Toast: Built to Serve


Dave Yuan

Founder and Partner, Tidemark

Toast, the subject of today’s case study, is a multi-billion dollar Vertical SaaS company with a singular focus on serving the restaurant. Toast belongs in the pantheon of software companies. It is live in 57k+ locations in the U.S., went from 0 to 500M+ in ARR in 10 years, did $901M in ARR at the end of 2022, and has been the first to embed offerings like payments and payroll. Beyond that, they have extended towards employees, guests, suppliers, and capital. Perhaps most importantly, they are one of the fastest learning, most data-driven, and humblest teams I’ve ever worked with. In case it isn’t already obvious, I’m a fan (and sit on the board).

Working with this company has been the privilege of a lifetime. The experience helped crystallize many of the ideas for Tidemark’s Vertical SaaS Knowledge Project. The connections I have made with the company also translated into our Tidemark community—five of their executives serve as Tidemark Fellows.

With all this in mind, there isn’t a more perfect company to kick off our case study series than Toast. Previously, I interviewed Tidemark Fellow and Toast CEO Chris Comparato on the company’s “Better Together” corporate strategy. Today, we’re going one level deeper by talking with Toast’s SVP of Product, Matt Kaplan, about his approach to multi-product and control points



Dave: Hey Matt! Great to have you. Let’s start this off by having you tell us about yourself and your professional background. 


Matt: I’ve been leading the development of B2B SaaS products throughout my career in a variety of industries including advertising, education, communication and collaboration, security, and restaurants. Ironically, my first start-up experience was at a company called AdValue Network where we built a vertically-integrated network for buyers and sellers of spot television and radio advertising in the 90’s. The network connected TV stations, rep firms, and advertising buyers together to streamline the inefficient process of media buying (Note: Back in the 90s you still needed to manually install TCP/IP on computers and run leased lines just to get connectivity). The company was eventually acquired by Reuters, who once had strategies to diversify into other vertical networks including advertising and healthcare. Through this experience I learned the importance of solving a key problem for either the demand or supply sides of a vertical network, and ideally both. Long story short, I’ve long been fascinated by how vertical industries can be re-imagined through the application of Internet technologies.

Dave: Why do you love building products for Toast?


Matt: As product leaders, we’re wired to solve problems in the world. When we find problems that we care deeply about, it’s like a match made in heaven. Toast’s vision is to enrich the food experience for all. We do that by helping the restaurant community delight their guests, do what they love, and thrive.  Enabling restaurant owners, many of whom are small independent businesses, to thrive is a mission that means a lot to me. My dad was a small business owner and I watched him evolve his accounting practice even before products like Quickbooks were around. I also tried my hand at starting a small music education business. That ultimately didn’t make it but I learned as a small business owner the true meaning of “chief, cook, and bottle washer.” For restaurant owners to thrive these days, it takes more than great food, great service, and hard work. They now need to be experts in digital marketing, technology, finance, HR, and law without having the benefit of an executive team. They have to manage it all, so having a trusted partner like Toast who provides technology solutions that “just work” is critical.  I’m passionate about creating products for SMBs that help them grow and compete; products that are easy to try, easy to buy, simple to use, and don’t require a lot of training and support. 


Dave: What’s different about building products for Vertical SaaS?


Matt: Vertical SaaS allows you to go really deep with your customers. As a product leader, I wouldn't want to work in any other type of company now that I've experienced the difference. When I pitch Toast to prospective candidates, especially those in Product and Design, I talk about our ability to focus on a single customer type (i.e., restaurants) and solve their core problems. When developing horizontal products (in collaboration, media, security) it can be a real challenge getting a deep understanding of your customers and their business. Oftentimes, horizontal product companies are too concerned that narrowing their focus on a single customer type will limit their TAM. As a result, they end up solving problems for everyone, which limits their ability to go deep into their customers’ business.


For product folks, vertical SaaS is a dream job because you can discover so many adjacent problems just by staying very close to your customers. At Toast, we see many opportunities to solve problems for restaurant owners and operators as well as other stakeholders in the value chain such as guests, employees, and suppliers. As guests, we’ve all experienced the pain of waiting for a table on a busy night, getting a server to take your order, or paying your tab quickly when the kids have had enough. I love being able to walk into any restaurant and look for ways to make the experience better (and yes it sometimes drives my family crazy). 

Dave: Building for Vertical SaaS means selling into workers on the front lines that likely aren’t in front of a computer.  How do you stay close to your customers and understand their experience?


Matt: In addition to the more formal market and customer research we do, we have a number of “listening posts” that we’ve set up which allow us to gather direct input from restaurants and their stakeholders on an ongoing basis. One example of this is our Customer Advisory Board which is made up of a diverse cross-section of customers and represents a wide variety of restaurants whom we meet with regularly. We have a public community called “Food for Thought” which helps us keep an ear to the ground on the day-to-day challenges facing our customers. We also carve out time during senior leadership meetings and invite customers to our Zoom sessions to share their feedback on our products and services. We recently launched the “Test Kitchen” which allows customers to provide feedback on early concepts and “taste” new features while they’re still in the alpha and beta stage. Of course, nothing replaces the many direct conversations we have with restaurant owners, their employees, and guests on a daily basis. When we dine-out, our team often acts as “secret diners”, probing employees about their experience with Toast which helps to get the honest, raw, and sometimes uncomfortable truth.

Dave: How do you build for inclusivity?


Matt: When you look at the restaurant business, 40% of owners and nearly half of all restaurant workers are minorities. It’s our responsibility to ensure our products meet the needs of all owners, their employees, and guests. As a result, we’re actively working to be more inclusive in our research efforts and product design, more inclusive in how we go-to-market and price and package our products, more inclusive in the way we deliver customer service across geographies and languages, and certainly more inclusive in our workplace and the makeup of our own team. I’m really excited about our “designing for diversity” program we kicked off last year across our product team. One of the key concepts of designing for diversity is intentionally focusing on those groups who are being excluded or who may be harmed by a lack of inclusion. As a result, we started using a research service called Fable which helps us connect with people with disabilities for user research and accessibility testing.

Dave: In our VSKP framework, we talk about control points and seizing the high ground.  Do you use similar language in product strategy at Toast?


Matt: We tend to think of our control points as the interactions between restaurants and their key stakeholders (e.g., guests, employees, suppliers). We discovered this is more of a control tower or stack that's made up of the stakeholder experience (e.g., guest) at the top, the interactions (e.g., ordering) in the middle, and the value exchange (e.g., payments) at the bottom. You could begin to innovate anywhere in the stack, but you eventually need to expand to capture the whole stack. We often say it's easier to sell a product that drives revenue than one that lowers costs, but for vertical SaaS it may not matter where you start, so long as you solve an acute problem and then expand from there. In this way you can start lower in the stack and move up, or start higher and move down. This is how one can disrupt the all-in-one, legacy players mentioned in the "Integrate and Surround" section. You can pick a place within the stack to innovate and expand from there. For markets that already seem to have a clear VSV leader, narrowing the customer type to focus on an under-represented segment or use case could be another way to capture market share, just as HotelTonight (now owned by Airbnb) did by offering last minute hotel deals.

Dave: The benefit of owning a control point is to sell additional products to the same customer.  Tell us about the Toast multi-product journey.

Matt: Toast has been on a multi-product journey for some time now, having developed or acquired a number of adjacent products to complete our all-in-one suite for restaurants. We started with a cloud-based point-of-sale but now offer digital ordering apps, martech solutions, payroll and team management, back office automation, and financial products like lending and debit cards. As companies add products and teams, there’s a natural tendency for silos to develop which shows up as a fractured customer journey and poor user experience also known as “shipping your org chart.” As our portfolio and teams have expanded, we’ve addressed this by staying focused on the customer jobs to be done such as saving time, making money, enabling better decision making, and improving the hospitality experience. Last year we launched a company-wide movement called “Better Together” to ensure we stayed focused on our customers’ needs and that our products and services, when brought together, unlocked more value for them. Better Together became a rallying cry within the organization and helped us prioritize cross-team improvements in product, packaging, and customer support.


Dave: I always loved the expression “shipping your org.”  What are the key design, engineering, and organizational considerations around multi-product?


Matt: Multi-product can definitely put a strain on product organizations as the sheer number of dependencies grows exponentially with every new product added. The challenge with a “Better Together” strategy is that coordination among teams becomes a time consuming and difficult puzzle to solve. It can also lead to overplanning and a lack of agility teams need to react to customer feedback and changing market needs. To counterbalance this, we’ve invested in core horizontal or platform capabilities including common services like authentication and single-sign-on, account management, data platform services, onboarding and activation, partner integrations, and design systems. We talk about this effort as the evolution from a multi-product company to a platform company. As you make this transition, you not only solve for greater team efficiency and autonomy, but you also create more operating leverage. Some of the largest and well-known platform companies such as Salesforce.com, Amazon, and Shopify have executed on this transition extremely well.

Dave: Better Together is a powerful concept to improve the lives of every stakeholder, but it also provides you a compelling opportunity to “extend through the value chain” (to push our VSKP framework) Can you share your vision in engaging with the major stakeholders in the restaurant ecosystem?


Matt: Our product strategy addresses the three major challenges we’re seeing in the restaurant business today: rising costs, labor shortages, and guest retention. 

Restaurant margins, which are already slim, have been under tremendous pressure from the rising cost of ingredients due to inflation and supply chain issues, the growth of costly commission-based delivery services, and new safety and compliance regulations. As a result we’re investing in capabilities that provide more visibility into restaurant costs, drive greater operational efficiency, maximize their food and channel costs, and lower overhead. We’re now integrating the acquisition we made of xtraCHEF which includes a suite of back office tools for restaurants that helps them take control of rising inventory costs, automate accounts payable, and streamline back office tasks to increase their profitability.

Nearly every conversation with customers these days starts with the challenges related to labor costs and staffing availability. That’s why we’re investing in capabilities that help restaurants attract and retain their staff. New Toast products that benefit employees include Toast Tips Manager, which automates the time consuming process of calculating tips; scheduling, which simplifies the scheduling of shifts and improves team communication; and Toast Pay Card and Payout, which gives employees instant access to a portion of their earned wages and tips after every single shift at no cost.

With the proliferation of new ordering channels and third-party aggregators, restaurants face an increasing challenge of engaging directly with their guests. Every order they receive from a third-party channel (e.g., DoorDash, Uber Eats, Grubhub) comes with little to no guest data, making it impossible to take advantage of effective digital marketing tools. Our investments help restaurants unify and grow their guest database through digital channels such as online ordering, digital menus, order and pay via mobile, electronic receipts, gift cards, and loyalty programs.

Dave: Two of the key stakeholders—employees and consumers—are individuals. How is it different building products for individuals versus small businesses?

Matt: I think there’s little difference these days between designing products for SMBs and consumers. Their expectations are pretty much the same—they want simple, easy to use products that solve their core job to be done. The biggest challenge is meeting the high bar that’s already been set by other consumer products like Instagram, Airbnb, Netflix, and TikTok. These companies invest a lot in UX research and design to craft experiences that encourage consumers to spend hours with them daily. When your product fails to live up to the same high standards that have been set by these companies, people notice. While a restaurant can require their employees and guests to use the software and applications they select, it doesn’t necessarily mean they will be happy about it. We think a better approach is to create experiences that employees and guests will rave about, so they in turn encourage restaurant owners to seek us out and adopt.


Dave: Matt, this has been such a great opportunity to hear how you think about the product opportunity in Vertical SaaS. I’d love to end our talk with a question, “What’s your favorite product or company outside of Toast?”

Matt: You could say I’m a bit of a Disney fanatic. I really admire what they’ve done throughout the years to create a beloved hospitality brand and bring to life stories and experiences that appeal to so many people. For over fifty years Disney theme parks have pushed the boundaries of technology and storytelling to create immersive experiences and they continue to innovate in ways that make their guest experience better. On a recent trip to Disneyland, I was able to try out their new mobile app which was nearly flawless. The app is used to make the entire guest experience frictionless as it allows you to unlock your hotel room, view wait times, schedule lightning lanes (their new FastPass system), make dining reservations, and order ahead at all of the quick service restaurants throughout the park. The end result was never waiting more than twenty-five minutes for a ride or food and we didn’t miss a thing.  I’m inspired by every trip to Disney and find myself asking, why can’t we create the same magic in the outside world for independently owned restaurants and their guests?  There’s no reason to believe we can’t.

Share your thoughts

We love the idea of bringing together a community to explore the boundaries of Vertical SaaS and are excited by what we can learn from each other. If you have thoughts or comments or want to get involved, reach out to us at knowledge@tidemarkcap.com. If you would like to keep updated as we publish these essays, sign up below.


Toast: Built to Serve
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The information presented in this post is for illustrative purposes only and is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by Tidemark or any of the securities of any company discussed. Companies discussed in these posts may include current Tidemark portfolio companies and/or prior investments made by Tidemark employees while at other investment firms. These companies identified above are not necessarily representative of all Tidemark investments, and no assumption should be made that the investments identified were or will be profitable. The information in this post is not presented with a view to providing investment advice with respect to any security, or making any claim as to the past, current or future performance thereof.

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