From Rejected by VCs to a $15 Billion Market Cap: Toast CEO's 10,000-Word Entrepreneurship Manifesto | Z Talk

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Founded in 2011, Toast is a technology company focused on the restaurant industry. Its core products include POS systems, payment processing, and online ordering systems. Currently, Toast has reached $1.2 billion in annual recurring revenue (ARR), holds approximately 13% market share in the US, and serves 120,000 restaurant customers. Its lending arm, Toast Capital, has reached $1 billion in annualized loan originations.

Toast went public in 2021 and now commands a market cap exceeding $15 billion. Yet in its early days, not a single VC was willing to invest. The founding team ultimately accepted a $500,000 investment from their former company's founder at a $3 million valuation.

Aman Narang is Toast's co-founder and CEO. He previously worked with co-founder Steve Fredette at data management company Endeca. In a recent in-depth interview, Aman reflected on Toast's journey, summarizing lessons on entrepreneurship, scaling, and organizational management at each stage — showing us Toast's path toward a $100 billion market cap and its outlook for the future.

ZhenFund actively tracks frontier technology and innovation trends. Going forward, we will continue bringing you insights and deep thinking from the world's top founders. Stay tuned. This content comes from the 20VC podcast; below is the full translated transcript.

Core Takeaways

- Speed and iteration matter enormously in business: Founders often underestimate the importance of speed in business. Once you see signals of product-market fit, move fast — ship quickly, iterate, learn.

- POS is the central nervous system of a restaurant: POS is a restaurant's ERP (Enterprise Resource Planning) system. Toast must be the core of all expansion.

- Business is about people: The fundamentals of how much a company "can do" and "can do well" ultimately come back to people. Building a rigorous hiring process is critical.

- Every employee who joins Toast must spend one quarter on frontline sales: This way, when they show up in front of customers, they won't look foolish for lacking expertise or industry perspective. If managers don't understand frontline details, they will make terrible decisions.

01 Speed and Iteration Are Very, Very Important in Business

Harry Stebbings: My friend, I've gotten so much good news from your cap table, so thank you so much for joining me today.

Aman Narang: I'm excited too, Harry.

Harry Stebbings: What were the moments growing up that had a massive impact on you?

Aman Narang:

My parents were incredibly dedicated. Especially my mom — she practically lived for me and my brother. To this day, my parents live next door to me. They'll ask: "What can we do for you right now?" I was fortunate to grow up in such a caring family, which made me feel special.

I was born in India and moved to Nepal when I was seven. In ninth grade, my father sent me to boarding school because he felt my school was too easy. I was a confident kid, but I got bullied at boarding school and only lasted a year.

That was a formative experience. It taught me resilience, how to face challenges, how to face people who don't make life easy for you. I felt targeted at the time. Looking back, I'm grateful for it because it really made me stronger.

Harry Stebbings: Life is made up of many key "yeses" and "nos." If you think back to one key yes or no that truly shaped your journey, which was it?

Aman Narang: My first job was at Endeca, a company selling e-commerce software in Cambridge. I worked there for six or seven years, and that's where I met my co-founders Steve and John. I also met Steve Papa there, the founder of Endeca. After Endeca was acquired by Oracle, Steve and I discussed starting a company together.

I always joke that at first we were embarrassed to leave and start something. But for years we'd been telling everyone we were going to start a company someday. So when Oracle acquired Endeca, everyone was saying, "You guys are leaving, right? Because you've been saying you're going to start a company." That's when it really became real, because we had to find investment, figure out what kind of company we were actually going to build.

It wasn't like when Steve and I first started in 2008, when the iPhone had just come out and we didn't really know what to do. So in 2012 and 2013, we tried to do some early fundraising.

Initially we were confident because we felt we came from a successful company, Endeca, which had been acquired by Oracle. But we got rejected again and again. I remember going to 8-10 VC meetings and getting rejected every time. Maybe we were just naive, but everyone said no.

So for us, a key "yes" came from the founder of Endeca, who wrote us a check for $500,000.

Harry Stebbings: At what valuation?

Aman Narang: I don't remember the exact amount, something like $2.5 or $3 million. He said to us, "I don't know restaurants, I have no restaurant experience, but I respect you guys, so I'm going to bet on you."

That one "yes" was incredibly important. Without that "yes," we wouldn't be here today.

Harry Stebbings: It was a great experience for him too, and I think your success has been his reward.

I heard you mention before that you didn't actually start a company because there were a lot of restaurants out there, or because you loved the service industry — you just wanted to work with your co-founders.

How important do you think choosing a startup idea is? When selecting a space, how do you think about it? Do you have to love it and follow your passion?

Aman Narang: I feel lucky in life — at Endeca, I met Steve and John, who are those legendary "10x engineers." I think people underestimate this: what you need are people who can build products quickly and pragmatically.

Harry Stebbings: You mentioned building products quickly and pragmatically. In the zero-to-one journey, is speed the most important thing?

Aman Narang: I think speed is very, very important in business. People often underestimate it — they think the key is to perfectly and correctly solve the product problem.

But in product management, I've found there's so much work that goes into describing all the permutations of a problem. When you realize 80% of them aren't relevant, at least not yet, the most important thing you can do is get the product out as quickly as possible.

Because you learn so much from end-user feedback — way more than anything you could come up with yourself, like analyzing problems beforehand or doing user research. Not that I'm against user research.

Personally, I think there's enormous value in shipping quickly, iterating, learning, and recognizing that when you move fast, if something doesn't work, you can also pivot quickly.

When we started Toast, I remember the first six months, Nicole, Heather, and Amy said, "What are you guys doing sitting on the couch all day?" We weren't doing anything, because a lot of ideas were going nowhere.

But because we moved quickly, we could iterate, because we had time. If you spend two years getting your first thing into customers' hands, Toast wouldn't exist today.

Harry Stebbings: Is there any decision where you look back and wish you'd moved even faster?

Aman Narang: We were really naive. It was our first startup, we were all in our twenties, probably feeling like we could do anything. My fatal flaw was that I always tended toward scarcity, doing more with less.

I thought, I'm going to outwork everyone. So I wanted to minimize the time and energy I spent on leadership and management — we'd hire people to do the actual work. Early on I thought hiring managers was worthless. I only wanted to hire people who could sell or write code.

I thought Steve and I would do all the managing, we didn't need other managers. But honestly, we didn't know how to manage an organization back then.

So one of the biggest mistakes we made after entering this industry was not recognizing that you don't just get leverage by hiring salespeople or engineers — you actually get tremendous power simply by hiring people to support you.

If there's one thing I'd do over, it would be to recognize this very clearly: once you see signals of PMF, move fast, because usually other people can see those signals too. Build a team around yourself that can help you move faster.

02 What You Need Isn't 10x Results But One Positive Signal From a Customer

Harry Stebbings: Does doing this make management easier? Does running Toast become easier?

Aman Narang: Of course. I mean, there are always new challenges, but fundamentally, yes, it does get easier. In the early days, everything is about the founder mentality, about doing more with less. You have a lot of generalists, trying to figure out everyone's job and make everything work.

The good part, of course, is that at small scale there's shared empathy. Toast was tiny, it felt like us against the world. And you know a lot about what's happening everywhere in the company because it's small.

At some point you think, "Okay, we need to start building and scaling." And one mistake most founders make is being unwilling to let go of any control. I made this mistake too. Because you think, "I need to know what's happening everywhere or we'll mess up."

The reality is, you can benefit from specialists in a given area, but you also don't want to lose your entrepreneurial spirit. That's why all big companies say, "We want to be more entrepreneurial, we want to get back to innovation." So it's a balance. I always say, a company needs both specialists and entrepreneurs — you need to strike that balance.

I really liked a book our former CEO Chris recommended to us, Zone To Win. The "Horizons Framework" in it is genuinely useful, not just because it points out that "innovation in Horizon 3 is different from Horizon 1," but more importantly, the talent required for Horizon 1 versus Horizon 3 is different. If you want to build a company that lasts for generations, you need both types of people in your organization.

Horizons Framework

Harry Stebbings: When should you bring in specialists? Because we always hear that the zero-to-one phase needs generalists — so when is the right time for a startup to bring in specialists?

Aman Narang: There's no black-and-white answer. But I heard something I really liked: "You have to know when you can step on the gas."

What that means is, you work hard to figure out if everything is in place to really take action. That might be about performance marketing, sales, whatever — and then you actually start scaling.

For Toast, we had multiple starts and stops. Like raising funding, or a meeting where someone said, "We need to stop selling." Others were like, "What are you talking about?" Eventually we obviously worked through it, but we hit problems along the way.

I remember a conversation with a restaurant owner who said, Tesla's great, but it doesn't do me any good sitting in the showroom. What they were saying was, the product wasn't good enough yet. So we had to slow down or stop scaling multiple times.

At a startup, recognizing when you can actually step on the gas and accelerate is incredibly important.

When you do start accelerating — to get back to your question — I think that's when you can really benefit from specialists. I've seen us perform well and I've developed muscle memory. You can figure it out yourself, it just takes a lot longer.

Harry Stebbings: You mentioned your 100 restaurant customers and that you clearly felt signals of market opportunity. When you brought Toast to market, did you immediately feel early product-market fit, or was it through constant iteration that you realized there was actually customer demand for what you were building?

Aman Narang: For the first six months, we hadn't figured out exactly what to do. Then someone on the team studied how Alipay and WeChat were being used in restaurants for mobile ordering and payment.

I remember one night we were sitting at a bar in Kendall Square in Cambridge, and we waited like 20 minutes just to get the check. We thought, "This could be so much faster — you could order and pay on your phone, tables could turn faster because there are people waiting outside."

Before we had the Toast platform, we started with QR codes for restaurants. But we weren't making any real progress, we couldn't scale, so we pivoted. That raised a lot of questions about "whether to enter restaurant software" and "whether trying to rebuild something like POS (point of sale) even made sense."

But when we moved to POS, one thing became very obvious: when you talked to restaurant owners about it, they'd give you a day to try it because they hated their existing systems.

For me and the team, this taught us something — a lot of startups have this idea that you need to be "10x better," and "rebuilding the POS system" doesn't sound like a 10x idea. But getting positive feedback from customers is a great signal.

When we pitched QR codes, we got nothing — their reaction was "please go away." But when we said "hey, we can help you run your restaurant better on the POS," they were very interested and would sit with us for hours talking.

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Android, Cloud, and Embedded Payments Trends

Drove Toast's Birth

Harry Stebbings: One difficulty with targeting POS systems is that it's a bit like a bank account — I think it's very sticky, people don't switch often. Based on Toast's current new signup data, I think about 70% to 75% of new restaurant locations choose Toast as a new system, while about 25% are switching from something else. Were you worried about this? How did you think about the core challenge of getting customers to switch?

Aman Narang: We actually did it. We were worried, and these ideas grew over time, which is interesting.

Our initial thinking was that moving all the technology to the cloud — so when someone opened a new restaurant, maybe that alone would be enough for them to choose Toast. Then we realized our product was just much better than what was out there. Despite the challenges, we got positive signals from customers.

Then we realized, POS systems are also electronics — they slow down after basically four years or so, so that's the frequency and cycle people consider switching on.

We also realized we could bundle more functionality into one cloud solution, which made things easier. And we could offer high-value products at extremely competitive prices.

Early on, people didn't understand, they'd ask, "Why would anyone buy Toast?" And I'd say, "Well, because it's cheaper." That's not usually a good reason for VCs to like you, but I thought, "No, it can be a good reason."

Harry Stebbings: Just because it's cheaper? Is that an acceptable answer?

Aman Narang: Not just because it's cheaper — it has to be both cheaper and better.

Harry Stebbings: But a startup will always have areas where it can't compete. You know, you might always be behind on product, your R&D spend is basically zero compared to others, your customer service is basically zero compared to others. If startups are always going to be somewhat behind in various ways, how do you think about this?

Aman Narang: You can get a lot from persistence and perseverance, I really believe that.

When we brought our product to market, I can share a few experiences. I remember sitting down with restaurant owners, and they mentioned that 80% of the features these platforms offered didn't actually matter. What really mattered was that the world was moving toward digital and mobile.

Without Android, cloud, and embedded payments, Toast wouldn't exist — those three trends really drove Toast's beginnings.

What people cared about was, everyone's ordering online now — can you make it easier for my kitchen than receiving orders by fax? That was the feedback we got, about what restaurant owners actually needed.

A lot of times what people want hasn't been well executed. Going back to our "10x engineer" philosophy, even if the product had some bugs, we could build software incredibly fast — building what our customers needed was our strength.

I remember when we got our first big restaurant — it was a place that also ran a nightclub, and the owner's name was Billy. I remember meeting with him, he was excited. He was a practical guy, he said, "Well, it looks like my partners are interested in using your product. Why would we switch to you?" I said, "Because mobile devices will turn your tables faster. That's a key differentiator for Toast."

He said, "Okay." Then he asked, "What about customer service?" I said, "What about it?" He said, "I can't reach my current vendor's support until 2 a.m. If we can't use the system, that's a big problem."

I remembered Steve had updated the website a few days before saying we had 24/7 support. So I said, "Well, don't worry. We're small, but we have 24/7 support."

He asked what our website was, he opened it, and called — and my phone started ringing because it was a Google Voice number.

I knew it would ring four times before going to Google Voice voicemail, and I thought if no one answers, that's going to look terrible. I had my phone in my pocket feeling it vibrate — but one ring, two rings, three rings, four rings — I had to answer. Right in front of him, I said: "See, I told you, we have 24/7 support."

Harry Stebbings: How did he respond?

Aman Narang: He's still our customer, they're still our customer. (laughs)

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Product, Word of Mouth, Funding, Infrastructure, Leadership

Every Aspect of a Startup Must Advance Together

Harry Stebbings: So there was early demand, and you were clearly picking up signals. Before we get into product expansion, geographic expansion — all the exciting things that require more money — VCs matter.

I spoke with Bessemer's Kent earlier, and I know there's a story behind Bessemer's investment. Tell me about Bessemer, because they actually rejected you once before investing.

Aman Narang: Yeah, this goes back to that initial string of rejections.

Harry Stebbings: How many times were you rejected?

Aman Narang: 8-10 times — we'd met with basically every well-known VC in the Boston area. I think a lot of it was on us, we were a bit overconfident. We thought we were good engineers, and we came from a company that got acquired and was successful, but we didn't do a good job explaining what we wanted to do.

I remember in meetings, investors would ask what CAC (Customer Acquisition Cost) was, what LTV (Lifetime Value) was, and so on.

But the way my brain worked at the time was, we're here to make customers successful — do that, and everything else follows, nothing else matters.

Harry Stebbings: Do you still believe that?

Aman Narang: Yes. Those metrics and all that stuff matter, just like you need data in a sales process. But if you're just sitting there staring at a dashboard and trying to tell your employees to do better that way, it doesn't work.

Harry Stebbings: Here's my question. As an early-stage investor, I've observed that a company at seed or Series A can have terrible sales efficiency. But on the other hand, startups need to create products that customers love, and brand advocates among early restaurant owners — that creates word of mouth, which builds brand and improves sales efficiency down the line.

So at what point do people believe "sales efficiency will get better" versus feeling like you're being too "idealistic"?

Aman Narang: You need both. I think you need to have a model for what the product could look like, and prove that it will be a good business.

I remember modeling what Toast might become without the full platform, without fintech capabilities, without payments. The result was that it would be very hard to scale, because you'd be going door-to-door selling to people, and it's a considered purchase.

Harry Stebbings: Did you know this from day one? Did you know the fintech piece would be critical?

Aman Narang: I didn't know it on day one, but I think we realized after having ten customers that the financial model we had wasn't really working.

Because early on, we were making at most two or three hundred dollars a month from software, and I remember talking to a customer and thinking, "You call us too much, and given what you pay us, there's just no way we can scale this."

So you need to have some credible models in your head, then piece them together and say, "This is what my product could look like." But then very quickly you have to shift to "How do we get customers to love what we build?" So you need both.

Back to Bessemer and our early fundraising — we had met Kent, he didn't invest, so we got investment from Steve, and later Kent invested in our Series A.

We had many conversations with him asking why he didn't invest in us initially. He said, "You guys seemed fine, but I noticed you started arguing about strategy in the middle of your pitch, and it kind of scared us." So we probably didn't do a great job.

Harry Stebbings: That's so interesting. What price did they come in at?

Aman Narang: Around a million dollars.

Harry Stebbings: Understandable behavior from Kent. If you could go back, is there anything you wish you had done better in early fundraising?

Aman Narang: I probably would have spent more time on it. We were very focused on customers, which is right, but you need balance. You also need to step back and pay attention to building a great company, and fundraising is an important part of that.

So you need to be good at fundraising — not an expert, but at least good enough. You need to put real thought into it. That matters.

Harry Stebbings: I completely agree. After you got Bessemer's investment, Toast had the cash flow to scale. Kent later told me that Toast actually went through a period of aggressive expansion. What broke first?

Aman Narang: I think one of the first things that broke was when we accelerated again, we thought, "We should ramp up sales capacity, we should try to expand."

But we didn't have the infrastructure to scale. We didn't have the leadership to micromanage everything. We didn't have the infrastructure, we didn't have the leadership, and we didn't have the product.

Harry Stebbings: What do you mean by "no leadership"? Because as founders, you had built a founder-led sales motion and transitioned to a sales-team-led sales motion. What specifically about leadership?

Aman Narang: For example, when signing customers, we probably cared too much about revenue and scale, because those are metrics a lot of people care about.

But while you got customers to sign up, they either never went live because we didn't have a smooth, scalable onboarding process — we tried to force it through — or customers felt like we abandoned them after go-live because we had no support infrastructure. And the product itself in some cases wasn't mature or complete enough.

So there were many product features that just weren't ready at the time, and that affected the customer experience. I remember when Chris joined us — Chris was our former CEO — that was one of the hardest moments for the company.

Because Steve and I were having a lot of issues with speed of execution. The reality is you have capital, you have to deploy that capital to scale; on the other hand, you have to do it well enough that the company doesn't fall apart.

I heard a saying that you have to make sure everything in an organization is in sync, moving forward together. One thing can lead another, but it can't get too far ahead, or the whole thing breaks.

We didn't have the team to help us expand at that point. I gradually came to understand that at some point, the founder's role shifts from doing things yourself to coaching and teaching others to do things for you.

Then the question becomes: How do you hire the right people, how do you onboard them effectively, how do you transmit culture and vision? And those were things I severely underestimated at the time.

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From Day One

We Focused on Solving Problems for Restaurants

Harry Stebbings: Why didn't you become CEO earlier?

Aman Narang: I didn't get the job.

Harry Stebbings: That's the most honest answer I've heard in a long time, and I love it. Tell me about it.

Aman Narang: When you're very early in a startup, nobody cares about roles and titles. Everyone's just trying to build the business. Steve was CEO, I was president, we were trying to keep the company alive — nobody really cared about that stuff.

Then at some point, we raised $30 million, which was real financing, and we were going to step on the gas and scale. But it was very clear that we didn't know what we were doing in the scaling phase.

Harry Stebbings: Did your VC investors sense that?

Aman Narang: To some extent, yes. Steve Papa was the first investor, he was like a friend and mentor to us, and I think he sensed it. We all realized it was a challenging, unstable period for the company — we were going through real growing pains.

We had worked with Chris at Endeca. One of Chris's superpowers has always been that he knows how to get the most out of people. I remember in that meeting, we were trying to figure out the future of the company, and we decided we needed to bring someone in from the outside.

Harry Stebbings: What stage was the company at? $5 million ARR?

Aman Narang: No, that was very early, around $2 million ARR. Two years in. It was the best decision we ever made.

We brought in a talent that gave us space to do our own thing, but who was also a great advisor and coach, and who knew how to scale and lead an organization in ways we didn't. So to answer your question, I didn't get the opportunity.

Harry Stebbings: Okay, so later you got to $30 million ARR, you had to scale, and you had a scaling strategy. Is there anything in hindsight you wish you hadn't done?

Aman Narang: You know, one interesting thing about Toast — and this is still an issue today — is "how many things do you want to do?"

From day one, we focused on solving problems for restaurants. Toast was going to be the best solution for the restaurant industry. Our strategy was to build a vertical platform that solved this industry's problems better than any other company in the world.

When we got going, we realized sales efficiency wasn't great. So we had to get cash flow working by offering some products. Because like you said, switching POS systems is a considered purchase. You know, switching POS systems has been described by many people as being like a root canal.

Harry Stebbings: So you needed to increase RPU (Revenue Per User) per customer to improve sales efficiency.

Aman Narang: Right, so the big challenge was, how do we build more of the platform faster while also scaling? How many products can we do well, and then, how many segments can we really serve?

I remember an early customer, Urban Outfitters — they had restaurants inside all their retail stores — and they said, "You're doing such a great job, can you just do all our retail too." I'm glad we said no and really stayed focused on restaurants.

Figuring out the target market is always challenging — like, how big is the right market for our product?

Harry Stebbings: Have you done anything you wish you hadn't done?

Aman Narang: That's a good question.

Harry Stebbings: For me, for example, in the creator economy hype, getting big celebrities on the show would have been an easy way to blow up. It's easy to get a lot of attention, to get famous. But that's not our positioning. Our show is about talking to and learning from the best entrepreneurs in the world — that's what we do. We did the celebrity hype thing, but I wish we hadn't.

Aman Narang: For us, it was probably moving too fast, scaling too aggressively when capital was easy and cheap.

Harry Stebbings: Was it always that easy?

Aman Narang: No, our first round was very difficult — we couldn't get funding at all. But once we got through that first real financing round, we saw the numbers start to turn, and everything became "how fast can you move?"

So on one hand, you have to move fast; on the other hand, building the right foundation and the right culture is also really important — like the carpenter's rule of "measure twice, cut once."

In the early days, we could have done better on these fronts. If we had slowed down our expansion, we could have seized a lot of opportunities, and in the long run, I think it would have made things much simpler.

I remember one time, we were shipping hardware devices to restaurants. Almost all the hardware we sold was returned within 90 days. And we were still selling it, because we thought we needed to attract more customers to the platform.

Harry Stebbings: Why was that, and what did you do? When you were facing that return cycle, seeing so many products coming back so quickly, what was management's decision on that?

Aman Narang: We made a key decision to build the Toast platform on Android rather than iOS. Though in hindsight it looks like a strategic decision, it was really just because we thought Android was an easier platform to build on.

But in reality, Android had all kinds of hardware devices, and one complicating factor we ran into was that the hardware we got didn't have the right configuration to support the card readers and other components that restaurants needed.

When our hardware was coming back, we were desperate to find a device that could actually work in restaurants. What we really needed at the time was just enough time to get through the next quarter, until we got the device we're using now — developed in partnership with a Chinese partner — so we could feel more confident about scaling.

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Is Toast a Fintech Company or a SaaS Company?

Harry Stebbings: When we think about expansion, there are really three core areas: product expansion, segment expansion, and geographic expansion. Toast has done an incredible job on product expansion, like launching Toast Capital, your financial services offering, and you have excellent researchers on that.

In 2019, you founded Toast Capital, and now annualized loan originations have exceeded $1 billion. Though this completely derails from what I was going to ask, I want to ask: is Toast a fintech company or a SaaS company?

Aman Narang: Both.

Harry Stebbings: If you had to pick one?

Aman Narang: Customers value our software. That's why they choose Toast.

Harry Stebbings: But is it the fintech business that makes all of Toast a great business?

Aman Narang: I think the two reinforce each other.

Harry Stebbings: But for people just starting out, achieving a product portfolio and success like Toast's often feels impossibly far away. When they look at Toast and the product portfolio you offer, they feel amazed and envious.

Did you have a vision for developing this kind of product portfolio from day one, or did this portfolio shape emerge over time?

Aman Narang: It emerged over time. Initially, we were mainly thinking about how to better solve restaurants' problems through the POS system. That was why we started the company, and honestly, that's all you have the capability to do at the beginning.

When we first started, we were targeting slightly larger restaurants, because for a two-person restaurant, there were already other companies providing very simple solutions.

So we realized our segment and product positioning had to be larger-scale restaurants — even if they were SMB restaurants, they were the ones with higher revenue, more employees, larger scale, and more complex operations.

So we would walk into these restaurants and pitch them our POS system, and that's how we got some customers. I remember meeting with Chris Kane at Finale, and the situation was: our product had the POS system, payments, lending, online ordering, scheduling, inventory management, gift cards, loyalty programs, websites — all of these things.

All of these things had to be integrated into the POS system in some way, because the POS is the central nervous system of the restaurant. So our choice was either to partner with other companies or build these capabilities ourselves. Sometimes people didn't want to partner with us because we were just a small company, so we had to build them ourselves.

Harry Stebbings: Those standalone solutions always claim, "But we have richer features. We're better because we're a point solution for a specific problem."

To what extent do you agree with that view, thinking "Yes, but the bundled product portfolio is better, and as a bundle, even if each feature is 20% worse than the standalone solution, that's acceptable"? Or do you think, "No, we're actually better than those standalone solutions"? How do you think about that?

Aman Narang: I think it depends on the situation. It's a question that changes over time.

The reality is, the market is very segmented. In certain segments of the market, you might only need a simple solution to make it work, but in others, that's not the case.

It's well known that pizza restaurants are much more complex than typical restaurants, and when we got into some pizza restaurants, we found our system couldn't support managing all the complex modifiers for pizza orders — like size, toppings, flavors — and the different ordering and delivery methods. So we had to seek partnerships.

So I do think it's a segment-specific question. In the process of building a platform, you might succeed in some areas and have to partner in others.

Harry Stebbings: What was the second product that changed the company?

Aman Narang: Payments.

Harry Stebbings: So then Toast Capital — how did you come up with the idea of doing lending?

Aman Narang: At the time, our CFO had done some research on broader businesses we could get into, so we weren't just discussing lending — we were also discussing embedded finance, banking, payments, and so on.

Our view was, once we became a payments provider, payments became a core product that gives you all the data about a restaurant's sales and success. So what else can you do based on payments services?

And by then, we had already seen examples of other companies offering lending services. For us, a common challenge when pitching lending to restaurants was that the restaurant had already taken out a loan, or they wanted to finance the hardware rather than paying for it all upfront.

We thought, what if we did the lending ourselves? Then we realized, because we're the payments partner, we could assess risk better.

We could make the loan process happen with just a few clicks inside Toast, and repayment became very simple because it could be built directly into the payment flow. That was the starting point of Toast Capital. We also realized this was a very promising business.

Harry Stebbings: What was the hardest part of building Toast Capital?

Aman Narang: The hardest part was accurately assessing risk. The most important question when we make a loan is: what's the likelihood this restaurant will still be around in 3 months, 6 months, and 12 months?

Harry Stebbings: What's the worst adjacent product decision you've made? Which product made you think, "Oh, this isn't working"?

Aman Narang: There have actually been many such decisions. What's great about Toast is its ability to focus on key areas and succeed. You know, we have teams dedicated to expanding existing businesses or products, and other teams working on various new experiments.

Harry Stebbings: Have you really separated these two functions in the organization — like an innovation team and an expansion team?

Aman Narang: Yes, we have both. Within each business line, there are specific teams.

For example, in our fintech business, which processes $160 billion in annual transaction volume, the team focused on expanding and scaling the product is concentrated on making sure the business keeps running and growing. But within the fintech business line, there are also teams thinking about what the next adjacent area is where we can create value.

At the same time, we also have a new projects program. We want to attract people who might otherwise want to start their own companies and seek VC funding to join Toast instead. We want to create something, and we try to keep these projects somewhat separate from the core business so they can develop independently.

What we often discuss is that for talent, the benefits of joining Toast have to outweigh the challenges and costs of being part of a large organization.

So we've tried both models, seeking balance between maintaining independence and operating a large organization.

Harry Stebbings: What was Toast's worst product expansion? Which product was a complete failure?

Aman Narang: I think I have two lessons.

First, building an average product isn't enough just because it's integrated on the POS system. At the time, we thought if we just kept building more and more products integrated on the POS, people would buy them. But it's like, you can't just build a phone system and say because it's integrated on the POS, that's enough to make people switch out their existing phone system. The expanded product has to be better than what came before.

The second lesson is that among the stakeholders we serve, we serve restaurant owners or operators the best. For a long time, we've been building technology for that stakeholder, and now we're also starting to focus on other stakeholders — whether employees, customers, or suppliers. For example, we also have rich data about these other stakeholders.

But that's not a superpower. We're not a consumer company. We understand how to serve restaurant operators better than serving these other stakeholders. So far, we've built many products that directly serve customers or employees.

That's not to say we won't eventually get there. We're doing some really cool things, which is commendable. But we're also learning, going through many starts and stops.

07

The Sales Flywheel Effect

Emerges After Restaurant Density Increases

Harry Stebbings: That's product expansion in a sense, and it's fascinating. I really love the Toast business.

Harry Stebbings: So the other expansion vector is moving into new verticals. You mentioned earlier that in Toast's early days, you wanted to target the middle of the market — enough revenue to sustain a viable business, but not the powerhouse world-class enterprise clients like McDonald's or Starbucks. Now both of those are customers.

In 2023, you launched products for bakeries and cafés, plus more self-serve, lower-cost offerings. By 2024, you moved into restaurant management and more enterprise business. What were the most important lessons you learned about successfully expanding into the SMB market?

Aman Narang: We've actually been in the enterprise market for a while. In fact, our penetration in the mid-market — typically the segment between SMB and large enterprise — is even higher than it is in SMB today. Think regional chains.

We don't have many massive enterprise deals, but we have plenty of restaurants with hundreds of locations that carry similar complexity.

Harry Stebbings: Who's winning the large enterprise market?

Aman Narang: A lot of them still run homegrown or legacy on-premise solutions that are deeply intertwined with everything else these chains do.

Harry Stebbings: Do you think they'll switch over time?

Aman Narang: I think so. Looking back, technology used to be much simpler. You had a basic POS system that just took orders and processed payments — nothing like what the product is today. I'd argue it was barely more than a slightly more powerful calculator.

But that's not the case anymore, because POS is actually an operating system. It's the ERP for a restaurant. When you build on top of that — adding online ordering, kiosks, staff scheduling, and everything else that serves all these stakeholders — the list gets massive, and the technology becomes increasingly complex.

So if you're an enterprise chain, developing more and more feature software isn't your strength or core competency. Over time, that's why cloud providers like Toast continue to grow and take that market.

Especially when you look inside the restaurant itself — whether you're a food truck, café, bakery, full-service restaurant, or enterprise chain — the needs around POS tend to be remarkably similar.

Restaurants care about operations, workflow, speed, efficiency — every second counts. Software is about turning tables faster, speeding up the line, improving kitchen efficiency, making sure you have good controls in place so people aren't stealing. These are the things POS does inside a restaurant, and that doesn't change.

Coming back to vertical strategy, there's a lot of overlap.

Harry Stebbings: There's a lot of overlap, I completely agree, but the requirements are different. For example, in your go-to-market, you can't use the same direct outbound model for every company.

For SMBs, you need a more self-serve sales motion and probably lighter-touch customer service. Is that right? Or are they fundamentally different businesses?

Aman Narang: The sales model is definitely different. Though franchise chains can feel a bit like SMB to me.

Harry Stebbings: Sorry to jump around — I want to know when you started seeing the sales flywheel effect kick in.

Aman Narang: We got going pretty early. We were scrappy and built partnerships. We were smart, and lucky, about finding key partners to propel us forward.

Then we started doing some performance marketing, developed inbound — these things helped too, and we saw results.

The sales flywheel was actually something our revenue leader Jonathan Vassil noticed: the flywheel emerges as restaurant density increases.

In hindsight it's obvious, because restaurants are a unique business — there are typically five on every street corner, right? So as you win one restaurant on a street, you win all the restaurants on that street.

There are so many restaurants that what we saw were lots of micro-flywheels. In a place like Cambridge, Massachusetts, you might think Toast is the only POS provider there. That sales effect actually plays out at a very micro, hyper-local level.

So we started looking at the data across these different markets and saw this pattern further: as you get more customers, you get better word of mouth, more referrals, more top-of-funnel leads, higher conversion rates, and faster growth.

Harry Stebbings: Did this affect your strategy around org design and outbound sales? Did you then focus on very local markets, build very local teams, do guerrilla marketing on every block? What changed as you recognized this?

Aman Narang: One challenge is how to play both the long game and the short game in sales. Because if you're just playing the short game, you'd simply hire more reps in your most successful markets to increase density and grow even faster. Because productivity is highest there.

We're slicing markets and growing fast, our reps are more efficient. But they also have to build teams across the country. We actually noticed it's always easier to add fuel to markets where you're already more successful. Balancing those two is hard.

But ultimately what matters more is: can you hire great people? That comes back to scaling the company and evaluating the talent you're looking for.

One of our hiring principles is around onboarding. "Have you built a good onboarding program?" Everyone who joins the company — whether you're an IC, BDR, sales rep who closes deals, or a manager — you have to go sell.

If you're a regional manager who's managed people in running sales teams before, that's great, but you have to go sell Toast yourself for a quarter and learn.

Harry Stebbings: Why do you want them to go through that?

Aman Narang: It helps you have relevant context when you're doing your job, and you also have to get out there and actively learn. It's a combination — you have to have foundational knowledge and perspective, and you have to engage with customers.

So when you show up in front of customers or others, you don't look stupid because you lack expertise or industry perspective — which was absolutely my state. Honestly, I remember learning so much about this business in the first year because we'd never been in restaurants before.

Harry Stebbings: Toast is 12 years old. How long from founding to IPO?

Aman Narang: Nine years.

Harry Stebbings: What was the market cap at IPO?

Aman Narang: $20 billion.

Harry Stebbings: Incredible. $20 billion in nine years.

Aman Narang: Early on we always thought, "If we could get to $100 million ARR, or even $1 billion ARR, that would be amazing."

We weren't worried about what it would become or wouldn't become — we just focused on Toast's target customer and building a good business.

08

Toast Must Be the Central Nervous System of Every Expansion

Harry Stebbings: So we have product expansion, vertical expansion — let's talk about geographic expansion. You've made more coordinated efforts around international expansion. How do you think about build versus buy for that?

Aman Narang: POS is like the central nervous system of a restaurant. It touches so many things, provides such broad coverage. When we think about M&A, we gravitate toward companies with great products and great founders early on, where we can integrate the product into our existing go-to-market machine and improve their sales efficiency.

That's how we've found success. So whether we're looking at vertical expansion, geographic expansion, or product expansion, we've held to this principle: Toast must be the central nervous system of every expansion.

Harry Stebbings: Because POS is so important and so core to a restaurant, it's actually very difficult to switch out. So wouldn't it work to just go international, enter countries, hire local talent, bring in add-on products that locals don't have, and increase ARPU? Is that not meaningful?

Aman Narang: Our belief is that if we enter these markets with the best solution, it's hard to switch, but we still have plenty of opportunity.

I've always loved the phrase: strong opinions, loosely held. I think as our product capabilities grow, that could change. So far, this has just been our view.

Harry Stebbings: Yes, you've done five acquisitions now?

Aman Narang: Four.

Harry Stebbings: What hasn't worked that you've learned from?

Aman Narang: Coming back to the M&A thesis — acquire great products built by great founders, integrate them into our existing go-to-market machine so they can scale faster.

One benefit of this is that we can do on-the-ground sales in these markets, because restaurant owners prefer to buy in person, and our ARPU is high enough to support expanding that way. If you're trying to scale individual solutions or products through e-commerce or inside sales, they don't expand as fast as on-the-ground sales.

I think a challenge you have to be careful about is, say, a product has found great success in some niche segment of the market. For example, a product that's been hugely successful in the low end or in large enterprises, and then you say, let's take it to small restaurants, plug it into our existing go-to-market machine and it'll work.

But what you don't realize is that small restaurant owners don't have enough staff for specialized functions, because they only have enough bandwidth to focus on making sure their restaurant survives each day. When you add more products to the portfolio, you have to consider whether your buyers can actually absorb it.

09

At the End of the Day

Business Is About People

Harry Stebbings: How much profit can you extract from restaurants? How much revenue can you actually capture before you hit a ceiling and pivot to retail and broader hospitality?

Aman Narang: I think it starts with value creation, and revenue follows. Everything always starts with value creation. That's a piece of advice — everyone should focus on what value you're creating.

Companies often get into trouble when they think about driving their own metrics rather than their customers' metrics.

Coming back to the strategy of "how much can you do," the TAM question — that's really hard. But the fundamental question is "how many things can you do well?"

That comes back to people. If you have mediocre people, you get stuck in the details, with a million reasons why things don't work, and you fall into this mode of micromanaging. If you bring in great people, they figure it out themselves.

"How much can you do" and "how many things can you do well" always comes back to people and talent.

When you consider all the different variables and ways to grow, maybe you'd say we're doing too much, but we see the opportunity. Our strategy can work in other segments, geographies, the high end — we can extend this platform. The question is, how do you sequence these things in a thoughtful way?

There's a quote I love: you underestimate what you can do in ten years, but overestimate what you can do in one year. It's a long game. It's not about doing all these things in one year, it's about a longer-term strategy.

We're looking at what we did in the first 10 years — so, what can you do in the next 10? That's the mindset you have to have.

Harry Stebbings: For me, the only thing that matters is great guests, to drive our entire business flywheel. We get great guests on the show, have great episodes, deliver massive value to millions of founders.

Then more founders want us to invest, we'll make great investments, which brings more great guests on the show.

Aman Narang: Yeah, that makes sense.

Harry Stebbings: I've made a lot of hiring mistakes. What's your biggest hiring mistake?

Aman Narang: Hiring is hard. So building a rigorous process is really important. And we're still not good enough at it — it takes time.

Fundamentally, work hard to be clear about what you're looking for in the hiring process, write it down, make it explicit. Sometimes the most basic things get overlooked, like what are you hiring this person for, what will they do? Be clear about that as a team.

In the interview process, things like writing notes — literal transcripts of the interview process, Amazon does this too. In the interview itself, you have to have the ability to go deep, because you only have so much time, and it's hard to ask sharp questions deeply of someone you don't know.

You have to do it even if it's uncomfortable or difficult, because you need to understand what challenges this person has faced, where they've shown resilience. Where they've made an impact, whether they're a real driver versus someone just along for the ride.

Harry Stebbings: You know my favorite question is, what trait are you slightly ashamed of that has contributed to your success?

Aman Narang: Yeah, your superpower is often your fatal flaw.

Harry Stebbings: What traits do you have that you're slightly ashamed of but that have contributed to your success?

Aman Narang: When I focus on something, I can probably get really annoying.

Harry Stebbings: Oh, Steve told me.

Aman Narang: Hahaha, yeah. Or I can probably get passionate about details. I care really deeply about going deep into details, and going deep is good.

Harry Stebbings: Are you a micromanager?

Aman Narang: I think it depends. I believe some people would say I'm not a good manager, or that I'm a micromanager. I've had to learn through that process.

Harry Stebbings: What are you not good at today but want to get better at?

Aman Narang: Communication. Recognizing the importance of aligning and motivating a large team — I've consistently underappreciated that.

I get tremendous energy from solving problems and going into details, or coming up with business strategy, thinking about the competitive landscape — those things matter.

But the reality is, if you're managing a large team, making sure everyone understands what you're going to do and why we're making certain decisions — that's really important. You have to communicate many things repeatedly, and I think that's an area I absolutely want to improve.

Harry Stebbings: You have to communicate repeatedly, and create a sense of followership. A lack of followership is often not an employee problem, it's a leader problem. One thing you're very good at is being authentic.

Aman Narang: Yeah.

Harry Stebbings: At the end of the day, whether people buy in comes back to people.

Aman Narang: I've always said, one thing I learned from Chris is that business is about people. At the end of the day, it's not business strategy, it's not whatever strategy you want, it's not making a PowerPoint or Excel spreadsheet saying here's a business model. It's about people.

Business is about attracting great people, having great values, complementary skills, being aligned on what matters, having the right tension in the organization so people can work together and push each other. That's where the magic happens.

Harry Stebbings: Before we go into quick fire, one last question. You said before, I think it was something like a humble learning mindset, that's your company culture and values.

Aman Narang: One of the values is leading with humility.

Harry Stebbings: Leading with humility, that's a great value. Good values are ones where you can stand on the opposite side and consider it.

For me, we work really hard, we'll do the best work of our careers. I believe working more hours leads to more success, a lot of people would say that's wrong, you should work strategically, fewer hours, have balance. But I just feel like most things are solved by determined effort, even brute force — I can't get behind "humble learning" or whatever. Is that a good value?

Aman Narang: Sure, because I think for us, leading with humility means as a leader, you have to stay close to the front lines. That's one way to interpret it.

To build a great business, you have to stay close to customers, close to the people actually doing the work, because things change. Even if you had a point of view about the future ten years ago, things change.

If you're not close to the front lines and you're making important decisions about the future of the business, if you don't understand the technical context, the domain perspective, the details — you can make really bad decisions.

10

Quick Fire

Harry Stebbings: Let's do a quick fire round, just give me your immediate thoughts.

Aman Narang: Okay.

Harry Stebbings: What's the most memorable near-death experience for Toast?

Aman Narang: It was actually early, when we were building the QR code thing. You know, we spent a year on that project, were about to give up before pivoting to POS — that was the closest we came to giving up.

Harry Stebbings: Did you have a lot of funding then? Or were you running out of money?

Aman Narang: We had no money at all. We were funding it with a little bit of money we'd made from our previous company.

Harry Stebbings: Which board member do you wish you had that you don't currently have?

Aman Narang: I've heard a lot of great things about Satya, about how he's transformed Microsoft in terms of building amazing culture and a learning mindset and growth mindset — he's who comes to mind.

Harry Stebbings: What's your most memorable first investor meeting?

Aman Narang: I remember we drove from Boston to New Hampshire to meet Steve Papa. We had some slides prepared, sat down to meet him. One thing he noticed was that our spreadsheet had a zero in it — we were off by an order of magnitude.

At the end of that meeting, I think he said something like "I guess I don't really know restaurants." He initially thought we were opening a restaurant.

Harry Stebbings: Did he decide to invest then?

Aman Narang: No. We had several meetings. I remember at some point I had to tell him, "We've really done a lot of work for you. You know, worst case, if this doesn't work out, at least someone will acquire-hire us."

Harry Stebbings: Which funding round was the hardest?

Aman Narang: It's interesting. We've been really fortunate. After our Series B, we grew up in a low-interest-rate world where there was a lot of money out there, and our fundamentals were also really strong.

Not that everything was perfect, but the fundamentals were good. We hired some great people who are really good at this, and honestly, I never felt like we were capital-constrained.

Harry Stebbings: What have you changed your mind on in the last 12 months?

Aman Narang: This is actually interesting, just mentioned leading with humility. I think one piece of advice is, trust your gut more. Because I think people can sometimes get into a world where if you don't trust your gut, you move too slowly.

Harry Stebbings: What's something where you didn't trust your gut and later regretted it?

Aman Narang: Usually the hardest decisions are about people, not business or strategy.

Harry Stebbings: What's the single most important, unconventional piece of advice you'd give to founders listening?

Aman Narang: This might sound strange, but don't raise too much money. There's always this narrative that having abundant capital is healthy, and that's great.

On one hand, VCs aren't stupid. If you raise too much, you get diluted early. Second, I think doing more with less matters a lot too.

Harry Stebbings: When did doing more with less really stick with you? You mentioned earlier that scarcity drives creativity — was there a moment where it was like, "We had no money, so we did this"?

Aman Narang: Like when we had no money for massive marketing or brand promotion, our creativity came from going to every trade show and making sure Toast appeared right next to the biggest player in the space.

Harry Stebbings: What do you know now that you wish you'd known when you started Toast?

Aman Narang: Culture and values really matter; spending time hiring the right people really matters, especially at the leadership level.

Someone once told me, if you have to schedule an interview, a deal, and an internal meeting, you have to make sure one thing takes priority — and that's the interview. Because especially early on when you're building culture, if you get it wrong, it's very hard to change later.

Harry Stebbings: We discussed earlier the ability to spot false narratives. Right now every CEO needs to tell an AI-related story. The question is, to what extent are these stories being told to meet public market expectations versus genuinely doing the deep work on the business?

Aman Narang: Yeah, that's interesting. I think maybe I'm just naturally a bit skeptical, so I'm always trying to figure out why something might not work. I think that's actually a healthy way to look at things.

With the metaverse or crypto, I always struggled to understand from first principles how that business would scale. By the way, I was wrong about a lot of that in many ways. What's interesting is AI feels different to me because you can see real applications, like voice.

I don't know how it scales, but AI might be like the internet pre-bubble. Which applications will take off, we're still in the process of figuring out.

Harry Stebbings: How does this change the future of the restaurant industry?

Aman Narang: I think the biggest change is helping restaurants get smarter with data. Most restaurants have no data or visibility into some very basic things, like pricing, what to put on the menu, what inflation looks like, how they're performing relative to competitors, and so on.

One of the simplest things is helping restaurants get smarter about some very basic aspects of their business.

Most restaurants don't optimize yield — they don't know how to maximize table utilization for the right guests. You think about airlines or hotels, they're constantly optimizing yield; restaurants don't have that capability, and that's an opportunity.

I think another opportunity is voice. Imagine in a drive-thru, or ordering at the table, being able to hear what's happening and know what to do. We're not there yet.

Harry Stebbings: I'm a huge fan of Toast, and when thinking about the future and value creation, we envision Toast growing into a hundred-billion-dollar company. What does the path to a hundred billion look like?

Is it deeper partnership integration with the restaurant industry, really capturing more of the consumer wallet share? Or expanding more broadly into retail, hospitality, hotels, and other areas?

Aman Narang: Talking about Toast's long-term strategy, I'd mention a few things.

First, we have about 13% to 14% market share in the U.S. restaurant industry. We have to scale and become the leading provider in that space — that's our top priority. In building this core solution that powers restaurants, we have the ability to create tremendous value by having a larger platform.

So over time, doing more for restaurants, supporting a larger ecosystem, serving more stakeholders — that's where we think we have the right to win and create value for the restaurant industry.

The platform we're building, given the complexity of hardware, software, and network, applies not just to restaurants but to many physical industries. So we've taken the same deep approach. We need to solve for restaurants, but we have to do other verticals methodically. Starting with food and beverage retail, we're getting into grocery stores, convenience stores, and gas stations.

What you see in these subcategories is that these businesses have similar complexity — they have lots of employees and lots of revenue. So our sales model, service model, and the complexity and depth of our product are very applicable, and that's a growth opportunity for us.

With enterprise and international markets, we have to be thoughtful about how many markets we can enter without breaking the company.

The key is being thoughtful about how we approach these growth areas, and how we sequence them over the next decade versus the next year or two.

Harry Stebbings: Are you worried about a recession? I mean, your business is heavily dependent on consumer spending and transaction volume. If consumer budgets get hit, spending goes down.

Aman Narang: Not too worried, because we've looked at previous recessions and you find that the restaurant industry is largely very resilient. People love dining out. There might be some shifts, like from full-service restaurants (FSRs) to quick-service restaurants (QSRs), but nothing too dramatic.

One nice thing about Toast is that our value proposition is about efficiency — it's about doing more with less. In some ways, when times are more challenging, our value proposition actually becomes stronger.

In fact, one thing we don't talk about enough long-term is data. Today we have over 100 million guests dining at Toast customer restaurants, millions of employees working at Toast customer restaurants, and thousands of suppliers interacting on the Toast platform through our supply and accounting products.

So leveraging that data to create value for restaurants — I think that's a massive area where we have huge potential going forward. It's underappreciated. Think about McDonald's — what they provide franchisees isn't just technology, but helping them think about what to put on the menu, how to get the best delivery rates, how to do marketing and branding.

So in some ways, we love this model of how we can enable small restaurants to leverage data and expertise to run a better business — that's our space, and that's what we're thinking about over the next decade.

Harry Stebbings: As I said before, I absolutely love the Toast business, I'm a total vertical SaaS enthusiast. This has been such a joy. Thank you so much.

Aman Narang: This was great, Harry, thank you so much.

Translated by Stone

Edited by Wendi

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