For restaurant tech company Toast, going public may be on the menu
But the story of how Toast weathered last year’s turmoil can’t wait.
I did it first written about the startup in December 2012, when co-founder Steve Fredette met me for lunch at Kendall Square and showed me a system that allowed customers to view their checks on a mobile app, split the bill based on what each had ordered and paid without waiting for the server to make several round trips to the register.
This initial concept has grown into a company that provides a wide range of technology to restaurants, including employee scheduling and payment, gift card sales, and payment processing for online and restaurant orders.
Toast also sells Android-based hardware of its own design, such as portable devices used by servers. for taking orders and processing credit card transactions, and screens that display those orders in kitchens.
Along the way, Toast was forced to compete with other sharp-sided startups such as Square, as well as more established players. such as NCR (founded in 1884 as the National Cash Register Co.) and Oracle.
Toast has been successful in raising funds from investors, starting with New Hampshire entrepreneur Steve Papa. In the early 2000s, Dad ran a Boston-area software company called Endeca, which Oracle acquired in 2011 for just north of $ 1 billion. The three founders of Toast and its CEO all worked for Papa at Endeca. Since Dad funded the business, Toast has raised around $ 900 million. The latest shooting, $ 400 million, took place in February 2020 and involved Bessemer Venture Partners, a venture capital firm with an office in Cambridge. Bessemer provided office space for Toast when the company was taking shape, and his partner Kent Bennett sits on Toast’s board of directors.
Before the pandemic, Toast was the typical ‘go big or come home’ start-up, looking to integrate its technology into as many restaurants as possible. Its revenue grew by over 100% in 2019, but Toast was not profitable.
As cities around the world closed in March 2020, Toast’s ability to sign up customers stagnated.
“We didn’t have much time to prepare at all,” said a former manager, who requested anonymity due to departure conditions. “Everyone has stopped buying.”
After spending most of the past eight years trying to hire employees in the hyper-competitive Boston talent market and other U.S. cities, Toast decided in early April 2020. lay off half of its staff – around 1,300 people. Some groups, including the “talent acquisition” team, have gone from more than 70 employees to five, explains Loren Boyce, a former Toast employee who survived the layoff but left at the end of 2020.
Good CEOs “make decisions quickly,” says venture capitalist Michael Skok. “There is no benefit in waiting.” Skok met Toast CEO Chris Comparato at another Skok-funded startup, but he has no financial interest in Toast.
“They quickly assessed the potential for a downturn,” says Skok. “They laid people off, reorganized themselves and focused on what they could do. It was impressive.
Skok says the Toast management team also spoke to customers about what the restaurants were going through and the help they needed to support more online and mobile orders, curbside pickups and pickups. deliveries. “Once he got that data,” Skok says, “Chris and the team really made it their true north.”
Toast had already launched Toast TakeOut, an application that allows customers to order directly from restaurants, as part of its goal cashless transactions. But with the pandemic, “it looks like they were able to bring these things to the fore very quickly,” says the former director of Toast. “It’s hard to do in a company of this size, to be able to speed up some of these things.”
Toast also allowed restaurants to connect to delivery services like DoorDash to get meals to customers, allowing them to pay a flat fee for each delivery, rather than a percentage of the order.
Toast took advantage of the fact that restaurants processed more online orders in 2020, as it levies transaction fees on credit card payments. Skok says that to outsiders, Toast may sound like a hardware and software sales company, but it’s “almost a high-tech company,” referring to a startup geared towards financial services.
It may have also helped Toast when restaurants expanded their outdoor seating. It has become more difficult for waiters to move between tables and internal registers, which has made some restaurants more inclined to purchase Toast’s portable devices. These allow customers to see their tab and pay immediately with a credit card – or with a mobile phone using a digital wallet like Apple Pay.
During the pandemic, Toast encouraged consumers to support local restaurants and provided $ 250,000 in matching funds to help restaurant workers through its philanthropic arm. It also made it easier for Toast’s customers to use its software to apply for funding from the Small Business Administration Restaurant Revitalization Fund.
“Toast has done a really good job creating a customer-centric culture,” says Rohit Shenoy, former director of Toast and founder of Hone Technologies, a startup that helps restaurants with bookkeeping. And, he adds, the company “hired a lot of people from the restaurant industry, so we had empathy and understanding of how restaurants work – and we could speak their language.”
So when will Toast go public?
Skok, the venture capitalist, says “they are not motivated by a Sword of Damocles problem” and do not need to make a public offering by a specific deadline. But several other people expect Toast to try to take advantage of the market’s current openness to tech IPOs.
Today, Toast is back in hiring mode; its website advertises nearly 250 job vacancies, from California to Boston to Dublin. But the big issues it faces are chip shortages and other supply chain issues related to building Toast’s hardware products, such as digital cash registers and Toast Go devices.
“We don’t want hardware to be a limiting factor” to growth, says Papa, the investor and president of Toast.
The past year has not been easy at all, says Papa. Toast employees “had to adapt and change” to help restaurants quickly understand how to serve customers more digitally.
Before the pandemic, “it was a good thing to have,” says Dad. “Then it became a staple.”