Welcome to Expedite, a (mostly) weekly newsletter by Kristen Hawley covering what’s important in restaurant technology.
What Makes a Billion Dollar Restaurant Tech Company?
For restaurant- and food-tech watchers, the last few years have burst forth with promise and potential — funding rounds in the hundreds of millions, valuations in the billions, and the promise of world-changing technology with starry eyes.
California-based Zume started as a pizza-making robotics company. Intrigue surrounding the company stemmed from its business model, which used trucks to cook and deliver pizza. Presumably, the pizzas could be made en route to the customer, making it the closest thing to actually sitting at a pizza restaurant eating a pie straight out of the oven. In practice, real life got in the way. Among other issues, according to one report, turns and bumpy roads caused some… cheese integrity problems. Still, its vision of the future helped Zume land a series of large investments, including $375 million from the now-infamous SoftBank Vision Fund. Its valuation climbed to $2.5 billion, and as recently as November, Recode reported rumors of a new valuation of close to $4 billion.
In early January, the company laid off half of its workforce, pivoting from robots to packaging and data. Last week, Bloomberg published a look inside the firings, replete with post-WeWork buzzwords and phrases: comparisons to Tesla and Amazon, a “Masa* says I’m going to change the world,” (secondhand) quote from the CEO, and a flashy one-day party for employees.
So what does make a billion-dollar restaurant tech company? It’s not the robots. Not yet.
Last week, Toast, the restaurant point of sale and operating system, announced a $400 million round of funding at a $4.9 billion valuation, nearly doubling its April 2019 valuation of $2.7 billion. It’s good to be Toast, apparently, as revenue is up over 100 percent last year after it added “tens of thousands” of restaurant customers. According to the company’s press release, the funding will go toward the usual suspects: growing the product in a way that helps restaurants operate more efficiently and effectively, improving the guest experience and removing friction. It also plans to add products that help restaurants access funding if and when they need it.
There’s a lot of value in a solid hardware-software product that serves as an operating system for a restaurant, but there’s also a lot of value in payments processing, and Toast does that, too.
My favorite billions-of-dollars restaurant tech story to tell is DoorDash, which frequent readers of this newsletter will know as I repeatedly share that DoorDash has a $13 billion valuation. But, really! The company has taken over $2 billion in cash, according to CrunchBase, including a $100 million round a few months ago. It has a number of presumably lucrative official partnerships in place with businesses like Walmart and Chipotle. Rumors are swirling of an impending public offering (or direct listing, like Spotify and Slack), but all eyes are on third-party delivery as a business as investors (and restaurants, and diners) balance the ease of convenience, the so-called incremental lifts in business, and all of the questionable business practices that seem to be popping up in the industry.
*Masayoshi Son, founder and CEO of SoftBank.
What else is happening?
Last week I got a little fired up about California’s proposed AB2149. (The “AB” stands for “Assembly Bill.”) According to a press release from Assemblywoman Lorena Gonzalez (the same politician who introduced the controversial AB5 in an effort to regulate the gig economy), the bill would mandate third-party delivery companies share customer data with restaurants and prohibit delivery companies from listing restaurants without their permission. The text of the actual bill, as I can see it, is a little less forceful. Instead, it allows restaurants to request customer data from delivery companies once per calendar year (!) with no mention of other permissions. I asked Gonzalez’s office for clarification, but haven’t received a response. Regardless, this proposed legislation in California, like similar proposals in Rhode Island and New York, addresses small parts of fundamental issues with third parties and independent restaurants. These feel like maybe the first high-profile steps toward some systemic change. The wild card: will consumers adjust their delivery app and restaurant usage once more restrictions and regulations are in place? As a reminder, third-party ordering and delivery isn’t a profitable business, and eventually the subsidies are going to run out. Someone's going to have to foot the bill.
Expedite is produced by Kristen Hawley, a San Francisco-based journalist with over six years of experience covering the restaurant technology industry. Previous iterations of this content were available via Chefs+Tech and Skift Table. Thanks for reading.
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