Toast: Aman Narang. How a Long Wait for the Dinner Check Launched a $2 Billion Business.

Transcript from https://podmenti.com/t/71672d100f8a66e6

We were installing this restaurant.
And they open.
And
With then
Twenty minutes.
Uh
Taking like the first few orders.
It's like the system is down.
Now they've got a line and they think we're like
Physically writing down the order.
on a piece of paper and dropping it off in the kitchen.
Yeah, taking the credit card number down and paper and like
Trying to do this manually.
And
realize as part of the experience that uh

Or mission critical and like
Can't break.
Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements.

I'm Guy Raz, and on the show today, how a frustrating way to pay a dinner bill led to the launch of Toast.
One of the most popular point of sale services in the
Country.
There are about seven hundred thousand restaurants in the United States.
Big chains, tiny neighborhood cafes, family owned diners.
Fancy tasting menu places?
It's a huge market.
And if you could build something that even a fraction of those restaurants needed every day?
you'd have a pretty good business.
But restaurants are tough customers.
Margins are thin, they can't afford downtime.
And once they install the software that runs their business,
They almost never switch it.
For years that software was clunky.
It was expensive and really hard to update.
And it usually lived on a server somewhere inside the restaurant.
Totally disconnected from the cloud.
Most owners hated these systems.
But replacing them felt impossible.
Which is where today's guest, Amon Narang, saw an opportunity.
The idea began with what else?
A frustration.
A frustration I am sure you've experienced.
You finish dinner, you're ready to leave.
You're waiting for the check, you finally get the server's attention.
And then you wait again for your credit card to come back. And that everyday annoyed Amon and his co-founders to build an app that would let people pay for their meals from their phones.
But
It didn't work.
This was back in 2012, so the technology was a bit clunkier.
But that failure uncovered a much bigger opportunity.
The real problem wasn't just paying the bill, it was the technology running the entire restaurant.
Inventory, payroll, scheduling, kitchen operations, online ordering, loyalty programs,
None of it worked very well.
So Amon and his co-founders made a bold decision.
Instead of building one feature, they'd replace the entire operating system for restaurants.
They called it toast.
And even after the technology started working, they still had to convince skeptical restaurant owners, raise money from investors who wanted nothing to do with restaurants.
compete with companies that had been around for decades, and survive COVID.
But today
Toast supports nearly one in five restaurants in America and generates more than two billion dollars in annual revenue.
So
As for Aman Narang, he actually grew up in Nepal and in India.
And moved to the United States with his family when he was a teenager.
In two thousand six, after graduating from MIT with a master's degree in computer science,
He started working in Boston at a tech company called Ndeca.
Yeah, so NDECA was primarily e commerce.
An e commerce search.
was their core business. So
Um back in the day, like you know, twenty five years ago, if you went and searched
You know, Home Depot or Nike or Disney Store or J Crew or Pick Your Brand.
And you wanted to say like show me.
all of the washers and dryers and this brand and this price range that are available now. And so that was the beginnings. And then they went in and started to build merchandising tools. Uh when I joined Indec in two thousand six, they had already had a lot of success in e commerce.
And Steve Papa, who was the founder of Indeca.
Um he wanted to build
essentially a business intelligence platform because they had a lot of the underlying technology to be able to do that.
And so myself and Steve Fredette, who is my co founder, Steve and John are my co founders at
Uh uh toast.
Um
Steve Freddie and I joined a team out of college.
Called.
Special operations. And you didn't know Steve at
Uh he also went to MIT. Did you know him from MIT or did you meet him there at Ndeca? I met him at Ndeca, yeah, I met him on my first day at Ndeca.
And uh
We were building this, you know, business intelligence, the beginnings of a business intelligence platform. And the reason that's important is it was it we were trying to break new ground with this technology.
And so it was almost like a little startup, mini startup within NDECA.
And so it was it was you start you I you got to experience all the failures actually the first couple of years of like
Trying to get
to product market fit and had very little success with the first couple of years.
And kind of saw the grind of that.
Together.
So all right, so you're working there and um and I guess while I mean while you're there,'cause you joined in two thousand six, so right around the time
right before the iPhone comes out. Right. Which I think has a huge impact on the b a good impact, positive impact on the business. And and you are involved in
Sort of
building out the mobile side of their product.
Yeah, we so when the iPhone came out we
You know?
Like I'm a big believer that you've got these new technol you know, any any anytime you've got a tech sh shift like that, you've got to t try to lean in and

Tailwind. And so we almost quit.
To go build our own business at the time.
And uh Steve. Steve and I almost quit. We uh
It started off with like
We built these e-commerce apps for some local brands like ShuBey.com, which is a Boston brand, and a bunch of other
uh companies who wanted to go mobile.
And so we built out their e commerce m mobile app.
And then we're like wondering whether we could build a business to scaling that. Like there was a bunch of mobile web companies at the time that could you could power your mobile experience. You were doing this all while you were still at
Uh Indigo.
And um we're fortunate that Steve Papa supporter all this. He was okay with it, I think. Um
Yeah, and then Steve Papa I I remember sitting down in the office with Steve and Steve and saying we're gonna quit, we're gonna go build a business with the iPhone and they say, What are you gonna build? It's like we're not sure. We have a couple of ideas, we're exploring.
And then he said, Well why don't you build this at Neka?
Because we've got, you know, fifty

one hundred retailers in the world using our platform. And they all want to go mobile. And so you could build and deck as mobile business. And uh
We did that, and that was
The first time I'd say we had real success because
All these retailers wanted to go mobile and uh
And in fact we were like limited not on on not on
demand but even supply, just getting all these apps stood up and and um that business ended up being a meaningful part of the revenue by the time uh Oracle bought in Deco, which was in uh
think end of twenty eleven. Twenty eleven Oracle acquires Indica for uh about a million dollars. And you guys have an opportunity, presumably to stay there, but uh but I guess this was sort of a a a sign that maybe
Maybe you should you should go off on your own.
Yeah, Steve actually, to his credit.
was like, Hey, like now's the time with the acquisitions like it's a good moment to quit.
And um without even telling me basically just quit. He's like, Okay, well I'm quitting. I don't know if you're gonna quit, but I'm definitely quitting to go do this. And then we were talking to John, because John was one of the best engineers. John Cram. John Crim. Yeah. And it's interesting that like
It's me and Steve initially.
And we were trying to convince John to join, he wasn't sure.
But then Steve quit and then John quit, but I didn't quit.
'Cause I was like, I'm not sure what we're gonna work out. You didn't know you didn't have a uh you sort of
had rough ideas, but you didn't exactly know what it was gonna be. You were just gonna kinda get together and start to
Yeah.
Yeah. We were exploring again a bunch of ideas.
Yeah. Everything from we had seen like
There's some local companies, for example, we'd seen um there's a company called Level Up, I think, that was doing some food ordering locally. We'd seen what Groupon had done.
Obviously we'd seen what Square had done. So we've seen a bunch of we had some ideas that in in in like the local space there were some interesting opportunities.
But we were looking at all sorts of ideas.
Frankly, like there was a you know bunch of things we explored. And did you I mean, you guys were you know, you're relatively young, you'd been there for five years, but presumably you got a little bit of money
when the company was acquired.
Yeah, we I mean we've got enough money to like put a down payment on the house and just get you know have the like not have to worry about
A salary for a couple of years kind of thing.
So you decide to to leave. And I guess in December of twenty eleven, um so not not too long after
Yeah.
You guys incorporated
to what would become toast. I guess you it was initially called like opti system, but you called it toast. Um
he changed the name in in twenty twelve. But before we get there, um tell me about
about what you start to work on. I mean I y you don't have a
you sort of have rough ideas, but you don't know exactly what it's gonna be. And I read that you
You spent
about three, four months trying to figure out what it was going to be. So tell me a little bit about what you were doing during that three month period before you came up with the first idea.
We were doing more what we were doing, frankly.
Which is we were exploring
What are different ideas that we could
incredibly, you know, go after.
And we'd spend time just like
you know, discussing and debating and we were still at on deck and Oracle, right? So it wasn't like we had to go
It wasn't a ton of pressure to be like, Oh, we need to be like

And then when Steve quit
It became a lot more real.
Um, and so there was this bar downstairs from where we used to
to work uh
This is in Kendall Square.
In the Boston area.
It was called Firebrand Saints.
And they had this big patio outside right on Main Street.
And
You know, like on a on a busy night, you had a lot of lot of folks after work there.
And

Ten plus minutes to get your check.
Right.
In when you just want to leave.
And
The restaurant also
wants to turn that table because if people actually want that table.
You have to get the attention of the server and you're like waiting and
Yeah, everyone's been in that situation. Okay, so you guys are in that situation.
And so we just looked at each other and said, Like, hey, like
Should we just
build this. Like should we build an app where you could use your phone.
to pay.
And
We didn't to be honest, in fairness, we didn't know a lot about the restaurant space at the time. Short of just going being diners and going out. But I mean it's like the way to think about it is like imagine today
If
In an Uber we went back to our credit card machine and that's how you had to pay. People would be like what is this, right?
And I think that option exists even today in restaurants, but uh which we can discuss. But so we started to build this, which is like okay, like what would it take? We convinced Gary
Gary Stark, who uh you know he was in the middle of Gary was the it was the owner of the restaurant, Firebrand Saints.
That's right. Yeah.

He felt he thought we were a bunch of nerds on you know next to MIT's campus and and um he felt bad for us. But you pitch you basically said to him, Hey
If we build this

To make it easy to pay, would you be up for trying it?
Yes, we yeah, so we convinced him to give us a shot.
Okay.
It wasn't easy, but we did.
And um

Saying okay, like how would we go about building it?
Yeah.
Was to build an app.
That people could download.
And then put a card on file.
And pay.
And so the three of you guys were actually
Writing the code.
building this app just a little bit with Steven John. Okay.
I I contribute I started to build a
Once we pivoted to the point of sale. Okay, so you start with this app, and then how long does it take for this app to be built?
Yeah, a couple months.
W what does it do?
So
Imagine like you know, you go to the table, server.
Comes up.
Takes your order.
And so the point of sale system is the
It has the r data.
On
What's on your check.
What have you ordered?
Or the taxes.
Adding tip.
Right.
All that data sits in the point of sale. That's why they can print the receipt today that you can sign.
Yeah.
And so we had to integrate with that.
Right. And so the app basically
Would uh
Yeah.
You'd identify the table.
You would pull that data.
And then with your card on file you would pay and adjust a tip.
But it was largely
the app experience and the integration into
the system of record that ran the restaurant.
Okay, so you have the app and and it launches at
You launch it with this restaurant and
I mean how did it work?
Well I remember we had a launch party with our friends and family and we uh invited them all to Fireband Saints and
Convince them to download the app and
try it and I think some people got through it, but it was it was actually quite buggy, I remember.
Um
Because the infrastructure we were building on top of wasn't as reliable. It wasn't built for m
For cloud.
Right, these systems are built for install interactions.
And and so
Beyond that first day when we had that launch party, when we got maybe, you know, fifty or so people paying.
We were never able to figure out.
how to get users to pay
With any sort of velocity after
that first day and we would like I remember
We'd go out Steve went out there a bunch of times and spent time
Uh to try to like get people to understand how this works and to develop the restaurant at the restaurant. Yeah.
Yeah.
But it just it never really took off.
Um
And I think part of it was the experience was just
Not consumer great, if I'm if I'm honest. Okay, just to kinda set this up for a moment, because this is my understanding of it, and and maybe you can fill in the gaps. Mm-hmm. Because you you alluded to it a couple months ago, which is
At this is twenty twelve, right? At the time
Most restaurants
had
uh point of sale system that was all
sort of it was hardwired into the restaurant. I think it was like
Micros and N CR the two companies that kinda dominated this at the time. And and basically what it meant was that
You had a
PC and you had like l s literally servers in the restaurant.
And that was your point of sale system. So like if you wanted to
Um
get any data about your restaurant. You had to be in the restaurant inside the system. You could not do that.
remotely. Th it was not a cloud based system. This
Every restaurant was like its own its own server.
I think there's a a lot of learnings as part of that experience. One was
I like we grossly underappreciated how much these systems did.
Um these systems took
Ordered in the restaurant.
And
It was different workflows when you sit down at the table versus you go through counter service versus when you at a at a bar when you put a card on file versus a drive through. The kitchen had
Workflows to automate
the the efficiency of a kitchen. So if you have orders, you know, coming in across different stations, you gotta bring them together. The prep times are different for a salad versus a steak versus a fried chicken.
You had employees that were clocking in.
You had schedules.
Then there was software.
And there was hardware because it didn't work on a typical laptop. You have to have hardware with a touch screen. That was restaurant grade.
Um and then the other thing that was important was
Well,
We could have built these systems in the cloud, but the reason they were built
with these physical servers is if you've got a
Busy restaurant that's bustling at nine PM at night.
And your internet goes out.
You can't at the restaurant stop working.
Right, and that would that would literally happen if the internet
stopped or right, I mean or the system
you know, there's a something happened to it. You have to have like tech support come out.
Fix it.
Yes.
And I think the the the naive naive maybe realization that we had was
We could make these this technology a lot better.
by moving it to the cloud and by taking advantage of Android hardware because
The Android hardware.
Actually
is open which allows for
uh which allowed us to build our own hardware which was critical to building something that was durable and s it could work in the restaurant environment.
But we also I think grossly underappreciated
Early on.
What it would take.
Yeah. To build these systems.
So this was not
From what I gather, this was not working.
And so
Like was there a period of time where you guys thought well we can still make this work
Or was it clear pretty early on that this was not gonna work and and maybe
You know, maybe you uh go back to the drawing board or you try something new or or what?
We were trying to find a way to
To make it work. And um the mindset we had was
Well,
You know, let's go talk to Asme restaurateurs and in the in the Cambridge area.
And
It was really hard to get people to really understand.
the value prop of like, Oh, if you could check out faster, it would help you.
Turn on the table faster.
That just wasn't enough? Because you're thinking this is a no brainer.

They're they're just not that interested in it.
And even for folks that said yes.
One of the other challenges we had was
Our system was integrated to one point of sale system.
I think a system called Posit, which is a local.
Um
Company out of Rhode Island, I think, if you recall.
But there was a long tail of providers.
And so the only way we could even make this experience work.
It's skill.
is to integrate into
It what felt like
Over a hundred different systems.
'Cause if you couldn't integrate with a P with a p particular POS you couldn't work with that restaurant.
Exactly right. Yep, because without the integration, there's no way to get the check data.
So how long before you guys kind of
decide to just call it a day on that on that product.
So
Now we're in
Early twenty thirteen.
Okay.
It's been about, you know, launched maybe in the fall and since been three or four months of us
Trying to find a path.
And as part of that experience, we got to know a lot of the restaurateurs in Boston and Cambridge.
And the one thing we
Start to realize it's like
Nobody really liked their point of cell system.
And you would hear things like
Hey, why can't this be simple like my smartphone?
'Cause they'd gotten used to downloading apps on a phone and
And the management of all of this.
And when we
On the one hand, we couldn't get time and day when we talked about this app.
But when we pivoted the conversation to talk about their restaurant technology platform
That spent a lot of time with us.
And just to be clear.
The technology platform it was
Probably very expensive.
'Cause it was hardware inside the restaurant.
A touch screen.
Yeah. And that enabled you to
ring in orders and then those orders go to the restaurant, to the kitchen, and then they could see
What to make and then
U
Could print the bill on it and Yeah. So typically the way these systems worked is they offered a lot out of the box, and there's differences across different systems.
And
One of the things that was really important was
the the core data of the menu.
And what's available and what's in stock and when it's open and
All that data sat in the point of cell system, so it was very central to the entire operation.
All right, so you're s you're talking to restaurant tours and they're saying, you know
The thing that really is really annoying is a system that we have. It's like
It's bulky, it it it's complex, it's and and th this is g getting the

gears in your head to s to start to spin about well maybe that's actually the problem.
Absolutely. In fact
I remember
I had a conversation with uh
The owner of a restaurant.
Crawl finale desserts.
Chris Kane. He was uh
Um
One of the first I'd say like
Full service like
Busier restaurants that was open to giving us a shot.
And um
I remember sitting with them and and pitching toast and and my pitch was
Anchored on a few things.
'Cause you know, these systems are hard to switch.
People describe these switches as like root canals.
And so
I
I pitched it as like yes, of course we can do all the things you do today.
But there are a few things that are unique and better.
We have these handhelds so you can take the order and payment at the table.
Two, you've it's got integrated e commerce.
as online ordering was becoming bigger, so you can you can people can discover you and order online and you get incremental demand.
And then three.
Um
You know, we talk about how you can access and manage everything.
Uh from anywhere. And so
When we sat down with Chris.
He said it's a good vision, but like let me show you like
What it takes to run this.
I think it was like a location, Harvard Square and in the back bay.

A commissary for a lot of their catering.
And
It's like well I've got the point of cell system.
I've got a company providing payments.
I've got a loan with somebody.
I'm got the separate software for accounting.
Separate from inventory.
Separate software for online ordering.
Separate software for gift cards in store and online.
I've got uh
Apparel system.
Separate scheduling system.
And
None of these systems.
Talk to each other.
To the point where
This really shocked me.
Like
The
Order's coming in online into the restaurant.
This is in twenty thirteen.
We're coming into a fax machine.
Yep.
And so
We had as as part of that learning, while the the op the potential of making these systems better was there was also quite complicated.
Because
We have to then go figure out okay not only are the what are the pieces we're gonna build
But how do we integrate into the ecosystem?
And
The truth is like nobody wanted to integrate with us because we were nobody.
And so we couldn't get these folks on the phone.
So we just said to hell with it, let's just try to build as much as we can on our own. Just a build basically to replace the entire system. As much as as we could.
Yeah.
Um one of the other realizations we had was
We felt like in order for us to
Create our niche.
We were gonna go all in in restaurants.
Yeah. Because there were a bunch of providers that were building something more horizontal.
Where you could be a restaurant or a coffee shop or a flower shop or a
Pick your re small retail business.
And
We felt like our
unique edge because we had we'd gotten a sense of the complexity of restaurants we're dealing with.
was to go all in and build a purpose built
platform for restaurants.
And specifically we wanted to go after these busier restaurants that typically were supported by
You know, systems like Micro Serency R or Puzzly Touch and others. Mm-hmm.
Like we have to go in and actually support these busier restaurants right from day one.
Right. Okay. So you you have this now very ambitious idea. Essentially
build a cloud based system that would enable restaurants to do all all or most or all of the things that they were doing now.
But in a simpler way.
How I mean.
at this point it's still the three of you. Uhhuh. And and I imagine to actually do this in twenty thirteen you would need a lot more people.
To start to build this.
Yeah. So
Let's talk about money. I mean w did you start to to raise money at that point?
We did. We did raise a little bit of money. We um
So I
Wait.
In uh early twenty thirteen.
And that's when we
Pivot it from the app.
Yeah. To this point of sale.

And um
Steve Papa, who was the founder of Indeca.
Invested uh
I think it was five hundred K to get started.
He believed in in this idea.
Uh he didn't I'm not sure I think
I think he believed in us more than the idea.
Um
And but what about yeah, what about like
Institutional investors. Did you go and pitch people?
We did and and almost I I
It's actually pretty humbling because
We
had gotten good introductions uh you know into some
Great folks.
Like the feedback is along the lines of like
One, like restaurant tours, restaurants that are tough business, they've got a business, they don't buy online. Margins are real tough. Yeah, margins are low. Yeah. Um, they're not tech forward.
And and and and and you're trying to build like
Yeah, this like
Yeah.
platform that's gonna take you years to build.
And also they're looking at giants like Micros and N C R
to take them on, right, probably seemed
Like a you know, a Sisyphian task.
Yeah.
You know, like the the reason we uh we had so much conviction
Is
One.
Fundamentally
This was
A ca a big category.
Restaurants.
That hadn't benefited from
The cloud.
hadn't benefited from
Android and mobile.
But yeah, I think
We I also we also knew that I I like I knew that Steve and John and then we brought in a few folks
And we just knew we had some great engineers that we had worked with who
had experience building systems like this.
And
I had a lot of confidence that that
As long as we understood the problem well.
We could build it.
But we come back in just a moment.
Amon and his team build the next iteration of Toast, and then
comes the hard part.
getting restaurants to buy it.
Stay with us, I'm Guy Raz, and you're listening to How I Built This.
Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2013, and Amon and his partners have a small pot of money.
a handful of engineers, and an idea to launch a point of service payment platform for restaurants.
their next step?
Find customers.
the business development was largely at this point.
Initially at least, just talking to restaurateurs. It wasn't anything more than that. I mean we have to figure out some key partnerships, but those were just but that was the focus to try to see if we can get restaurateurs to try it.
And so we had some I mean, of course, there's only so much you can do with
Seven right people, but
We got our first customer live
in July of twenty thirteen.
Yeah, I think you you
Basically
From what I read to save money, you also didn't get an office, right? You had everybody working
Yeah. Was it your house?
We were in my basement, so we um
In fact my b basement was unfinished.
When we were trying to figure out office space.
I I did the math and realized it was a lot cheaper to just put some carpet down and
Yeah.
It was ne there wasn't even heating down there. This is in Boston.
And uh we just bought some bunch of space heaters and just set up shop. And uh so we just did that to save money and and eventually had uh
Ten people there.
I think at the end in the end of twenty thirteen.
Alright, so by July of twenty thirteen you have enough of a product, I guess to
To test this out.
We have um

Walk me through the first restaurant because I imagine they have a system in there. Yep. What are they I'm assuming they're not gonna get rid of it right away'cause they don't know if it's gonna work.
But it's a big deal.
Yeah.
to shift from one system to another system entirely. I mean
you know, and then train everybody on it and
To try to do that while still running a restaurant. So how did you convince
The first
restaurant to do this.
The first restaurant was
Dwell time.
And uh this was in
Cambridge port.
Um
And the pitch we made to him was
We can build you something that's a lot more restaurant specific.
then the system he was using
And he was using one of these cloud solutions.
That
weren't purpose built for restaurants.
And and then
I remember
You know, we worked really hard for a bunch of months to try to get

And
I still remember we we're getting installing this restaurant.
And they open.
And
Within
Twenty minutes.
Um
Taking like the first few orders.
It's like the system is down.
And um
Now they've got a line and they think we're like
physically writing down the order.
on a piece of paper and dropping it off in the kitchen.
Yeah, taking the credit card number down on paper and like
Try to do this manually.
And
Realize as part of the experience that uh
These systems
Or mission critical and like
Um can't break. There's a lot of learning just that first day.
I mean obviously you guys would would start to work out the kinks, right? And and get the technology to be
More reliable.
But I want to ask about the the
overall challenge of getting people to adopt this, right? Because
A lot of restaurants were
w were not obvious they weren't happy with their point of sale systems, but still
Like this was gonna be a huge overhaul for for most of them, right?
So
I mean, did you have restaurants where like I I don't know if I even wanna do this? Like this is g just gonna be such a pain.
Oh yeah.
All the time.
You know, we would I mean I think I must have pitched
Hundreds of restaurant tours.
In the first couple years, and very few.
Said yes.
Um
But I think there are a couple things that mattered. One was
It's not just existing restaurants, it's also new restaurants that open.
And when restaurants open, they've gotta do the work anyways to set up something.
And our value proposition was
Instead of spending.
Like for a restaurant like Finale, for them to go buy a legacy on prem system.
Yeah, you might spend fifty to a hundred K up front.
And so our pitch was
Very little up front, and sometimes nothing up front.
Uh, then we had a SAS fee.
And then we had
Built into the platform.
um capabilities that uh that the the staff
And the ownership loved, and so we had a few data points. Um and
I remember we would we would
code at the restaurants because the best thing you could do is

is to
get Steve and John and Tim and others like you know actually at location, helping install
Up big train.
Getting feedback.
And then
Proving the software.
Uh what's restaurant tours? I always say that the b restaurant tours in Boston
Helped us build the platform.
You know, we had a hypothesis for what
We we thought we needed to build, but
Until we got this up and running with
With customers, like you know, there was that's that's when the rubber hits the road and you learned a lot about
What was apps actually needed?
Yeah, I'm curious, I mean, from what I gather
You very deliberately only
Focused on initially restaurants in the Boston area, that makes sense.
But you didn't wanna go you stayed on the east coast, you didn't wanna go to California. I mean at this time, by by twenty thirteen.
There were I mean some competitors today. Square wasn't I don't think they were quite doing restaurants or focus on ro restaurants yet, they were but small business. Clover, another competitor, was starting out as well.
Were you very like
Did you did you wanna kinda stay under the radar intentionally?
Well, I think initially it was we didn't have the capability to get on a bus. Yeah.
Because
As I said, like a lot of these restaurant tours
would buy in person, they needed service in person, our technology wasn't hardened.
Um
And so we'd lots of issues.
And then we we
About six months in, maybe this is like
Early twenty fourteen.
We were chatting with Steve Papa, who was the investor.
And uh
Steve mentioned to us that
One of the customers that we had
At Indeca was uh a company called Gordon Food Service.
GFS
out of Grand Rapids, Michigan. And this is a distributor, right? A food distributor. Food distributor, yeah. That's the core business. Yeah. And uh
So we got a meeting.
With with GFS through Steve.
And uh
walk them through the potential of what toast could do for restaurateurs in terms of helping them run more efficiently.
drive sales, help them drive their sales as a result.
And
That was a
Really important partnership for us.
That helped us get outside of Boston.
So we um
We launched in in in in Miami and Chicago, thanks to GFS.
And their support.
And then went from there.
It's interesting because
On the one hand, it seems like a huge opportunity, but it's also surprising that
That there weren't many people doing it. There were, though, some, and I wonder when you guys found out or learned about
some competitors also working in this space.
How did it affect how you guys
Did it did it
speed you did it make you move faster.
w did it make you more vigilant? Um what did it mean for
What you guys were doing at Toast.
Well
When you
Talk to customers.
That we're using toast.
That further reinforced for me.
uh that
We were on to something.
Because
We didn't have the brand.
Or the distribution.
Or the funding really. That's somebody's
Startups had.
And yet
You'd hear them say
of the cloud solutions,'cause some of them I tried a few.
Tils was the best one.
I'm a big believer, by the way, in like customer obsession and not being

Competitor obsessed. Yeah.
And
Um

It we were already working as hard as we could.
You know, we were like all in on this. Like there was no
Yeah, the only plan was to make this thing successful.
And uh
And so we didn't need any motivation to try to work harder or faster.
And in fact the hardest thing was
Once we got to
A hundred customers.
We actually s and we had this GFS partnership, we actually start to see a lot of interest.
Mm.
And
We weren't ready to scale. There was lots of things in the way we we had built the company to start was not scalable.
You know, an example of that is just
Remember one of our early customers in Boston was this
Restaurant and nightclub.
And um
When we met with the owner of Billy there
He he asked me, hey, like
What happens at one in the morning when
You've gotten outage or an issue, like
What am I gonna do?
And I said look, you know.
Or small and scrappy, but we have great twenty four seven support.
So he uh
Went to the rest our website, toestab dot com.
And to his credit, he called the phone number.
And um
That was a Google voice number.
Uh-huh.
We had six or seven of us.
And my phone started ringing in my pocket.
And uh
I remember we all kind of
By then.
and realized that like we would wait for two or three rings to see if someone else would pick it up,'cause no one really loved picking up the support calls.
So on the third ring I picked it up and I I said I told I told you got really good twenty four seven support. We'll personally pick up these calls. And they're still a customer, but I think that just speaks to how
We there's so many examples like that that we weren't ready to set up for sc to scale.
uh to and and make customers successful and and and that was the blocker not
the competitive pressures. In fact no one had cracked the code.
And
You know, like
It was clear that our execution
was getting in the way to me.
Of us actually scaling this company.
Well we come back in just a moment.
How a new CEO helps toast hit its stride.
And how COVID sends it right back to the startup stage.
Stay with us.
I'm Guy Raz and you're listening to How I Built This.
Hey, welcome back to how I built this.
I'm Guy Raz. So it's early 2015, about a year and a half after launch, and DeMon and his partners have been able to grow toast to a few hundred customers.
But on a day to day basis?
The business was frankly struggling. On the one hand there was some
Yeah, customers who were using it and they were happy or at least cheering us on and uh
But there were a lot of issues, like
I remember at one point.
All of the hardware we would ship would like come back.
And we had lots of outages and downtime.
Our customers were not happy with our support experience.
I remember that was one of those times actually even more than when we pivoted to point of sale. That was like in my mind one of the low points for us because
There was actually a good signal here that customers
Wanted what we were building.
And in hindsight it just seems so obvious.
But
At the time
Yeah, part of the problem here was like I was so focused on
Trying to
Grow the business and grow revenue.
That.
Thank you.

Work with Steve to build the systems to scale, the the capabilities we needed to scale.
Right. And I think things got to the point where
Or you decided to to bring in a new CEO who could deal with some of these challenges. And and this was uh Chris Comparado, who I guess you knew from your days at at Ndeca. Yeah, we we knew Chris through uh Ndeco.
And and so what did that mean for you? Like what what how did your job change?
It actually did not change at all because
You know, when you're smaller and you just try
No one we weren't concerned about titles or any of this stuff. We were just concerned about
Try to make the company survive.
Yeah. And and so we were doing whatever it took.
And I was largely focused at the time.
even before Chris joined on distribution and getting the partnerships in place and the sales team in place.
To get the customers because
Obviously we we you know, we have to show revenue growth.
Um'cause we were burning quite a bit of capital.
And so I think in many ways our jobs didn't change.
But I think one of the first things that Chris did was when we got together was
To step back and and spend time with us to try to understand.
to articulate to everybody who we are and what we do.
Um
There was this.
I think a maybe a four thousand square foot office.
And
A cafeteria where everyone got together.
And uh
There was someone taking a support call from a customer.
Uh was fired up.
And uh Chris is very
Passionate about
Customer experience.
And uh

Our support rep just hung up on the customer.
Because he was unhappy with the way he was being treated. And
Chris remember saying.
We need to step back and rethink how we do things here.
Okay, so you guys are growing and then you hit
A
But you know potentially disastrous.
moment which is which is covet, which had a
Hugely
negative effect in many ways on many restaurants in the United States. And I think, you know
by you know I think by twenty twenty.
You guys have raised now by this point four hundred million dollars your five billion dollar valuation, and then within weeks.
Uh the country shuts down.
You know, we um
For years between twenty fifteen and twenty twenty.
We were this business that was growing over a hundred percent.
It was just
This moment where we felt like
We're ready to really take off.
We had aggressive plans that year.
And then I think early April of twenty twenty.
We'd gone from
This company that was growing like this to
Maybe
Revenues down over ninety percent because restaurants weren't taking
Payments and
When restaurants aren't open, they can't really pay their software fees.
And so we had to make the hard decision to
Cut.
I think it was like fifty five percent of the team.
And then also to like
Get on a call with the team and explain, well, what's the plan now?
I remember like n none of us really knew, but the one thing that we knew
Was
We had gotten here
about being obsessive over
What customers needed.
Mm-hmm.
And
What our customers told us was
They need tools to manage
off premises better off premises sales
That's the beginnings for us of
The QR codes that you s that you see at a table to
pay or to scan a cure code to look up menus and order.
And I think I
that period specially is it just felt like
Like the basement stage?
Yeah. In terms of just the level of
maniacal focus that we had.
in the speed with which we were building because we knew that it was everything was at stake.
I think it was the first time
Since
Really twenty fourteen.
Where it was like, Oh, this thing could be over.
And
Unlike in twenty thirteen or fourteen when it was like hadn't really ever taken off.
Wait a minute
Business but
Thousands of employees and
Tens of thousands of customers.
at that time. So that was just
Um
Really tough to even fathom.
Coming out of the pandemic you went public in in twenty twenty one and now you're publicly traded stock.
And and
And I'm I'm gonna fast forward for a moment to twenty twenty four because you
Actually
come back to a
Well, I mean you had been, you know, in the executive position before, but you come back to you become the CEO.
Yes.
So tell me about that I mean, did it feel like okay
Uh I mean probably, you know, maybe Chris wanted to to to move on and and and but I'm assuming
He'd been there for almost ten years and you felt like okay.
I'm ready to do this now.
Yeah, I mean I think Chris was um

I think the words he used were like this was a tour of duty.
And I think one of the things that I remember
Someone I trust told me was like
Something on lines of like
You know, no one's perfect, you're not perfect. There's a lot of blind spots you have, that you have to learn.
But
It's not obvious to me that someone from the outside's gonna come in and do it better than you given the context and history you have in this business and the passion you have for this business.
And so that that got me comfortable.
to wanna step back in and
I also felt like it was a partnership. Like I I never felt like even one of the things that Chris I think did really well is
It was
Always a partnership on the top.
Yeah.
And that was important to me heading into
this phase as well. So I wanted to make sure that
the key people around me were in it for the next talk, next for the next leg of the journey.
Um
I I think in in the last quarter you guys had
Reported.
profitability I think or maybe it was in twenty twenty four, it was in that year, first full year of profitability. But um in the latest quarter I saw that um
think you you now are be between fifteen and twenty percent of
of restaurants in the US. Does that sound about right?
Small business restaurants over twenty percent.
And so you have a
an opportunity to get to eighty to the eight remaining eighty percent. And I'm sure there's a fierce competition with, you know, some of your
your your rivals in the space. What is the what's the unlock? How do you get to that?
That those other
Yeah, the remaining eighty percent.
I think it's a c well so first of all, like w one of the things that
We focused on from day one.
Was these busier restaurants.
So even though we have twenty plus percent of the restaurants, we actually have more of the sales volume.
Because the average restaurant that's on toast
has more sales than the average restaurant in America. And so one of the things
In fact our marketing
campaign that we just launched was called Build for Busy.
Because the busiest restaurants choose toast. Because again
We are purpose built for restaurants.
We have
A tremendous amount of opportunity now with
AI
We know for example that
If a guest comes into a restaurant three times, they're more likely to become a regular.
And so how do you create the right campaigns to bring those people back?
As an example, we launched this product.
uh recently called Toast IQ Grow. Toast IQ is the
branding behind our AI platform.
And
Customers that have switched to it have seen sales go up eight percent.
Hm.
The analogy I like to use is
You think about as a McDonald's franchise, for example.
There's a lot they do to set them up for success.
And
In the restaurant business
A lot of the decisions that are made.
About
How much food to buy, which suppliers to pick, how to price your menu, what marketing to do, how to schedule your staff.
Is not.
Driven by data often.
In fact it's often driven by gut.
And
Got and some data, but I i I think the opportunity for toast within the restaurant business specifically.
Is too.
leverage our data across the twenty plus percent of restaurants that are using toast.
Help drive better outcomes for these customers.
Yeah.
Um you know when you think about about where you guys
Got to, right? Here you are.
Uh, thirteen years in, I mean I think your market cap is like fifteen billion. It's gone up and down, obviously, but it's still I mean it's a huge business, right? And it's um and you have
Really
Found.
Um
You know.
a strong position within this category.
Um, where do you
You know how do you protect
the uh you know, the moat. I mean it's a bit of a pr uh sort of a a cliched question, but I mean you guys really took on huge players, N CR micros and
you know, back in the day where they kinda dominated this business and they may still be involved heavily in the business, but how do you make sure that, you know
You are ahead of ahead of the curve, uh when it comes to
You know, what what might come next in this industry.
Yeah, I I'm a big believer in like
Not
Forgetting where you came from?
And uh

push on culturally internally is
What got us here was
The hunger, the scrappiness, and the customer centricity.
I also think like for the company on the
Offensive side.
There's a tremendous mount opportunity to
extend beyond
What we have done for the first ten years.
So the past two or three years we've gone into new markets.
We launched in Canada, UK, Dublin, Ireland. We've got a team there in Australia.
And uh
Um
We've built a
You know.
product to support
Retail.
And so think of grocery stores.
Convenience stores that have a gas station, liquor stores.
Um
Hardware stores.
We're starting to build out the platform.
To really support local neighborhoods, not just local restaurants.
And so
Um
We see a lot of opportunities actually expend.
the capabilities we offer.
While continuing to scale uh within the restaurant business.
When you think about the journey you took and, you know, where you've where you were and where you've come to, how much do you do you attribute to the work you guys put in? How much do you think had to do with
Luck and timing.
You know, it's it's um
One of the best decisions I made, I remember when we were someone someone gave me some advice that said
You know me, think about your your team, your co founders.
Try to find people that are good people.
that have good values'cause they would go through a lot together and and you need
Um
You need that. And I'm very fortunate in that whether it's Steve or John or Chris and really a lot of the management team.
And so of course, like, you know, big part of
What got us here is the incredible skills that
The team had and and all the work we put in.
But I think there's a lot of luck too. Like I think had we not raised that capital right before the
Covid may not have survived.
You know, had we launched the business in two thousand nine versus two thousand twelve, we may have tried to build it on IOS, which would have been the wrong call.
You know, back in two thousand twelve and thirteen is when payments were opening up, without which the business model may not have worked.
Um
Frankly, Chris joining us at that time.
was important.
to helping us scale when we
Um
Things
Could have gone a lot worse, I think.
It's there there's a lot of like
There' and there's so many like this. There's so many breaks that
Went our way.
Um
But it's a combination, I think.
You know?
Uh the harder you work, the luckier you get.
That's Imon Narang, co-founder and CEO.
Of toast.
By the way, you remember the very first restaurant where they got their start?
Firebrand Saints in Cambridge.
It actually closed down in 2017, but was replaced by another restaurant, a rotisserie chicken place called Scheiberg.
And when we called them up to ask which payment method they happened to use,
They told us.
Toast.
Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free.
And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at guyroz.com or on Substack.
This episode was produced by Sam Paulson with music composed by Ramteen Airbluey. It was edited by Neva Grant with research by Casey Herman. Our audio engineer was Quasey Lee.
Our production staff also includes Chris Massini, Alex Chung, Carla Esteves, JC Howard, Catherine Seifer, Carrie Thompson, John Isabella, and Elaine Coates.
I'm Gai Raz, and you've been listening to How I Built This.