Prior to launching Toast, Inc., Aman Narang and one of the company’s other co-founders, Steve Fredette, honed their enterprise application and business intelligence development skills while working at e-commerce software developer, Endeca. On a regular basis, they would meet at a local restaurant in Cambridge to discuss their ideas for starting their own business and solving retailers’ business challenges. “When the restaurant was busy, we found that it was difficult to pay and leave,” recalls Narang. That’s when the light bulb first went on that they should create an app that would simplify the checkout process.

In 2013, Narang, Fredette and another former Endeca colleague, Jonathan Grimm, started Toast with aspirations of making it big in restaurant mobile payments, and shortly afterwards they landed their first customer, which was a Boston restaurant and pub. But, in Fredette’s words, “It just didn’t work very well.”

Aman Narang, co-founder, Toast

Like so many ISV startups focused on building the next killer app, Narang and company overlooked some factors concerning the viability and scalability of its product within the market they hoped to serve. They decided to abandon their initial app and move on. To their credit, they learned several lessons from their earlier miss and quickly turned things around.

In less than four years, Toast has grown from a few employees to more than 600, and it now has thousands of restaurants throughout the country using its software. DevPro Journal recently caught up with the ISV and learned the key lessons that led to the company’s dramatic turnaround and success.

Lesson #1: Your Target Audience May Have a More Immediate Problem to Fix First

Rather than concluding that restaurants just weren’t ready for mobile payment solutions, Toast used the initial setback to investigate a piece of the puzzle it had initially overlooked – the point of sale (POS) system. “Despite their previous unwillingness to talk about a mobile payments app, restaurant owners would spend hours talking to us about how much they hated their existing POS system,” recalls Fredette. “We learned that restaurant POS systems were difficult to operate and poorly serviced. We also learned that software updates were complicated and time consuming, and required service to be interrupted to perform a system reboot. Plus, if there was an issue with the update, the restaurant would have to pay a hefty fee to bring an IT person on-site to fix the issue.”

After dozens of conversations with distraught restaurant owners and managers, it became clear to Toast’s executive team that before they could sell mobile payment solutions and other add-on software, they would need to build a new POS system from the ground up. The company sought to create an all-in-one system built on a cloud platform that would provide easy access to data and updates while also improving the consumer experience.

Lesson #2: Hone in on The Ideal Prospect That Needs Your Product

Once it made the decision to pivot from mobile payment to POS, the concern shifted to questions like, how could a small company build a POS system that would compete with well-known industry brands like Micros and Aloha? “Another challenge was building a product that could address the various complexities that exist within the range of restaurants – from fast food to fine dining and everything else in between,” says Narang.

While it was no easy undertaking, one of the things Toast had in its favor was that it developed its product on a cloud platform using open standards, which made it easier to adapt to various segments. Another principle Toast followed was finding restaurants that met two criteria: First, the prospect had to have a certain level of scalability on revenue, employee count, and menu complexity. Additionally, a prospect couldn’t be any larger than twice the size of the ISV’s current biggest customer. “Following these principles has enabled us to solve customers’ business challenges without losing our personal touch with customer service,” says Narang.

Lesson #3: You Don’t Have to Figure It All Out on Your Own

Another challenge the startup faced was a lack of experience in the various aspects of bringing a new product to market. Unlike the owners’ previous experience at Endeca, where they were surrounded by sales, marketing, engineers, HR and legal teams, they had to figure out these various roles and responsibilities on their own during the startup phase. In addition to building a playbook for a market that was largely unfamiliar to them, they had to think about how they could build a viable business that could scale from 10 employees to 50 and then from 50 to 500.

One of the moves the founders made early on was recruiting the former CEO of Endeca, Steve Papa, to chair Toast’s board. In addition to founding and building up Endeca, which was sold to Oracle for $1 billion in 2011, Papa has held key roles in redefining technology companies over the last 20 years. He’s been instrumental in helping Toast identify and track the most important KPIs necessary to gauge its success, says Narang. Toast also brought in Chris Comparato a couple of years ago to take the helm as CEO. Comparato has an extensive background in leading high growth SaaS, software, and consulting companies with a focus on customer success and building strong teams. Prior to Toast, he led customer success functions at Acquia (named Inc. 500 #1 fastest growing company) and Endeca.

Lesson #4: Make POS a Strategic Part of Your Customers’ Business

While focusing on a couple of core principles and heeding the advice of business leaders played integral roles in Toast’s exponential growth, it’s the company’s commitment to product improvement that keeps the momentum going, says Narang. “We’re always looking for ways to refine existing features and add new ones,” he says. “The primary focus for any decision, however, is how we can improve the guest experience.”

With these lessons learned and a continual focus on growth — personal and business — Narang is confident Toast is on the right path. Based on the fact that the company was able to raise $101 million in investment capital recently, it’s clear that others in the industry are confident in Toast’s future as well. 

Datacap Systems