BOSTON–(BUSINESS WIRE)–Toast, the fastest-growing restaurant management platform in North America, announced today it raised $250 million in Series E funding at a $2.7 billion valuation led by TCV and Tiger Global Management along with participation from existing investors including Bessemer Venture Partners, Lead Edge Capital and funds and accounts managed by T. Rowe Price Associates, Inc. Following a period of tremendous growth – during which revenue increased 148 percent in 2018 – this fundraise establishes Toast as the leading restaurant management platform for restaurants of all sizes.
“At TCV, we invest in companies that have the potential to reshape entire industries. By providing restaurants of all sizes with access to innovative technology, Toast is leveling the playing field and leading the industry’s transition to the cloud,” said David Yuan, general partner at TCV. “Our investment will enable Toast to extend their platform beyond point-of-sale and guest-facing technology, and in doing so, create a powerful SaaS platform with a superlative business model. We’re excited to partner with Toast as they accelerate the growth of the community they serve.” TCV invested in some of the largest franchises in technology including ExactTarget, Facebook, Netflix, and Spotify; David Yuan will join Toast’s board of directors.
During the past year, the number of restaurants that selected Toast more than doubled as globally acclaimed brands like José Andrés’ ThinkFoodGroup and Tartine Bakery chose Toast in addition to high-growth concepts like Joe Coffee Company, Eggs Up Grill, JACKS Urban Eats, and The County Line.
“Last year we celebrated the five year anniversary of our first Toast customer, Barismo. Now with tens of thousands of restaurants powered by Toast – and nearly 1,500 employees serving our community – it’s impressive to see how far we’ve come,” said Chris Comparato, CEO of Toast. “At our core, we believe every restaurant should benefit from the massive investment we continue to make in restaurant technology.”
Leading the Industry’s Transition to the Cloud
Toast will invest over $1 billion in research and development — over the next five years — to continue building software and hardware designed specifically for the restaurant industry. The Series E investment will enable Toast to help solve some of the industry’s most pressing challenges:
Attracting, engaging, and retaining guests:Today, guests spend tens of billions of dollars at restaurants powered by Toast. Restaurants like SuViche already use solutions like Toast Go™ and Toast Guest Feedback to accelerate speed of service by up to 40 percent, increase revenue, and capture guest feedback in real-time. New guest marketing capabilities planned for 2019 will enable restaurateurs to deliver highly personalized offers and campaigns triggered by guest behavior.
Recruiting and retaining talent:Restaurants using Toast Point of Sale already benefit from higher sales, increased tips, and lower staff turnover. For example, with Toast Guest Facing Display, Broad Street Baking saw staff turnover significantly decrease as tips increased by 58 percent. New products planned for this year will simplify back-office operations and arm restaurateurs with tools to recruit, hire, and retain talent in a competitive labor market.
Improving operations and increasing profitability:Today, the Toast Platform processes over 2,500 requests per second across tens of thousands of restaurants. Through Toast Reporting and Analytics, restaurateurs can monitor the performance of their business in real-time –on any device — so they can run their business from anywhere. Investments planned in 2019 will provide restaurants with access to new reporting capabilities and insights.
Jeffrey Pandolfino, the owner of Green & Tonic, a five-location café in Connecticut, shared how Toast’s focus on the restaurant industry impacted his business: “As we outgrew our legacy point-of-sale-system, we needed a cloud-based platform to build our business on,” said Pandolfino. “With Toast, we’re not only processing orders faster, but we’ve also seen aspects of our business like catering and delivery grow by more than 50 percent.”
Recruiting Top Talent to Serve the Toast Community
In 2019, Toast significantly extended its presence with on-the-ground employees across the U.S. – in addition to engineering teams in Dublin, Ireland – by recruiting from the software, financial technology, and food & beverage industries. Funding from this latest investment will enable Toast to accelerate hiring across research and development, customer success, sales, and marketing to better serve the restaurant community. Interested candidates may find additional information on Toast career opportunities here.
Restaurant owners and operators can learn more about Toast and schedule a personalized demo here.
Launched in 2013, Toast powers successful restaurants of all sizes with a technology platform that combines restaurant POS, front of house, back of house and guest-facing technology with a diverse marketplace of third-party applications. By pairing technology with an unrivaled commitment to customer success, Toast helps restaurants streamline operations, increase revenue and deliver amazing guest experiences. Toast was named to the 2019 Forbes Fintech 50, 2019 SXSW Interactive Innovation Finals, 2018 Forbes Cloud 100, and recognized as the third fastest-growing technology company in North America on the 2017 Deloitte Fast 500. Learn more at www.toasttab.com.
McCarty and his partners built an innovative software company that transformed
the quality standards movement. Glenn recently sat down with TCV General
Venkatachalam to talk about the early days of the company and
deciding to sell it 25 years later. He also shares advice for founder CEOs of
technology companies looking to scale their business and what to expect if they
decide to go down the private equity path. Key topics include:
ETQ’s origins and early pivots
How to assess your buyout options and find the right partners
Preparing for success in the due diligence process
How to bring your team on board
The Early Days…
Kapil Venkatachalam: How would you describe
what ETQ does?
Glenn McCarty: Most people today know ETQ
as a provider of a quality management software platform that automates the
process of organizing operating data for managing compliance and quality
improvement across a variety of industries, including automotive, healthcare,
pharma, energy, food and beverage, and chemicals. It’s designed to layer onto a
company’s existing processes while opening up much better visibility into
opportunities for increasing quality and competitive advantage.
Kapil Venkatachalam:I’d love to hear more about the roots of
the company…the cocktail-napkin story. As I understand it, you were a consultant
rather than a technologist when you launched ETQ.
Glenn McCarty: Technically, I was an
auditor. In the 1980s the U.S. had gotten behind the curve for manufacturing
quality. The rest of the world was pushing ahead with ISO 9000, an
international standard for improving manufacturing processes, as a way to
improve product quality. It was becoming hard for U.S. companies to sell
products in Europe and Asia that didn’t come from factories with ISO 9000
Kapil Venkatachalam: How did this lead to
the formation of ETQ?
Glenn McCarty: I was working as a
quality engineer for Underwriters Laboratories in the U.S., and I was getting bored
with testing hairdryers. ISO 9000 was the big international trend in
manufacturing at the time. So I joined a group that was doing ISO 9000 audits.
giving failing grades to tons of manufacturers, because their processes just
didn’t measure up to the standard. We would get together with other auditors
after work and feel terrible. I was a 20-something quality auditor sitting in a
boardroom of a large company and telling the executive team all the quality issues
Kapil Venkatachalam: Did you see the vision for ETQ
given the demand and had it figured out from that point on?
even close. We started a consulting firm, because we saw that the big
accounting/consulting firms did not offer services to address ISO 9000. So we
pioneered that market. The thing is, we were able to help a lot of companies
achieve ISO 9000 certification, but then they struggled to maintain it. American
manufacturing was heavily oriented toward inspections and testing, while ISO
9000 focuses much more on process management with continuous improvement.
Pivoting to Software
Venkatachalam: What led you to
pivot from consulting to software?
McCarty: Two things. First, we knew from our auditing and
consulting experience that every company was different. They really valued the
processes they had developed to become successful, but there was so much
variation from company to company. While consulting was a great business that
filled a need, it was not scalable — we had to start over with every company
to learn their business. The other issue was that to maintain ISO 9000, U.S.
companies had to collect tons more information about their processes than they
were ever used to and capable of. It was a serious data management problem.
Venkatachalam: And this was decades before what we now call the “digital
McCarty: Exactly. No one was offering software focused
in this area.
Kapil Venkatachalam: What did you initially
envision for the product?
Glenn McCarty: We knew there was a need
for something more versatile than the document management systems of the time,
which had some nascent workflow capabilities. Companies needed real
workflow-based systems to lead their operating personnel through the process, track/capture
their process data, to capture their decisions. So we decided to develop
technology to track everything: all the
training records, audit findings, document approvals and revisions, different
corrective actions or non-conformances that went on in a factory.
When we made
the software, the first epiphany was that we had to develop software that could
be configurable, not customizable. And it all came from our auditing/consulting
days, knowing that companies have distinct processes. They had to be able to
layer the software over their own processes.
Assessing the Private Equity Route
Kapil Venkatachalam: When did you start
thinking about an exit? What drove that decision?
Glenn McCarty: Things were going well
for us, growth was high, and the profits were great relatively speaking to
where we came from – we started in a basement. And we said, “Let’s
continue growing this, we can do this.” We kept our heads down and kept
hitting our targets. As a founder, you think there are no limits to growth. And
while I still believe that’s true, I began to realize that home-grown leadership
had its limitations. That’s simply reality. I began to wonder what was out
Kapil Venkatachalam: How did you put that realization into action?
Glenn McCarty: The truth is, we used to get letters from
various companies saying they were interested in investing in us or acquiring
us. We didn’t even respond to them. Then one of our competitors was bought by a
large company. I called that company up and said, “Hey, why did you buy our
competitor? We’re stronger than them, we’re bigger than them, we’re better than
them.” They said, “Well, you wouldn’t talk to us.” That’s when we
started to explore our options to bring on a partner.
Kapil Venkatachalam:Did you have a framework to evaluate
Glenn McCarty: We didn’t have much of a
framework, but we did have some goals. The main goal was to maximize the value
and the potential of the business. That, for us, meant we wanted two things in
our partner. One was keeping ETQ intact as a business. We had seen scenarios where
competitors were bought by a platform company and integrated into another model.
We didn’t want that. The other key aspect for the partner was to bring a lot
more than money. To maximize the value and potential of the business, we needed
a partner with domain expertise, someone who could understand what we built and
take it to the next level.
Kapil Venkatachalam:What about a good fit in terms of culture?
Glenn McCarty: Really important.
Working with like-minded people, who see things the way you do, makes
everything easier. That realization came quickly, after we began meeting with
potential investors. A lot of them had their standard approach, and we were
supposed to just fit into it. For example, there were the folks that said,
“When we buy you, we’ll keep you folks as the executive management team.
We want to come to board meetings and have you report to us on how great you’re
Kapil Venkatachalam:Was that appealing?
Glenn McCarty: When we asked, “How are you going to help
us with our products, with sales and marketing?” they said, “Well, we know
people.” And I said, “No, that’s not going to work.” Then we had other
people say, “We’re going to send you back to “school.” You’re going to
have to do this our way.”
engineer and went to many years of school before I graduated. The last thing I
wanted was to change everything we had built and stood for. What we were
hearing was either status quo or a reeducation program, but our main goal was
to maximize value and potential. We
recognized that we needed a partner who offered value creation via a true
partnership. Once that came into focus
our next steps became clear. I would
advise founders to seek a partner who can think about your business and your
goals the way you do and bring in improvement and new sources of value. Because
you’re going to be talking about that value, and working on that, side by side,
for months to come.
Kapil Venkatachalam:Once you knew what type of partner could offer
the right fit in terms of your objectives and culture, you headed into the
private equity journey. In hindsight, what lessons would you offer to other
people who are thinking about taking this journey?
Glenn McCarty: In retrospect, the most
important thing is to prepare. Like everything else in life, luck favors the
people who are ready for it. You have to think ahead about what buyers want, so
you don’t wind up doing fire drills down the line because you weren’t prepared.
You want to show them a smooth-running business with a ton of potential.
Kapil Venkatachalam:What are the keys to good preparation?
Glenn McCarty: I would say there are two things. First,
surround yourself with good advisors. You are not in the business of selling companies,
so get people who are experienced. Your cousin, your sole proprietary
accountant or lawyer, the people on your softball team might say he or she can
advise you, but it’s unlikely. The reason it’s unlikely is, if they were
experts in buying and selling companies then they would be doing that for a
living. You don’t ask your CFO to write code, because that’s not what she/he
Kapil Venkatachalam:Also, no one expert or firm is going to
be the best at everything.
Glenn McCarty: That’s right, you want experts in each area of
financials, taxes, legal, and so on. And this gets us to the other big thing
about preparation: you have to get your management team ready. In most cases,
they are going to be the ones working with your expert advisors, and then with
the experts from the acquiring company. As the CEO you are relying on your
management team to raise the bar to meet the due diligence level. You need to
make sure that the right people on your team are aware of what’s coming their
way and connect them with the right coaches, so they can be prepared in terms
of their time, their systems, and whatever information they are going to have
Kapil Venkatachalam:What are some of the points you might
use to differentiate buyers?
Glenn McCarty: You want to know how many founder-owned
companies the potential partner has acquired in the past. How many of those
companies did the buyer scale up successfully? What is their expertise in sales
and marketing or product development? How many other companies in their
portfolio could become customers or business partners for you? You want to know
all these things, because the potential buyers are doing exactly the same
analysis of your company.
Kapil Venkatachalam:Let’s dig a little deeper here and talk
through the different areas of preparation for the due diligence process.
Glenn McCarty: The first thing to realize is that it’s going
to be time-consuming. It’s easy to think that you already have your house in
order, because your business is humming along. But the buyers have a completely
different perspective. They will require you to participate in a due diligence
process to demonstrate your companies past and future potential.
Kapil Venkatachalam:Explain why financial systems matter,
along with the numbers.
Glenn McCarty: In hindsight, while you might think the world
of your business and its strategic value, at the end of the day the objective
measures of success are financial. If you think you are headed for private
equity, you may want to invest in better financial systems first. If you do not
have a CFO, you might want to seriously consider bringing one on even though
you only have one to three years to go before exiting. One of the benefits is that your financial
advisors won’t have to work so hard to explain your financials. They are going
to spend some time at this no matter what, but better systems speed it up.
Kapil Venkatachalam:Many founders are aware of the need for
strong financials, but they are surprised by the amount of purely legal work
that also has to get done.
Glenn McCarty: We had not realized that our contracts with
customers and suppliers would be scrutinized. You have to prepare an amazing
number of documents for a transaction. So yes, you need good legal advice and
some leverage for document creation, and it should be from a firm that
specializes in the type of transaction you are doing. Even with support from an
outside legal firm, your General Counsel will be spending a huge amount of time
on a transaction, so you have to make plans for them to continue with the
business operations while the transaction process is in play.
Kapil Venkatachalam:So now you have your advisors lined up.
They’re all experts. But the people on your team may not be experienced in the
process ahead. What do you tell them? How do you prepare them?
Glenn McCarty: First, it’s important to understand the
implications of what you are asking. In our case, we had a lot of long-term
employees who had worked their way into senior management, so they had never
seen this process somewhere else. In that situation, you have to ease them into
the whole idea, bring them into your thinking, and get them aligned before you
start explaining what they’re going to have to do.
Kapil Venkatachalam:Is this an area where you can get
Glenn McCarty: I think you have to get them involved, because
they know the drill and probably most of your team doesn’t. They can provide
education about the process before it starts and coaching all the way through
it. You need this because the same employees you are asking to help you sell
the company are also running it. No matter how you look at it, this is an ask
that is an additional task to their day job. The danger of distraction is
there. You need your team to be on top of the due diligence process, while also
making sure the ship doesn’t lose speed or direction.
Kapil Venkatachalam:That’s great, thanks, Glenn. My final
question is about the takeaways for founders who may be looking at these
options. What’s your advice in a nutshell?
Glenn McCarty: Private equity firms provide an interesting
alternative to help you maximize the potential of what you have already built.
That said, you have to take the time to find the right firm for you – whose
values, experience, and vision are aligned with yours. As we discussed earlier,
you have to prepare your team for the journey before you lead them on it. And
finally, recognize the value of good advisors. They are worth the money because
they bring you the right partners and prepare you for a successful partnership.
Selling your business is both exhausting and exhilarating, and I am grateful
for all the support I received.
Kapil Venkatachalam:Thanks so much, Glenn.
The views and opinions
expressed in the transcript above are those of the speakers and do not
necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). This
transcript is not an offer to sell or the solicitation of an offer to purchase
an interest in any private fund managed or sponsored by TCV or any of the
securities of any company discussed. TCV has not verified the accuracy of
any statements by the speakers and disclaims any responsibility
therefor. The TCV portfolio companies identified above, if any, are not
necessarily representative of all TCV investments, and no assumption should be
made that the investments identified were or will be profitable. For a complete
list of TCV investments, please visit www.tcv.com/all-companies/. For additional important
disclaimers regarding this document, please see “Informational Purposes Only” in
Check out Harry Stebbing’s latest podcast with TCV General Partner Woody Marshall.
Companies that scale quickly share many of the same problems. Institutional knowledge becomes fragmented or lost as people leave. Decision-making authority changes or becomes opaque. New cultural norms are developed. Personality conflicts arise as the old guard and new guard merge. Collaboration becomes even more essential, because almost everyone is involved in creating new functions and establishing new processes.
But if the conditions during scaling are similar, the results vary widely. Some companies thrive through it, while others struggle. I’ve seen both in my career, working at Pinterest, Facebook, and other startups, and cultural differences don’t explain it. Leadership does. There is universality to the qualities exhibited by the best leaders at successful companies. If you’re hiring or promoting from within during a period of high growth, these are the qualities that you can and should identify. Leaders with these qualities naturally maintain momentum, exceed their objectives, develop and attract top talent, and amplify the best aspects of your culture. They are best suited to thrive on constant change and they are instrumental in driving success for the organization. Colloquially, they are the 10Xers.
From my own personal experiences leading teams through scale at Pinterest, Facebook, and other startups, I’ve identified a set of three attributes to consider when vetting leaders during the hiring or promotion process:
Leaders That Scale Take A Position…
What is it: Leaders who can scale companies successfully know how to take a position. I know it sounds simple, but not everyone can do it – especially during times of pressure. A position is an informed stance amid a swirl of uncertainty, which galvanizes others to understand it, respond to it, and imagine how it would work. As such, it speeds the organization toward decisions and action.
Why is it Important: A position is not an opinion, because everyone has plenty of those. A position is also not a point of view because again, everyone has a perspective from which they view the world. A position is a singular proposal for addressing a particular issue. In taking a position, you may actually diverge from your own opinion or perspective, in order to take a position that’s more provocative and therefore more productive. Taking a position creates urgency and gets the conversation moving toward an agreement on next steps.
This is critical because as organizations grow, people can get stuck in paralysis by analysis. They’re not sure of their status yet. They may be afraid of making the wrong decision, or making the right decision, but in the wrong way for the culture they find themselves in.
Leaders who take a position dissolve all this. Though it may sound like a paradox, taking a strong position at the outset of a meeting is a unifying force, not a divider. Everyone else now shares the same task: testing the position, modifying it, figuring out whether and how it would work. It’s easy to focus because a hodgepodge of opinions and questions has been replaced by a proposed solution. Even if the stance is only a straw man, it sparks a productive conversation. And if the position becomes a North Star that everyone can navigate by, you’ve just taken a great leap forward.
How to Hire or Promote for it: First of all, you want candidates with a wide range of knowledge and interests, not superficially, but down to details. These people tend to be polymaths. They are familiar with a wide range of fields, technologies, cultures, and customers, and they can see the big picture intuitively. They can also explain it from multiple angles. They love to share their data or historical knowledge if it will enlighten or empower others. Typically, they can formulate their position as they walk into a room, because that’s how their minds work: synthesizing many factors into one proposition and pitching that proposition at the right level for others to understand and react to.
During the interview pick a big hairy sector, such as transportation or education, and ask the candidate “How do you think this sector will change in 10 years? In 50 years?” Ask about the candidate’s hobbies, pick the one you’re most familiar with, and ask the candidate to talk about it at length; you’re looking for what it says about them, their passion, and their personality. What was the last book they read? What is the next book they want to read? Do they play a musical instrument or a sport? Ask them to analyze the strategy of the organization they’re working for now, both pro and con, to see how many different perspectives they incorporate into their analysis.
Leaders Don’t Get Stuck On A Position…
What is it: The second trait for leaders who scale is effortlessly moving off their own positions when the time is right. They do this because they understand that the position is a means to an end. If you’re familiar with the expression “strong opinions weakly held,” you understand this trait already. In many ways, it’s the flip side of the first trait. Strong opinions weakly held means that leaders readily evolve their positions in the face of new information or through an ability to read a room. They understand that a stronger position is forming – and this was the reason for taking a position in the first place.
Why is it Important: Why does this matter for scaling an organization? Because you need everyone to share their ideas, even if they’re shy. Being inclusive of thought accomplishes this. It also draws out sharper analysis from bolder or more informed members, because they trust that they’re not going to hit a wall if they voice partial or even complete disagreement with a leader’s opinion. Getting to a new, better, shared position makes everyone feel connected to the outcome. Now it’s time for action.
How to Hire or Promote for it: Testing for the ability to gracefully move off a position can be fun for you and the candidate. Before the interview, pose a real-world business problem within an area where you have lots of data but there are many ways to solve the problem. For example, if you’re at a ride-sharing company you could ask “How would you build a driver loyalty program?” Once the candidate states a position in the interview, begin to challenge it constructively, as if you were colleagues in a meeting. Probe for the thinking behind it. Share new data and see how they change their position. You’re not just looking to see if they’re open to revisiting their conclusions. You also want to see if they can continue to effectively articulate their position in the face of resistance — without getting stuck on it.
Leaders Embrace the Outcome…and Adapt Appropriately
What is it: Unless you’re the CEO you don’t get to make the final decision most of the time. That’s when leaders need to have a third critical trait: they embrace the outcome of the conversation that just concluded. If the board decides to cut marketing hiring by 50%, the leader of the marketing department could respond in a variety of ways. The one you want is understanding and expressing the consequences of that decision to the department, in a constructive way.
Why is it Important: Psychologically, this leader has an innate ability to assume best intent. If a management decision goes against such individuals, or their organizations, they don’t take it personally. Quite the opposite, they default to a position that the people above them or around them share a vision for success and that the decision was necessary. Today is not forever, and marketing will be hiring again in the future. The focus now is making the current strategy succeed, rapidly. A good leader will take a positive, proactive position on how to do that.
This natural aptitude is an invisible bulwark against confusion and fatigue during times of rapid change and growth. Why? Because leaders with this trait are consistent in message, countenance, and style. When the environment is constantly changing, people look to their leaders. If the leaders are showing up as constructively positive in good times and bad, their teams will adapt a similar penchant for consistency and there will be fewer productivity troughs.
How to Hire or Promote for it: There are two approaches that can help you identify candidates who will naturally embrace an outcome, turn it positive, and lead their team to success with it. The first approach is to ask the individual to describe a time they disagreed with a boss or peer, and how they responded. You’re not looking for surface answers like “Of course I had to go along” or “I won.” You’re looking for the ways the candidate turned the adversity into opportunity – graciously.
The second approach is to actually put the candidate through adversity as part of the hiring process. If you gave them a homework assignment before the interview, change the terms before they can present their work. Substitute in an interviewer they didn’t expect to talk with. Pick something on their resume that could potentially be a deal-breaker and ask them to reframe it into a deal-maker instead. Again, you’re not looking for pat answers. You’re looking for the natural inclination to embrace what’s happening and turn it positive.
The Most Important Deliverable You Have
In my own career I came to realize that vetting for and then fostering leadership attributes on my teams was more important than any other deliverable I had. I am also aware that this knowledge can get crowded out when your company is on pace to grow 10X in two years, because you’ve got so many high-priority problems to solve. Fight the tendency. Sure, you don’t want to be distracted. But you still have to get leaders in place who can scale. Making this a priority benefited my teams tremendously. Individuals with the traits described above were resilient culture carriers who instilled confidence, trust, and good-will in the organizations they were involved with. They were best suited to manage constant change and rapid growth, and most responsible for the ultimate success of the organization.
The day Steve Trundle’s first home alarm system was installed, he was outside with garden shears in his hand. He realized that he could easily reach up and cut the phone lines that connected his system to the monitoring company. “Suddenly it didn’t seem so smart to pay a monthly bill for something anyone could disable in two seconds,” he recalls. His vision of wireless, internet-enabled home security was born.
Trundle, then an executive at public software company MicroStrategy, gathered product design and engineering talent to build a product that would become Alarm.com. It took three years to field a do-it-yourself kit for homeowners that debuted in 2003. That milestone was also the beginning of Alarm.com’s first pivot. “We saw that there was already a whole universe of local security service providers all over the country,” Trundle explains. “We decided that rather than battle with the industry, we would partner with it, accelerate it, and transform it.”
To establish a channel with the security industry, Alarm.com began developing partnerships with security panel manufacturers and service providers. Integrating Alarm.com’s proprietary cellular communications module with security panel equipment eliminated the vulnerable wire that anyone could cut and provided a reliable connection to Alarm.com’s cloud-based services. For the first time, customers could control their security panel — and monitor their home — from any remote interface. This great leap forward quickly helped Alarm.com to develop productive partnerships with thousands of local security service providers who could exclusively offer interactive security monitoring to their customers.
This audacious strategy succeeded because Alarm.com’s software architecture made it possible to add new services to a security system via the cloud rather than physically replacing the panel. By leveraging data from the security system and integrating connected devices into its services, Alarm.com enabled innovative and engaging new capabilities. Proactive security alerts and home automation solutions like energy management, access control and video monitoring, helped to make security systems more valued and customers less likely to cancel their service.
TCV began monitoring Alarm.com’s progress when the company’s installed base was close to half a million “roofs” – industry slang for buildings with a security system. Alarm.com was a striking fit with an investment thesis that TCV was developing for the next-generation connected home, led by Tim McAdam, Jake Reynolds, Kapil Venkatachalam, and Scott Kirk. The TCV team had spent significant time talking to security dealers and industry thought leaders at ISC West, an annual security conference, and realized the need for improving end customer retention, the most important metric for managing a security dealer’s business. All of these conversations pointed TCV again and again to one company with a leadership position and a team committed to success: Alarm.com.
Then, in 2011, Nest introduced a thermostat that could be managed wirelessly, and industry analysts began publishing predictions about the “Internet of Things” phenomenon – often called the IoT. The TCV team realized that if Alarm.com was going to maintain its early lead in connecting homes to the cloud, it had to accelerate its growth to millions of roofs – fast.
Trundle saw it, too. He had known Tim McAdam since college at Dartmouth, and they agreed that the time was ripe for Alarm.com to make another great leap forward.
“TCV understood everything we had done to that point, and they knew how to do the big things we needed. Other VCs thought we weren’t disruptive enough, but TCV focused on our business model. They got how durable it was, and how rapidly it could scale.”
– Steve Trundle, CEO of Alarm.com
TCV invested in Alarm.com in 2012, McAdam joined the board, and Alarm.com shifted into high gear. TCV helped strengthen Alarm.com’s management team and Board with the recruitment of new board members Don Clarke and Darius Nevin, as well as Jeff Bedell as Chief Strategy and Innovation Officer, Dan Kerzner as Chief Product Officer, and, more recently, Steve Valenzuela as Chief Financial Officer. In addition, Alarm.com moved quickly to acquire several adjacent companies that allowed it to broaden its product footprint, entered large new markets in Europe and Asia/Pacific, partnered with industry giant ADT, delivered new apps for mobile phones, televisions, and voice assistants, and extended its data analytics program into machine learning and AI.
“Alarm.com was the first company to provide a smart home security system with an easy-to-use interface primarily accessed on a smartphone. The security functionality quickly expanded to include lighting, energy management, and camera management,” McAdam relates. “Alarm.com was a pioneer in bringing all of these disparate services into the mass market in one app and ultimately has become the market leader in the connected home as well as the most under marketed example of a dominant IoT business.”
With a stronger team and investors who brought best practices for rapid growth, Trundle soon faced the question of when to go public. After starting the process for a 2014 offering, Alarm.com put it on ice until 2015. “The timing didn’t feel right,” Trundle recalls. “Sometimes as CEO you have to make tough calls based on your gut.” That instinct proved prescient, as the company successfully completed its IPO in 2015. TCV showed its commitment to the company and IoT by increasing its investment just prior to the IPO.
The company raised over $100 million in fresh capital with its IPO and moved quickly to invest it in new growth opportunities. Alarm.com acquired the Connect platform from iControl Networks, which serviced a different segment of the security and automation market, and grew its global installed base to more than five million roofs in 2017. The number of security dealers using Alarm.com to offer interactive services climbed to more than six thousand worldwide, and a group of super-dealers emerged to lead the way. The company’s standing in the connected home market has never been stronger.
These achievements are all the more remarkable considering that Alarm.com is headquartered in the Washington D.C. area – on the other side of the country from Silicon Valley. “We learned a long time ago that great companies can be founded and built anywhere,” TCV’s Kapil Venkatachalam says. Trundle says that he overcame any geographical disadvantage through smart hiring. “The Washington D.C. area offers a rich talent pool and we attracted many of the best engineers in our area because we’re one of the few market-leading tech companies here,” he points out, “and with TCV we’re also connected to the talent pipeline in Silicon Valley.”
Top talent remains a priority, because the connected home market is now eyed by all the major players in technology. Startups continue to form with dreams of disrupting the security industry. In a dynamic time and marketplace, Alarm.com must maintain its technology lead while strengthening its relationships with incumbent manufacturers, distributors, and installers. McAdam concludes: “When we look at global penetration rates for the connected home services that Alarm.com offers, the math suggests single-digit penetration. We have a lot of market to take over the next decade.”
London, 7 December 2017: Leading digital money transfer service WorldRemit has raised $40 million to drive its next phase of growth, supporting its plan to serve 10 million customers connected to emerging markets by 2020. The Series C funding round brings the total amount raised to $220m.
Currently sending from over 50 countries to 148 destinations, the funding will be used to expand WorldRemit’s service into new markets, deliver innovative products and services, and scale the technology that underpins its mobile-first, digital model.
The Series C round was led by LeapFrog Investments, with significant participation from existing investors Accel and TCV.
WorldRemit handles a growing share of the $600 billion migrant money transfer market — better known as remittances. The company is a global leader in international transfers to mobile money accounts — an emerging market technology where a customer’s phone numbers acts like a bank account to hold funds.
LeapFrog is the largest dedicated equity investor in financial services and healthcare for emerging market consumers, supporting fast-growth firms that deliver social impact alongside commercial returns by empowering low-income customers. LeapFrog’s existing portfolio reaches 111 million people.
Ismail Ahmed, founder and CEO at WorldRemit, comments:“This new funding will fuel our growth, and help bring our service to millions more customers across the globe. We are pleased to attract LeapFrog Investments, a strategic investor whose profit with a purpose mission is aligned with ours.”
Stewart Langdon, Partner at LeapFrog Investments, adds: “This investment is an opportunity to bring a global leader in digital remittances into the LeapFrog portfolio. WorldRemit’s model is uniquely suited to scale and offers a best in class service that is vital to the livelihood of millions of consumers in LeapFrog’s core markets. The company also has a huge potential to expand globally — a combination that puts it at the heart of our profit with purpose philosophy. I’m delighted that a world-class fintech company like WorldRemit is choosing LeapFrog as its partner for growth in the emerging markets.”
Since its last funding round in 2015, WorldRemit has launched 206 new services across the globe and has grown its transaction volume by 400%. Last month WorldRemit became Arsenal FC’s first-ever online money transfer partner.
This latest funding round follows a Series B investment raised from TCV in 2015 and a Series A from Accel and Project A in 2014 — then one of the largest ever Series A rounds in Europe.
NOTES TO EDITORS
WorldRemit was founded in 2010 by Ismail Ahmed, a remittance specialist and former compliance advisor to the United Nations. Personal experience of using money transfer agents convinced Ismail that technology could improve the sending process, enhance compliance and reduce costs to the customer.
In November 2017 WorldRemit became Arsenal FC’s first-ever online money transfer partner in a global sponsorship deal for all Premier League, League Cup and FA Cup games. In June 2017 WorldRemit added Android Pay to its service, offering a new way for WorldRemit’s Android Pay users to safely and securely send money to 130 million mobile money accounts accessible via its network.
WorldRemit has secured $220 million in funding backed by Accel and TCV — early investors in Facebook, Spotify, Netflix and Slack — and LeapFrog. WorldRemit’s global headquarters are in London, UK with regional offices in the United States, Canada, South Africa, Japan, Singapore, the Philippines, Australia and New Zealand.
About LeapFrog Investments
LeapFrog invests in extraordinary businesses in Africa and Asia. We partner with their leaders to achieve leaps of growth, profitability and impact. LeapFrog companies now operate across 33 markets reaching 111 million people with financial services and healthcare. Over 93.8 million of those are emerging consumers, often accessing insurance, savings, pensions, credit and healthcare for the first time. LeapFrog companies provide jobs and livelihoods to over 114,626 people. These companies have grown on average by 43.3 per cent per annum since LeapFrog’s investment. LeapFrog was recently named by Fortune as one of the top five companies changing the world, the first private equity firm ever to be listed. www.leapfroginvest.com @leapfroginvest
Accel is a leading venture capital firm that invests in people and their companies from the earliest days through all phases of private company growth. Atlassian, Algolia, Avito, Cloudera, Crowdstrike, Deliveroo, DJI, Dropbox, Etsy, Facebook, Flipkart, Funding Circle, Kayak, QlikTech, Slack, Spotify, Supercell and WorldRemit are among the companies the firm has backed over the past 30 years. The firm seeks to understand entrepreneurs as individuals, appreciate their originality and play to their strengths. Because greatness doesn’t have a stereotype. For more, visit www.accel.com,www.facebook.com/accel or www.twitter.com/accelfyfstffyetuxcfvasst
Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. TCV has invested over $9 billion in leading technology companies and has helped guide CEOs through more than 100 IPOs and strategic acquisitions. TCV investments in the financial technology sector include Automated Trading Desk, Avalara, AxiomSL, CCC Information Services, Envestnet, FX Alliance, Green Dot, iPipeline, Lynk Systems, MarketAxess, Payoneer, Retail Merchant Services (RMS), Solarc, Riskmetrics Group, Tastyworks, thinkorswim, and WorldRemit. TCV’s internet and software investments include Altiris, Dollar Shave Club, ExactTarget, Expedia, Facebook, Fandango, GoDaddy, Genesys Software, HomeAway, Merkle, Netflix, Redback Networks, Rent the Runway, Sitecore, Splunk, Spotify, VICE Media, and Zillow. TCV is headquartered in Palo Alto, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, please visit http://www.tcv.com
The global quality management software market is estimated to reach over $12 billion by 2024, according to Grand View Research. As industries like automotive, healthcare, pharma, biotech, energy, food and beverage, and chemicals are becoming more sophisticated, quality management has become a large-scale phenomenon around the world for companies of all sizes.
Purpose-built Enterprise Quality Management Software (EQMS) platforms enable organizations to collect key quality indicators, monitor them and proactively address root causes of deviations from the norm. “This approach becomes a strategic asset when it is adopted across the organization,” says Matthew Littlefield, President and Principal Analyst at LNS Research. It can also have a symbiotic effect across related functions within an enterprise, such as R&D, product design, and manufacturing. LNS Research, for example, has found that companies using EQMS see measurable and significant improvements in everything from product compliance and manufacturing defect rates to engineering and service metrics. In LNS’s most recent research, Building the Executive Business Case for EQMS, Principal Analyst Dan Jacob analyzes over 1,000 manufacturing companies, showing that those that deployed EQMS have reduced the Cost of Poor Quality (COPQ) by 11% and increased the share of successful New Product Introductions (NPI) by 21%.
I recently had a chance to connect with leading-edge quality experts across multiple industries at EtQ’s User Conference. We talked about the forces driving radical changes in how companies think about their products, how quality can be a competitive advantage, and the trends companies need to focus on with regards to quality management.
Quality and Brand: One and the Same
One of the strongest themes was that quality is no longer a late-stage process of weeding out defects at the end of a production line—today, it’s a proactive concern of senior management. Quality and reliability have become a differentiator between equally priced products and a reason you’d buy Brand A over Brand B. For some companies, quality goes beyond brand reputation because their products can be a matter of life and death. Case in point: the brakes in your car. They must work without fail, regardless of the price or brand of the car.
Meanwhile, market-side communication about products and services now operates at digital speed. Customer mishaps with a brand-name product can go viral and create a crisis for the manufacturer overnight. Examples include General Motors’ ignition switch recalls and Chipotle Mexican Grill’s food safety issues which sickened customers and pushed the stock down dramatically since the first outbreak was reported.
Source: CNN Money, Yahoo Finance
The Factors of Quality Management Systems (QMS) Growth
Some trends, I think, are driving the increased adoption of better quality management software:
Companies now go through more external inspections and validations than ever before, and regulators increasingly want direct access to companies’ QMSs. This speeds things up and makes inspections more efficient, compared to plowing through reams of paper documentation. In addition, regulatory rigor is rapidly spreading around the world, using industrialized economies as models. India, for example, passed new legislation regulating medical devices in early 2017—just a few months before the European Union updated its own rules.
Digitization is another major driver of how companies are now thinking about quality. Today, growth in sensors and Internet of Things (IoT) in manufacturing processes generate billions of data points along the supply chain. Companies now have access to information in digital format that is allowing them to track and make informed decisions in real time, so they can manage and optimize their assets more effectively and deliver consistent products aligned with regulations.
A shift in the social mindset around risk. For example, a toy manufacturer that manages to maintain strict quality control of its products might hear about a child that ended up getting injured, even though the product had no defect and was designed for children. The toy manufacturer might use that as a learning point to design the next version of the toy, taking into consideration these corner cases, even though it might not be mandated to do so by any kind of regulation. Arguably, society has become more aware and less tolerant to risk than ever before.
From Control to Assurance: A Shift in the Approach to Quality
With many factors driving the adoption of quality management, companies have shifted their approach to quality as well. Quality management used to mean inspecting products at the end of the assembly line. That was Quality Control, and it was reactive and not very efficient.
Now, big pharma companies (among many others) start from the very conception of the product in R&D and manage quality through production and all the way to eventual product retirement. In other words, quality is now managed end-to-end. This is what the industry now calls Quality Assurance.
In line with that strategic approach, some quality managers are pushing themselves to look at quality beyond regulatory requirements. “You have to imagine there is no FDA,” said a quality executive at a major supplier of healthcare consumables. “That’s the way you have to think. For some products, our company services up to 20 million accounts. How do we make sure every one of our medical gloves, for each of those accounts, has the same quality, reliability, and characteristics as the next glove?”
Companies Implement New Org Structures and Technology to Rise to the Challenge
Companies have spent decades answering the above-mentioned question of delivering consistent quality by throwing more people and processes at the issue. Today, a large company might have a technical quality team that assesses products from an R&D perspective, a regulatory team focused on the supply chain of materials, quality engineers in production processes, a compliance team doing internal audits, and post-market surveillance to close the quality feedback loop.
The proliferation of quality assurance processes has driven responsibility for quality management higher up in the organization. When quality leadership ultimately landed in the C suite, so did the need for integrated, on-demand reporting of key quality metrics. Many companies I spoke with have done surveys of their entire quality teams, only to find more than hundreds of different systems were being used for quality. The need to streamline processes has therefore become key to delivering operational excellence.
Quality managers related their struggles to developing an internal quality management software system or getting their existing ERP suppliers to provide it, before they discovered EtQ’s platform solution. EtQ makes it easy to integrate data streams from existing quality processes, create new ones, and present management with a clear picture of key metrics.
“We had one of the large ERP systems,” explained a manufacturing quality manager, “and we were told they offered a quality management software. That came with a $3,000 per day development cost. We didn’t want something that rigid, because we already had some processes in-house that included a lot of existing data. Newer platforms like EtQ’s give you that flexibility. As an end user you can play around with the platform to create your own processes.”
Looking ahead, conference participants predicted that quality management will continue to become even more strategic while also getting more mobile and more granular, right down to the electronic device history records for every part of a product. Companies like EtQ will continue to drive this innovation in quality management software because, as many conference attendees concluded, “quality is non-negotiable.”