pandemic.

We're also powering other

companies, like ClassPass and

PureFit, that are accessing that

inventory through our APIs.

Taking a step back, when you

think about these trillion-

dollar industries -- it could be

travel, food delivery, or car

services -- there's a household

name. It's usually one or two

category leaders that doesn't

just dominate that industry, but

they really define. You can

think of Uber and Lyft for

ridesharing or Airbnb and BRBO

for vacation booking. Really,

what we want to build Mindbody

towards is becoming the

household name for these local

and authentic wellness

experiences. Really being that

marketplace that consumers come

to for discovering and booking

their wellness experiences, and

then the businesses which are

running on our software platform

want to be connected to, because

they can tap into that consumer

demand.

Quite the transformation, and I

know you've done a lot to

educate on the wellness industry

and other aspects of wellness. I

know one of the concepts you

talk about is the seven

dimensions of wellness. Can you

speak to what that means?

The seven dimensions of wellness

is really saying, "Take a

holistic view at wellness."

Historically, I think that

wellness really has been viewed

as fitness, depending on the

segment. Broad-based population,

I think, thinks of wellness as

fitness. One thing that COVID

really did was shined a light on

the fact that there are so many

other elements of wellness. You

think about the very early days,

when unemployment shot through

the roof, and we had tens of

millions of people that were

unemployed. One of the

dimensions of wellness is

occupational wellness. How are

you as a person feeling well if

you don't have a job, you don't

have income, and you need to

provide for your family? There's

stress that's created around

that. Another angle on their

element of wellness is your

mental wellness. This has been

something that I think over the

years has been fairly taboo. Now,

everybody's talking about mental

wellness. Companies are getting

funded with hundreds of millions

of dollars in the mental

wellness space right now. I

think that that's one of the

really positive things that has

come out of COVID, is thinking

more holistically about wellness.

One of the great things about

Mindbody is that we have

businesses on our platform that

address most of the seven

dimensions of wellness. We've

certainly seen a surge in

businesses going into

integrative health, for instance,

into acupuncture, stress

management, and meditation. We

expect that that's going to

continue to be a trend as we

exit COVID.

Let's shift to discuss your tech

platform. You spoke to the APIs

that you're enabling in the

community, and you spoke to the

evolution of being a B2B booking

and payments tool, to now an end

user consumer brand. Talk about

the maturity of the tech stack

and what you need to do to

innovate to get there.

As I mentioned, Mindbody was one

of the original vertical SaaS

players. We have a combination

of legacy tech and then bleeding

edge tech. We've also grown

through acquisitions. As you

acquire companies, they're on

different tech stacks. We don't

view that we need to have a big

bang approach, where we got in

and go from 2. to 3., and it's a

completely different

system. We're taking more of

what we call a room-by-room

approach. One of our

initiatives this year is called

Strengthen the Core. By that, we

mean the core of the software,

as well as the core of the

business, but in speaking about

the software, it really looking

at those features that people

use 80, 90 percent of the time,

and making sure that those

experiences are new, they're

modern, they're sleek, they're

easy to onboard, they're easy to

train people on. What we see,

especially in the SMB segment,

is that most of these customers

look almost like consumer users.

They want it to be as simple as

using an iPhone or using their

iPad. We have to adapt our

technology to where the current

users are. We're on a, what I

call, a transformational journey

right now to replace the legacy

aspects of our software, all the

way from the back end to the

front end, with new technology.

Beyond your own products, as

well as some of the acquired

products that you're integrating

to the tech stack, I know you

support many different partners,

and you've built your own

partner ecosystem. Can you talk

about some of the challenges in

evolving your partner ecosystem?

Yeah, so the partner ecosystem

for us is really core to how we

view Mindbody. If you think

about how other platforms like

Salesforce have evolved over

time, they start out with

developing a generic set of APIs

that are going to work for

certain feature functions that

you probably go, "Hey, that's

not something we're going to

build ourselves, so let's get

the APIs in place so that we can

extend that functionality

through a partner." In some

cases, you hope that, if you

build it, they will come. That's

really where you start out in

the early days, but without

having the APIs and having that

capability, nobody's ever going

to come. Nobody wants to partner

with somebody that has a closed

ecosystem is really difficult to

interface with. Over time, what

we've done is we've extended

those APIs into different

feature areas. If you think

maybe in the early days, it was

just about scheduling. Somebody

could look in and see a schedule

and pull appointment information

out. Well, the road map for

that then becomes, "OK, somebody

needs to be able to book

appointment and put it in." They

need to be able to change an

appointment. They might need to

be able to change pricing,

change a location. There's a

whole body of work that then

goes much deeper in a particular

category that you start off with.

Same thing is true with CRM. Do

you want to allow somebody to

access a customer that's only at

one location or across the

entire brand, across 500

locations? That's a very

different API endpoint. We

identify partners, then, that

can help us extend feature

function to better serve our

customers.

When you spoke to category

leadership, like Uber or Airbnb,

one of the things in B2B

technologies we see is the

ecosystem that's the most open

and that has as many use cases,

and has a cultivated developer

community, is typically the one

that becomes leading. It's

incredible to see the types of

integrations and partners that

have evolved on your platform

over the years. Can you speak to

that strategy of how to start

from just being Mindbody as a

closed software system, to then

really opening up and saying, "

OK, I want to cultivate many

different types of services

across different verticals with

best-of-breed, but also native

capability"?

Yeah, I think that it first

starts with being oriented to

saying, "Hey, that's actually

something that we want to do,"

because a lot of businesses

ultimately don't want to do that.

They would want to have a closed

ecosystem. When you make that

conscious decision, there are a

lot of knock-on effects from

that decision. Number one is, is

your product and engineering

team capable of doing that, and

is there sufficient staffing

that they could do that while

still delivering on your

internal road map requirements?

If you check that box and say, "

Yeah, from a technical

standpoint, we can do it," then

you have to think about, "OK,

well, how do we organize the

business around enabling that,

selling that, and supporting

that?" I think in the early days,

our business development group

was one or two people. Now, it's

10 people. As we think about

the areas that we're going to

invest in, we also want to make

sure that we've got at least an

ecosystem that there is to tap

into to find those type of

businesses. We have to make sure

that, if somebody's inbounding,

that when they inbound, there's

somebody there to answer the

email or answer the call, and

then provide them with the API

documentation. I think that

that's one thing that

historically was really

underestimated, is the amount of

support that it can take for

some of these partners, because

not everybody can just take a

look at an integration doc and

start writing code to that,

especially for some of these

more complex use cases that we

see in service-based businesses.

Having support there, having

technical support, having

business support, and then also

thinking about what your

monetization strategy is. This

is going to cost you millions of

dollars to go build, and if you

can't monetize it, then that's a

pretty tough case to make to

your board and your investors

that you should go spend on a

bunch of money on it, and you

can't monetize it. It really

requires an end-to-end thinking.

It's not just, "Hey, we're going

to go develop and publish APIs,

everybody's going to write to it,

and that's going to be the end

of it." There's always some

component of partner management

and technical integration work

that's going to be there. Then

as you get into the monetization

side of it, how does it feed

into your billing system, how

does it feed into your

financials and all of your

reporting as well as also then

thinking about how do you drive

value to those businesses that

are integrating? Do you have an

app store, like we have with you,

or do you have other ways that

you can promote that through

emails or through different

webinars or through conferences,

so that people actually

recognize, "Hey," this is a

service that they can buy

through a partner.

You spoke to the monetization

strategies and the app store

being one of them. We're really

grateful to be partnered with

you there. Can you speak to how

your desired evolution of the

monetization strategy for your

partners and how the app store

might evolve?

It has evolved, and it's

different depending on the type

of partner. You might have a

huge partner, like let's take

Constant Contact, who's one of

our larger partners. That model

looks different than a new

startup that is only coming with

five locations. Usually, our

approach is that we have a per-

location, per-month integration

fee. That's the starting point.

Then, if it's a transactional

business, then we charge a per-

booking fee. Somebody that's

tapping into our inventory and

then going and reselling and

monetizing that inventory, they

pay us both an access fee as

well as a booking fee. Those

are the ones that we have

consolidated around. There's

been different pricing per-user

for this, and we really found

that those two structures for us

were the right structures.

Fantastic. Clearly, you're known

for building a culture around

wellness. I've heard so many

great things about your team

members feeling so strongly

about the culture that you've

created for the sector that

you've created. What are some of

your lessons and secret sauce to

cultivating a unique culture?

I think the first part for us,

we've been really fortunate to

have a team that joins Mindbody

for our core values. Our first

core value is committed to

wellness. We have for years

preached that wellness is about

the seven dimensions of wellness.

I think people come to us, first

of all, to think about their

wellness and to be part of

something that has a higher

purpose. As I mentioned earlier,

our purpose is helping people

lead healthier and happier lives

by connecting the world to

wellness. You'd just be blown

away by how many times, when I'm

talking with new employees,

they'll share with me some major

health challenges that they had,

or somebody that was in their

family had. They go, "That's why

I'm here, because I want to help

more people in the world connect

to wellness." I think that

that's a starting point, is it

really starts at the beginning.

When you're recruiting people,

you've got to have the right

vision, mission, and core values

that's going to attract people

that are going to come in that

are going to "fit" into the

culture and really add to the

culture over time.

Just in wrapping up, as we look

to the next decade and beyond

for the fitness industry -- you

spoke to the hybrid trend, but --

what are some innovations that

people might not think of on a

day-to-day basis that you think

could evolve over the next

decade or so?

I think that there is definitely

going to be more technology in

our lives and not less. You see

it with Apple Watch and Apple

Fitness that's coming out.

There's a lot of AI/ML work

that's happening in the

background. I think the

connected devices in general,

right now, you think of a

connected device, "Hey, I can

track my heart rate, and I can

track my workouts." Over time, I

think that those devices are

going to be capturing a lot more

data and then going into a

repository that's collecting

data from other parts of your

world and then coming back and

proactively recommending things.

It might even get to the point

where it's not just recommending,

but it's saying, "You're

scheduled in this 3:00 PM

meditation class, because we've

noticed that your biorhythms are

off. Here's a virtual meditation

class that you can go into." It

could probably also starting

pushing you nutrition plans

based on how your body is

reacting to something that you

ate the day before or the week

before. I think that that AI/ML

on the back end is really going

to become pervasive over the

next 5 to 10 years. That's one

to definitely watch out for.

The other one, I think, is

gamification. We've seen

gamification work in the

different industries, and we're

starting to see it definitely in

the fitness industry. The basics,

like we own a company called

FitMetrix, and that's one of the

businesses that puts up the

leaderboards in a spin class or

in HIIT class, where you're

tracking your heart rate or your

output compared to everybody

else. That drives people to

come in, and they want to see

how they're comparing and how

they're competing. Other aspects

of that, I think, will start

filtering more into overall

fitness. Even Peloton does

gamification when you see how

you could high-five somebody

that's riding, and also create

different communities within

that for people to engage in. I

think that that will also become

more pervasive over time.

Josh, well, thanks so much for

being such an industry leader.

It's been great getting to know

you over the last several years,

and excited to test out all the

incredible innovations that are

to come.

Right on. I appreciate the time.

Thanks for having me.

On the next episode of Decoding

Digital...

I would rather you have no

influencers. I would rather you

have no hype. I would rather you

raise less capital and obsess

with what is the product feature

that's really going to resonate

with a group of people, like the

raison d'etre. What is it that

they're waking up every day to

use your product to do, and why

your product and not other stuff?

Managing Partner at Upfront

Ventures, Mark Suster. Thanks

for listening to Decoding

Digital. Make sure you never

miss an episode by subscribing

to the show in your favorite

podcast player. To learn more,

visit decodingdigital.com. Until