Don’t underestimate seasoned software developers who come highly recommended—even when they’re building a product for an industry in which they have little experience.
That’s the lesson that Bessemer Venture Partners’ Kent Bennett learned with Toast, the fast-growing Boston restaurant technology company that today announced a $30 million Series B round led by Bessemer. GV, formerly known as Google Ventures, and individual investors also participated in the deal.
It’s an investment that Bennett wishes he had made sooner.
He might have done so about three years ago, when a trio of Endeca alumni were getting Toast off the ground. Steve Papa, the serial entrepreneur who led Endeca and sold it to Oracle for $1.1 billion in 2011, called Bennett—whose firm invested in Endeca—and encouraged him to keep an eye on Toast co-founders Steve Fredette, Aman Narang, and Jonathan Grimm. Papa told Bennett “‘you should just invest in whatever they do next,’ just sort of the blank check endorsement,” Bennett says. (Papa was an early investor in Toast and sits on its board.)
Bennett met with the Toast team, who said they were experimenting with restaurant software and thought they could build a better point-of-sale system—the technology that handles payments and other business activities. Bennett says Toast wasn’t making a hard pitch for an investment, and he didn’t exactly say no. But he hadn’t spent much time studying restaurant businesses, and he says he was concerned that it might be difficult to sell such a product to an industry that has been slow to adopt new technology.
“It was pure naiveté on my part,” Bennett says. “Almost immediately as they got off into the market, it was clear to me that they had something special.”
Since launching its product in 2013, Toast has accumulated 1,400 customers in 43 states, including independent restaurants, cafes, and nightclubs, as well as restaurant chains. The company says its customer base and revenue have been quadrupling each year.
Bennett kept an eye on Toast, which was housed early on in Bessemer’s Kendall Square office, according to a Boston.com article from 2012. He says he has been impressed by Toast’s rapid growth in an increasingly crowded field, which includes competitors like Square and Breadcrumb.
“From a distance, it’s a noisy space,” Bennett says. And it’s certainly not easy to be a tech startup trying to gain a foothold in an old industry like restaurants, as the ups and downs of companies like Swipely, Leaf, and Objective Logistics have demonstrated.
But Toast has taken off thanks to developing a quality product and serving customers well, Bennett says.
Toast started as a mobile payments app for restaurants, but it now offers mobile, cloud-based software that can perform a range of tasks for restaurants. It can execute payments and online orders, run e-mail marketing campaigns, update online menus, and track sales, customer ordering data, food inventory, and hours worked by staff.
The co-founders’ experience at Endeca building search and e-commerce software for large enterprises has helped set the tone for Toast. “Having a team like this approach restaurant software with the same sort of standards for reliability and resiliency that they would approach critical business systems is a big deal,” Bennett says.
Toast’s software runs on the Android operating system, which the company says offers more flexibility and customization options. It also means the software runs on a wide variety of tablets that tend to be more affordable than Apple’s iPads, Bennett adds.
The bottom line is that Toast has reached the point where its “product is so good that it’s really easy to sell and existing customers are doing a lot of your marketing for you,” Bennett says.
The question is whether Toast can sustain its early growth and reach new heights. The new money should help.
Toast, which has raised more than $37 million from investors to date, says it will use the cash infusion for product development and hiring. The company currently employs more than 170 people, and it intends to hire more than 150 people nationwide this year, marketing vice president Ellie Mirman says.
