With software multiples on the decline, it might not be a terrible idea for Square to acquire SpotOn.<\/p>\n\n\n\n
Why?<\/p>\n\n\n\n
First is market segmentation.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
But as they grow, they often migrate off of Square.<\/p>\n\n\n\n
This is especially true in the full service segment of the industry, where Toast has run over all the legacy table service providers.<\/p>\n\n\n\n
SpotOn has invested in features that make it compelling to the core Toast merchant: full service, 1-10 locations, > $1M GPV per store.<\/p>\n\n\n\n
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?<\/p>\n\n\n\n
Not exactly an easy engineering feat.<\/p>\n\n\n\n
But sometimes it’s faster do acquire your way into a market than it is to build it organically.<\/p>\n\n\n\n
Next is go to market.<\/p>\n\n\n\n
People seriously underestimate the importance of go to market.<\/p>\n\n\n\n
In fact, go to market is THE most expensive part of nearly every company.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
This rarely happens with B2B products, and the cases where it does<\/em> happen it’s through a product-led growth strategy where self-educating employees are keen to improve their own performance.<\/p>\n\n\n\n This DOES NOT happen in retail.<\/p>\n\n\n\n Retailers do not self-discover.<\/p>\n\n\n\n They don’t behave rationally by any stretch of the imagination.<\/p>\n\n\n\n It’s why both Square and SpotOn make a lot of their revenues on payments, not on software.<\/p>\n\n\n\n SpotOn has a GTM function that rivals that of Toast.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n But they’re fundamentally required<\/em> if you want to win offline commerce.<\/p>\n\n\n\n There are no shortcuts.<\/p>\n\n\n\n We’re not sure Square wants to build this muscle, but they do want to continue moving upmarket.<\/p>\n\n\n\n SpotOn would give Square a very real GTM capability to become more competitive with Toast overnight.<\/p>\n\n\n\n Lastly is the link between the two companies: Bryan Solar.<\/p>\n\n\n\n Bryan ran restaurants for Square, and is now CPO at SpotOn <\/p>\n\n\n\n His approach to partnerships and product is unlike every other POS company we’ve worked with – in a good way.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n Spoton is on a bit of a collision course with Toast.<\/p>\n\n\n\n Toast is in a position where, “if you live long enough, you become the bad guy.”<\/p>\n\n\n\n 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.<\/p>\n\n\n\n But restaurants aren’t smart, and it will take them another decade to figure this out. <\/p>\n\n\n\n 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.<\/p>\n\n\n\n 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.<\/p>\n