Restaurant sales reached $ 825 billion last year in the US, but with average margins of just three to five percent per business, they always look for an advantage in efficiency and overall, they handle things in a smarter way. A startup called Toast, which has built a popular platform for restaurant management, has closed a major funding round to double the opportunity to do so.
The company has raised $ 250 million at a valuation of $ 2.7 billion, money that it will use to invest in construction technology to help restaurants with marketing, recruiting and operational efficiencies, as well as to start thinking about expanding further. territories outside of the U.S.
Funding fundamentals were marked today by Prime Unicorn Index and we reached out to the company to confirm. It is led by TCV and Tiger Global Management, with participation from Bessemer Venture Partners and funds from T. Rowe Price Associates and other existing investors.
This E Series is a huge boost for the company: in its previous round in July 2018, the company was valued at $ 1.4 billion, partly as a result of strong growth in the company. While it’s not disclosing revenue numbers or if it’s still profitable, Toast currently serves tens of thousands of businesses, covering a range of sizes from freelance locations to smaller chains, and in the last year recorded transactions in the tens of thousands of million dollars, According to CFO Tim Barash, revenue growth was about 148 percent.
The restaurant business represents a great opportunity for e-commerce companies, but there have been some notable setbacks where ambitions have not been successfully fulfilled. Groupon, which spent several years organically acquiring and building a restaurant and point-of-sale management business, first cut dramatically and then finally canceled and sold its efforts, called Breadcrumb, in 2016. Amazon also abandoned point-of-sale services (targeted to more than restaurants) and in some regions it has also withdrawn to other restaurant efforts, such as order management and delivery platform.
Barash said in an interview that he thinks the key to why Toast It has steadily grown its business through all that is because a large proportion of its own employees, about 70 percent, have worked in the foodservice industry.
“First I was a busboy, and then I worked in pizza delivery for years,” he said. “Seventy percent of our employees have worked in restaurants, including those in our product leadership, and that helps us understand the problem.”
Restaurants, as Barash points out, are complicated. “They are essentially manufacturers and retailers at the same time, all in a small physical footprint,” so the key to creating products for them is understanding that and the challenges they face in building and managing those businesses.
And that’s before considering the many other factors that can make restaurants a risky game, from changing kitchen tastes to changing eating habits, many of them getting food delivered today, to the precariousness of the real estate market. commercials and much more.
Toast’s goal is to create tools to apply data science and orderly computer processes to address any of those variables that can be controlled by the restaurant.
Today, Toast’s products include point-of-sale services, as well as reporting and analytics; display systems for kitchens; online order and delivery interfaces; and loyalty programs. It also builds its own hardware, which includes portable ordering platforms, order and payment terminals, self-service kiosks, and guest displays. It also offers links through a network of about 100 partners, such as Grubhub for takeout, when a restaurant does not cover those services or functions directly, to help bring services together to work on its platform.
Tomorrow, the plan is to use the funds to upgrade all those with more advanced features who speak to some of the biggest issues and concerns Barash said his clients are voicing today.
That will include better and more services aimed at guest engagement and retention; better ways to recruit and keep people in an industry with high employee turnover; and, of course, more tools to address the efficiency of running a business to make it more profitable. The company has committed about $ 1 billion over the next five years to R&D to build more hardware and software.
Having access to this type of technology and platform is a big deal, especially for independently owned venues hoping to compete against larger chains without having to compromise on their core competency: making unique and delicious food.
Meanwhile, Barash said that while Toast itself is no stranger to big-player approaches, he declined to say who, but said many of those with ambitions to do more business with the restaurant industry have approached it as over the years. The long-term vision is to grow bigger and remain your own boss.
It’s an ambition that has hit the spot with investors who have an appetite for high-growth companies.
“At TCV, we invest in companies that have the potential to reshape entire industries. By providing restaurants of all sizes with access to innovative technology, Toast is leveling the playing field and leading the industry’s transition to the cloud, “said David Yuan, TCV General Partner, in a statement, joining the board of directors in this round. “Our investment will enable Toast to extend its platform beyond point of sale and guest-facing technology, and in doing so, create a powerful SaaS platform with a superlative business model. We are excited to partner with Toast as they accelerate the growth of the community they serve. “