What It Takes to Build Software for 171,000+ Restaurants | Aman Narang

19:22That was the biggest blocker. We couldn't scale this thing, because there's no way to scale this thing. And the other thing that was interesting was we'd go pitch this idea of using your phone to check out. but we got barely any time from customers. But when we pivoted the conversation to talk about, hey, how do you like your technology more broadly? And a couple of themes emerged. One, none of them liked their legacy platforms. You could tell it was like oil and water because restaurateurs are not technologists. It's like how people feel about Salesforce today.

19:52Aman Narang:You really pick on Salesforce. Anyways, it was like they didn't love their technology. The other thing that jumped out was they were using a lot more technology than I expected. Like, a lot of these restaurants, I remember one of our early customers was this place called Finale. It was like the first, I'd say, first or second, maybe like real restaurant. Before that, we got some food trucks and cafes to get going. And we sat down to have a meeting with them. It's like, hey, you know, I remember a great guy, Chris Kane. And he started off by saying, well, I've got this point of sale. And then we saw all the workflows around the kitchen and the restaurant.

20:31And then they were like, well, I've got e-commerce now because like orders coming online. This is a 2013. Orders were coming into a fax machine, by the way, right? Nothing was integrated. They had like, well, I have a website and it was like this old school 1024 by 768 website. I've got like online gift cards and I have in-store gift cards. I've got this punch card loyalty program. Then I've got like staff scheduling. I've got payroll. I've got like inventory. I've got accounting. I took a big list. And I was like, well, how do you manage all this stuff? And he's like, yeah, it's manually exporting and importing data across systems.

21:06Like just to bring it to life, like you would have, like imagine, it's a busy restaurant, one's in Harvard Square, one's in Back Bay in Boston. And imagine you got to line out the door because at lunch and you've got like orders coming in online. It was less frequent than there today on a fax. And you got to line out the door and you got to rekey the entire order and imagine the big order, right? It's like, makes no sense. And so the thing that the realizations were like, because cloud didn't exist, the technology just hadn't kept up. And there were a couple of companies that had tried to build, I'd say, more of like a horizontal solution that could work more broadly in many verticals.

21:44And I think our realization was, let's just go deep on restaurants and let's go nail as many of the restaurants as we can. And like the vision, the mindset was any more food is served, like Toast should be the platform. And that's really what led to the early, at least the beginnings of the product market fit. There's more to the story in terms of what it really took, but at least the beginnings of product market fit early on.

22:11Aman Narang:Super interesting. Yeah. So nine months, nothing's happening. Then you have conversations like this. You like start to tune the messaging in a way that starts to make sense to the restaurateurs. Yeah. Then you can go back and start shaping the product to conform to what they want. Then you start getting maybe a couple food trucks, a few more people around. Is it still you three? No. So the funding side, maybe even talk about capital. So we had come out of this company, Indeca, as I mentioned. So we're like, well, you know, and we were, there was Steve Papa, who was the founder of Indeca, was a supporter of us.

22:51We'd done good work for him. and so we made a bunch of intros to a bunch of VCs. And maybe long story short, we couldn't really raise capital until we got Steve Poppa to put in the first check. And he said, I'm gonna commit 500K, and then 100K showed up in our account. And I said, I thought you said 500K. And he said, well, I'm gonna give you 500K, 100K at a time, and you also need to approve every hire by me, right, early on.

23:16Aman Narang:Come on. I think he was trying to be helpful. Yeah. In terms of making sure that he'd just been through the journey. Anyways, actually, his advice throughout the years, his imprints are all over the company in many ways. That really helped us get to where we are today. But he, so we raised some funding through him. So we actually started hiring people without really any product. I mean, we had this app before that we had built on the side, but then when we were pivoting to going to build this whole platform, there was a much bigger undertaking. And so we had Howard E, we had Tim, we had a couple of early engineers.

23:52So we did have some people, yeah. We did have some team, some team members. And I think one of the things, like, realizations we did have was it was not gonna be trivial. Like, a lot of people, when you go to investors and talk about toast, they would say, like, restaurants don't buy online, they're not tech forward, they go out of business, like, and also, it's like, this seems very heavy, there's a lot to build here. And we were, I think, self-aware enough to realize that there was a lot to build, so we needed some support. And, um, and, um, and so, and the other thing we realized was back to not being horizontal.

24:20In our first, like, I'd say 10 or 20 restaurants, we had, like, you know, food trucks and cafes. We had some quick serve, like, you know, restaurants. We had sit-down full serve. We had some nicer fine dining style restaurants. We had a bar. We even had a nightclub. I remember there was a place called Flattop Johnny's, like, around MIT, where they had, like, a bar and they had, like, the pool tables. It was like to figure out how to power the pool tables because they had one platform before in terms of, like, timing and how many hours you're using So there was a lot of these edge cases. In fact, the terminology we use in marketing now in the company, our branding is, it's like the thousand little things that make restaurant tech what it is.

24:58And like Toast is built for busy restaurants.

25:00Aman Narang:And you're saying just like within restaurants, there was a million edge cases just across your first 20 customers that you have to basically build into the platform. And I think that was a deliberate strategy. It wasn't like we were just like, you know, some people might say, what are you doing? Why don't you focus, right? And like go nail this one segment. And I think there was like our, and there was enough overlap between restaurant types, and our perspective was, at the end of the day, what was our strategy? It was like, we're going to put people on the ground. In fact, a lot of people were questioning, are you going to put people all over the country and cities?

25:27Now, we've got people all over the world in cities, and people, restaurateurs, love the fact that we have sales and service near them, right? And then we said, we're going to build this platform that can work universally across these different restaurant types. And then the other thing we realized, especially if we make it VC fundable, Like, we realized, like, the business model had to evolve. And so we, we, we, we... And, you know, we were the first ones to do this, but, like, we, within restaurants, I think we were, in terms of embedding payments, embedding more of the software, and making the hardware and the service a lot cheaper than these legacy platforms that had, like, upfront costs and such.

26:10And so I think those are the three things that mattered, was, like, the, you know, the cloud platform, Android as the hardware, and then embedded payments to make the business model work. And we said, if we're going to hire a sales team, they've got to be able to sell not just a small segment of the restaurant industry, you've got to sell across different restaurant types. And so that was part of the deliberate strategy back to the strategy to go serve all these different restaurant types and lean into the complexity. We felt like that would actually be an advantage, and it is an advantage for us.

26:39Even as we've actually now expanded into retail, a big part of our strategy is like, you know, we are all about local commerce, like physical brick and mortar stores. And we like the complexity of like a grocery store, for example, or a convenience store, a gas station that has a fuel pump. And like, and so that's really been in our DNA from day one is to lean into some of that complexity of making local commerce work, starting with restaurants.

27:00Aman Narang:Super interesting. How, um, so you hire the first set of team members, call it eight to 10 of you to go build the platform. And a couple of people to help sell too. A couple of people to help sell. Yeah. And so, and you're still riding on that first seed check, basically. Yes. Oh, yeah. Very, very, very, we were in my basement and like, after being frugal. Yeah, I was going to say. Oh, we were, I mean, we didn't take any salaries or I forget exact details, but I think we were very, very careful about like, you know, burn. We leaned in a little bit more, which has worked out into equity than cash early on with employees because we'd really wanted to make that 500K count because we didn't know if we'd ever have more money.

27:38I remember the first couple of sales jobs we hired, they were like kids out of school And they're like, well, you know, we... And what's the comp plan? Like, it actually happened years later because they were on, like, some base salary of, like, I think 40K or something. And, like, I remember, like, years later, they came back to me, sat me down. They're like, we found something. It's like two years later, or a year later, I forget. They're like, we found that salespeople make commissions.

28:04But we were very, very frugal early. We had to be. But because we wanted to make sure that we could build as much as a platform, find some early product market fit, And the hard thing was, even when we got the first 100k in ARR or so, and we had maybe 10 or 15 customers, the thing was, scaling in our business required more investment. And actually, Steve Poppa was really helpful there to keep us going. Because the funny thing is, we got these early customers, and we were like, let's go put the pedal down, let's try to scale a little bit. And we were totally not ready. Because, one, our software didn't work offline.

28:39So imagine, most SaaS applications, the internet's out, doesn't matter. Restaurants, internet's out at 9 p.m., you need to build around the restaurant. So you have to rebuild a lot of that platform to work offline. Then, like our hardware, like I remember, we're having more hardware to deploy all these sites, because there was a lot of customer pull.

28:55Aman Narang:And you build the hardware yourself? No, we were using commodity hardware for it. It's very hard on 100K checks to build hardware. And so we were buying on Amazon or wherever, Alibaba, we were buying a lot of hardware. It was just like commodity, Acer, Android, a bunch of tablets. We were buying these physical metal stands. I remember some of the updated... Some of these tablets were instead of having two ports, like micro USB and USB, moved to one port. And so our solution was, well, this is not a good solution, was like, well, when you're running the restaurant, you should plug in the credit card reader, and when you're at night, you should plug in the power so they can charge it at night.

29:32And so the hardware wasn't ready for scale. In fact, I remember one of the stats was, all the hardware, the first iteration that we launched, 100 % of the hardware would come back within like 180 days or something because it just wasn't ready for scale. The software didn't work offline. And then for support, right, it was like we had sales and product, but like we didn't really have any help in this. Like restaurateurs need support with the platform, like 24-7 support. They have an issue at 11 o 'clock. It was tip-outs not working. So the support number was like a Google voice number, right? That just rang for everyone in the company.

30:07In fact, maybe I'll share this. There was an early customer, and it was like this busy bar, nightclub, and he walked me through this back alley into this club in Boston. I was a little bit nervous walking in. I sat down with this owner, his name is Billy, and he said, like, hey, we're not happy with micros. What can you do? And I told him about our handhelds, because the Android form factor allowed for these mobile devices. You could take orders and payments at the table, and you can improve your turns and be more successful, more efficient in terms of your turn, and you'll make more money. And he said, what about support?

30:43I'm not happy with the support I'm getting locally. And so I said, well, you've got, with Toast, we're small, but we've got great support. We've got 24-7 support. We've got your back. And so he was smart, and he's like, what's your website? And then he ghosts the website, and he calls the number on the support site.

31:02Aman Narang:While you're sitting with him. And my phone starts ringing in my pocket. And so I muted the phone, and then I was like, okay, I knew how many rings it was before it would go to voicemail, and I did not want it to go to voicemail, and I was hoping someone would pick it up. And unfortunately, I had to pick it up, and I told them, I said, look, I told you, we've got great support, I've got your back. They're still a customer today. That's amazing. But the point of all this was, we thought we were ready to scale, but because of the complexity of the hardware, the software, the support. We just really were not ready.

31:40I remember having a conversation. We were like, because we were getting customer pull, because people liked, like, the customers still liked the fact that it was mobile, it was cloud, it was so much better, and that you could access your business from anywhere, make changes from anywhere. They'd never had access to that. They liked the handhelds. They liked the fact that it was cheaper. Often, if you're a new restaurant, you could get up and running for under$5K versus spending$50K in some cases or more. and so there's a lot of customer approval from the sales team we had but i remember sitting down with steve and steve so steve for debt it was my co-founder and steve papa and i remember i think one of them both of them saying like we need to slow down like we are not ready to put the pedal down we need to step back and um and so we had to like go back and fix a lot of these foundational capabilities um and um and it's hard right because on the one hand like you want to keep scaling because revenue growth is so important when you think about like you know the culture and like what motivates people in the early, especially you got like the, going from like 10 customers to 50 to 100.

32:35I remember we had this thing, there was like this thermometer, which is like, when we get to 100 customers, we're going to have like, you know, it was like, I thought it was something like, we're going to have fun with Amman. It was like one of the things they had, because they asked me what it was. I'm like, I'm not sure, we'll have some fun. And so it was hard to slow down, but we had to. And then, you know, picked that back up later.

32:54Aman Narang:Can you put a finer point on like, why revenue growth is so important for early stage companies? like besides the obvious of like money matters? I just think it is so important for all sorts of reasons. Like, first of all, you want customer usage. Like you want, and not just driving, you go, usage of platform is very, very important, right? I remember early on, they were asking about pricing was a big topic. I'm like, I don't care about pricing. We just need people using it. You can make the platform cheaper than everybody else. That's fine. Because we need a lot of people using the platform because usage obviously is like fundamental to learning.

33:23And so that's like really, really important. Then there was like, okay, If you want people to buy in, you want to recruit talent, one of the first questions is, do you have traction? Tell me about your traction. You want to raise capital. It's the same conversation. You don't have, it's like you're always trying to punch above your weight. When you're a startup, you don't have credibility, and you're always trying to figure out how can you punch above your weight. And revenue growth is a good way to really, it's one of the more purest ways to do that, to talk about the product market fit and the impact you're having for whatever you're doing.

33:56That's why I think it's really important.

33:58Aman Narang:Yeah, I agree. It's like these companies are so fragile that like one of the ways to almost be like anti-fragile is just to keep moving. Like momentum just feels like such an important like oxygen to the business. Just momentum. Engineering momentum, velocity, hiring momentum, customer momentum, revenue. like any way that you can funding momentum, any way that you can like find momentum in the business. Yeah. It's like, uh, it's just like, uh, the way that I think about it is like a deposit that you can put into the people that are there that like, it's something is working and then like, that'll get us to the next milestone.

34:41Aman Narang:You know, it's like just little deposits along the way. Right. Right. Yeah. And, you know, I think on the inside is you all is, is, you know, it's, it's a lot more chaotic and broken than even it might feel from the outside. Yeah. Right? And so, people are looking for those, you know, those mile markers, the validation. Like, one of the things I learned, for example, was, you know, Steve and I, we had this relationship where we were super close, and, you know, we would, like, debate and discuss strategy or, like, priorities, or, like, openly. And, like, we'd be sitting on the floor, and I'd be at, like, you know, maybe 25, 30, 50, 40 people.

35:15And people would be like, what's going on? Like, why are you guys fighting? It's like, no, we're not. So we learned the hard way. Like, you know, if we've got disagreements to work through, we're going to go a ways that people are distracted by what we're doing.

35:25Aman Narang:That's hilarious. When, um, when, how long did it take to get to your first million of error? So we launched the product summer of 2013. And... The broader product. The broader product, yeah, yeah. The first thing was fall of 2012. Um, and there's actually a pretty good product market fit. And like, we were able to fix this stuff relatively quickly. So by the end of, I don't remember exactly when, but I remember the end of 2014, we were, like, approaching$2 million. A year and a half. Yeah. And had you raised the A at that point? So, Steve had leaned in, and he had gone a little bit beyond the initial check and had given us some additional funding through, like, I think convertible debt or something.

36:04I forget that would convert the next round. So we had some more capital available. We hadn't raised... I think we raised our first... I hope I don't get this wrong. Our first institutional round... I think it was, like, late 2015, end of 2015.

36:20Aman Narang:and you went two to what in the next year?

36:27What's that formula that people talk about? Like triple, triple, triple, triple, double, double. These days, these days. That's not good enough anymore. Yeah, yeah, yeah.

36:36Aman Narang:So you went like two to six. Yeah, something like that. I think we were, we were, I don't remember exactly, but we had, the thing that was important was like, we had very obviously, we had really good product market fit because, in fact, you know, you'd interview people and it was execs. And I remember one time I was sitting with a exec and they're like asking about, like, what's your strategy for like nonlinear scale? And I've come to appreciate some of what they meant a lot better now. And I was like, it's working. Like there's this linear scale. I need to make this thing first work and like scale the thing.

37:07So the model had really good product market fit from very early on. But I think the challenge for us was more about like scaling the organization. So I think, first we talked about we weren't ready to scale because of the tech.

37:19Aman Narang:Yeah. Then, I think when we started to hire people, this is like, you know, end of, middle of 2014. And we grew from doing 20 people to 50 people, something like that.

37:33This is like the classic, you know, maybe founder... First of all, we'd never really managed at scale before. Yeah. Not any of us. and um and we were you know trying to do it all ourselves and so it was actually like we didn't have the foundations to scale like how do you like very basic things like how do you think about hiring people how do you assess people how do you onboard people how do you like communicate with the organization um um how do you um make sure like how do you think about like what does it mean to be a toaster and like the culture and the values and and actually that was like one of the low points for us where like i feel like at least for me where i kind of knew like at the end of 2014 that even though we had like customer pull we weren't really like we hadn't figured it out like it wasn't really working because our execution wasn't like what it needed to be and uh and i

38:27Aman Narang:think part of it was like like your company building execution yeah yeah and i and i think like in the first like one of the like blind spots for me was when you got the first 20 people 10 people in the company maybe it was all people we'd known in our network because we knew they were good and when you grow in scale and try to hire fast like it's not you know this is like the you hear proverbially right the founders or whatever the ceos interviewing a lot of people early on we just didn't do a lot of that well and so we were seeing that in our business where like you just simple things like you look at the distribution performance in the company like you could see huge differences and so we sat down and that's actually when we brought in pretty early on like 2015, I think, February maybe, we brought in Chris, who we had worked with at Ndeca.

39:12He had scaled their customer success at the CS org at Ndeca. And Steve and I talked about this, and, you know, Steve's recommendation was it would really help you to have a leader who had scaled before to help you scale. And you can imagine, like, you know, that's tricky, because you're like, are you going to lose control? like, what does that mean? And we did do that.

39:36Aman Narang:What did you bring him in as? CEO. To run the company. To run the company, yeah. And so, and I think that Steve and I were presidents. And I think it was probably the phase where, like, I think the closest we came, like, maybe before that, I would say, to, like, it not really working out. Because the business wasn't really scaling effectively. Like, the financials were getting worse as we were adding more salespeople. The customer sentiment wasn't great. Like, you know, I remember one of the conversations we talked about, what's your NPS? We were measuring it. And just didn't have the right feedback loops back in the organization for what needed to get built, right?

40:16And it's amazing. Like, one of the things that was really positive was, Chris actually, like, one of his superpowers was, like, to bring people together. And he had scaled before, And so he did a really nice job of both leaving his imprint on the company, but also it wasn't about his show, it was about all of us. I remember when we were raising one of our later rounds, one of the concerns they had was, we think the company's got really good bones and economics. A couple years later, we're not sure if there's one CEO or five CEOs. I actually think in retrospect, that was his superpower, bringing the team together.

40:57And I remember we put in, like, we took some of our top employees, and in retrospect, it seems obvious, but we asked them, like, what makes Toast tick? And we had them put together our mission and our purpose and our values, and our, you know, we put some basic infrastructure in place for how we hire and onboard. And that made a huge difference. Like, that was, I'd say, of course, there were some strategy elements to it, too, but I'd say more so than strategy, it was about execution at Toast, whether it's building the platform initially. A lot of people wanted to build this platform. I think John, Steve, and team built a platform that actually worked in these complex environments and worked well.

41:37It was about scaling the team and the culture, which I think was another area where it's easier said than done. Naturally, humans organize. The bigger the group gets, it's harder to organize. Because when you're smaller, you can be like, you're not working on something together. We're working on it together. I'm helping you, we're working through stuff. And as you get bigger, it's like, okay, like, communication is really important, and I'm learning this as I stepped in as a CEO role two and a half years ago, but, like, it is much harder to build culture as you scale. Right? And so it's really, like, I think we did a lot of the hard stuff really well, you know.

42:16And then, of course, on the strategy front, as you see success with customers, the customers lead you, right? And they say in terms of like, we started off with this core point of sale application. We added, you know, payments to make the business model work. Then from payments, we saw capital was an opportunity because a lot of these, a lot of the existing legacy providers had capital products. And in fact, sometimes customers wouldn't switch because you wouldn't have a capital product as part of our payments. We added a lot of the e-commerce capability like online ordering, gift, and loyalty and CRM.

42:48We bought a company for payroll and scheduling, separate companies for payroll and scheduling. We bought a company for back office inventory and AP automation. And of course, we continue to build organically in the platform and have added a lot more. But a lot of that, I'd say, on the strategy within restaurants, there's more we're doing. But within restaurants, a lot of it is customer-driven. And I think that's worked quite well for us.

43:11Aman Narang:How long was the CEO that you brought in CEO for? Long time. 2015 through 2023. That worked out. Yeah, absolutely. And then we wouldn't be able to do that, Chris, for sure. And then you took over almost three years ago? Two and a half. Yeah, two years ago, actually. Two years ago. Yeah, through end of 23, so 24, 25. Damn. Yeah. That's crazy. That's like old school, this idea of bringing in a CEO. There's actually a lot of success stories that don't get told very often. And, you know, now the kind of zeitgeist in Silicon Valley is just like you would never hire a CEO, you know? And, you know, what's funny is like there's many ways that you've gone against the conventional wisdom, that being one of them.

44:08Aman Narang:And it must be, I don't know, surreal now, like everybody wants to build toast for X, you know? and uh i wonder like when did like it probably was obvious to you yeah and the folks inside the company at some point and there was probably a lag from when it was obvious to you to then when it became obvious to everybody else yeah like how long was that lag that's a good question i you know we um i don't know like when did all the like fancy vcs start piling on yeah we um for us you know we i remember early on like even very early on actually steve was like you know we got to 10 000 restaurants and we had like 10 restaurants and then when we when we started to see good product market fit in a few cities because you know the strategy was city by city when we saw the fundamentals of like what it takes what we were doing in chicago or miami or boston those are the first three cities we launched that's when it was kind of obvious like because people ask all these questions about like what does it mean to really scale because we were so small, these three cities were early, but it was very obvious from the sales cycle, from the customer pull and the customer value prop, that it was very obvious to me and others, what we needed to do was to scale this, first and foremost, as quickly as possible.

45:29And so we had a lot of conviction, I'd say, right in 2015, 16, especially when we got back to the scaling elements, right? And then it took us a couple years, maybe, maybe 2017, 2018, once you started to see... I mean, the market's so fragmented, so even in the first couple of years, it was hard to know. We were in a market of many providers. But I think when people saw our business, and they saw the unit economics, and they saw the customer satisfaction, the customer pull, the customer interviews, I think that's when it started to become bigger. I remember, though, for me, it was like, when I started to get texts from some friends and family, it's like, oh, I wanted this restaurant.

46:16It's using toast. I remember that was like an initial, like, oh, we're doing something right. And then we'd get a lot of input and feedback on how to make the experience better. And then I think, like, the Toast for X was actually one of those moments. I remember some presentation we'd gotten from somewhere, from some VC or so, I forget, saying, like, they're trying to build Toast for X, like, to your point. And I was like, oh, damn, we've made it. I remember telling Steve about this, people are talking about us, right? As like the category creator or whatever it may be. Totally. Yeah. Super cool.

46:46Yeah.

46:46Aman Narang:What, um, what did you, um, what are the things that the, when the new CEO came on board, like as things were broken and then needed to be fixed, what were the, some of the early things that you observed him do that now in hindsight were like, no shit, we should have done that. Yeah. I think it's like some of it was just slow down and speed up right sometimes like maybe it's a part of who I am but I'm always trying to like maybe too focused sometimes in the here and now right so like even as like whether you're a CEO or like you're a manager or a coach or a leader in a department you got to step back it's maybe it's obvious we got to build the systems right to actually think about what does it mean to build and scale the company you've got to build you've got to shape the organization.

47:31So you've got to think about, like, okay, how do I think about our culture and our values, back to what I talked about? How do we work to actually make these things true? Because that's about putting them on a wall, where you've got to actually make these things true. You've got to think about hiring leadership. Like, okay, what are the people that you need around you to help you scale? And then I think, you know, the other thing that I think that I... I'd say that all that I think many people can do But the thing that I think, and Chris and Steve both do this very well, that I've learned a lot from over the years, is...

48:07And it's actually funny, like, it's not natural to me. Like, I'm, you know, I can be sometimes, I can push. And sometimes, you know, I can remind myself I've got to be direct and be kind in terms of, like, how to push people. But they, like, had this, like, both of them had a real good superpower, real superpower, I'd say, of really bringing

48:31the team together in a way that was... And I think some of it because of who they are. They're just good people, and it just comes through. And like Chris would, for example, he cared deeply about customer success, and he would take tons of escalations himself, and he would listen to the calls. And one of the things we built in the culture early on was still one of our values is we're all in customer success. like, be on the front lines to really understand. Like, I was much more focused on, like, how do we grow and get customers and revenue? And, like, I would be very happy to take the next sales call with someone because I felt like I was, you know, I was, you know, maybe the best salesperson in telling the strategy and the story and the product.

49:15And Chris was, like, really good complimentary and focusing on our customer experience. And Steve, of course, on innovation. So that really worked well, too, and then to the three of us. But I think the superpower of how to pick one thing. like even today our number one value i'd say still that resonates like there's the one team value and how we work together and to do that you have to live those things right and and um and i think they early on like were really focused on the small things as a leader right you've got to the small things well and the big things well and they were really good at doing the small things well in like a genuine way not a bs way because you have to check a box to do it any like habits

49:50Aman Narang:or rituals, routines, things that you observe them do that you thought were instrumental in bringing the team together? I think the one thing that I always saw was there was, we were all like in it together, right? And when there was adversity and challenge and learning, it was always in the spirit of like, like, how do we make this better? Like, how do we, it's not about like who's right, It's about what's right. It's not about keeping politics and some of that stuff out when you're scaling. And I think, I don't know if there's a specific ritual. The biggest thing, I think Chris really worked really hard.

50:32He was the first one there, first thing in the morning. Those things matter. I think Steve also really led from the front. And so being present for the team, being there, being outworking, leading from the front, again back to like outworking everyone those are things that really really matter and and i think the other thing i'd say is like i don't know if i'm giving a good answer for like the ritual i don't have any specific thing but i saw them spend a lot more time on the team than i was maybe spending time on earlier one of the learnings for me was you've got to be able to think about it's like your job moves from being like the one who's doing you know like helping close that deal or helping build help helping figure out the product market why this feature is not working as you expect, or maybe to like helping shape the organization and getting in the right people.

51:23And even basic things like, and maybe this is obvious, but like, what does it mean to be a good manager? And like building, like it's about the what and the how, and working through the basic, the foundations, because we're hiring a lot of people out of the restaurant industry. In fact, even now we're really proud of the fact that we hire a lot of people out of the industry that have empathy for restaurants and the restauranteurs. And so we have to teach them, like, what does it mean to work in a corporate environment, and what does it mean to be an effective manager? And I'm a big believer now that a good manager, number one thing that you have to do is you have to be a good coach.

51:56Because at the end of the day, if you're not an effective coach, and you can't dig into the team and do their job with them and help them, none of the other stuff really matters. You don't have credibility. And so those are the things I saw, I'd say, them kind of help model. companies 20 how many employees 6 500 6 500 yeah big okay that's a lot of people um um

52:21Aman Narang:now what 20 billion dollar companies 6 500 you're the ceo it's been two years in the saddle yeah um i'm sure you're gonna say something about like the world is changing and ai is gonna change all of our lives yes um uh i'm curious like what is that um like uh and it's ironic like in some ways like restaurants are an anti-ai like restaurants are a way to just like connect with somebody yeah and you know like you still got to power the restaurants and deliver good technology and do all those things but fundamentally the reason you go to a restaurant is actually just like connect with somebody right right yeah so you know i think we um one of the things that back to like this superpower that got us here which was like vertical focus on restaurants, and specifically restaurants in the U.S., and specifically SMB restaurants.

53:14We had some mid-market chains, but not truly the enterprise. And so the good thing was that focus has got us to where we are, because of whether it's how we build and sell and service and such. The challenge is, okay, if you truly want to build a company that is at the next level of scale, right? One of the key questions that told me the IPO was like, what is the TAM really? And like, how big is the opportunity really? And so, um, one of the things we did was, um, this is like in 2021, maybe I forget exactly something 21 we brought in. Uh, cause we've grown and scaled up and like, one of the things we were feeling was like, Hey, we've kind of lost some very entrepreneurial spirit.

53:56I'm sure many companies that, you know, I'm, I'm, I like this phrase, which is like, you know, all entrepreneurs want to build enterprises someday, but all enterprises also want to be entrepreneurs. And so we started this program called New Ventures. And it was actually like paying homage to how we started to begin with, which was in this theme called Special Operations, which is all about innovating and finding product market fit. And it was largely like we wanted to bring in entrepreneurs into the company. And often like a pair worked really well, actually, like folks that maybe considered starting a company and maybe hadn't found product market fit or people that we knew that we think would have been good.

54:37And we built out these teams within Toast. Literally, it was like, you know, isolate the teams, give them a comp plan that's very focused on their business.

54:50And we launched through that a bunch of products that have been very meaningful to the company. So we launched Toast Retail, which we'll talk about in a bit. and in a long term like I'm a big believer that that retail opportunity for Toast could actually be bigger than restaurants. We launched a bunch of guest facing products like reservations and wait list and this Toast local app that now that has become part of that. We launched products for catering and events. We launched an advertising product and not everything worked like anything else in these early stage things but actually a really good success hit rate.

55:30And what that's allowed us to do is just bring back a little bit more of like a good balance. And you need this, I think, in any company. You need folks that can think about scale. There are lots of leaders that are really good at thinking about scale. That's really important, by the way, because like you learn the hardware if you don't do those things well. The technology and systems, for example, like internally can get in the way, right? But you also need folks that like are actually like the entrepreneur that want to build zero to one within your company and want to find product market and know how to do that because it is different.

55:59Like, you don't build for scale early on. And so that was, I think, like, a real unlock for us to start to open up the opportunity. And so what we're about now is, you know, we certainly want to continue to grow and scale in U.S. restaurants. And I can talk about some of the things that I think are...

56:19Aman Narang:What percentage of restaurants are you in? In the U.S.? In the U.S., about 20%. 20%. 20%, yeah. And at the IPO, what percentage were you in? Five. Five percent. And so the question was like around the TAM was just like, hey, like, you know, let's just say you get 50 % market share someday. Like even 50%, like how big of a company is that going to be at 50 % if you just stay in restaurants in the US? Yeah, yeah. And I think specifically SMB restaurants in the US. SMB restaurants, not even enterprises, right? SMB restaurants in the US. And so we, if you think about like where, what that allowed us to do back to is like, really start thinking about how do you innovate, right?

56:59And continue to bring back like some of the early work that allows you to see, like, can you find product market in other places? So retail, for example, was an interesting one where we, you know, you think of like restaurants in the US, spend about a trillion dollars spending in restaurants in the US, give or take. I'm using round numbers. But like, if you go look at the US economy and look at GDP and then look at like personal consumption, more just very broadly, second is, zero spending is like 70 % of the economy. So 20 trillion plus. And so our team actually went back and analyzed some of this and said, well, wait a minute, like there's, at least seven or eight trillion of spend.

57:30Where, and it's pretty bold, they're like, toast should be relevant, because it's all about local commerce. Like, what does that mean? It's like, well, grocery stores, gas stations, convenience stores, merchandising, clothing stores, like all these businesses that are not about e-commerce, they're about in-store physical commerce. And not the like, you know, heavily regulated stuff, like HIPAA compliance stuff, not pharmacies and hospitals and all that, but, and we, so we, that combined with like some of the customer pull through COVID where restaurants want to do more retail just to survive, got this business off the ground.

58:04And, you know, it's like probably the fastest growing business in the company.

58:08Aman Narang:And are you starting SMB retail? SMB retail. And then you're going to move up market there? We have, yeah. So we have the strategy from a growth standpoint is retail. SMB restaurants go up market to the restaurants, US and then go global. than SMB retail, maybe follow a similar pattern. Exactly. Doing retail. Exactly. Core SMB, enterprise, international, and retail are the three growth factors when it comes to location growth. And of course, like you said, there's intersections there because there's enterprise retail locations and international retail locations. It's actually funny. I was in London last year and I walked into this place and it's called the Supermarket of Dreams.

58:46And it was on toast. I was like, cool. I started to see like signal, even internationally of this. But that business, back to strategy, it's like dramatically expand the TAM, like 10x or more. And it's not just about like these, expanding it into the categories we're in now, but it's actually like having a mindset to say like, we're not going to just power local restaurants, right? Or neighborhood restaurants, we're going to power entire neighborhoods. I know it's a bold vision, but I actually think the reason we have a right to win play is, at the end of the day, like when we built the restaurant platform, it was all about leaning into complexity.

59:21And it's the same thing as you go into retail. Some of these categories, grocery is very complicated. Bottle shops have lots of very specific needs. And what you hear from a lot of these folks is they value the fact that with something like Toast, like I was talking to a merchant of ours the other day, a customer of ours, and they said they love the fact that with the Toast platform, they've got a grocery store, and they've got a coffee shop within it, and they've got some light retail. And they like the fact that you can use one platform versus three or two. And then you can... Little things like, oh, and the tipping...

59:58They don't want tipping in the grocery store, obviously, but they want it in the restaurant. And they want the reporting to be in one place across both the systems, and they can really manage it from one place. And so we... Even managing, by the way, inventory on a smartphone, on the floor without having to take the system down, because a lot of what these people are using are still these legacy systems, is actually very similar to what we saw with restaurants back in 2013. And so we believe the future is vertical. It's not horizontal. And as you think about these sub-verticals, it's like brick by brick, you got to build the capabilities necessary to support.

1:00:34Because at the end of the day, no matter how much innovation you have on top, right, whether it's AI, we can talk about that, but you have to make sure you solve the operational complexity and the workflows they need to run their businesses. And so that's the strategy in terms of location expansion. And I think because point of sale, again, there's a lot to it, even going to enterprises and international markets, like now we have brands like Marriott and Hilton and Applebee's and Denny's and a bunch of other brands, and there's a lot there too to actually support. Like, what does it mean to support a large chain versus an S &B restaurant, supporting restaurants in London or in Sydney or Toronto?

1:01:09Aman Narang:I like to ask all the consumer CEOs this. When you go into a restaurant, like I asked the one, and the Oura Ring CEOs this too. When you go into a restaurant, do you try and figure out what they're using? At this point, I pretty much know pretty quickly. I can just tell. How? I can just see the back. But you look? Of course. Every time? Every time. No matter what? Every time. In fact, one of the other rituals we've got is, I don't know every time, but I try to do it most of the time, where if I am sitting at dinner and I don't know the place, I'll try to ask the server like two questions like or server and if there's like a manager if I can get them I'll ask him like how do they like the product and how do they like the service because those are both things that are very important to restauranteurs.

1:01:53Aman Narang:And your family's like oh my god here we go can't even have one meal. Yeah. How much do you travel? Twice a month maybe. Nothing crazy? Nothing crazy. So like as you go international it hasn't constrained your you have not had to the demand on your time has not been through travel in that way? No. No. I think a lot of it is like bringing in good leaders who have helped us, who have seen that before. And so it's not that, of course, you want, like I haven't been to Australia. We've just launched in Australia about, you know, six months ago or so. But I've spent time, like, you know, spent time in the markets that we have customers.

1:02:27But I don't have to be there every day.

1:02:29Aman Narang:Yeah. Yeah. So that's one part of the strategy is like expand the CHAM. Like, you know, instead of being in 160 ,000 customers, like we firmly believe, like there's no reason why if you think long-term, Tosk can power millions of locations. The second piece is, and this goes back to within restaurants, this goes back to maybe a little bit on like how we started and some of our consumer ambitions long-term. But, you know, what's the hardest thing about a restaurant going out to eat? The hardest thing? Okay, I mean... Sit down restaurant, for a start. We'll start there. Like, I mean, get a reservation would be like number one.

1:03:06No, you've got the table, but like operationally, like what's the hardest thing? It was the most annoying part of like the restaurant experience.

1:03:12Aman Narang:Oh, like if you're running it or if you're a consumer? You're a guest. If you're a guest. Yeah. Uh, well, if you're with somebody that's indecisive, picking what food you want. Yeah. Uh, you know, making sure you get the right dish that you want. That's probably the, that would be my guess. Yeah. That's part of it. That's part of it. But the one thing that we hear consistently is just like when you're done, you just want to leave. Oh, okay. Yeah. Like that's a no brainer. Yeah. I mean, that's why I always sit at the bar because I'm trying to get out of there. Yeah, yeah. And so like one of the things I do, for example, is if it's, I try to like give the card earlier.

1:03:46Aman Narang:Okay, I do that every time. But the problem is then, like I'm sure your wife is now habituated to it. But if you're with somebody else, the first thing they think is like, oh, he's trying to get us out of here. You know, in some ways I am, I am. That's the point. I don't do it. So it's fair. I only do it with people I know. Fair. I always do it. Yeah, yeah. Okay, all right. And so one of the things that we want to fix is that experience. So imagine, right, you get a table or you join a wait list. You've got a card on file. So Toast now, just launched that. And so when you go to Toast Restaurant and you book through Toast Tables, soon with Rezi and Tak and others, you're going to be able to walk out.

1:04:29So I think that does a couple of things. because if you know Jobin and you - That's cool. Yeah. That's cool. Yeah. Yeah. It's a real problem, right? A real pain point.

1:04:39Aman Narang:I mean, it's not dissimilar from like, there used to be a day where you'd like check out of a hotel. Or a cab, right? And then you just leave. Like that makes so much sense to me. Right. That makes so much sense to me. Right, right. So that's something, and what's powerful about that is if you - That makes so much sense to me. If you connect the guest profile, the problem with most restaurants is that guests are anonymous so often right because you don't know a lot about them and so if you know the guest profile in the point of sale that the thing that's running the restaurant before the trend before um earlier versus at the end of the transaction you can now do things like um you can personalize the guest experience right you um because toast so much data, we know.

1:05:27And actually, in any given menu, we probably know what you're going to order

1:05:30Aman Narang:with very high accuracy, because people are creatures of habits. You can start to... Another feature that I think may be more of a niche feature, but I've got two young kids, I've got a 10-year-old and a 7-year-old, and it'd be awesome sometimes when we're busier to just be able to have the food ready sooner when we show up. And so imagine when you get a table, the system you can pre-order and when you check in, it fires to the kitchen so that the drinks and the chicken nuggets or the, in my case, my son loves bacon and fries. Very cool. You're speaking my language. Efficiency. You're speaking my language.

1:06:06And then the last piece is like the personalization at the table.

1:06:09Aman Narang:I will be a beta test anywhere you want me to be. I will do it. Awesome. We'll definitely get you on this. I'm in. I'm in. The other thing I think a lot about is like, remember cable TV back in the day versus Netflix today? Like Netflix turned on and just kind of knows what you want to watch, it knows based on your history, and if YouTube TV does a nice job with this too now, why shouldn't that be in restaurants? Why shouldn't they know... Why shouldn't the server, of course, know your name, right? And then know what on this menu you're going to care about, like which allergies are, which preferences are, and then use that to actually recommend stuff.

1:06:42And so, this we call that, like, internally, I like to use the word cheers experience, that show back in the day, where everybody knows your name. And so, like, that's one area where I think if we can move the needle, like, on efficiency and on the experience, like, it's like, said another way, like, if you were building a restaurant today, imagine no restaurants existed, we wouldn't build it like this, given the tech we have today. Totally. Right? Like, you wouldn't be like, oh, like, you know, someone shows up with a piece of paper, then you give them some plastic, they come back with them with a piece of paper, you sign it, they go back to system, enter in something that you typed in, that you wrote in.

1:07:16and so that I think is one opportunity area we're very focused on again and the focus here is to help restaurants with you know better turn turns better guest experience higher check sizes the second thing and this one's harder is I always have I've struggled with the fact that restaurants are one of the few categories where there's like no concept of like how to think about yield you know you think about like most places like they're gonna like i've seen hotels or airlines pick pick a thing is like this concept of like some demand supply matching happening and i think in restaurants it's reasonable that it's harder but there's so many little things you can do to help match demand and supply right and they do it like in in organ and like analog ways right like oh it's happy hour to help at times they're not as busy but the thing that doesn't exist is like something that says let's go look at your demand patterns let's go look at the weather let's go look at um you know events that are happening locally there's like an ai a lot of this i think it gets easier and let's help you generate the right set of offers to actually optimized yield.

1:08:32Because some people, like when I was in college, I used to go to this place called Boar House, you get like two dollar burgers. And so for some folks, they care deeply about the value.

1:08:46And in fact, they come and, you know, this is like Groupon's Promise back, and they've tried it once, they may love it and come back and say, actually, it's so good. I've never tried it before, I want to come back. And then there are other people who are not as price sensitive. And like, you know, there's no technology to help these restaurants just get a little bit more incremental yield. And like, I look at like a restaurant and say like, anytime you've got slots open, what are ways in which we can fill those, whether it's for delivery or pickup or in-store? Because they've got all these fixed costs, right?

1:09:20Like restaurants like, this is like, I don't know if it's exactly right, but directionally it's correct, which is restaurants are, you know, sub 10 % margin business, where every incremental order is like, you know, 80 % margin. And so that's, I think, another area where tech can, I think, play a role to help restaurants just be smarter about helping fill their seats. And then I think the other area that back to you asked about AI, and you were like, hey, what are we doing with -

1:09:49Aman Narang:Sorry, on the every incremental order being over at least 80 % more, is that because the 10 % or less is a fixed cost that has already been basically capitalized? And so any new person that comes in is just, looks like a software business margin. Very few businesses that can pull that off. That's interesting. I've never thought about it that way. Yeah, I mean, if you think about it, you've got rent, your team's already there. You've got food that's going to go out bad if you don't use it often, not always, but often. And you've got all these, you know, you're trying to, all the costs that you have in the business.

1:10:21and like incrementally fill that next seat is just all about, yeah. And there's no, like, it just drives me, like, I just don't understand why. It's like, maybe there's a good reason why there's not any technology to enable some of this. And my gut is because there's like a, it's like a fragmented SMB market. That's why I think fundamentally, especially in the SMB space. And so, and actually that's part of our AI, the back that you were asking about, like, what's the AI strategy? So I think it's a, if you, For me, the AI strategy for restaurants starts with, these are SMB restaurateurs, and often they're dealing with their next curveball just to keep the restaurant open and successful.

1:11:01People didn't show up to work. Their hood's not working. They're just basically pair coach for their locations often, trying to make sure that things run well. And it's actually really hard. In fact, one of the... It's maybe obvious, but really hard business. It takes a lot of heart to keep these restaurants open and day after day and, like, these consistency of experience that, you know, all these restaurants we love, we think about, like, going back and get these amazing experiences. The amount of energy and work it takes to do it. That's why restaurants are really hard to scale into chains.

1:11:35Like, because doing it well in the SMB space is really, really hard work. It really... It's like, you know, it's work that they do out of passion. And so, often when you give them a lot of technology, you know, for a lot of them, not always, but a lot of them are like, it can easily get overwhelming. You're like, hey, there's all this tech that I don't have the time. And so the types of tech that works really well is like, stuff that like you just kind of set it and forget it, and just works in the background, like online ordering, driving demand, right? Or your point of sale, like operating your restaurant.

1:12:12And then the other thing that you see is a lot of these folks, a lot of restaurateurs are not able to leverage the intelligence and the data that the platform has to make smarter decisions. And so they've got lots of folks that they'll hire fractionally often. They'll be like a fractional marketer. They'll hire a fractional accountant, a fractional person that's doing their tax and their payroll. and I think fundamentally when it comes to the customer that is like what we think the opportunity is long term and the way we're going about it is step one is we've got this thing called Toast IQ which is not that different than ChatGPT but with our data, all of our data and so what you can do is you can go in and query this thing, ask any question you want you can make changes to the back end of Toast and so people like the fact that it's been one of the fastest adopted products because it makes the platform accessible.

1:13:10Like, you have support questions. We're doing about half our support through it now, or through the support agent. We are getting the...

1:13:19Aman Narang:Did you build or buy the support agent? We bought it. We partnered with somebody. Yeah, so we have a... And we're still figuring it out. We are building a lot of the... I mean, in terms of, like, we're still using all these foundation models for a lot of it anyways, right? even if we're building. But for the support, we're using some software off the shelf. But still, we want to make the experience as natives that can be, right? And so, for people, like, the vision and strategy is, one, you can use Toast, and so you have to go find how to do something, like how do you 86 an item, like, it's not available, or how do you revamp some parts of the menu, or where maybe I can do it with this GPT interface, right?

1:14:00And then the other piece of it is getting, like i was talking to restaurant the other day they said you know it's like a coffee shop uh in wellesley and they were saying love the fact that with toast that you can see these patterns where it's like and alerts on things like you know who are the best employees that they can give a spot bonus to or like they added some incremental menu items to their menu what does that do for throughput those are things you couldn't do before and so and by the way that's actually also what i use personally like one of the things i love about like you know chat gpt or jgemini whatever maybe is like whenever I want to build custom data views, I'm not a Power Excel user.

1:14:35And it's like really amazing how quickly you can generate the exact view you want. And so custom data views, alerts, and then long-term, like with AI, I think the vision is if you believe, I don't know how far we are, but like if you really believe in this like agentic vision coming up sooner rather than later in terms of like fully starting to do some of this work, then there's all these areas where restaurateurs don't get to that work anyways themselves. And so being intelligent about marketing, and back to the yield comment we talked about earlier, helping them with their back office and accounting.

1:15:12I can't tell you how many restaurateurs I've talked to that don't really understand their piano because, you know, they are getting their books closed 20 days after the month is over, right? And then, of course, on payroll and tax, there's a lot of complexity as well. So there's a bunch of areas where we think we can leverage AI to like maybe some humans in loop to start to start to automate away some of that work.

1:15:34Aman Narang:It's awesome, man. Yeah. I'm excited that you're so excited. There's plenty ahead of you. Yeah. This is why everybody wants to build the toast for X because there's a lot of greenfield in front of you. Yeah. Are you hiring? Yes. Are you hiring? Yeah, absolutely. We're hiring. In fact, I was looking at the numbers for this year yesterday, actually, and we're hiring in across the board. You know, we're hiring in product engineering, in support, in go-to-market, G &A, some key leadership hires. When you hear the word grit, what do you think of? You know, I was thinking about this. For me, the word grit, like, one of the things I've always loved is whenever it's like, people question or doubt, you know, you, like, I always had this mentality of, like, no, no, no, we're going to do whatever it takes.

1:16:22And it's not, of course, it doesn't always work. Whatever it takes might not be good enough. But that mentality of like the passion, perseverance, the resilience of saying, you know, you want to go accomplish something hard. We are like the reason we're going to succeed is we will do whatever it takes. And I like that mindset when it comes to grit.

1:16:39Aman Narang:I appreciate this, man. I'm glad we got to do this. Thank you. Thank you. That's it for now. If you like the episode, please leave us a review or go back into the archives where we've done more than 200 episodes with some fantastic folks. This podcast is a Kleiner Perkins production. And I'm Juven. Thanks for listening.