With software multiples on the decline, it might not be a terrible idea for Square to acquire SpotOn.
Why?
First is market segmentation.
Square has thrived with upstart merchants. Consistent marketing, a clean design, and a first-to-market payments dongle reputation made Square the POS choice for smaller merchants when starting up.
But as they grow, they often migrate off of Square.
This is especially true in the full service segment of the industry, where Toast has run over all the legacy table service providers.
SpotOn has invested in features that make it compelling to the core Toast merchant: full service, 1-10 locations, > $1M GPV per store.
In acquiring SpotOn, Square would more rapidly gain access to this market segment. It’s true that this would create technical debt of no trivial magnitude: how do you merge the systems to offer a single, unified platform?
Not exactly an easy engineering feat.
But sometimes it’s faster do acquire your way into a market than it is to build it organically.
Next is go to market.
People seriously underestimate the importance of go to market.
In fact, go to market is THE most expensive part of nearly every company.
The outlier companies (Facebook, Amazon, et al.) had such a good product that it SOLVED go to market without the need for massive investments in sales or marketing, and that is why they were so successful.
This rarely happens with B2B products, and the cases where it does happen it’s through a product-led growth strategy where self-educating employees are keen to improve their own performance.
This DOES NOT happen in retail.
Retailers do not self-discover.
They don’t behave rationally by any stretch of the imagination.
It’s why both Square and SpotOn make a lot of their revenues on payments, not on software.
SpotOn has a GTM function that rivals that of Toast.
They run a direct sales model with feet on the street, in-person support, and a number of other tactics that technology companies don’t like.
But they’re fundamentally required if you want to win offline commerce.
There are no shortcuts.
We’re not sure Square wants to build this muscle, but they do want to continue moving upmarket.
SpotOn would give Square a very real GTM capability to become more competitive with Toast overnight.
Lastly is the link between the two companies: Bryan Solar.
Bryan ran restaurants for Square, and is now CPO at SpotOn
His approach to partnerships and product is unlike every other POS company we’ve worked with – in a good way.
He would also affirm that a lot of his competitors believe that tech wins on its own, but this is not the case for brick and mortar.
Spoton is on a bit of a collision course with Toast.
Toast is in a position where, “if you live long enough, you become the bad guy.”
Right now, those of us inside the industry know how terrible Toast is, from how they treat “partners”, to their win-at-all-costs-have-no-ethics culture, to their abuse of their customers.
But restaurants aren’t smart, and it will take them another decade to figure this out.
In that time Toast will get overly aggressive to maintain growth, making moves on that flirt with desperation, so there will be a plethora of evidence that demonstrates how bad of an actor Toast has become.
Whether Square sees SpotOn as a viable option to further penetrate the restaurant industry is anyone’s guess, but they would be the best date for the dance.
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