Software Executive Magazine

OCTOBER/NOVEMBER 2017

Software Executive magazine helps software executives grow their businesses by showcasing the business best practices of our readers, executives from established and innovative software companies.

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or it's voluntary, you have to use every one of those to get better and to refine the profile." Because Toast was cre- ated by a team with strong engineering backgrounds, that department's hiring process was well-structured. Therefore, the company spent more time building its ideal employee profile for various management layers, such as district managers and regional VPs. UNDERSTAND YOUR MARKET DIRECTION Toast had to learn its growth metrics inside and out, in order to pitch investors, and had to keep iterating its hiring profiles in order to rapidly scale. Fredette takes the same hands-on approach to understanding Toast's vertical market. The co-founders didn't come from the restaurant industry. Sure, they liked eating at restau- rants, and they knew restaurants had real pain when it came to technology, but they never claimed to be hos- pitality industry masterminds. So when Fredette sat down to write his 10-year plan for Toast, he made it a point to study up on the history of his industry. Fredette sounds like a seasoned historian when he talks about his market. He can tell you about how modern-day restaurants were products of the French Revolution, the rise of fast casual dining, the food truck movement, and the push toward fresh, sustainable local foods. These ar- en't topics you'd expect to read about in a software com- pany's business plan. Fredette sees it as essential to Toast's mission: "I think our job in the technology industry is to make our customers' jobs easier, simpler, faster, and better. We have an important role in allowing our customers to bring better food to people at a lower price, because we can make a restaurant operate more efficiently. It gives them more time to focus on the food. That, in our own way, will be helping to improve the quality of food that we all eat." Paying close attention to trends in the restaurant space makes Fredette even more excited about the op- portunity he and his co-founders first discovered five years ago. Toast plans to double its headcount again in the next 18 months, which would put it at more than 1,000 employees. Not bad for a chemistry major. S instead of shifting to an integrated solution. The compa- ny also shifted its approach to fundraising and hiring. After the co-founders bootstrapped the company to get it off the ground, Toast needed more cash to grow its idea of developing cutting-edge POS software. Initial reactions from investors were lukewarm. Toast couldn't immediately say how its software was different in a crowded market, but what it did have was traction, an upward sloping growth curve, and the financial help of former Endeca CEO (and current Toast board member) Steve Papa. Remember, Papa was the one who gave the Toast co-founders the green light to pursue their pas- sion for building mobile apps, which they turned into a $10 million revenue stream. Papa took care of the early financing, which was fortunate because Fredette admits the co-founders were never great at pitching investors. His advice to the young co-founders was, "I'm taking care of funding right now, so you can focus on building the company. Focus on building amazing products, serving your customers really well, and hir- ing a good team. Just focus on that." By the time Toast closed its Series B round, the team had refined its pitch and had a much better understanding of the metrics investors wanted to see. The $30 million round was led by Bessemer Venture Partners (investors in Skype, Box, and LinkedIn). Toast's $101 million Series C was led by Lead Edge Capital (investors in Uber and Marketo) and Generation Investment Management (investors in Docu- Sign). That's pretty good company for a team of founders who didn't consider pitching investors one of their strong suits. Fredette says the series C round was more refined because, "We know more about the market, we know more about the competition, we know more about our own exe- cution engine. We've got a better onboarding team, we've got a better screening team, we've got a better hiring team, and we've got a better hiring profile." Speaking of Toast's hiring profile, that has changed, too. Toast's employee count grew about 200 percent be- tween the close of its Series B in January 2016 and the close of its Series C in July 2017. In between, the com- pany learned from hiring mistakes. "If you make a bad hire, or if a hire leaves, whether it's a performance issue "I THINK ANYBODY DOING A STARTUP CAN BE VIEWED AS A LITTLE CRAZY. MY WIFE CERTAINLY THOUGHT I WAS CRAZY. I SAT ON A COUCH AND WORKED FOR SIX TO NINE MONTHS. EVERY DAY SHE'D COME HOME AND GO, 'WHY DON'T YOU GET A JOB? WHAT ARE YOU DOING ALL DAY?'" S T E V E F R E D E T T E President & Co-Founder, Toast, Inc. 27 SOFTWAREEXECUTIVEMAG.COM OCTOBER/NOVEMBER 2017

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