20VC: Five Lessons Scaling Toast to $14BN Market Cap | The Biggest Mistakes Founders Make in Fundraising, Hiring and Selling with Aman Narang, CEO @ Toast

22:32Or we had customers that felt like we were abandoning them after they went live because we didn't have any supporting for structure. And the products themselves were in some case not fully baked. And so I think a lot of these functions were not set up to scale. It was affecting customer sentiment. And I remember like when Chris joined us, the Chris was a CEO that was with us for I think really the early days. And that's actually one of the tough moments in the company because Stephen and I were having a lot of issues around how fast to move because the reality is you've got a scale, right? You've got capital, you've got to deploy the capital, you've got to scale.

23:06On the other hand, you've got to do it well enough where things don't just all break. And so one of the expressions I've heard is like, you've got to make sure in an organization everything's kind of in sync. And something can be ahead of another thing, but it can't be so far ahead that the whole thing starts to fall apart. For us, it was just we did not have the team to help us scale. And I want to simple analogies that I think come to appreciate is at some point you go from doing to coaching and teaching others Right how to do and then it becomes about okay like how do you hire well? Right? How do you onboard well?

23:36And those were all things that I grossly underappreciated why did you not take the C .O. role earlier? That wasn't given it Actually, that was one of the most I mean look I think I noticed on this I'm sorry about that in a long time. I love that. I can't what told you about that. When you're early, no one cares about roles and titles as much. It was like trying to build this business. We weren't over -indexion. Any of the Steve was the CEO. I was the president. We were trying to make this company survive. No one cared. And then at some point, we just raised this 30 million, whatever the money was around, real round.

24:10We were going to put the pedal down in scale. And it was very clear that we did not know what we were doing in the scaling phase. And did your VCs feel that? I think to some extent, I think Steve Poppins was the first investor who was like a friend and mentor. I think he picked up on it too. I think we all kind of picked up on the fact that was one of the rocky phases in the company where we were dealing with the real growing pains. And we had worked with Chris at Andecca. And one of the superpowers Chris always had was he knew how to get the best out of people. And I remember in the session, we're sitting there trying to figure out the future of the company.

24:42And it was hard to be like, we're going to bring someone in from the outside. But in most of the stage was the company out at this point five million error. No, it was like two million error pretty wrong Yeah, yeah two years and it was the best decision we made we were able to get someone in that we could You know that gave a space to go do our thing But also was just a really good sounding board and coach and also had seen how to like scale and lead people in ways that we didn't And so back to your question. I just wasn't wasn't given it. Okay So then we have the 30 million dollars and we have to scale and we have some points breaking, we have strategies to scale.

25:18What did you do with the benefit of hindsight you wish you hadn't done? You know, one of the things that toasts that was interesting was, and this is still an issue today, is how much do you want to do? So our focus from day one was we're going to solve for restaurants. I'm going to be the best solution for restaurants as the verticals, you know, the thesis and the strategy was by building a platform that was purpose built. We can solve the problems of this industry better than anybody else in the world. As we got going, we realized the sales efficiency, though, wasn't quite there. And so we just say, well, what can we offer where we can make the financials work?

25:53Because it was a highly considered purchase factor, which you said. It's like, you know, a phone of sales, like, I think it's described to me many times as like a root canal switching out phone of sales systems. And so you have to show me to increase the all -poo on a customer basis to make the sales efficiency back. Exactly. Exactly. And so one of the big challenges was how do we build out more of the platform? and do it fast enough while scaling locations. And so one of the challenges that we faced was how many products can we do well? And then how many segments of the market can you really do well?

26:23Like I remember one of early customers, I think it was Urban Outfitters, they had all the restaurants in their retail stores. They wanted us to do that, you're doing such a great job, do all our retail. And I'm glad we said no, right? And really focused in on restaurants. That was always challenging to figure out like what is the right surface area for us to be able to go to market with? What did you do that you wish you hadn't done there? It's a good question. So for me, it's an interesting moment. We saw the creator economy hype of the easy wins that you get from having big famous people on the show.

26:51And it's very easy to get big numbers of your very famous, but actually that's not who we are. We are incredible shows with the best entrepreneurs in the world. Fark having big celebrities on, it's about incredible lessons with great entrepreneurs at our business. Yeah, we did that and I wish we hadn't done that. I think for us, one of the biggest things was we were trying to move very fast and trying to scale as fast as possible. Capital was cheap. Was it always cheap? No, once we raised our first round, it was really hard. We couldn't get any capital, but once we raised our first real round, we saw the numbers get better.

27:25It was all about how fast can you move? And so I think one of the learnings was on the one hand, you've got to move fast, right? It's like the gold rush and you've got to move as fast as you can. On the other hand, it's very important to get your foundations and your culture right. It's like the measured twice cut ones. There's some of that that I think we could have done a lot better early on. And so for us, had we slowed down to speed up, there were a lot of opportunities where we could have slowed down to speed up that I think would have just made it a lot easier in the long run. I remember those one time when we were shipping out hardware to restaurants and every piece of hardware, like close to a felt like every piece of hardware that we shipped came back in 90 days.

27:59And we were still selling it because we're like, we need to get more customers on the platform. What did you do when you have returned cycles where it feels like so much is coming back so quickly? What is the management decision on that? One of the things that was a crucial decision that we made was we built this platform on Android versus IOS and it was not in hindsight. It feels like a strategic decision, but in reality it was simply because we thought Android was an easier platform to build on. But what happened was Android had this proliferation of hardware. I think one of the complexities was the hardware that we got didn't have the right configurations to support like card readers and all the components that you need in a restaurant.

28:37And so as we get in the hardware back, we were looking desperately to go find a device that would actually work in the restaurant and get in great environment. And so we just always remember we'd have these conversations. So we just need to find enough time, make it through like the next quarter before we got like this device we had found with a partner in China, Elo, that we could we had more confidence in scaling. When we think about expansion, there's kind of three full segments of products, expansion, segment, expansion, and geospension. When we think about those three, the product expansion, I can nuts what you've done.

29:08Like, toast capital, we have amazing researches that I'd love to pen like it's all just me. But like in 2019, you did toast capital, I think it was the notes I got. And now it does over a billion in annualized loans. Wow, question for you. Totally normal. I was going to ask, is toast to FinTech business or SaaS business. It's definitely both. I mean, if I were to force you to be one, customers carried deeply about our software. That's why they picked us. But it's a great business because it's a FinTech business. I think the two together are a compliment. But I think it's often quite removed for founders starting today, where they look at some of my toast and the products we that you have is incredible.

29:46Did you have that vision for the products we from day one, or does it come over time? It came over time. Initially it was, how do you solve the needs of the restaurant through the point of sale better because that's where we started. You can only do so much to begin with anyways. And you can imagine when we started, you know, we were going after these slightly bigger restaurants because there were other providers that offered something very simple if you had two employees. And so for us, we had to, we realized like our niche had to be restaurants, even if they were S &B restaurants, these more complex operations that had more in revenue, more employees, more scale, more complexity.

30:17And so you'd go into the restaurants and, you know, we talked about pitching for on a sale. We got a few customers that way. But But then I remember we had this meeting with this guy, Chris Kane and finale. And it was like, I've got point of sale. I've got payments. I've got a loan. I've got online ordering. I've got scheduling. I've got inventory. I've got gift cards and loyalty and all this stuff has to integrate in some way to the point of sale because that's the central nervous system of the restaurant. And so our choices like we can either partner or build. Sometimes people didn't want to partner because we really see any companies.

30:43We're like, we have to build it. Those individual point solutions were always there. But we're so much more feature rich. We're much better. because we are a point solution. To what extent do you say yes, maybe, but it's better as a bundled offering, and it's okay to be 20 % less than a point solution per faction? Yeah. Because it's a bundled offering, or do you say no, we are better than those point solutions. Forget that. I think it depends. It comes over time. Like in any of these markets, the reality is it's very segmented. So in certain segments of the market, you may have something simple that can work.

31:17And then, I remember in Victoria, they Pete's line restaurants It's really complex. And when we got some pizza restaurants, like the ability to manage the complexity of the modifiers and how all the different ways you can order pizza and have pizza delivered, we couldn't support so we had to partner. So I think it's really a segment segment specific question where as you build out the platform in certain segments, you might see success and other segments you have to you have to partner. What secondary product has been the biggest game changer? Payments, toast capital. How does that come about?

31:43You guys sit in the room and you're like, let's do loans. How does that come to be? This was, I remember our CFO at the time had done some research on Fintech more broadly and all the things we could do. So we were not, we were just talking about loans, we were talking about embedded finance and banking and payments and the, and the, and the, and the thesis was once you're the payments provider, that's such an anchor product in terms of you got all this data about the sales and about the success of the restaurant. And so what else could you do? And we had seen some other examples where lending was a product that, you know, others had built.

32:17And for us, one of the challenges was often when we go sell these restaurants, they had an existing loan, or they wanted to finance their hardware. And so we had all these partners and we said, well, what if we could do this in our own? And what we realized was because we're the payments partner, we could do a better job of assessing risk, we could make the process of getting the loan out. The payment back was really simple because it was just built into the payments flow. And so that's really what the beginnings was for for capital. And also we realized that it was it was a good business to be in.

32:45What was the hardest element of building toast capital? It's not knowing how to assess risk. The biggest question we have to answer when we lend that money is, what are the odds that the restaurant will survive over the next three, six, and twelve months? What was the worst ancillary product decision that you made? Which product did you do that you're like, all that didn't work? With that many, actually, where we've tried. And the one thing that's great about toast, back to the zones to win horizons, we've got teams that are focused on scaling what we have and their teams that are tinkering. and this is across the business.

33:15You actually have that separated in the all -glite team -curing teams and skating teams. We have both. There are certain teams within each lines of business. We've got teams focused on scaling our products. You can imagine the Fintech business, for example, we've processed like 160 billion in volume every year. And so that's about scale and making sure that it works all the time. But then there teams within the Fintech LLB that are thinking about what are the next adjacencies where we can create value. So there's within the LLBs, but we also have a new Ventures program. We bring in folks that otherwise want to maybe go start companies and go raise capital through VCs and want to come work a toast and Want to go build something and we try to make them as Separate from the core business as we can and so one of the things that we always talk about is the benefits of being part of toast Have to outweigh some of the challenges, right in terms of you know the overhead of being part of a larger organization And so we do both in terms of both models What was the worst product expansion which product was like that was a flop and a fail?

34:13In two learnings one is it's not good enough to just build commodity products because it's integrated on the point of sale There was thesis was hey if we just do more and more and more if these products are integrated the point of sale people will buy But you know you can't just build a phone system and say oh because it's integrated the point of sale That's good enough for someone to swap out their phone system. It has to be better. It has to be better one big learning I think the second big learning was within the solutions that the stakeholder we serve the best is the restaurant owner of the operator.

34:42We've been building technologies to serve the stakeholder for a very long time. And the other stakeholders that exist, whether it's employees or guests or suppliers, we're starting to get there. Like we have now tons of rich data about other stakeholders, but it's not something that is like a superpower of ours internally. We're not a consumer company, we're not a company that knows how to support all these stakeholders as well as we know how to serve restaurant operators. When we've built these applications so far, like app products to serve the guests or the employees, it's not to say we won't get there and we're doing some really cool things to their credit, but it's something we're learning.

35:17There have been lots and starts and stops. So that's like product expansions to a certain extent. So funny, I'm such a nerd on your business. I love the toast business, as you know. So the other element is segment expansion. And you mentioned that kind of you like to actually almost be in the middle of it, seen like in the early days, which is like, you have enough revenue where it's a sustainable business, it's not only robust, but also it's not the largest corporations in the world. You're McDonald's or your Starbucks. But you've actually spread across both now. I mean, again, I have incredible people who do a lot of the work for me now, the joys of our jobs.

35:492023, you did bakeries and cafe products and a more like self -serve lower cost. and then 24 we did restaurant management and more heavy enterprise. What have been the biggest lessons in what it takes to expand down to SMB and do while there? Yeah. We have been in the enterprise business actually for a while. In fact, we have more market penetration within mid -market than we even do in SMB today. I think a regional change. So we don't have lots of enterprise businesses at massive scale, but we have lots of restaurants that have hundreds of locations and have some of the same complexity. Who has the enterprises at massive scale?

36:24A lot of it is still on either custom homegrown or legacy on -prem solutions. These solutions are so wired into everything else these chains do. Will you replace them over time? Yes, I think so. I think look, it goes back to like, there was a time when a lot of this technology was simpler. Like if you had a simple point of sale system to take orders and payments, that's very different than, I remember early on, I thought this was a glorified calculator at least. It's not because it's the operating system. So I'm just the ERP of the restaurant. So as you build on top and you add online ordering and Piosks and employee scheduling and all sorts of capabilities to process what all the stakeholders is a massive list, the tech gets more and more complex.

37:05And so if you're an enterprise chain, that is not your core competency to build more and more software. And so I think that's where I see cloud providers like Toast grow and take over over time. And especially because if you look in the four walls of restaurant, whether you're in a food truck or a cafe or a bakery or a full serve restaurant or your enterprise change, often the needs are actually quite similar, which is how do you make this, like restaurants are about operations, workflows, speed, efficiency, you know, seconds matter. And so the software is about, often about like, how do you turn the tables faster?

37:35How you move the line faster? How do you make the kitchen more efficient? Are you making sure there's good governance of people or stealing from you? Like, those are the things that the point of sale does within the restaurant, that doesn't change. And so there's a lot overlap, back to like second strategy, There's a lot overlap, whether there's a restaurant here in London or there's a restaurant in, you know, there's a lot of overlap, 100%. Yeah. But the requirements are different. In terms of like you can't have the same direct outbound model in terms of sales, you need a more self -serve model with SMB, you probably have a light touch customer support.

38:0620 % is not actually the case, are they actually fundamentally different companies? Yeah, I mean, the sales model is definitely different, for sure. The service model, I think, is somewhat different, but there's also often franchise which I can feel a little bit like SMB. But at the end of the day, when did you see the flywheel kick -in on sales efficiency specifically? The flywheel is, I mean, we got going early on, we were getting feeling the ground, getting these partnerships. We were lucky that we found some of these key partners to get us going. And then we started to do some performance marketing, we built inbound marketing, and all those things started to help us.

38:43Then we saw this effect. Actually, this was Jonathan than Vassalore had a revenue who noticed this, which is as you get density, and it's kind of obvious, I guess, in hindsight, but as you get density, because restaurants have a unique business, where every street corner you got like five of them, right? And so we were starting to see this pattern where like you go sell one restaurant on a street and you get all of them. But there's so many that it's like, there's like microfly wheels that you see. Like, and Cambridge Massachusetts, you think toast is maybe the only point to sell. The pattern was actually at a very micro level and a local level.

39:13And so we started to look at this data to say, what are we seeing in terms of these different markets? And we saw this pattern that as you get more restaurants, you get better word of mouth. And you get more referrals, you get more top of phone, you convert better, you grow faster. How does that change your approach then in terms of outbound sales, in terms of all design? Is it focusing hyper -local, building very local teams doing kind of guerrilla marketing on a per -street basis? How does that actually change with that realization? Yeah. One of the challenges is like, how do you play the long game in the short game?

39:42If you were playing a short game, you just hire more and more sales and it's the most successful market to grow even faster because the productivity was some of the best. We were cutting territories and growing faster and our reps were more productive. But they also had to put the foundational teams in all these markets around the country. That's always easier actually than we would be noticed was to actually add maybe more in these markets we were seeing more success in. So you balance the two. But at the end of the day, the more important thing was actually like, can you hire great people? This goes back to scaling companies and this goes back to the processes to actually assess What you're looking for, like, and we have these big three on how you hire now.

40:15How do you onboard? You have an onboarding program. One of the things we do is everyone that joins a company whether you're at IC, a BDR, rep closing deals or a manager, you have to go sell. Like, you're a district manager. It's great that you've managed people before, they're in the running sales team, but you got to go sell toast for a quarter and learn it. For a quarter. Yeah. Why do you want to get a rule of this? It helps you have context when you show up. Then you've got to get out there, too. So they said both, combination of like you've got to get out there with prospects and the customers and you've got to learn some of the basics You don't show up and look foolish because you just you know don't have any expertise or an industry perspective Which is that I felt honestly.

40:52I remember the first year I was just learning so much about this business because we've never worked in restaurants. It's a 12 -views -ort. Yeah, how do you take to IPA? Nine years. Nine years. What was the market cap on IPA? 20 billion. Nine years to 20 billion. You know early on we were like, oh we get this 10 billion ARR or a hundred million ARR that will be amazing. We weren't worried about what it could be or it couldn't be, we're just focused on the customers and building a good business. So we have product expansion, we have segment expansion, and we have geo expansion. Yeah. You're making a much more concerted effort in terms of international expansion, it would seem.

41:24How do you think about build versus buy on international expansion? One of the decisions we made was this point of sale platform is the central nervous system of the restaurant, and there's a lot to it. There's a lot of surface area to our product. where we think about like M &A and where it's worked is often products that are great products with great founders earlier where they can plug it into our go -to -market engine and we drive better sales efficiency for them. Like that's where we've seen success and so when we think about expansion to segments or Gios or products it's been often about that's the one rule that we've kind of stuck to which is the central level system has to be toast.

42:01Given the importance of that POS and being that kind of heartbeat of the, the kind of restaurant itself. Yeah. But actually the acknowledgement that it's incredibly difficult to get people to switch. Yeah. Does it not make sense just to do a roll -up play on international expansion? Get at each individual country, pick up the individuals, and then plug in the ancillary products that none of those guys have, and juice up your arpeggies on that. Yeah. Now, our beliefs are that if we go into these markets and offer the best solution, I know this is hard to switch and all that, but there's plenty of opportunity.

42:30I always liked this expression of like, you know, you've got strong opinions loosely held, like I think, you know, as we grow and scale that might change. So far, that's a spin that these totally got. I've done five M &A's now. I think four. Four. Okay. What's not what that you really learn from? Back to the thesis on the M &A has been, you take great products with great entrepreneurs and you plug it into a go -to -market engine and they can scale faster back to like one of the benefits we've got is we've got this on the ground sales model in these markets, restaurants like to buy for people in person and we've got enough R -Poo that you can actually scale it that way.

43:00And so if they're point solutions of products where you're trying to sell, let's say through E -com or through, you know, inside, those don't scale as quickly. And that's worked quite well. The challenge that I think you have to be careful about is to say, let's say there's a product that's having a lot of success in a segment of the market. Like let's say you have a product that's having a lot of success in the down market or with larger groups. And you say, well, bring a down market into the smaller restaurants and plug it into a what a marketing that's going to work in. What you don't realize is like, well, those restaurant tours don't have the people to do all these specialized things that may help them because you can imagine a restaurant tour is just trying to make sure you get through the day.

43:39Often they're like, I had more of the expressions that I like is like restaurant tours are like in the here and now, they're dealing with right now. And so it's like one of the learnings has been as you add more of the product, but portfolio you got to think through like, Can the your buyer actually absorb it? Right versus if you buy from a solution that serves a different segment of the market, maybe they serve a different segment of the market for a reason. If that makes sense. How much juice can you extract from restaurants? I know that's a horrible statement and it's one of the V .C. But how much revenue can you actually get before you hit the ceiling and go, we go to go to retail?

44:16First of all, I think it's about value creation. I think the monetization follows. It always starts with value creation. This is one piece of advice. It's like everyone should focus on what is the value you're creating. I think often companies get in trouble when they're looking around to say how do we drive our metrics versus the customers metrics. And then back to like the strategy of like how much can you do, it's really hard. But the fundamental question is like how much can you do well, which actually goes back to people always goes back to people. If you've got average talent, you get in the details of why is not working.

44:43There's a million reasons why not the things don't work and you get into this mode of like you're micromanaging. versus bringing great talent and actually they go and figure out a lot of how much can you do and how much can you do well always goes back to people on talent. When we think about all the different variables and all the different ways in which you can grow, as we looked at, and maybe you could argue we're doing too much, but we see opportunity where the platform we serve, the strategy can work in other segments, in other GOs, upmarking enterprise, and we can expand the platform. And the question is, how do you sequence all this in ways that is thoughtful?

45:14And so one line I like is like, you know, you underestimate what you can do over a decade or over estimate what you can do in a year. So this is a long game. Like, it's not about doing all this in one year. It's about a longer -term strategy of like, we're looking how much we did in the first 10 years. Well, how much can you do in the next 10 years? And that's the mindset you've got to have. It's so funny because I have obviously a media business and a venture business. And I say the only thing that matters is knowing that the supply of great guests drives our entire business flywheel. We get great guests in the show.

45:40We have amazing shows. We deliver amazing value to millions of founders. and then more founders will want to take money from us. We make great investments and it'll lead to more great guests in the show. Yeah, makes sense. The only thing that matters is getting you in the hot seat. Yes. But it goes back to the values. Very generous. Thank you. Not at all. I've made many hiring mistakes, dude. What's your biggest hiring mistake? The hiring is hard. And so just building a rigorous process, actually, is really important. And we're still not great at it in Transwringer's Hard because it takes time.

46:08Right? Like you're busy, but like just as a different function. Yes, it does. But I think fundamentally like doing the hard work to say what are you looking for up front the process writing it down? Right being clear about it. Sometimes you don't make the basics are lost like what are you hiring this person for? What are you going to do and being clear about it as a group in the interview process like having a thing Amazon does as well Like writing down your notes like clearly the transcript or what happened in the interview and I think in the interview itself You have to be able to go deep because you live so much time It's hard to go deep and have ask hard questions so many don't know one of the things I've learned is you have to do it even if it's uncomfortable or hard because you have to understand where has this person really dealt with challenges and had to be resilient, what have they done that has been impactful where they were the driver and the bus and not just the passenger.

46:50That's what's really important in the process. Do you have my favorite question to ask on that is what trait do you have that you're most ashamed of but has also contributed to your success? 100%. Yeah, your superpower is also often your kryptonite. What trait do you have that you're slightly ashamed of? Yeah, but it's also like, what should you success? Yeah. What would it be? When I get fixated on something, I can be very annoying and - Oh, Steve told me. Or I can be, you know, passionate in the details and care deeply. So I think there's a fine line often there where you - it's great to be in the details and care and go deep.

47:27But also - Are you a micromanager? I think it just - it depends on the situation. I'm sure there are people who would tell you that I'm not a great manager or that I am a micro -manage and I have to learn along the way. Do you hear a great CEO? I'm learning. I mean, look, I think a lot of this goes back to, we're all on a learning journey. And as long as we, is all of us trying to get better every day, that's the most important thing. More than whether or not I'm good or great or bad, like I think that's what matters. What are you not great at today that you would like to get better at? I think communication and recognizing how important it is to align and inspire a big group is really, really important.

48:01I've always underappreciated that. Where I get the most energy is like solving the problems in the details or coming up with like the strategy of the business and thinking about the competitive landscape and the chessboard. And those things matter. But actually, like if you're managing a team at scale, it's really, really important to make sure everybody understands where you're going and why and why we're making certain decisions and you've got to over communicate a lot of that. And I think that's an area where I absolutely want to get back. You have to over communicate. You also have to create a sense of follow a ship.

48:28Yes. And the reason why you don't have a follow a ship, not you, but leaders in a follow a ship because they don't feel like that was that tick. Yeah, I feel like they're being sold to by politicians, by people hate politicians. Yes. One thing that you're very good at, you're authentic. Yes. You're not selling this animal fucking great CEO already. People buy that. Yeah. At the end of the day, people buy from people. I would say businesses, there's one thing I learned from Chris, like businesses about people. At the end of the day, finally back to like, you know, it's not a business strategy, like, but any strategy you want, but the PowerPoint together and Excel spread together as it says, you know, here's a business model.

48:57It's about the people. And so 100 % likes about bringing great people, great values, complimentary skills, and then being aligned and what matters, having the right tension in the organization where you can work together, but also push each other. Yeah, those things are what magic happens. Final one for you, do a quick far round. I suppose Steve, before sorry, needs is that you have not much tolerance for BS. And you said before, I think it was a humble mindset towards learning or something, was a culture, a cultural value. One of the values is lead with humility. Lead with humility. Yes. Brilliant value.

49:28So values that are good are ones where you could take your opposite side. So it's like for me we work unbelievably hard and you will do the best work of your career. And I believe that more hours leads to more success. A lot of people say it's wrong, strategic work, less hours, balance, go somewhere else. Both strategic and I just think actually brute force most things. Do you go to gym this morning? Yeah, I can't take the opposite side of learn with humility. Is that a good value? Is that not a mistake? I think for us leading with humility is about recognizing that as a leader, you've got to be close to the front line.

50:07That's one way to interpret that value. Back to build a great business, you have to stay close to customers, just go to the people that are actually doing the work. Because things change. Even if you had some perspective from 10 years ago, how things happen? Things change. Not being close to the front lines, you're making important decisions about the future of the business. If you don't have context and perspective and texture and what's going on, you can make a really bad decision. I am pushing you. I'm just wondering if that's still because no one's going to say, oh, I did, because what you were saying there is actually customer proximity drive success or customer facing teams.

50:39In fact, not just customer facing teams, all of the frontline teams, but no one's going to say that not being close to customers drives the excess. So your question is, what is that a good value? Yeah. I mean, I think you can take it to an extreme where you also have to have some level of self confidence because you want to go in and say like hey I've done it and confidence instills confidence and others and so I think it's a balance there of anything but I think overall it is a good value I do think most people as individuals most companies they can get in trouble if they think they know that they're the shit like I think there's a lot of value to just always being balanced and always being grounded but I know it's interesting you said Steve said that I have no tolerance for BS no tolerance yeah I've been told to my face many times that Steve's the fun one Listen, I want to do a quick fight.

51:24So I say a short statement, you give me your immediate thoughts. Does that sound okay? Sounds good. So what's been the most memorable near -daq experience for toast? It was actually pretty early when we were building these QR codes. I said, you know, we were trying to get... We spent a year working on this and we were ready to give up. And that pivot to point of sale, like that was the closest we came to shutting it down. Did you have much money then? Like, we close from where, guys? No, not at all. We were like funding this from the little money we had made from the last company. What four member do you not have that you would love to have?

51:53I mean, I've heard just like great things about Satya, about how he's transformed Microsoft, you know, in terms of building an amazing culture and learning mindset and growth mindset. That's somebody that comes to mind. What was the most memorable first investment? I remember we'd go in a Steve Papa's house. This is like, we went on a new Hampshire. We're driving from Boston, New Hampshire. We put together some slides and sitting down and meeting him. And he looked at this. I remember one of the things he noticed was our spreadsheet had zero graph by a factor of 10 in the meeting. at the end of the meeting, I think he said something like, yeah, I don't really understand restaurants.

52:23And that's all I thought he said. I think at the end of the presentation. Did he commit on this poll? No, no. We had a couple meetings. I think at one point I had to tell him, I was like, look, we've done good work for you. I had a minimum, some will acquire us, even if it doesn't work. What was the hardest round to raise? You know, it's interesting. We've been really fortunate. Like once we got that series B, we grew up in a world of low interest rates and there was a lot of capital in the business, had really good fundamentals. Not to say it was perfect, but had good fundamentals. We hired some great people to surround us that were really good at it, if I'm honest.

52:55So it never felt like we were constrained by capital. What have you changed your mind on in the last 12 months? It's actually interesting you bought up leading with humility. I think one piece of have gotten advice is trust your instincts more. Because I think sometimes you can end up in a world where if you don't trust your instincts, you can move too slowly. What did you not trust your instincts on that you should have done? often the hardest decisions are about people, not about business and strategy. What's your biggest most unorthodox advice for founders listening? This may sound odd, but don't raise too much capital.

53:26I think there's all this perspective, I think we're playing a runway that's healthy, that's good. On the other hand, like, you know, if BC's aren't stupid, they're going to raise too much capital to get diluted early on. Secondly, I think there's a lot to be said about doing more with less. What did you do more with less that really comes to mind? You said earlier about scarcity driving creativity. Is there an example where like we didn't have money and so we did this for us like we didn't have the money to try to do a lot of marketing and get the brand out there You know the creativity we had was to go find all these trade shows and go make sure toast was right next to the biggest provider in the space Tell me what do you know now that you wish you'd known when you founded toast culture values really do matter It really do matter.

54:11They really do matter. And like, spending the time hiring the right people really does matter, especially the leadership levels. If you get caught up in like the here and now and what happens the next deal or you know, someone's once told me like if you're going to prioritize like an interview versus a deal versus let's say, you know, like an internal meeting, you really want to make sure there's one thing you prioritize. It's like the interview because especially early on when you're founding the culture, if you get it wrong, it's hard to change afterwards. It's not easy. We said about BS me so AI.

54:41Yes. Every public company is the only one in AI story. Yes. To what extent is it like a bit of an AI story for public markets versus, this is a genuine innovation. Yeah, it's interesting. I think maybe I'm a little bit skeptical by nature. So I always am trying to figure out why something might not work. I think that's a healthy way to look at things also. And so with the metaverse or with crypto, I always struggled with first principles on like on how this was going to scale in battle and many ways have been wrong. And it's interesting, it felt different because you were seeing like real applications, you know, you can go to the doctor, I went to the doctor recently and like, yeah, I listened to our conversation, figured I want to do it, it worked.

55:21I was pretty impressed. And so you're starting to see like these early signals, I don't know how scalable it might, yeah, I might be where the internet was, pretty bubble, like where like things have to like, you know, which applications take out, we're still trying to figure out. But the fundamental technology, of being able to, especially like things like voice AI is so powerful. You can listen to our conversation, have a conversation. The other thing I think about is like, I want an AI personal assistant. I think that's coming. That can actually, can you think of the internet? What's been amazing is you can do so much, but you have to learn all these interfaces, and it's complex.

55:52I would love to just talk to someone and say, can you get me a table tonight or can you? I have a set change in future restaurants. I think the biggest thing that we're going to see is helping restaurants leverage data to be smarter. Like you think at restaurants today, most restaurants do not have any data or perspective on how to do some very basic things Like how do you price a menu? What do you put on a menu? What's inflation doing? How am I doing it all to my competitors? And so one of the one of the most fundamental things that AI can do is Helping the average restaurant tour be smarter about some very basic things in their business You know most restaurants don't optimize yield.

56:24They don't know how do you maximize the right guests in the tables? You know you think an airline or you think a hotel? They're optimizing yield all the time restaurants don't have no ability to do that That's one opportunity. I think that other opportunities and voice imagine like an adrived through or you go order at the table and imagine the advice and we're not there yet is listening to what's going on and just knows what to do. So I am as we've discovered a massive toast fan. When I think about the future and value creation and we think about toast being a hundred brilliant all the business, what is that pathway to a hundred brilliant all this?

56:57Is it a much deeper partnership integrations in the restaurant vertical, I'm really only more of that wallet. Or is it the expansion much more into retail, hospitality, hotels, and expansion on that segment basis? Paying that part away. Yeah, I think it's a talk about a few things when I talk about the longer term strategy of toast. One, we've got 13 to 14 % share in the US in restaurants, we've got a scale, and be one of the leading providers in the space. That's priority number one. As we've built out this anchor solution to power restaurants, we have the ability to create a lot of value by having a broader platform.

57:34And so doing more for restaurants over time to support the broader ecosystem and more of the stakeholders is an opportunity where we believe we have a right to win and create value for restaurants. Then the platform we've built, we think about all the complexity of hardware and software and network, you know, applies a lot of brick and mortar articles, not just restaurants. And so the same deep approach that we took to say we're going to solve for the needs of restaurants. We've got to do it gradually one by one in other sub -borticals starting to start with food and beverage retail with grocery, convenience stores and gas stations and what you see is in bottle shops What you see in these subcategories is these are also businesses that have complexity that lots of employees There's lots of revenue and so the sales model the service model and the complexity in depth the product really applies And so that's that's a growth opportunity for us and then I think over time You know if you think about upmarking enterprise in international We've got to just be thoughtful about how many markets we can do without falling over.

58:28I think it's all about how do you do it thoughtfully across all these growth factors and how do you sequence it over the next decade versus the next year or two? Do you worry about recessions? What I mean by that is, your business obviously depends on consumer spending and transaction volume in large parts. You have consumer budgets hit and they don't even spend as much. Not as much because if you think about, we went and studied some previous recessions and which you see is restaurants are largely very resilient. People love to go out to eat. And so, yes, they may be some shifting in terms of shifting from FSRs to QSRs, or they might be a little bit of shifting, but it's not dramatic.

59:03One of the things that's great about toast is the value proposition is about efficiency. It's about how do you do more with less? It's how do you turn the tables faster? How do you drive incremental demands through online ordering channels? That's cheaper. The value proposition in some ways is actually stronger when things are more challenging. In fact, one of the things that longer term that we don't talk enough about is the data. As you get to see in today, we've got 100 million plus guests that are dying at toast restaurants. We've got millions of employees working at toast restaurants. We've got hundreds and thousands of suppliers in the toast platform that interact through our supplier and accounting product.

59:36So, the ability to leverage that data to create value for restaurants, I think, is like a big area where we have a lot of potential over time that's underappreciated. You think of McDonald's, right? When what they do for their franchisees is not just about providing tactics about helping them think through what to put in menus itself, about helping them think through how to get the best pricing on their delivery. It's about helping them get marketing in brand. So we think in some ways, like I like that model, about how do we provide our small business restaurants, the ability to leverage the data and the expertise to run a better business.

1:00:14So that's an area that I think we're also thinking about it for the next decade. As I said throughout this, I love the business itself. I'm the biggest vertical saasner. This has been such a joy to do. So thank you so much for joining me. It's been great, Harry. Thank you so much. As you can tell, as such a fan of a toast business, I'm warden incredible journey to the $14 billion market cap today. I want to say thank you to a man for being such a great guest. If you'd like to see the full video, then you can check it out on YouTube by searching for 20VC on YouTube, but before we leave you today.

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