SpotOn Raises $125M Series D, Valuation Triples to $1.875B

The Impact of COVID-19 on Small Businesses and SpotOn's Response

The COVID-19 pandemic disproportionately affected various sectors, particularly during its initial phase.

Small businesses, encompassing retailers and restaurants, experienced significant setbacks due to mandated lockdowns and subsequent closures. Adapting swiftly became crucial for their survival. Many were compelled to embrace technology, as a substantial shift towards digital platforms occurred in response to the pandemic. This period proved to be a turning point for companies like SpotOn.

SpotOn's Pivotal Role

The company, specializing in software and payment solutions for restaurants and small-to-medium businesses (SMBs), recognized the need to support its clientele. This commitment extended beyond simply assisting their customers; it was also vital for SpotOn’s own sustainability.

Co-CEO and co-founder Matt Hyman reflects, “We thoroughly assessed the challenges faced by our clients and understood the necessity to adapt to continue providing support.” He further explains, “We faced a critical decision as our revenues were also declining alongside those of our clients. Instead of resorting to layoffs or salary reductions, we remained steadfast in our core principles and persevered.”

Achieving Unicorn Status: A $125 Million Funding Round

This dedication has yielded positive results. SpotOn recently announced its achievement of unicorn status, securing $125 million in Series D funding led by Andreessen Horowitz (a16z).

Existing investors, including DST Global, 01 Advisors, Dragoneer Investment Group, and Franklin Templeton, also participated in the financing, alongside new investor Mubadala Investment Company.

Valuation and Growth

This funding round has tripled the company’s valuation to $1.875 billion, a significant increase from its $625 million valuation during its Series C raise last September. It represents SpotOn’s third funding event since March 2020, bringing its total funding to $328 million since its founding in 2017.

According to Hyman, the company’s revenue has tripled since February 2020, demonstrating substantial growth.

SpotOn's Competitive Landscape and Platform

SpotOn directly competes with companies like Square in the payments sector. However, the company emphasizes that its offerings extend beyond basic payment processing and point-of-sale (POS) software.

Its platform aims to provide SMBs with a comprehensive suite of tools to manage all aspects of their businesses, “from brand building to payment acceptance and everything in between.” SpotOn strives to be a “one-stop shop” by integrating features such as custom website development, scheduling software, marketing tools, appointment scheduling, review management, analytics, and digital loyalty programs.

During the pandemic, SpotOn rapidly developed and launched 400 new product innovations, as stated by Hyman. The company also waived $1.5 million in fees, including monthly subscription costs for its integrated restaurant management system, for several months. Furthermore, it acquired SeatNinja to broaden its service offerings.

SpotOn provided free website creation services to businesses forced to quickly establish an online presence. They also offered commission-free online ordering for restaurants and assisted retail merchants in updating their websites for e-commerce. Hyman noted the resilience of these businesses and the resulting customer loyalty.

Current Status and Future Outlook

Currently, over 30,000 businesses utilize SpotOn’s platform, with nearly 8,000 new clients joining this year. The company anticipates this number will triple by the end of the year.

The customer base is currently divided approximately 60% retail and 40% restaurants, but the restaurant segment is experiencing rapid growth.

The company attributes this growth to restaurants seeking more affordable and integrated solutions after initially adopting online ordering for delivery or curbside pickup.

Hyman highlights that SpotOn’s integrated platform allows businesses to save “thousands of dollars” by consolidating payments and software fees from multiple vendors. The platform also offers integration capabilities with other systems.

SpotOn has expanded its workforce to approximately 1,250 employees, up from 850 in March 2020. These employees are located across offices in San Francisco, Chicago, Detroit, Denver, Mexico City, and Krakow, Poland.

Investment and Strategy

While not currently profitable, Hyman states this is a deliberate choice. “We have the ability to become cash flow positive at any time. However, our current focus is on product innovation and talent acquisition to exceed client expectations,” he explains. “We strategically secured capital to prioritize these areas.”

The new funding will be allocated to further accelerate product development and expand market reach. The company is particularly focused on enhancing its integrated restaurant management system.

This marks Andreessen Horowitz’s first investment in SpotOn, although General Partner David George was previously acquainted with co-founders Matt and Zach Hyman.

George estimates that 80% of restaurants and SMBs still rely on outdated and inefficient legacy systems. The pandemic has spurred increased demand for digital solutions.

“We believe we are in the early stages of a significant transition [to digital], and the opportunity is substantial,” he stated. “We are witnessing a tipping point in the replacement of outdated restaurant and small business software with modern, cloud-native solutions.”

George also commended SpotOn’s performance over the past 14 months, noting the company’s ability to build exceptional products, sales teams, and provide outstanding customer service – a rare combination.