Toast Startup Raises $115 Million To Give Restaurant Owners What They Want by Forbes – Entrepreneurs

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When Steve Fredette, president and co-founder of Toast, launched his startup in 2012 with co-founder Aman Narang, he pretty quickly learned he had created a solution to a problem nobody much cared about.

Steve Fredette, president and co-founder of Toast.Courtesy Toast

Toast is a restaurant software company based in Boston. Both Fredette and Narang came from a Cambridge, Massachusetts software company called Endeca, which was acquired by Oracle in 2011.

But back to Toast.

“We originally started building a mobile payment app, but there wasn’t a lot of demand for it,” Fredette said. “It was not solving a big enough problem.”

It wasn’t long, however, before Fredette and his team hit on what was a big enough problem, by talking to restaurateurs in the Boston area: a point-of-sale device that did more and worked better for wait-staff taking orders and payments at the table.

“Everybody had it, nobody liked it, everybody wanted it to do more,” Fredette said of existing point-of-sale technology for restaurants.

So what if Toast was able to build that thing, that point-of-sale device that did more?

“All of a sudden, restaurant owners said, ‘Yeah, that’s what we want,’” Fredette said.

In 2013, Toast went to work in Narang’s basement, building a new point-of-sale device and software for restaurants, raising a $500,000 seed round of capital for the effort. By the end of the year, the company had its first pilot customer for the Toast Go, as the handheld tablet is called.

The Toast Go revolutionized point-of-sale transactions in restaurants.Courtesy Toast

“Now we have tens of thousands of customers in every state in the United States,” Fredette said. “In five years we went from 25 customers to tens of thousands of customers, and five employees in a basement to over 1,000 employees. Pretty crazy growth.”

What drove that growth? Customer demand. Toast did a Series D round of funding last year that raised $115 million.

“That reflects the demand from the market,” Fredette said of the Series D results. “We benefited from a pull from customers, a great problem to have. You don’t often see that. With a new market usually you’re pushing.”

Why the strong pull from customers? Fredette said restaurants were essentially passed by when it came to cutting-edge technology to run their businesses, and found themselves wallowing in antiquated software architectures. When Toast came along with something much newer, and much better, they bit hard.

“What happened was the general manager was afraid to use his own system,” Fredette said. “He would take down the whole system trying to change a beer line out.”

And when the system crashed, that general manager would have to pay a tech support guy $300 to come on site for five minutes of work to fix it.

The Toast Go in action at Mei Mei Restaurant in Boston.Courtesy Toast

“You call Toast, we pull up your account and that five minutes it takes us to fix it doesn’t cost anything,” Fredette said.

The Toast Go can easily be carried in one hand, is lightweight and fits in an apron pocket. With the Toast Go, servers can take orders, payments and tips without ever leaving the table.

“Turn times improve,” Fredette said. “A table that used to take two hours is now taking an hour and a half. Servers can serve more tables, tips are going up, restaurant revenue is going up.”

Toast ran a case study at an Austin restaurant called the Odd Duck, Fredette said, which showed servers could make $7,000 more annually by using Toast technology and the restaurant could grow revenue by half a million dollars. Bear in mind that Odd Duck was already doing big business, about $5 million annually, according to Fredette, but that is still a huge boost in revenue.

Fredette believes lots of opportunity remains to improve restaurant technology.

“Our mission is to empower the restaurant community, and help restaurateurs create great moments and great food,” Fredette said.

 


December 16, 2018 at 10:41PM
https://www.forbes.com/sites/danieldamrbosio/2018/12/16/toast-startup-raises-115-million-to-give-restaurant-owners-what-they-want/?ss=entrepreneurs
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