Document page
entrepreneurial sectionprinted 09 · PDF 10
42 pagesrevision 9185
printed 09 · PDF 10
Page image rendered from the stored file at 110 dpi; it sharpens as you zoom. Outlines are placed from each region’s stored position on the page (595 × 842 pt).
readable
Source of this text: embedded text layer. The better of the embedded text and OCR is kept.
09
Toast profits from a suicide mission
By: Mustafa Ali Dastgir H1
best engineers were working on something new that Bessemer, which had
previously backed Endeca, would be crazy not to fund. Kent Bennett, who’d
been a junior associate on the Endeca deal, fielded the call. He told Papa there
was some space at the firm’s office in Boston that his people could use. But
Bennett knew he couldn’t get his firm, one of the biggest and most successful
in the venture industry, to write a check to three engineers with an
unspecified project. “I said, ‘Well just send them over here and they can hang
out here until they figure it out,’” Bennett told CNBC, recalling his
conversation with Papa. The three guys and some office space eventually
became Toast, a provider of software and hardware to restaurants that held its
New York Stock Exchange debut on Wednesday, closing the day with a market
cap of over $31 billion. (It’s since slipped to $28 billion.)
The three co-founders Steve Fredette, Aman Narang, and Jonathan Grimm are
billionaires and remain top executives at the company. Fredette, Narang, and
Grimm now collectively have about 2,200 co-workers. They call them Toasters.
Bessemer eventually ended up investing in Toast in 2015, and Bennett joined
the board. Bennett told one of his partners he’d made a “massive mistake”
bypassing. It wasn’t just Bessemer. Venture capitalists wanted nothing to do
with the restaurant industry, where margins are low and budgets notoriously
tight. Toast was born on the other side of the country and a world away. The
founders lived in the Boston area and had no plans to leave. Boston had been a
venture hub in an earlier era, but the momentum had shifted to Silicon Valley,
where all the big exits were taking place. Bessemer has offices in both
locations. Papa said one Bay Area VC indicated an interest in the pitch for
Toast but said he didn’t want to get on a plane. Fredette, Toast’s president, said
the company’s East Coast roots ultimately became an advantage because it
could be “a little unconstrained by the traditional wisdom of grow, grow, and
grow.”
The founders sprinkled in a healthy dose of naiveté. Fredette said they were so
inexperienced with fundraising and business in general that he and Narang,
oast Inc. is a self-made company that was established by three hard-
working engineers. Not long after selling their software company,
Endeca, to Oracle in 2011 for over $1 billion, Steve Papa called
Bessemer Venture Partners with a key insight. He said three of his
T