Toast’s three co-founders join billionaire ranks after IPO
Toast’s surge beyond $ 30 billion in market cap when it debuted on Wednesday turned its three co-founders into billionaires.
Steve Fredette, Aman Narang and Jonathan Grimm started the company in 2012 after their former employer, Endeca, was sold to Oracle for $ 1 billion. They stayed at home in Cambridge, Massachusetts, where Endeca was based, and built their restaurant hardware and software system by testing products in local bars, restaurants and cafes.
Fredette, president of Toast, owns 33.2 million shares, for a stake worth $ 2.1 billion at Wednesday’s close. Grimm, the company‘s chief technology officer, controls 26.8 million shares, worth $ 1.7 billion, while Narang, the chief operating officer, owns 24.6 million shares, for a stake valued at just over $ 1.5 billion.
Toast, Inc. IPO on the New York Stock Exchange on September 22, 2021.
The three founders and other insiders are not allowed to sell shares for 180 days under the foreclosure deal, so the value of their holdings could rise or fall significantly by the time they can start cashing in.
But based on the first share price on Wednesday, the trio join a growing list of tech executives and founders who are seeing their net worth rising in a booming year for IPOs and tech valuations in expansion. The founders of Coinbase, UiPath, Roblox and Robinhood are among others who joined the three-comma club in 2021. At least 19 tech companies that went public this year are now worth at least $ 10 billion, according to FactSet.
Full circle to mobile payments
Toast’s original product almost a decade ago focused on mobile payments, allowing consumers to pay for their meals from their devices. However, point of sale systems in restaurants made integrations difficult, if not impossible, during this time.
To make real progress in an industry with low margins and tight budgets, Toast decided they needed to rebuild the entire technology stack, including all the hardware and software restaurants use to run their operations.
The founders also sought more experienced help from their Endeca network, hiring Chris Comparato as CEO. He was previously Executive Vice President at Endeca and then spent over two years managing customer success at Acquia. Comparato’s stake in Toast jumped to over $ 700 million on Wednesday.
By the time Comparato joined, Toast had made a critical decision that seemed risky at the time but proved critical in the long run.
Some payment startups were using iPads as cash registers, but Toast chose to rely on Android, even though the technology was clearly inferior.
âIn the beginning, iOS was the best platform,â Fredette said in an interview with the New York Stock Exchange on Wednesday. “The devices were more expensive and of better quality.”
But as sleek as iPads look and feel, Toast recognized a number of potential issues if they followed the Apple route. Most importantly, Apple’s system is locked down – it owns all the hardware and software. As a third-party developer, the best Toast can do is build a killer app.
Android’s technology, although plagued by buggy software and frequent updates, was completely open source. This meant that Toast could design their own hardware and go deeper into the software, using a core operating system that Google created but no one was really in control of. This has given Toast immense flexibility to meet customer demand.
âOver time, as we grew, we were able to go directly to manufacturers to build whatever we needed for the industry,â said Fredette.
The company’s offerings, which include a full point-of-sale terminal, portable server devices, and mobile ordering and payment software used by consumers, are now deployed by 29,000 customers in 48,000 restaurants.
Over the past year, consumers have become much more familiar with Toast – for reasons the founders never could have predicted.
Covid-19 initially hammered the business, which relies almost entirely on a thriving restaurant industry. But as restaurants grappled with pandemic restrictions and tried to find ways to satisfy consumer demand for takeout options and contactless ordering, Toast presented itself with a suite of options that most Upscale restaurants had never considered.
One of the most popular products has been mobile ordering, which consumers use from their devices to bypass physical menus and pay automatically without waiting for a check. That’s exactly what the company wanted to do eight years ago, when the technology was far from ready.
âWe definitely see it as something that has come full circle,â Narang said on Wednesday. “It’s amazing to see some of the growth.”
LOOK: Toast goes public with a valuation of $ 20 billion