Toast: Aman Narang. How a Long Wait for the Dinner Check Launched a $2 Billion Business.

After waiting too long to pay his restaurant bill, Aman Narang thought there had to be a better way. His first idea—a mobile payment app—flopped. But that failure revealed a much bigger opportunity. Restaurants were struggling with outdated software that many owners hated. Payment systems were expensive, unreliable, and trapped on servers hidden in back offices. Replacing them cost time and money. But that’s exactly what Aman and his co-founders set out to do: create an entirely new POS system for restaurants—from scratch. They worked from an unfinished basement, answered customer calls on their own phones, crashed their first restaurant on day one, survived years of rejection from investors—and eventually grew Toast into a business that generates more than $2 billion in annual revenue. In this episode, Aman shares how a failed product became a billion-dollar company. What you'll learn: How to know when it's time to pivotWhy investors rejected Toast again and againHow to convince customers to replace mission-critical softwareWhy Toast intentionally stayed small before scalingThe leadership lesson Aman learned after almost breaking the companyHow Toast survived COVID after restaurants shut downWhat founders should look for when choosing a co-founder Timestamps: 11:25 — The frustrating restaurant experience that inspires Toast15:41 — The first product fails—and reveals a bigger opportunity16:43 — Building Toast: “We grossly underappreciated what it would take.”26:05 — Why nearly every investor said “No.”32:31 — Toast’s disastrous first launch: writing credit card numbers by hand34:18 — Pitching hundreds of restaurant owners before finding believers38:08 — Why customer obsession beats competitor obsession44:17 — Bringing in a new CEO: “We need to rethink how we do things here.” 52:31 — The biggest lessons from building a $2 billion company This episode was produced by Sam Paulson with music by Ramtin Arablouei. It was edited by Neva Grant with research help from Casey Herman. Our engineer was Kwesi Lee. Follow How I Built This: Instagram → @howibuiltthis https://www.instagram.com/howibuiltthis/ X → @HowIBuiltThis https://x.com/howibuiltthis Facebook → How I Built This https://www.facebook.com/howibuiltthis Follow Guy Raz: Instagram → @guy.raz https://www.instagram.com/guy.raz/ YouTube → guy_raz https://www.youtube.com/channel/UCNSfrxNEmCruNtjIzxCBHjg X → @guyraz https://x.com/guyraz Substack → guyraz.substack.com http://guyraz.substack.com Website → guyraz.com http://guyraz.com See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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• 0:00Guy Raz?

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• 0:45Guy Raz?

  build the prototype, analyze the market, maybe even come up with the idea, what separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/HIBT. We get support from US Bank, a question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making

• 1:27Guy Raz?

  until you realize it's the reason everything after it either worked or didn't. Say you're 18 months in, business is growing, you've got expenses coming from six directions, gas for the van, office supplies, your phone bill, team lunches that are actually client meetings, and you're putting it all on whatever card you grabbed in year one. You're not thinking about it. Why would you? You've got bigger problems. But here's the thing, path A, you keep going like that. End of the year, you're sorting through statements, trying to figure out what went where. You've left hundreds, maybe thousands on the table in rewards you never earned, money that could have gone back into the business.

• 2:07Guy Raz?

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• 4:20Guy Raz?

  I'm thinking about getting in, filling up, and getting on with my day. And it reminds me a little bit of the founders I talked to on this show, because the best ones obsess over things their customers will never see. Tiny details, invisible improvements, relentless iteration. And not because anyone's watching, but because it makes the product better. That's what the mobile brand does. It engineers fuel the same way great founders engineer their products. Mobile Supreme Plus Premium Gas helps keep engines three times cleaner, which can mean better performance and improved gas mileage. It's for people who care about what's under the hood, even if they never see it. Three times cleaner compared to mobile regular gas in port fuel-injected engines.

• 5:05Guy Raz?

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• 5:22Speaker 01

  We were installing this restaurant and they opened. And within 20 minutes of taking the first few orders, it's like the system is down. Now they've got a line and they were like physically writing down the order on a piece of paper and dropping it off in the kitchen and taking the credit card number down on paper and like trying to do this manually. And realizes part of the experience that these systems are mission critical and like can't break.

• 6:01Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:13Guy Raz?

  I'm Guy Raz, and on the show today, how a frustrating way to pay a dinner bill led to the launch of Toast, one of the most popular point-of-sale services in the country.

• 6:31Guy Raz?

  There are about 700,000 restaurants in the United States. Big chains, tiny neighborhood cafes, family-owned diners, fancy tasting menu places. It's a huge market. And if you could build something that even a fraction of those restaurants needed every day, you'd have a pretty good business. But restaurants are tough customers. Margins are thin, they can't afford downtime. And once they install the software that runs their business, they almost never switch it. For years, that software was clunky. It was expensive and really hard to update. And it usually lived on a server somewhere inside the restaurant, totally disconnected from the cloud.

• 7:14Guy Raz?

  Most owners hated these systems, but replacing them felt impossible, which is where today's guest, Aman Narang, saw an opportunity. The idea began with, what else? A frustration, a frustration I am sure you've experienced. You finish dinner, you're ready to leave, you're waiting for the check, you finally get the server's attention, and then you wait again for your credit card to come back. And that everyday annoyance inspired Aman and his co-founders to build an app that would let people pay for their meals from their phones. But it didn't work. This was back in 2012, so the technology was a bit clunkier. But that failure uncovered a much bigger opportunity.

• 7:58Guy Raz?

  The real problem wasn't just paying the bill. It was the technology running the entire restaurant. Inventory, payroll, scheduling, kitchen operations, online ordering, loyalty programs. None of it worked very well. So Aman and his co-founders made a bold decision. Instead of building one feature, they'd replace the entire operating system for restaurants. They called it Toast. And even after the technology started working, they still had to convince skeptical restaurant owners, raise money from investors who wanted nothing to do with restaurants, compete with companies that had been around for decades, and survive COVID. But today, Toast supports nearly 1 in 5 restaurants in America

• 8:43Guy Raz?

  and generates more than $2 billion in annual revenue. As for Aman Narang, he actually grew up in Nepal and in India and moved to the United States with his family when he was a teenager. In 2006, after graduating from MIT with a master's degree in computer science, he started working in Boston at a tech company called Endeca.

• 9:05Speaker 01

  Yeah, so Endeca was primarily e-commerce. And e-commerce search was their core business. So back in the day, like 25 years ago, if you went and searched Home Depot or Nike or Disney Store or J. Crew or pick your brand, and you wanted to say like, show me all of the washers and dryers and this brand and this price range that are available now. And so that was the beginnings. And then they went in and started to build merchandising tools. When I joined Endeca in 2006, they'd already had a lot of success in e-commerce. And Steve Papa, who was the founder of Endeca, he wanted to build essentially a business intelligence platform, because they had a lot of the underlying technology to be able to do that.

• 9:49Speaker 01

  And so myself and Steve Fredette, who is my co-founder, Steve and John are my co-founders at Toast. Steve Fredette and I joined a team out of college called Special Operations.

• 10:01Guy Raz?

  And you didn't know Steve at, he also went to MIT. Did you know him from MIT or did you meet him there?

• 10:06Speaker 01

  I met him at Endeca. Yeah, I met him on my first day at Endeca. And we were building this business intelligence, the beginnings of a business intelligence platform. And the reason that's important is we were trying to break new ground with this technology. And so it was almost like a little startup, mini startup within Endeca. And so it was, you start, you got to experience all the failures, actually, the first couple of years of like trying to get to product market fit and had very little success really the first couple of years and kind of saw the grind of that together.

• 10:36Guy Raz?

  So, all right, so you're working there. And I guess while, I mean, while you're there, because you joined in 2006, so right around the time, right before the iPhone comes out.

• 10:47Speaker 01

  Right.

• 10:47Guy Raz?

  Which I think has a huge impact on, a good impact, positive impact on the business. And you are involved in sort of

• 10:56Guy Raz?

  Building out the mobile side of their product.

• 10:59Speaker 01

  Yeah, we so when the iPhone came out, we, you know, like, I'm a big believer that you've got these new techn- you know, any, any time you got a tech shift like that, you've got to try to lean in and there's so much tailwind. And so we almost quit to go build our own business at the time.

• 11:14Guy Raz?

  You and Steve?

• 11:15Speaker 01

  Steve and I almost quit. We, it started off with like, we built these e-commerce apps for some local brands like shoebuy.com, which is a Boston brand and a bunch of other companies who wanted to go mobile. And so we built out their e-commerce mobile app. And then we were like, wondering whether we could build a business to scaling that. Like, there was a bunch of mobile web companies at the time that could, you could power your mobile experience.

• 11:36Guy Raz?

  You were doing this all while you were still at Indica?

• 11:39Speaker 01

  All on the side. Yep, yep. And we were fortunate that Steve Papa supported all this. He was okay with it, I think. Yeah. And then Steve Papa, we actually, I remember sitting down in the office with Steve and Steven saying, we're going to quit, we're going to go build a business with the iPhone. And they said, what are you going to build? It's like, we're not sure. We have a couple of ideas. We're exploring. And then he said, well, why don't you build this at Indeca? Because we've got, you know, 50% or whatever of the top 100 retailers in the world using our platform. And they all want to go mobile. And so you could build Indeca's mobile business. And we did that. And that was the first time I'd say we had real success, because all these retailers wanted to go mobile. And

• 12:20Speaker 01

  in fact, we were like, limited not on, not on demand, but even supply, just getting all these apps stood up. And that business ended up being a meaningful part of the revenue by the time Oracle bought Indeca, which was in, I think, end of 2011.

• 12:36Guy Raz?

  2011, Oracle acquires Indica for about a billion dollars. And you guys have an opportunity, presumably to stay there. But, but I guess this was sort of a sign that maybe, maybe you should, you should go off on your own?

• 12:51Speaker 01

  Yeah, Steve, actually, to his credit, was like, hey, like, now's the time with the acquisitions. It's a good moment to quit. And without even telling me, basically, just quit. He's like, okay, well, I'm quitting. I don't know if you're going to quit, but I'm definitely quitting to go do this. And then we were talking to John, because John was one of the best engineers.

• 13:08Guy Raz?

  John Grimm.

• 13:09Speaker 01

  John Grimm.

• 13:09Guy Raz?

  Yep.

• 13:10Speaker 01

  And it's interesting that like, it's me and Steve initially, and we were trying to convince John to join. He wasn't sure. But then Steve quit, and then John quit, but I didn't quit. Because I was like, I'm not sure what we're going to work out.

• 13:22Guy Raz?

  You didn't know, you didn't have a, you sort of had rough ideas, but you didn't exactly know what it was going to be. You were just going to kind of get together and start to?

• 13:29Speaker 01

  Yeah. Yeah, we were exploring, again, a bunch of ideas.

• 13:32Guy Raz?

  Yeah.

• 13:33Speaker 01

  Everything from, we had seen, like, there's some local companies, for example, we'd seen, there's a company called Level Up, I think, that was doing some food ordering locally. We'd seen what Groupon had done. Obviously, we'd seen what Square had done. So we'd seen a bunch of, we had some ideas in, in like, the local space, there were some interesting opportunities. But we were looking at all sorts of ideas, frankly. Like, there was a, you know, a bunch of things we explored.

• 13:53Guy Raz?

  And did you, I mean, you guys were, you know, you're relatively young, you'd been there for five years, but presumably you got a little bit of money when the company was acquired?

• 14:03Speaker 01

  Yeah, we, I mean, we got enough money to like, put a down payment on the house and just get, you know, have the, like, not have to worry about a salary for a couple of years, kind of thing.

• 14:11Guy Raz?

  So you decide to, to leave. And I guess in December of 2011, so not, not too long after the acquisition, you guys incorporated to what would become Toast. I guess it was initially called like OptiSystem, but you called it Toast. You changed the name in 2012. But before we get there.

• 14:29Speaker 01

  Yep.

• 14:30Guy Raz?

  Tell me about, about what you start to work on. I mean, you don't have a, you sort of have rough ideas, but you don't know exactly what it's going to be. And I read that you, you spent about three, four months trying to figure out what it was going to be. So tell me a little bit about what you were doing during that three month period before you came up with the first idea?

• 14:51Speaker 01

  We were doing more of what we were doing, frankly, which is we were exploring, what are different ideas that we could credibly, you know, go after? And we'd spend time just like, you know, discussing and debating. And we were still at Indec, at Oracle, right? So it wasn't like we had to go, there wasn't a ton of pressure to be like, oh, we need to be like, you haven't quit, it's a little different, right?

• 15:12Guy Raz?

  Right.

• 15:12Speaker 01

  When it comes to the pressure. And then when Steve quit, it became a lot more real. And so there was this bar downstairs from where we used to, to work. This is in Kendall Square in the Boston area. It was called Firebrand Saints. And they had this big patio outside, right on Main Street. And, you know, like, on a, on a busy night, you had a lot of, a lot of folks after work there. And it, you know, it'd take you 10 plus minutes to get your check.

• 15:42Guy Raz?

  Right.

• 15:43Speaker 01

  And when you just want to leave. And the restaurant also wants to turn that table because if people actually want that table.

• 15:51Guy Raz?

  You have to get the attention of the server, and you're like, waiting, and yeah, everyone's been in that situation. Okay, so you guys are in that situation.

• 15:59Speaker 01

  And so we just looked at each other and said, like, hey, like, should we just build this? Like, should we build an app where you could use your phone to pay? And we didn't, to be honest, in fairness, we didn't know a lot about the restaurant space at the time, short of just being diners and going out. But, I mean, it's like, the way to think about it is like, imagine today, if in an Uber, we went back to a credit card machine, and that's how you had to pay.

• 16:25Guy Raz?

  Right.

• 16:25Speaker 01

  People would be like, what is this, right? And I think that option exists even today in restaurants, but, which we can discuss. But, so we started to build this, which is like, okay, like, what would it take? We convinced Gary, Gary Stark, who, you know, who was in the middle of.

• 16:39Guy Raz?

  Gary was, who was the owner of the restaurant, Firebrand Saints?

• 16:41Speaker 01

  That's right. Yeah. We joke now that, I think he only let us build it because he felt, he thought we were a bunch of nerds on, you know, next to MIT's campus. And, and he felt bad for us.

• 16:52Guy Raz?

  But you basically said to him, hey, if we build this way, this app, to make it easy to pay, would you be up for trying it?

• 17:00Speaker 01

  Yes, we, yeah. So we convinced him to give us a shot.

• 17:03Guy Raz?

  Okay.

• 17:04Speaker 01

  It wasn't easy, but we did. And, and then we went about saying, okay, like, how would we go about building it?

• 17:10Guy Raz?

  Yeah.

• 17:11Speaker 01

  And then we debated, you could have built it in mobile web, but we, we felt like, the right way to build it was to build an app that people could download, and then put a card on file and pay.

• 17:22Guy Raz?

  And so the three of you guys were actually writing the code, building this app?

• 17:26Speaker 01

  Initially, it was Steven, John on this app. I, I contribute, I started to build once we pivoted to the point of sale.

• 17:33Guy Raz?

  Okay, so you start with this app. And then how long does it take for this app to be built? Couple of months?

• 17:39Speaker 01

  Yeah, a couple of months.

• 17:40Guy Raz?

  And what does it do?

• 17:43Speaker 01

  So imagine, like, you know, you go to the table, server comes up, takes your order. And so the point of sale system is the, it has the data on what's on your check. What have you ordered? Were the taxes adding tip, right? All that data sits in the point of sale. That's why they can print the receipt today that you can sign.

• 18:04Guy Raz?

  Yep.

• 18:04Speaker 01

  And so we had to integrate with that. Right? And so the app basically would, you'd, you'd identify the table, you would pull that data, and then with your card on file, you would pay and adjust a tip. But it was largely the app experience and the integration into the system of record that ran the restaurant.

• 18:26Guy Raz?

  Okay, so you have the app, and, and it launches at, you launch it with this restaurant?

• 18:32Speaker 01

  Yeah.

• 18:34Guy Raz?

  I mean, how'd it work?

• 18:36Speaker 01

  Well, I remember we had a launch party with our friends and family. And we invited them all to Firebrand Saints and convinced them to download the app and try it. And I think some people got through it, but it was, it was actually quite buggy, I remember. Because the infrastructure we were building on top of wasn't as reliable. It wasn't built for, for cloud, right? These systems are built for in-store interactions. And, and so beyond that first day when we had that launch party, when we got maybe, you know, 50 or so people paying, we were never able to figure out how to get users to pay with any sort of velocity after that first day. And we would, like, I remember, we'd go out, Steve went out there a bunch of times and spent time to try to like, get people to understand how this works and to.

• 19:19Guy Raz?

  At the restaurant?

• 19:20Speaker 01

  At the restaurant.

• 19:21Guy Raz?

  Yeah.

• 19:21Speaker 01

  Yeah. But it just, it never really took off. And I think part of it was the experience was just not consumer grade, if I'm, if I'm honest.

• 19:29Guy Raz?

  Okay, just to kind of set this up for a moment, because this is my understanding of it, and maybe you can fill in the gaps. Because you, you alluded to it a couple of months ago, which is, at, this is 2012, right? At the time, most restaurants had a point of sale system that was all, it's sort of, it was hardwired into the restaurant. I think it was like, Micros and NCR, the two companies that kind of dominated this at the time. And basically, what it meant was that you had a PC and you had like, literally servers in the restaurant. And that was your point of sale system. So like, if you wanted to get any data about your restaurant, you had to be in the restaurant inside the system. You could not do that

• 20:14Guy Raz?

  remotely. It was not a cloud-based system. This, every restaurant was like its own, its own server.

• 20:20Speaker 01

  I think there's a lot of learnings as part of that experience. One was, I, like, we grossly underappreciated how much these systems did. These systems took orders in the restaurant, and it was different workflows when you sit down at the table, versus you go through counter service, versus when you're at a bar, when you put a card on file, versus the drive-through. The kitchen had workflows to automate the, the efficiency of a kitchen. So if you have orders, you know, coming in across different stations, you got to bring them together. The prep times are different for a salad versus a steak versus a fried chicken. You had employees that were clocking in, you had schedules. Then there was software,

• 21:03Speaker 01

  and there was hardware, because it didn't work on a typical laptop. You had to have hardware with a touchscreen that was restaurant grade. And then the other thing that was important was, well, we could have built these systems in the cloud, but the reason they were built with these physical servers is if you've got a busy restaurant that's bustling at 9:00 PM at night, and your internet goes out, you can't have the restaurant stop working.

• 21:28Guy Raz?

  Right. And that would, that would literally happen if the internet stopped, or, right? I mean, or the system, you know, something happened to it, you have like, tech support come out and fix it.

• 21:39Speaker 01

  Yes. And I think the, the naive, naive maybe realization that we had was, we could make these, this technology a lot better by moving it to the cloud and by taking advantage of Android hardware. Because the Android hardware actually is open, which allows for, which allowed us to build our own hardware, which was critical to building something that was durable and it could work in a restaurant environment.

• 22:08Speaker 01

  But we also, I think, grossly underappreciated early on what it would take

• 22:13Guy Raz?

  Yeah.

• 22:14Speaker 01

  to build these systems.

• 22:15Guy Raz?

  So this was not, from what I gather, this was not working. And so like, was there a period of time where you guys thought, well, we can still make this work? Or was it clear pretty early on that this was not going to work? And, and maybe, you know, maybe you go back to the drawing board or you try something new or, or what?

• 22:35Speaker 01

  We were trying to find a way to make it work. And the mindset we had was, was, you know, let's go talk to Asmi restaurateurs and in, in the Cambridge area. And it was really hard to get people to really understand the value prop of like, oh, if you could check out faster, it would help you turn on the table faster. That just wasn't enough.

• 22:56Guy Raz?

  Because you're thinking, this is a no brainer. But restaurants are not, they're, they're just not that interested in it.

• 23:02Speaker 01

  And even for folks that said, yes, one of the other challenges we had was our system was integrated to one point of sale system. There's, I think, a system called Positouch, which was a local company out of Rhode Island, I think, if you recall. But there was a long tail of providers. And so the only way we could even make this experience work at scale is to integrate into what felt like over 100 different systems.

• 23:28Guy Raz?

  Because if you couldn't integrate with a, with a particular POS, you couldn't work with that restaurant.

• 23:33Speaker 01

  Exactly right. Yep. Because without the integration, there's no way to get the check data.

• 23:36Guy Raz?

  So how long before you guys kind of decide to just call it a day on that, on that product?

• 23:42Speaker 01

  So now we're in early 2013.

• 23:47Guy Raz?

  Okay.

• 23:47Speaker 01

  So it's been about, you know, launched maybe in the fall. And so it's been three or four months of us trying to find a path. And as part of that experience, we got to know a lot of the restaurateurs in Boston and Cambridge. And the one thing we started to realize is like, nobody really liked their point of sale system.

• 24:07Speaker 01

  And you would hear things like, hey, why can't this be simple like my smartphone? Because they'd gotten used to downloading apps in a phone. And, and the management of all of this came up. And when we, on the one hand, we couldn't get time of day when we talked about this app. But when we pivoted the conversation to talk about their restaurant technology platform, they'd spent a lot of time with us.

• 24:31Guy Raz?

  And just to be clear, the technology platform, it was probably very expensive because it was hardware inside the restaurant, a touchscreen.

• 24:41Speaker 01

  Yeah.

• 24:41Guy Raz?

  And that enabled you to ring in orders and then those orders go to the restaurant, to the kitchen. And then they could see what to make. And then you could print the bill on it and...

• 24:54Speaker 01

  Yeah. So typically, the way these systems worked is they offered a lot out of the box. And there's differences across different systems. And one of the things that was really important was that the core data of the menu and what's available and what's in stock and when it's open and all that data sat in the point of sale system. So it was very central to the entire operation.

• 25:15Guy Raz?

  All right. So you're, you're talking to restaurateurs and they're saying, you know, the thing that really is really annoying is the system that we have. It's like, it's bulky, it, it's complex, it's, and, and this is getting the, sort of the, the gears in your head to, to start to spin about, well, maybe that's actually the problem?

• 25:35Speaker 01

  Absolutely. In fact, I remember I had a conversation with the owner of a restaurant called Finale Desserts, Chris Kane. He was one of the first, I'd say, like, full service, like, busier restaurants that was open to giving us a shot. And I remember sitting with him and pitching Toast. And, and my pitch was anchored on a few things. Because, you know, these systems are hard to switch. And people would describe these switches as like root canals. And so I pitched it as like, yes, of course, we can do all the things you do today. But there are a few things that are unique and better. One, we have these handhelds, so you can take the order and payment at the table.

• 26:19Speaker 01

  Two, it's got integrated e-commerce as online ordering was becoming bigger. So you can, you can, people can discover you and order online and you get incremental demand. And then three, you know, we talked about how you can access and manage everything from anywhere. And so when we sat down with Chris, he said, it's a good vision, but like, let me show you like what it takes from this. I think it was like they had a location in Harvard Square and in the Back Bay. And they had a, a commissary for a lot of their catering. And he's like, well, I've got the point of sale system. I've got a company providing payments. I've got a loan with somebody. I've got the separate software for accounting, separate software for inventory, separate software for online ordering,

• 27:05Speaker 01

  separate software for gift cards in store and online. I've got apparel system, a separate scheduling system. And none of these systems talk to each other.

• 27:20Speaker 01

  To the point where, and this really shocked me, like, the orders coming in online into the restaurant, this is in 2013, were coming into a fax machine.

• 27:32Guy Raz?

  Yep.

• 27:33Speaker 01

  And so we had, as, as part of that learning, while the, the, the potential of making these systems better was there, it was also quite complicated because we had to then go figure out, okay, not only are the, what are the pieces we're going to build? But how do we integrate into the ecosystem? And the truth is like, nobody wanted to integrate with us because we were nobody. And so we couldn't get these folks on the phone. So we just said, to hell with it, let's just try to build as much as we can on our own.

• 27:58Guy Raz?

  Just to build, basically, to replace the entire system?

• 28:02Speaker 01

  As much as, as we could.

• 28:04Guy Raz?

  Yep.

• 28:06Speaker 01

  One of the other realizations we had was we felt like in order for us to create our niche, we were going to go all in on restaurants.

• 28:15Guy Raz?

  Yeah.

• 28:15Speaker 01

  Because there were a bunch of providers that were building something more horizontal, where you could be a restaurant or a coffee shop or a flower shop or a, pick your small retail business. And we felt like our unique edge, because we had, we'd gotten a sense of the complexity of restaurants we're dealing with, was to go all in and build a purpose-built platform for restaurants. And specifically, we wanted to go after these busier restaurants that typically were supported by, you know, systems like Micros or NCR or Positouch and others.

• 28:45Guy Raz?

  Mm hmm.

• 28:46Speaker 01

  Like, we had to go in and actually support these busier restaurants right from day one.

• 28:49Guy Raz?

  Right. Okay. So you, you have this now very ambitious idea, essentially build a cloud-based system that would enable restaurants to do all, all or most or all of the things that they were doing now, but in a simpler way. How, I mean, at this point, it's still the three of you. And, and I imagine to actually do this in 2013, you would need a lot more people to start to build this. So let's talk about money. I mean, did you start to, to raise money at that point?

• 29:21Speaker 01

  We did. We did raise a little bit of money. We, so I quit in early 2013. And that's when we pivoted from the app.

• 29:32Guy Raz?

  Yeah.

• 29:32Speaker 01

  To this point of sale. And Steve Papa, who was the founder of Endeka, invested, I think it was 500K to get started.

• 29:43Guy Raz?

  He believed in, in this idea?

• 29:44Speaker 01

  I'm not sure. I think, I think he believed in us more than the idea.

• 29:50Guy Raz?

  And but what about, yeah, what about like institutional investors? Did you go and pitch people?

• 29:54Speaker 01

  We did. And, and almost, like, it's actually, it was pretty humbling because we had gotten good introductions, you know, into some great folks. But like, the feedback we got was along the lines of like, one, like restaurateurs, restaurants are a tough business. They've got a business, they don't buy online.

• 30:12Guy Raz?

  Margins are really thin.

• 30:14Speaker 01

  Margins are low.

• 30:15Guy Raz?

  Yeah.

• 30:16Speaker 01

  They're not tech forward. And, and, and you're trying to build like, you know, this like platform that's going to take you years to build.

• 30:25Guy Raz?

  And also they're looking at giants like Micros and NCR. To take them on, right, probably seemed like a, you know, a Sisyphean task.

• 30:36Speaker 01

  Yeah. You know, like, the, the reason we, we had so much conviction is, one, fundamentally, this was a big category in restaurants that hadn't benefited from the cloud, hadn't benefited from Android and mobile. But yeah, I think we, I also, we also knew that, I, I like, I knew that Steve and John, and then we brought in a few folks. And we just knew we had some great engineers that we had worked with who had experienced building systems like this. And I had a lot of confidence that, that as long as we understood the problem well, we could build it.

• 31:17Guy Raz?

  When we come back in just a moment, Aman and his team build the next iteration of Toast. And then comes the hard part, getting restaurants to buy it. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 31:37Guy Raz?

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• 32:20Guy Raz?

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• 35:12Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2013, and Aman and his partners have a small pot of money, a handful of engineers, and an idea to launch a point-of-service payment platform for restaurants. Their next step: find customers.

• 35:29Speaker 01

  The business development was largely, at this point, initially at least, just talking to restaurateurs. It wasn't anything more than that. I mean, we had to figure out some key partnerships, but that was the focus, to try to see if we could get restaurateurs to try it. And so we had some, I mean, of course, there's only so much you can do with 700 people, but we got our first customer live in July of 2013.

• 35:53Guy Raz?

  And I think you, basically, from what I read, to save money, you also didn't get an office, right? You had everybody working at, was it your house?

• 36:03Speaker 01

  We were in my basement, so we, in fact, my basement was unfinished. When we were trying to figure out office space, I did the math and realized it was a lot cheaper to just put some carpet down and put some drywall. There wasn't even heating down there. This is in Boston. And we just bought some space heaters and just set up shop. And so we just did that to save money and eventually had 10 people there, I think, at the end, in the end of 2013.

• 36:31Guy Raz?

  All right, so by July of 2013, you have enough of a product, I guess, to test this out with one or a few restaurants. Walk me through the first restaurant, because I imagine they have a system in there.

• 36:44Speaker 01

  Yep.

• 36:45Guy Raz?

  What are they, I'm assuming they're not going to get rid of it right away, because I don't know if this is going to work, but it's a big deal to shift from one system to another system entirely. I mean, and then train everybody on it and to try to do that while still running a restaurant. So how did you convince the first restaurant to do this?

• 37:07Speaker 01

  The first restaurant was Dwell Time, and this was in Cambridge Port. And the pitch we made to him was, we can build you something that's a lot more restaurant-specific than the system he was using. And he was using one of these cloud solutions that weren't purpose-built for restaurants. And then I remember, you know, we worked really hard for a bunch of months to try to get to what we felt like was something ready for production. And I still remember, we were getting, installing this restaurant, and they opened. And within 20 minutes of taking the first few orders, it's like the system is down.

• 37:52Speaker 01

  And now they've got a line, and they were like physically writing down the order on a piece of paper and dropping it off in the kitchen and taking the credit card number down on paper and like trying to do this manually. And realizes part of the experience that these systems are mission-critical and can't break. So there's a lot of learning just in that first day.

• 38:17Guy Raz?

  I mean, obviously, you guys would start to work out the kinks, right? And get the technology to be more reliable. But I want to ask about the overall challenge of getting people to adopt this, right? Because a lot of restaurants were not, obviously, they weren't happy with their point-of-sale systems, but still, like, this was going to be a huge overhaul for most of them, right? So, I mean, did you have restaurants who were like, I don't know if I even want to do this, like, this is just going to be such a pain?

• 38:45Speaker 01

  All the time. You know, we would, I mean, I think I must have pitched hundreds of restaurateurs in the first couple of years, and very few said yes. But I think there were a couple of things that mattered. One was, it's not just existing restaurants, it's also new restaurants that open. And when restaurants open, they've got to do the work anyways to set up something. And our value proposition was, instead of spending, like, for a restaurant like Finale, for them to go buy a legacy on-prem system, you know, you might spend 50 to 100K upfront. And so our pitch was very little upfront, sometimes nothing upfront. Then we had a SaaS fee.

• 39:26Speaker 01

  And then we had built-in to the platform capabilities that the staff and the ownership loved. And so we had a few data points. And I remember, we would code at the restaurants, because the best thing you could do is, you know, when we got some of these early restaurateurs up and running, is to get Steve and John and Tim and others, like, you know, actually at location, helping install, helping train, getting feedback, and then improving the software. With restaurateurs, I always say that the restaurateurs in Boston helped us build the platform, because, you know, we had a hypothesis for what we thought we needed to build.

• 40:09Speaker 01

  But until we got this up and running with customers, like, you know, that's when the rubber hits the road, and you learned a lot about what was actually needed.

• 40:19Guy Raz?

  I'm curious, I mean, from what I gather, you very deliberately only focused on initially restaurants in the Boston area, that makes sense.

• 40:29Speaker 01

  Yeah.

• 40:30Guy Raz?

  But you didn't want to go, you stayed on the East Coast, you didn't want to go to California. I mean, at this time, by 2013, there were, I mean, some competitors today. Square wasn't, I don't think they were quite doing restaurants or focused on restaurants yet, they were a small business. Clover, another competitor, was starting out as well. Were you very, like, did you want to kind of stay under the radar intentionally?

• 40:55Speaker 01

  Well, I think initially, it was, we didn't have the capability to get out of Boston.

• 40:59Guy Raz?

  Yeah.

• 41:00Speaker 01

  Because, as I said, like, a lot of these restaurateurs would buy in person, they needed service in person, their technology wasn't hardened, and so we had lots of issues. And then we, about six months in, maybe this is like early 2014, we were chatting with Steve Papa, who was the investor. And Steve mentioned to us that one of the customers that we had at Andeka was a company called Gordon Food Service, GFS, out of Grand Rapids, Michigan.

• 41:33Guy Raz?

  And this is a distributor, right? A food distributor?

• 41:35Speaker 01

  Food distributor, yeah. That's their core business, yeah. And so we got a meeting with GFS through Steve and walked them through the potential of what Toast could do for restaurateurs in terms of helping them run more efficiently, drive sales, help them drive their sales as a result. And that was a really important partnership for us that helped us get outside of Boston. So we launched in Miami and Chicago, thanks to GFS and their support, and then went from there.

• 42:07Guy Raz?

  It's interesting, because on the one hand, it seems like a huge opportunity, but it's also surprising that there weren't many people doing it. There were, though, some. And I wonder, when you guys found out or learned about some competitors also working in this space, how did it affect how you guys operated? Did it speed you, did it make you move faster? Did it make you more vigilant? What did it mean for what you guys were doing at Toast?

• 42:36Speaker 01

  Well, when you talk to customers that were using Toast, that further reinforced for me that we were on to something, because we didn't have the brand or the distribution or the funding, really, that some of these startups had. And yet, you'd hear them say, Of the cloud solutions, because some of them I tried a few, Toast was the best one. I'm a big believer, by the way, in like customer obsession and not being too competitor obsessed.

• 43:09Guy Raz?

  Yeah.

• 43:09Speaker 01

  And we were already working as hard as we could, you know? We were like all in on this, like there was no, you know, the only plan was to make this thing successful. And, uh, and so we didn't need any motivation to try to work harder or faster. And in fact, the hardest thing was, once we got to 100 customers, we actually, and we had this GFS partnership, we actually started to see a lot of interest.

• 43:37Speaker 01

  And we weren't ready to scale. There was lots of things in the way we, we had built the company to start was not scalable. You know, an example of that is just, I remember one of our early customers in Boston was this restaurant and nightclub. And, uh, when we met with the owner, Billy there, he, he asked me, hey, like, what happens at one in the morning when you've got an outage or an issue, like, what am I going to do? And I said, look, you know, we're small and scrappy, but we have great 24/7 support. So he, uh, went to the rest, our website, toastab.com. And to his credit, he called the phone number. And, um, that was a Google voice number.

• 44:22Speaker 01

  Cause we had six or seven of us and my phone started ringing in my pocket. And, uh, I remember we all kind of, by then had realized that like, we would wait for two or three rings to see if someone else would pick it up. Cause no one really loved picking up the support calls. So on the third ring, I picked it up and I said, I told it, I told you've got really good 24/7 support. We'll personally pick up these calls and they're still a customer. But I think that just speaks to how we, there's so many examples like that, that we weren't ready to set up for, to scale, uh, to, and, and make customers successful. And, and, and that was the blocker, not the competitive pressures. In fact, no one had cracked the code. And, you know, it like, it was clear that our execution was getting in the way, to me, of us actually scaling this company.

• 45:09Guy Raz?

  When we come back in just a moment, how a new CEO helps Toast hit its stride and how COVID sends it right back to the startup stage. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 45:36Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's early 2015, about a year and a half after launch, and Aman and his partners have been able to grow Toast to a few hundred customers, but on a day-to-day basis?

• 45:50Speaker 01

  The business was frankly struggling. On the one hand, there was some, you know, customers who were using it and they were happy, or at least cheering us on. And, uh, but there were a lot of issues, like, I remember at one point, all of the hardware we would ship would like come back and we had lots of outages and downtime. Our customers were not happy with our support experience. I remember that was one of those times, actually, even more than when we pivoted to point of sale, that was like, in my mind, one of the low points for us, because there was actually a good signal here that customers wanted what we were building. And in hindsight, it just seems so obvious, like some of the things that we did wrong. But at the time, you know, part of the problem here was like, I was so focused on trying

• 46:34Speaker 01

  to grow the business and grow revenue, that it probably didn't take enough time to step back and to work with Steve to build the systems to scale, the capabilities we needed to scale.

• 46:46Guy Raz?

  Right. And I think things got to the point where, where you decided to, to bring in a new CEO who could deal with some of these challenges. And this was Chris Camparato, who I guess you knew from your days at, at Endeka.

• 46:59Speaker 01

  Yeah, we, we knew Chris through, uh, Endeka.

• 47:02Guy Raz?

  And, and so what did that mean for you? Like what, what, how did your job change?

• 47:06Speaker 01

  It actually did not change at all, because, you know, when you're smaller and you're just trying to, no one, we weren't concerned about titles or any of this stuff. We were just concerned about trying to make the company survive.

• 47:18Guy Raz?

  Yeah.

• 47:19Speaker 01

  And, and so we were doing whatever it took. And I was largely focused at the time, even before Chris joined, on distribution and getting the partnerships in place and the sales team in place to get the customers. Because obviously we, you know, we had to show revenue growth, um, because we were burning quite a bit of capital. And so I think in many ways, our jobs didn't change, but I think one of the first things that Chris did was when we got together was to step back and, and spend time with us to try to understand, to articulate to everybody who we are and what we do.

• 47:54Speaker 01

  There was this, I think maybe a 4,000 square foot office and a cafeteria where everyone got together. And, uh, there was someone taking a support call from a customer who was fired up. And, uh, and Chris is very passionate about customer experience. And, uh, our support rep just hung up on the customer because he was unhappy with the way he was being treated. And Chris remembers saying, we need to step back and rethink how we do things here.

• 48:26Guy Raz?

  Okay. So you guys are growing and then you hit a, you know, potentially disastrous moment, which is, which is COVID, which had a hugely negative effect in many ways on many restaurants in the United States. And I think, you know, by, you know, cause I think by 2020, you guys had raised now by this point, $400 million, you're at $5 billion valuation. And then within weeks, uh, the country shuts down.

• 48:57Speaker 01

  You know, we, uh, for years, between 2015 and 2020, we were this business that was growing over a hundred percent. It was this, this moment where we felt like we were ready to really take off. We had aggressive plans that year. And then I think early April of 2020, we'd gone from this company that was growing like this to maybe revenues down over 90% because restaurants weren't taking payments. And when restaurants aren't open, they can't really pay their software fees. And so we had to make the hard decision to cut, I think it was like 55% of the team.

• 49:41Speaker 01

  And then also to like, get on a call with the team and explain, well, what's the plan now? I remember like, none of us really knew, but the one thing that we knew was we had gotten here by being obsessive over what customers needed. And what our customers told us was they need tools to manage off-premise, better off-premise sales. That's the beginnings for us of the QR codes now you, that you see at a table to pay or to scan a QR code or look up menus and order. And I think I, that period especially, it just felt like, like the basement stage.

• 50:26Guy Raz?

  Yeah.

• 50:27Speaker 01

  In terms of just the level of maniacal focus that we had and the speed with which we were building, because we knew that it was, everything was at stake.

• 50:38Speaker 01

  I think it was the first time since really 2014, where it was like, oh, this thing could be over. And unlike in 2013 or 14, when it was like, hadn't really ever taken off, we had a business with thousands of employees and tens of thousands of customers at that time. So that was just, uh, really tough to even fathom.

• 51:03Guy Raz?

  Coming out of the pandemic, you went public in, in 2021 and now you're publicly traded stock. And, and, and I'm, I'm going to fast forward for a moment to 2024, because you actually come back to a, well, I mean, you had been, you know, in an executive position before, but you come back to, you become the CEO.

• 51:24Speaker 01

  Yes.

• 51:25Guy Raz?

  So tell me about that. I mean, did it feel like, okay, uh, I mean, probably, you know, maybe Chris wanted to, to, to move on and, and, but I'm assuming he'd been there for almost 10 years and you felt like, okay, I'm ready to do this now.

• 51:40Speaker 01

  Yeah. I mean, I think Chris was, um, had always said to us, I think the words he used were like, this was a core of duty. And I think one of the things that I remember someone I trust told me was like, something on lines of like, you know, no one's perfect, you're not perfect, there are a lot of blind spots you have, you have to learn. But it's not obvious to me that someone from the outside is going to come in and do it better than you, given the context and history you have in this business and the passion you have for this business. And so that, that got me comfortable to want to step back in. And I also felt like it was a partnership, like I, I never felt like, even one of the things that Chris I think did really well is it was always a partnership on the top.

• 52:20Guy Raz?

  Yeah.

• 52:21Speaker 01

  And that was important to me, heading into this phase as well. So I wanted to make sure that the key people around me were in it for the next, for the next leg of the journey.

• 52:31Guy Raz?

  I think in, in the last quarter, you guys had reported profitability, I think, or maybe it was in 2024, it was in that year, first full year profitability. But, um,

• 52:42Speaker 01

  Right.

• 52:42Guy Raz?

  In the latest quarter, I saw that, um, I think you, you now are between 15 and 20% of, of restaurants in the US. Does that sound about right?

• 52:52Speaker 01

  Small business restaurants, over 20%.

• 52:54Guy Raz?

  And so you have a, an opportunity to get to 80, to, you know, the remaining 80%. And I'm sure there's fierce competition with, you know, some of your, your, your rivals in the space. What is the, what's the unlock? How do you get to that, that those other, you know, the remaining 80%?

• 53:11Speaker 01

  I think it's a, first of all, like, one of the things that we focused on from day one was these busier restaurants. So even though we have 20 plus percent of the restaurants, we actually have more of the sales volume. Because the average restaurant that's on Toast has more sales than the average restaurant in America. And so one of the things, in fact, our marketing campaign that we just launched was called Built for Busy, because the busiest restaurants choose Toast, because again, we are purpose-built for restaurants. We have a tremendous amount of opportunity now with AI. We know, for example, that if a guest comes into a restaurant three times, they're more likely to become a regular.

• 53:53Speaker 01

  And so how do you create the right campaigns to bring those people back? As an example, we launched this product, uh, recently called Toast IQ Grow. Toast IQ is the branding behind our AI platform. And customers that have switched to it have seen sales go up 8%.

• 54:14Speaker 01

  The analogy I like to use is, you think about as a McDonald's franchisee, for example, there's a lot they do to set them up for success. And in the restaurant business,

• 54:28Speaker 01

  A lot of the decisions that are made about how much food to buy, which suppliers to pick, how to price your menu, what marketing to do, how to schedule your staff, is not driven by data often. In fact, it's often driven by gut. And gut and some data, but I think the opportunity for Toast within the restaurant business specifically is to leverage our data across the 20-plus percent of restaurants that are using Toast to help drive better outcomes for these customers.

• 54:58Guy Raz?

  Yeah. You know, when you think about where you guys got to, right? Here you are, 13 years in. And I think your market cap is like 15 billion. It's gone up and down, obviously, but it's still. I mean, it's a huge business, right? And you have really found,

• 55:18Guy Raz?

  you know, a strong position within this category. Where do you, you know, how do you protect the moat? I mean, it's a bit of a sort of a cliched question, but I mean, you guys really took on huge players, NCR, micros, and, you know, back in the day where they kind of dominated this business and they may still be involved heavily in the business. But how do you make sure that, you know, you are ahead of the curve when it comes to, you know, what might come next in this industry?

• 55:52Speaker 01

  Yeah, I'm a big believer in like not forgetting where you came from. And one of the things we always push on culturally internally is what got us here was the hunger, the scrappiness and the customer centricity. I also think like for the company on the offensive side, there's a tremendous amount of opportunity to extend beyond what we have done for the first 10 years. So the past two or three years, we've gone into new markets. We launched in Canada, UK, Dublin, Ireland. We've got a team there in Australia. And we've built a, you know, product to support retail. And so think of grocery stores,

• 56:37Speaker 01

  convenience stores that have a gas station, liquor stores, hardware stores. We're starting to build out the platform to really support local neighborhoods, not just local restaurants. And so we see a lot of opportunity to actually expand the capabilities we offer while continuing to scale within the restaurant business.

• 57:00Guy Raz?

  When you think about the journey you took and, you know, where you were and where you've come to, how much do you attribute to the work you guys put in? How much do you think had to do with luck and timing?

• 57:11Speaker 01

  You know, it's, it's one of the best decisions I made. I remember when we were, someone gave me some advice that said, you know, when you think about your team, your co-founders, try to find people that are good people, that have good values because they can go through a lot together and you need, you need that. And I'm very fortunate in that, whether it's Steve or John or Chris and really a lot of the management team. And so of course, like, you know, a big part of what got us here is the incredible skills that the team had and all the work we put in. But I think there's a lot of luck too. Like I think had we not raised that capital right before the COVID, we may not have survived. You know, had we launched the business in 2009 versus 2012, we may have tried to build it on iOS,

• 57:56Speaker 01

  which would have been the wrong call. You know, back in 2012 and 13 is when payments were opening up without which the business model may not have worked. Frankly, Chris joining us at that time was important to helping us scale when we, things could have gone a lot worse, I think. And so there's a lot of like, and there's so many like this. There's so many breaks that went our way.

• 58:21Speaker 01

  But it's a combination, I think, you know? The harder you work, the luckier you get.

• 58:26Guy Raz?

  That's Aman Narang, co-founder and CEO of Toast. By the way, you remember the very first restaurant where they got their start? Firebrand Saints in Cambridge? It actually closed down in 2017, but was replaced by another restaurant, a rotisserie chicken place called Shyberg. And when we called them up to ask which payment method they happened to use, they told us Toast. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free. And if you're interested in insights, ideas and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at guyraz.com or on Substack. This episode was produced by Sam Paulson

• 59:10Guy Raz?

  with music composed by Ramtin Arablouei. It was edited by Neva Grant with research by Casey Herman. Our audio engineer was Kwesi Lee. Our production staff also includes Chris Messini, Alex Chung, Carla Estevez, J.C. Howard, Catherine Seifer, Carrie Thompson, John Isabella and Elaine Coats. I'm Guy Raz and you've been listening to How I Built This.