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Narrator

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Guy Raz

Got it. Texting you a link where you can set your proxy voting preference for your Vanguard index funds and be heard by the companies you invest in.

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Aman Narang

We were installing this restaurant and they open and within 20 minutes of taking the first few orders, it's like the system is down. Now they've got a line and we're like physically writing down the order on a piece of paper and dropping it off in the kitchen and taking the credit card number down on paper and trying to do this manually and realize as part of the experience that these systems are mission critical and can't break.

Guy Raz

Welcome to How I Built this, a

Narrator

show about innovators, entrepreneurs, idealists and the stories behind the movements they built.

Guy Raz

I'm Guy Raz and on the show today, how a frustrating wait to pay

Narrator

a dinner bill led to the launch of Toast, one of the most popular point of sale services in the country.

Guy Raz

There are about 700,000 restaurants in the United States.

Narrator

Big chains, tiny neighborhood cafes, family owned diners, fancy tasting menu places. It's a huge market and if you

Guy Raz

could build something that even a fraction of those restaurants needed every day, you'd

Narrator

have a pretty good business. But restaurants are tough customers. Margins are thin, they can't afford downtime. And once they install the software that runs their business, they almost never switch it. For years that software was clunky, it was expensive and really hard to update. And it usually lived on a server

Guy Raz

somewhere inside the restaurant, totally disconnected from the cloud.

Narrator

Most owners hated these systems, but replacing them felt impossible. Which is where today's guest, Aman Narang saw an opportunity.

Guy Raz

The idea began with what else?

Narrator

A frustration.

Guy Raz

A frustration I am sure you've experienced.

Narrator

You finish dinner, you're ready to leave, you're waiting for the check, you finally get the server's attention and then you wait again for your credit card to come back. And that everyday annoyance inspired Aman and his co founders to build an app that would let people pay for their

Guy Raz

meals from their phones. But it didn't work. This was back in 2012, so the

Narrator

technology was a bit clunkier.

Guy Raz

But that failure uncovered a much bigger opportunity.

Narrator

The real problem wasn't just paying the bill. It was the technology running the entire restaurant. Inventory, payroll, scheduling, kitchen operations, online ordering, loyalty programs. None of it worked very well.

Guy Raz

So Aman and his co founders made a bold decision.

Narrator

Instead of building one feature, they'd replace

Guy Raz

the entire operating system for restaurants.

Narrator

They called it Toast.

Guy Raz

And even after the technology started working, they still had to convince skeptical restaurant

Narrator

owners, raise money from investors who wanted nothing to do with restaurants, compete with companies that had been around for decades, and survive.

Guy Raz

Covid.

Narrator

But today, Toast supports nearly one in

Guy Raz

five restaurants in America and generates more than $2 billion in annual revenue. As for a Mondarang, he actually grew

Narrator

up in Nepal and in India and

Guy Raz

moved to the United States with his

Narrator

family when he was a teenager. In 2006, after graduating from MIT with

Guy Raz

a master's degree in computer science, he started working in Boston at a tech company called Endeca.

Aman Narang

Yeah, so Endeca was primarily e commerce, and E commerce search was their core business. So back in the day, like, you know, 25 years ago, if you went and searched, you know, Home Depot or Nike or Disney Store or J. Crew or pick your brand, and you wanted to say, like, show me all of the washers and dryers and this brand and this price range that are available now. And so that was the beginnings. And then they went in and started to build merchandising tools. When I joined Endea in 2006, they'd already had a lot of success in E commerce. And Steve Papa, who was the founder of Endeka, he wanted to build essentially a business intelligence platform because they had a lot of the underlying technology to be able to do that. And so myself and Steve Fredette, who is my co founder, Steve and John are my co founders at Toast. Steve, Fred and I joined a team out of college called Special Operations.

Guy Raz

And you didn't know Steve. He also went to mit. Did you know him from MIT or did you meet him there?

Aman Narang

I met him at Endeca. Yeah, I met him at my first day at Endeca. And we were building this business intelligence, the beginnings of a business intelligence platform. And the reason that's important is we were trying to break new ground with this technology. And so it was almost like a little startup, mini startup within Endeka. And so you got to experience all the failures, actually, the first couple years of Trying to get to product, market fit and had very little success really the first couple years, and kind of saw the grind of that together.

Guy Raz

So. All right, so you're working there and. And I guess while, I mean, while you're there because you joined in 2006 right around the time right before the iPhone comes out.

Aman Narang

Right.

Guy Raz

Which I think has a huge impact on. A good impact, positive impact on the business. And you are involved in sort of building out the mobile side of their product.

Aman Narang

Yeah, we. So when the iPhone came out, we, you know, like, I'm a big believer that you've got these new tech. You know, any. Anytime you got a tech shift like that, you've got to try to lean in and there's so much tailwind. And so we almost quit to go build our own business at the time.

Guy Raz

You and Steve?

Aman Narang

Steve and I almost quit. We. It started off with like, we built these e commerce apps for some local brands like shoebuy.com, which is a Boston brand, and a bunch of other companies who wanted to go mobile. And so we built out their e commerce mobile app. And then we were like, wondering whether we could build a business. Just scaling that, like, there was a bunch of mobile web companies at the time that you could power your mobile experience.

Guy Raz

You were doing this all while you were still at Indiga, all on the side.

Aman Narang

Yep, yep. And we're fortunate that Steve Poppa supported all this. He was okay with it, I think. Yeah. And then Steve Papa. We actually, I remember sitting down in the office with Steve and Steve and saying, we're quit. We're going to go build a business with the iPhone. And they said, what are you going to build? It's like, we're not sure. We have a couple ideas we're exploring. And then he said, well, why don't you build this at Endeca? Because we've got 50% or whatever of the top 100 retailers in the world using our platform and they all want to go mobile. And so you could build Endeka's mobile business. And we did that. And that was the first time, I'd say we had real success because all these retailers wanted to go mobile. And in fact, we were like, limited, not on demand. But even supply, just getting all these apps stood up. And that business ended up being a meaningful part of the revenue. By the time Oracle bought Endeca, which was in, I think, end of 2011,

Guy Raz

2011, Oracle acquires Endegga for about a billion dollars. And you guys have an opportunity presumably to stay there. But I guess this was sort of a sign that maybe. Maybe you should. You should go off on your own.

Aman Narang

Yeah. Steve, actually, to his credit, was like, hey, like, now's the time with the acquisition. It's a good moment to quit. And without even telling me, basically, he just quit. He's like, okay, well, I'm quitting. I don't know if you're going to quit, but I'm definitely quitting to go do this. And then we were talking to John because John was one of the best engineers.

Guy Raz

John Grim.

Aman Narang

John Grimm. Yep. And it's interesting that, like, it was me and Steve initially, and we were trying to convince John to join. He wasn't sure, but then Steve quit, and then John quit. But I didn't quit because I was like, I'm not sure what we're gonna work out.

Guy Raz

You didn't know. You didn't have a. You sort of had rough ideas, but you didn't exactly know what it was gonna be. You were just gonna kind of get together and start to.

Aman Narang

Yeah, yeah, we were exploring. Again, a bunch of ideas, right? Everything from. We had seen, like, there's some local companies, for example, we'd seen. There's a company called Level Up, I think, that was doing some food ordering locally. We had seen what Groupon had done, obviously, we'd seen what Square had done. So we'd seen a bunch of. We had some ideas that in. In, like, the local space, there was some interesting opportunities, but we were looking at all sorts of ideas, frankly. Like, there was a, you know, bunch of things we explored.

Narrator

And did you.

Guy Raz

I mean, you guys were, you know, you're relatively young, you'd been there for five years, but presumably you got a little bit of money when the company was acquired.

Aman Narang

Yeah, we. I mean, we got enough money to, like, put a down payment on a house and just get, you know, have the, like, not have to worry about a salary for a couple years kind of thing.

Guy Raz

So you decide to leave and I guess in December of 2011, so not too long after the acquisition, you guys incorporated what would become Toast. I guess it was initially called, like, Optisystem, but you called it Toast. You changed the name in 2012. But before we get there, tell me about what you start to work on. I mean, you don't have a. You sort of have rough ideas, but you don't know exactly what it's going to be. And I read that you spent about three, four months trying to figure out what it was going to be. So tell me a little bit about what you were doing during that three month period before you came up with the first idea?

Aman Narang

We were doing more of what we were doing, frankly, which is we were exploring what are different ideas that we could credibly go after. And we'd spend time just discussing and debating. And we were still AD and Deck and Oracle, right? So it wasn't like we had to go. There wasn't a ton of pressure to be like, oh, we need to be like, when you haven't quit, it's a little different. Right. When it comes to the pressure. And then once Steve quit, it became a lot more real. And so there was this bar downstairs from where we used to work. This is in Kendall Square in the Boston area. It was called Firebrand Saints. And they had this big patio outside right on Main Street. And, you know, like, on a busy night, you had a lot of folks after work there and, you know, take you 10 plus minutes to get your check, right? And when you just want to leave. And the restaurant also wants to turn that table, because if people actually want

Guy Raz

that table, you have to get the attention of the server and you're like, waiting and. Yeah, everyone's been in that situation. Okay, so you guys are in that situation.

Aman Narang

And so we just looked at each other and said, like, hey, like, should we just build this? Like, should we build an app where you could use your phone to pay? And we didn't, to be honest, in fairness, we didn't know a lot about the restaurant space at the time, short of just going being diners and going out. But, I mean, it's like, the way to think about it is like, imagine today if in an Uber, we went back to a credit card machine and that's how you had to pay.

Guy Raz

Right.

Aman Narang

People would be like, what is this? Right? And I think that option exists even today in restaurants, but which we can discuss. But so we started to build this, which is like, okay, like, what would it take? We convinced Gary. Gary Stark, who, you know, he was in the middle of.

Guy Raz

Gary was the owner of the restaurant Firebrand Saints.

Aman Narang

That's right. Yeah. We joke now that I think he only let us build it because he felt he thought we were a bunch of nerds on, you know, next to MIT's campus. And. And you feel bad for us, but you pitched.

Guy Raz

You basically said to him, hey, if we build this way, this app to make it easy to pay, would you be up for trying it?

Aman Narang

Yes. So we convinced him to give us a shot.

Guy Raz

Okay.

Aman Narang

It wasn't easy, but we did. And then we went about saying, okay, like, how would we go about building it? Yeah, and we debated. You could have built it in mobile web. But we felt like the right way to build it was to build an app that people could download and then put a card on file and pay.

Guy Raz

And so the three of you guys were actually writing the code, building this app.

Aman Narang

Just initially it was Steve and John on this app I started to build once we pivoted to the point of sale.

Guy Raz

Okay, so you start with this app and then how long does it take for this app to be built? Couple months.

Aman Narang

Yeah, a couple months.

Guy Raz

And what does it do?

Aman Narang

So imagine like, you know, you go to the table server, comes up, takes your order. And so the point of sale system is the. It has the data on what's on your check, what have you ordered, or the taxes adding tip. Right. All that data sits in the point of sale. That's why they can print the receipt today that you can sign. Yeah. And so we had to integrate with that. Right. And so the app basically would you identify the table, you would pull that data and then with your card on file, you would pay and adjust the tip. But it was largely the app experience and the integration into the system of record that ran the restaurant.

Guy Raz

Okay, so you have the app and it launches at. You launch it with this restaurant. And I mean, how did it work?

Aman Narang

Well, I remember we had a launch party with our friends and family and we invited them all to firebrand saints and convinced them to download the app and try it. And I think some people got through it, but it was actually quite buggy. I remember because the infrastructure we were building on top of wasn't as reliable. It wasn't built for cloud. These systems are built for in store interactions. And so beyond that first day when we had that launch party, when we got maybe 50 or so people paying, we were never able to figure out how to get users to pay with any sort of velocity after that first day. And we would, I remember we'd go out, Steve went out there a bunch of times and spent time to try to like get people to understand how this works and to download at the restaurant or at the restaurant. Yeah, yeah. But it just, it never really took off. And I think part of it was the experience was just not consumer grade, if I'm honest.

Guy Raz

Okay, just to kind of set this up for a moment because this is my understanding of it and maybe you can fill in the gaps because you alluded to it couple months ago, which is at. This is 2012. Right. At the time, most restaurants had a Point of sale system that was all sort of. It was hardwired into the restaurant. I think it was like Micro and ncr, the two companies that kind of dominated this at the time. And basically what it meant was that you had a PC and you had like literally servers in the restaurant and that was your point of sale system. So, like, if you wanted to get any data about your restaurant, you had to be in the restaurant, inside the system. You could not do that remotely. It was not a cloud based system. Every restaurant was like its own server.

Aman Narang

I think there's a lot of learnings as part of that experience. One was we grossly underappreciated how much these systems did. These systems took orders in the restaurant. And it was different workflows. When you sit down at the table versus you go through counter service versus when you at a bar, when you put a card on file versus a drive through the kitchen had workflows to automate the efficiency of a kitchen. So if you have orders coming in across different stations, you got to bring them together. The prep times are different for a salad versus a steak versus a fried chicken. You had employees that were clocking in. You had schedules. Then there was software and there was hardware because it didn't work on a typical laptop. You had to have hardware with a touch screen that was restaurant grade. And then the other thing that was important was, well, we could have built these systems in the cloud, but the reason they were built with these physical servers is if you've got a busy restaurant that's bustling at 9pm at night and your Internet goes out, you can't at the restaurant stop working. Right.

Guy Raz

And that would literally happen if the Internet stopped or. Right. I mean, or the system, you know, something happened to it. You had to have like tech support come out and fix it.

Aman Narang

Yes. And I think the naive maybe realization that we had was we could make this technology a lot better by moving it to the cloud and by taking advantage of Android hardware, because Android hardware actually is open, which allows for, which allowed us to build our own hardware, which was critical to building something that was durable and could work in a restaurant environment. But we also, I think grossly under appreciated early on what it would take to build these systems.

Guy Raz

So this was not, from what I gather, this was not working. And so, like, was there a period of time where you guys thought, well,

Narrator

we can still make this work?

Guy Raz

Or was it clear pretty early on that this was not going to work? And maybe, you know, maybe you go back to the drawing board or you Try something new or what?

Aman Narang

We were trying to find a way to make it work. And the mindset we had was, was, you know, let's go talk to asmead restaurateurs in the Cambridge area. And it was really hard to get people to really understand the value prop of like, oh, if you could check out faster, it would help you turn on the table faster. That just wasn't enough because you're thinking

Guy Raz

this is a no brainer. But restaurants are not. They're just not that interested in it.

Aman Narang

And even for folks that said yes, one of the other challenges we had was our system was integrated to one point of sale system. There's, I think, a system called Positouch, which is a local, a company out of Rhode Island, I think, if you recall. But there was a long tail of providers. And so the only way we could even make this experience work at scale is to integrate into what felt like over a hundred different systems.

Guy Raz

Because if you couldn't integrate with a particular pos, you couldn't work with that restaurant.

Aman Narang

Exactly. Right, Yep. Because without the integration, there's no way to get the check data.

Guy Raz

So how long before you guys kind of decide to just call it a day on that, on that product?

Aman Narang

So now we're in early 2013.

Guy Raz

Okay.

Aman Narang

This has been about, you know, launched maybe in the fall. And so it's been three or four months of us trying to find a path. And as part of that experience, we got to know a lot of the restaurant tours in Boston and Cambridge. And the one thing we started to realize is like, nobody really liked their point of sale system. And you would hear things like, hey, why can't this be simple like my smartphone? Because they'd gotten used to downloading apps on a phone. And the management of all of this came up. And when we, on the one hand, we couldn't get time of day when we talked about this app, but when we pivoted the conversation to talk about their restaurant technology platform, they'd spent a lot of time with us.

Guy Raz

And just to be clear, the technology platform, it was probably very expensive because it was hardware inside the restaurant, a touchscreen, and that enabled you to ring in orders and then those orders would go to the restaurant, to the kitchen, and then they could see what to make and then you could print the bill on it. And yeah, so typically the way these

Aman Narang

systems worked is they offered a lot out of the box and there's differences across different systems. And one of the things that was really important was that the core data of the menu and what's available and what's in stock and when it's open. And all that data sat in the point of sale system. So it was very central to the entire operation.

Guy Raz

All right, so you're talking to restauranteurs, and they're saying, you know, the thing that really is really annoying is the

Narrator

system that we have.

Guy Raz

It's like, it's bulky, it's complex. And this is getting the sort of the. The gears in your head to start to spin about. Well, maybe that's actually the problem.

Aman Narang

Absolutely. In fact, I remember I had a conversation with the owner of a restaurant called Finale Desserts, Chris Kane. He was one of the first, I'd say, like, full service, like busier restaurants that was open to giving us a shot. And I remember sitting with them and pitching toast. And my pitch was anchored on a few things because these systems are hard to switch, and people describe these switches as like root canals. And so I pitched it as, like, yes, of course we can do all the things you do today, but there are a few things that are unique and better. One, we have these handhelds, so you can take the order and payment at the table. Two, it's got integrated e commerce as online ordering was becoming bigger, so people can discover you and order online, and you get incremental demand. And then three, you know, we talk about how you can access and manage everything from anywhere. And so when we sat down with Chris, he said, it's a good vision, but, like, let me show you, like, what it takes to run this. I think it was like, the location Harvard Square and in the Back Bay, and they had a. A commissary for a lot of their catering. And it's like, well, I've got the point of sale system. I've got a company providing payments. I've got a loan with somebody. I've got the separate software for accounting, separate software for inventory, separate software for online ordering, separate software for gift cards in store and online. I've got a payroll system, a separate scheduling system. And none of these systems talk to each other to the point where this really shocked me. Like, the orders coming in online into the restaurant, this is in 2013, were coming into a fax machine.

Guy Raz

Yep.

Aman Narang

And so we had, as part of that learning, while the potential of making these systems better was there, it was also quite complicated because we had to then go figure out, okay, not only are, what are the pieces we're going to build, but how do we integrate into the ecosystem? And the truth is, like, nobody wanted to integrate with Us because we were nobody. And so we couldn't get these folks on the phone. So we just said to hell with it, let's just try to build as much as we can on our own.

Guy Raz

Just to build basically to replace the

Aman Narang

entire system as much as as we could.

Guy Raz

Yeah.

Aman Narang

One of the other realizations we had was we felt like in order for us to create our niche, we were going to go all in on restaurants because there were a bunch of providers that were building something more horizontal where you could be a restaurant or a coffee shop or a flower shop or pick your small retail business. And we felt like our unique edge because we had gotten a sense of the complexity restaurants were dealing with was to go all in and build a purpose built platform for restaurants. And specifically we wanted to go after these busier restaurants that typically were supported by systems like Micros or NCR or Fuzzy Touch and others. We had to go in and actually support these busier restaurants right from day one.

Narrator

Right.

Guy Raz

Okay. So you have this now very ambitious idea to essentially build a cloud based system that would enable restaurants to do all or most or all of the things that they were doing now, but in a simpler way.

Narrator

How?

Guy Raz

I mean, at this point it's still the three of you and I imagine to actually do this in 2013, you would need a lot more people to start to build this. So let's talk about money. I mean, did you start to raise money at that point?

Aman Narang

We did, we did raise a little bit of money. So I quit in early 2013 and that's when we pivoted from the app to this point of sale. And Steve Papa, who was the founder of Endeka, invested, I think it was 500k to get started.

Guy Raz

He believed in this idea.

Aman Narang

I think he believed in us more than the idea.

Guy Raz

But what about institutional investors? Did you go and pitch people?

Aman Narang

We did. And almost like it's actually it was pretty humbling because we had gotten good introductions, you know, into some great folks. But the feedback we got is along the lines of like one like restaurant tours. Restaurants are a tough business. They got a business they don't buy online.

Guy Raz

Margins are really.

Aman Narang

Yeah, margins are low. Yeah, they're not tech forward. And you're trying to build like, you know, this like platform that's going to take you years to build.

Guy Raz

And also they're looking at giants like Micros and NCR to take them on. Right. Probably seemed like a, you know, a Sisyphean task.

Aman Narang

Yeah. You know, like the reason we had so much conviction is one fundamentally this was a big category and restaurants that hadn't benefited from the cloud, hadn't benefited from Android and mobile. But yeah, I think we also knew that. I knew that Steve and John, and then we brought in a few folks and we just knew we had some great engineers that we had worked with who had experience building systems like this. And I had a lot of confidence that as long as we understood the problem well, we could build it when we come back.

Narrator

In just a moment, Aman and his team build the next iteration of Toast. And then comes the hard part, getting

Guy Raz

restaurants to buy it. Stay with us. I'm Guy Raz and you're listening to how I built this.

Narrator

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Guy Raz

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Narrator

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Guy Raz

Hey, welcome back to How I Built this. I'm Guy raz.

Narrator

So it's 2013 and Aman and his partners have a small pot of money, a handful of engineers, and an idea to launch a point of service payment platform for restaurants. Their next step? Find customers.

Aman Narang

The business development was largely at this point, initially, at least just talking to restaurateurs. It wasn't anything more than that. I mean, we had to figure out some key partnerships, but those were just. But that was the focus to try to see if we could get restaurateurs to try it. And so we had some. I mean, of course there's only so much you can do with seven or eight people. But we got our first customer live in July of 2013.

Guy Raz

And I think you basically, from what I read, to save money, you also didn't get an office, right? You had everybody working. Was that your house?

Aman Narang

We were in my basement, so we. In fact my basement was unfinished when we were trying to figure out office space. I did the math and realized it was a lot cheaper to just put some carpet down and with some drywall. There wasn't even heat down there. This is in Boston. And we just bought a bunch of space heaters and just set up shop. And so we just did that to save money and eventually had 10 people there, I think, at the end and the end of 2013.

Guy Raz

All right, so by July of 2013, you have enough of a product, I guess, to test this out with one or a few restaurants. Walk me through the first restaurant, because I imagine they have a system in there. I'm assuming they're not going to get rid of it right away because they don't know if this is going to work. But it's a big deal to shift from one system to another system entirely and then train everybody on it and to try to do that while still running a restaurant. So how did you convince the first restaurant to do this?

Aman Narang

The first restaurant was Dwell Time and this was in Cambridgeport. And the pitch we made to him was we can build you something that's a lot more restaurant specific than the system he was using. And he was using one of these cloud solutions that weren't purpose built for restaurants. And then I remember we worked really hard for a bunch of months to try to get, get to what we felt like was something ready for production. And I still remember we're getting, installing this restaurant and they open and within 20 minutes of taking the first few orders, it's like the system is down and now they've got a line and we're like physically writing down the order on a piece of paper and dropping it off in the kitchen and taking the credit card number down on paper and trying to do this manually and realize as part of the experience that these systems are mission critical and can't break. So there's a lot of learning just in that first day.

Guy Raz

I mean, obviously you guys would start to work out the kinks, right, and get the technology to be more reliable. But I want to ask about the overall challenge of getting people to adopt this. Right. Because a lot of restaurants were not, obviously they weren't happy with their point

Narrator

of sale systems, but still, like, this was going to be a huge overhaul

Guy Raz

for most of them. Right. So, I mean, did you have restaurants who were like, I don't know if I even want to do this. Like, this is just going to be such a pain?

Aman Narang

Oh, yeah, all the time. You know, we would. I mean, I think I must have pitched Hundreds of restaurant tours in the first couple years and very few said yes. But I think there are a couple things that mattered. One was it's not just existing restaurants, it's also new restaurants that open. And when restaurants open, they've got to do the work anyways to set up something. And our value proposition was instead of spending like for a restaurant like finale for them to go buy a legacy on prem system, you might spend 50 to 100k up front. And so our pitch was very little upfront, sometimes nothing up front. Then we had a SaaS fee and then we had built into the platform capabilities that the staff and the ownership loved. And so we had a few data points and I remember we would code at the restaurants because the best thing you could do is when we got to these early restaurant tours up and running, is to get Steve and John and Tim and others like, you know, actually at location, helping install, helping train, getting feedback, and then improving the software with restaurant tours. I always say that the restaurant tours in Boston helped us build the platform because, you know, we had a hypothesis for what we thought we needed to build. But until we got this up and running with, with customers, that's when the rubber hits the road. And you learned a lot about what was apps actually needed.

Narrator

I'm curious, I mean, from what I

Guy Raz

gather, you very deliberately only focused on initially restaurants in the Boston area. That makes sense. But you didn't want to go. You stayed on the east coast. You didn't want to go to California. I mean, at this time, by 2013, there were, I mean, some competitors. Today Square wasn't, I don't think they were quite doing restaurants or focus on restaurants yet. They were, but small business. Clover, another competitor was starting out as well. Were you very like, did you, did you want to kind of stay under the radar intentionally?

Aman Narang

Well, I think initially it was. We didn't have the capability to get out of Boston. Yeah, because as I said, like a lot of these restaurateurs would buy in person, they needed service in person. Our technology wasn't hardened. And so we had lots of issues. And then we, about six months in, maybe this is like early 2014, we were chatting with Steve Papa, who was the investor. And Steve mentioned to us that one of the customers that we had at Endeca was a company called Gordon Food Service, GFS out of Grand Rapids, Michigan.

Guy Raz

And this is a distributor, right? A food distributor.

Aman Narang

Food distributor, yeah. That's the core business. Yeah. And so we got a meeting with, with GFS through Steve and walked them through the potential of what TOAST could do for restaurateurs in terms of helping them run more efficiently, drive sales, help them drive their sales as a result. And that was a really important partnership for us that helped us get outside of Boston. So we launched in Miami and Chicago, thanks to GFS and their support, and then went from there.

Guy Raz

It's interesting because on the one hand it seems like a huge opportunity, but it's also surprising that there weren't many people doing it.

Narrator

There were though, some.

Guy Raz

And I wonder when you guys found out or learned about some competitors also working in this space, how did it affect how you guys operated? Did it speed you? Did it make you move faster? Did it make you more vigilant? What did it mean for what you guys were doing at Toast?

Aman Narang

Well, when you talk to customers that were using Toast, that further reinforced for me that we were onto something because we didn't have the brand or the distribution or the funding really that some of these startups had. And yet you'd hear them say of the cloud solutions, because some of them had tried a few. Toast was the best one. I'm a big believer, by the way, in like customer obsession and not being too competitor obsessed.

Guy Raz

Yeah.

Aman Narang

And we were already working as hard as we could. You know, we were like all in on this. Like, there was no, you know, the only plan was to make this thing successful. And so we didn't need any motivation to try to work harder or faster. And in fact, the hardest thing was once we got to 100 customers, we actually, and we had this GFS partnership, we actually started to see a lot of interest and we weren't ready to scale. There was lots of things in the way we had built. The company to start was not scalable. An example of that is just I remember one of our early customers in Boston was this restaurant and nightclub. And when we met with the owner, Billy there, he asked me, hey, like, what happens at one in the morning when you've got an outage or an issue? Like, what am I going to do? And I said, look, you know, we're small and scrappy, but we have great 247 support. So he went to the rest, our website, toastab.com and to his credit, he called the phone number and that was a Google voice number because we had six or seven of us. And my phone started ringing in my pocket. And I remember we all kind of by then had realized that, like, we would wait for two or three rings to see if someone else would pick it up because no one really loved picking up this support calls. So on the third ring, I picked it up and I said, I told you, you've got really good 24. 7 support. We'll personally pick up these calls. And they're still a customer. But I think that just speaks to how there's so many examples like that that we weren't ready to set up to scale and make customers successful. And that was the blocker, not the competitive pressures. In fact, no one had cracked the code. And, you know, it was clear that our execution was getting in the way to me, of us actually scaling this company.

Guy Raz

When we come back in just a

Narrator

moment, how a new CEO helps Toast hit its stride and how Covid sends it right back to the startup stage.

Guy Raz

Stay with us. I'm Guy Raz and you're listening to How I Built this.

Narrator

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Guy Raz

Hey, welcome back to How I Built this. I'm Guy Raz.

Narrator

So it's early 2015, about a year and a half after launch, and Daman and his partners have been able to grow Toast to a few hundred customers. But on a day to day basis,

Aman Narang

the business was frankly struggling. On the one hand, there was some customers who were using it and they were happy or at least cheering asan but there were a lot of issues. I remember at one point, all of the hardware we would ship would come back and we had lots of outages and downtime. Our customers were not happy with our support experience. I remember that was one of those times, actually, even more than when we pivoted to point of sale. That was like, in my mind, one of the low points for us because there was actually good signal here that customers wanted what we were building. And in hindsight, it just seems so obvious, like some of the things that we did wrong. But at the time, you know, part of the problem here was like, I was so focused on trying to grow the business and grow revenue that they probably didn't take enough time to step back and to work with Steve to build the systems to scale the capabilities we needed to scale.

Narrator

Right.

Guy Raz

And I think things got to the point where you decided to Bring in a new CEO who could deal with some of these challenges. And this was Chris Comparato, who I guess you knew from your days at Endeka.

Aman Narang

Yeah, we knew Chris through Endeka.

Guy Raz

And so what did that mean for you? Like, how did your job change?

Aman Narang

It actually did not change at all because, you know, when you're smaller and you just try no. 1, we weren't concerned about titles or any of this stuff. We were just concerned about trying to make the company survive.

Guy Raz

Yeah.

Aman Narang

And so we were doing whatever it took. And I was largely focused at the time, even before Chris joined on distribution and getting the partnerships in place and the sales team in place to get the customers, because obviously we had to show revenue growth because we were burning quite a bit of capital. And so I think in many ways our jobs didn't change. But I think one of the first things that Chris did was when we got together was to step back and spend time with us, to try to understand, to articulate to everybody who we are and what we do. There was this maybe a 4,000 square foot office, then a cafeteria where everyone got together and there was someone taking a support call from a customer who was fired up. And Chris is very passionate about customer experience. And our support rep just hung up on the customer because he was unhappy with the way he was being treated. And Chris remembers saying, we need to step back and rethink how we do things here.

Guy Raz

Okay, so you guys are growing. And then you hit a potentially disastrous moment, which is Covid, which had a hugely negative effect in many ways on many restaurants in the United States. And I think, you know, by, you know, because I think by 2020, you guys have raised now, by this point, $400 million. You're at 4, $5 billion valuation, and then within weeks, the country shuts down.

Aman Narang

You know, we. For years between 2015 and 2020, we were this business that was growing over 100%. It was this. This moment where we felt like we're ready to really take off. We had aggressive plans that year. And then I think early April of 2020, we'd gone from this company that was growing like this to maybe revenues down over 90% because restaurants weren't taking payments. And when restaurants aren't open, they can't really pay their software fees. And so we had to make the hard decision to cut. I think it was like 55% of the team. And then also to like, get on a call with the team and explain what's the plan. Now I remember, like, none of us really knew, but the one thing that we knew was we had gotten here by being obsessive over what customers needed. And what our customers told us was they need tools to manage off premise, better off premise sales. That's the beginnings for us of the QR codes. Now you that you see at a table to pay or to scan a QR code to look up menus and order. And I think that period especially, it just felt like the basement stage in terms of just the level of maniacal focus that we had and the speed between we were building because we knew that everything was at stake. I think it was the first time since really 2014 where it was like, oh, this thing could be over. And unlike in 2013 or 14, when it was like, hadn't really ever taken off, we had a business with thousands of employees and tens of thousands of customers at that time. So that was just really tough to

Guy Raz

even fathom coming out of the pandemic. You went public in 2021, and now you're publicly traded stock. And I'm going to fast forward for a moment to 2024 because you actually come back to a. Well, I mean, you had been in an executive position before, but you come back to. You become the CEO.

Aman Narang

Yes.

Guy Raz

So tell me about that. I mean, did it feel like, okay, I mean, probably maybe Chris wanted to move on, but I'm assuming he'd been there for almost 10 years and you felt like, okay, I'm ready to do this now?

Aman Narang

Yeah. I mean, I think Chris had always said to us, I think the words he used were like, this was a tour of duty. And I think one of the things that I remember, someone I trust told me was like, something on the lines of, like, you know, no one's perfect. You're not perfect. There's a lot of blind spots you have that you have to learn. But it's not obvious to me that something from the outside is going to come in and do it better than you, given the context and history you have in this business and the passion you have for this business. And so that got me comfortable to want to step back in. And I also felt like it was a partnership. Like, I never felt like even. One of the things that Chris, I think, did really well is it was always a partnership on the top.

Guy Raz

Yeah.

Aman Narang

And that was important to me heading into this phase as well. So I wanted to make sure that the key people around me were in it for the next talk, next, for the next leg of the journey.

Guy Raz

I think in the last quarter, you guys had reported profitability I think, or maybe it was in 2024. It was in that year, first full year profitability. But in the latest quarter I saw that I think you now are between 15 and 20% of restaurants in the U.S. does that sound about right?

Aman Narang

Small business restaurants over 20%.

Guy Raz

And so you have an opportunity to get to 80, the remaining 80%. And I'm sure there's fierce competition with some of your rivals in the space. What's the unlock? How do you get to those other, you know, the remaining 80%?

Aman Narang

I think it's the first of all, like one of the things that we focused on from day one was these busier restaurants. So even though we have 20 plus percent of the restaurants, we actually have more of the sales volume because the average restaurant that's on toast has more sales than the average restaurant in America. And so one of the things, in fact, our marketing campaign that we just launched was called Build for Busy because the busiest restaurants choose toast because again, we are purpose built for restaurants. We have a tremendous amount of opportunity. Now with AI, we know, for example, that if a guest comes into a restaurant three times, they're more likely to become a regular. And so how do you create the right campaigns to bring those people back? As an example, we launched this product recently called ToastIQ Grow. ToastIQ is the branding behind our AI platform. And customers that have switched to it have seen sales go up 8%. The analogy I like to use is you think about as a McDonald's franchisee, for example, there's a lot they do to set them up for success. And in the restaurant business, a lot of the decisions that are made about how much food to buy, which suppliers to pick, how to price your menu, what marketing to do, how to schedule your staff is not driven by data often. In fact, it's often driven by gut and gut and some data. But I think the opportunity for toast within the restaurant business specifically is to leverage our data across the 20 plus percent of restaurants that are using toast. Help drive better outcomes for these customers.

Guy Raz

Yeah, you know, when you think about where you guys got to, right Here you are 13 years in and I think your market cap is like 15 billion. It's gone up and down, obviously, but it's still, I mean, it's a huge business. Right. And you have really found, you know, a strong position within this category. Where do you, you know, how do you protect the, you know, the moat? I mean, it's a bit of a sort of a cliche question, but I mean, you guys really took on huge players NCR Micros and you know, back in the day where they kind of dominated this business and they may still be involved heavily in the business, but how do you make sure that, you know, you are ahead of, ahead of the curve when it comes to what might come next in this industry?

Aman Narang

Yeah, I'm a big believer in not forgetting where you came from. And one of the things we always push on culturally, internally is what got us here was the hunger, the scrappiness and the customer centricity. I also think for the company on the offensive side, there's a tremendous amount of opportunity to extend beyond what we have done for the first 10 years. So in the past two or three years, we've gone into new markets. We launched in Canada, uk, Dublin, Ireland. We've got a team there in Australia. We've built a product to support retail. Think of grocery stores, convenience stores that have a gas station, liquor stores, hardware stores. We're starting to build out the platform to really support local neighborhoods, not just local restaurants. And so we see a lot of opportunity to actually expand the capabilities we offer while continuing to scale within the restaurant business.

Narrator

When you think about the journey you

Guy Raz

took in, where you were and where you've come to, how much do you attribute to the work you guys put in? How much do you think had to do with luck and timing?

Aman Narang

You know, it's one of the best decisions I made. I remember when we were someone, someone gave me some advice that said, you know, when you think about your, your team, your co founders, try to find people that are good people that have good values because you go through a lot together and, and you need, you need that. And I'm very fortunate in that, whether it's Steve or John or Chris and really a lot of the management team. And so of course a big part of what got us here is the incredible skills that the team had and all the work we put in. But I think there's a lot of luck too. I think had we not raised that capital right before, the COVID may not have survived. Had we launched the business in 2009 versus 2012, we may have tried to build it on iOS, which would have been the wrong call back in 2012 and 13 is when payments were opening up, without which the business model may not have worked. Frankly, Chris joining us at that time was important to helping us scale when we. Things could have gone a lot worse, I think. And so there's a lot of like, and there's so many like this. There's so many breaks that went our way, but it's a combination, I think. You know, the harder you work, the luckier you get.

Guy Raz

That's Aman Narang, co founder and CEO of Toast. By the way, remember the very first restaurant where they got their start, Firebrand Saints in Cambridge? It actually closed down in 2017, but was replaced by another restaurant, a rotisserie chicken place called Scheibert. And when we called them up to

Narrator

ask which payment method they happened to use, they told us Toast.

Guy Raz

Hey, thanks so much for listening to the show this week.

Narrator

Please make sure to click the Follow

Guy Raz

button on your podcast app so you never miss a new episode of the show. And as always, it's free. And if you're interested in insights, ideas and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter@guyraz.com or on substack. This episode was produced by Sam Paulson, with music composed by Ramtin Erabloui.

Narrator

It was edited by Neva Grant with

Guy Raz

research by Casey Herman.

Narrator

Our audio engineer was Kwesi Lee. Our production staff also included. This includes Chris Masini, Alex chung, Karla Estevez, J.C. howard, Katherine Cipher, Kerry Thompson, John Isabella, and Elaine Coates.

Guy Raz

I'm Guy Raz, and you've been listening to How I Built this.