Restaurants Put Software on the Menu

By Alexander Davis

If software is eating the world, then the restaurant industry may be one of its last items on the menu.

While mobile and cloud-based technology has been revolutionizing other economic sectors, operators of bars and restaurants have been relatively slow at adoption. Now they’re busy playing catch-up.

That has proven appetizing to venture capitalists who over the past two years have lined up behind software that helps restaurants manage data surrounding work at the front and back of the house. Products from point-of-sale startups such as Revel Systems Inc., Lightspeed POS Inc., and Square Inc. cover platforms for payments, online ordering, inventory control, sales analytics and even labor productivity.

In the latest sign of venture activity in the segment, Toast Inc. said Tuesday it has closed on $101 million in capital. London-based Generation Investment Management and Lead Edge Capital led the Series C round, with participation by existing investors including Bessemer Ventures.

Customers of Boston-based Toast’s platform can manage and analyze data across most facets of the restaurant operation, including loyalty programs, in-restaurant kiosks for customers. It can also help determine which plates are the best-selling items on the menu.

“Restaurant operators aren’t used to having real-time data right at their fingertips,” said Toast Chief Executive Chris Comparato.

The startup, founded in 2011, says it has more than 50 midsize and large restaurants, including Mexican food chain Costa Vida, pizzeria Pieology and O’Maddy’s Bar & Grille.

Mr. Comparato declined to provide revenue figures but said the company has seen “fantastic growth” over the past year or two.

He said a big factor is the company’s decision to allow Toast’s platform to accommodate partnerships with companies like delivery startup GrubHub and loyalty platform Paytronix.

“We thought of things right out of the gate that pushed the user experience,” Mr. Comparato said, “both for the operator as well as the guest–into one platform.”

He said the Series C round was oversubscribed but declined to comment on Toast’s valuation, which was estimated at $325 million pre-money, according to PitchBook Data Inc.

Toast sells Android-based devices and charges a monthly service subscription to restaurants of all sizes throughout North America.

Several competing point-of-sale systems largely run on iOS for iPad. Revel has raised more than $127 million in outside funding. Oracle ’s Micros and NCR’s Aloha also focus on restaurant point of sale. In 2015 Lightspeed raised $61 million in a Series C round.

In another sign of the tech industry’s hunger for a slice of the hospitality sector, a startup called BentoBox is offering a website-building service that it says was designed specifically for restaurateurs. The company on Monday said it has raised a $4.8 million Series A round, led by Bullpen Capital.