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Radha Dhruv assistant general manager, using Toast software, February 23, 2018 in Denver, Colorado.
Joe Amon | The Denver Post via Getty Images
Toast, a start-up that sells software to help restaurants with online ordering, has had a rollercoaster of a year managing through the pandemic. Of late, business has been booming,
The company responded to the recent upswing by giving stakeholders a chance to cash out some of their shares. Last week, Toast closed a secondary sale that allowed current and former employees to sell up to 25% of their vested shares for $75 a piece, according to people familiar with the matter who asked not to be named due to confidentiality agreements.
The deal values Toast at about $8 billion. The company last raised a primary round in February, just before the coronavirus hit the U.S., reeling in $400 million at a $4.9 billion valuation. The share price at that time was $45.45, according to SharesPost.
Toast told stakeholders in correspondence ahead of the purchase that the secondary offer was for up to 800,000 shares, totaling $60 million, the people said. The Boston-based company laid off half its employees in April, amounting to about 1,300 jobs, so the deal allowed those with vested options to get some liquidity.
A Toast spokesman confirmed to CNBC that, “in order to support our employees and former employees as they navigate the impact of Covid-19, we did complete a secondary offering recently.” However, he declined to comment on who purchased the shares or the implied valuation.
Ups and downs of 2020
Coming into 2020, Toast was one of the hottest start-ups in tech, with a software and hardware suite that restaurants used to manage sales and take care of reporting, analytics and menu management. Revenue more than doubled last year, with tens of thousands of restaurants signing on as customers.
But the company also hired aggressively to get its product into market. When the coronavirus forced indoor dining to close down across most of the country, Toast had to quickly downsize to reel in costs.
CEO Chris Comparato wrote in a blog post in April that, in the previous month restaurant sales in most markets fell by 80%.
“This is a massive disruption that hit the industry virtually overnight,” Comparato wrote. “Many restaurants that have temporarily closed may never reopen.”
At the time, the company gave ex-employees 10 years to exercise their options, though many of the people laid off had only been employed at Toast for a few months, according to a LinkedIn search.
Since mid-year, the picture for Toast has changed dramatically. While Covid-19 has ravaged much of the services and tourist economy, including parts of the restaurant industry, the quick pivot from dine-in eating to takeout, delivery and outdoor dining has been a boon to a number of tech companies that assist with the transition.
DoorDash’s revenue more than tripled in the third quarter, providing enough momentum to convince the delivery company to try and go public before the end of the year. Meanwhile, Uber’s main ride-sharing business has been hammered this year, but its delivery business Uber Eats, which competes with DoorDash, saw revenue jump 190% in the latest quarter.
Toast’s technology is focused less on delivery and more on takeout. Its software has enabled restaurants that used to get almost all of their business from in-house dining to convert to pickup and to sell gift cards. The National Restaurant Association said that nearly 70% of operators have added curbside takeout to help deal with limited operations, even as an estimated 15% of all eating and drinking places were closed, at least temporarily.
Toast prepared for the shifting trend in March, without knowing what the world would look like in the coming months. Comparato told clients in an email at the time that the company was providing “millions of dollars in the form of a one-month credit of software fees for all Toast customers,” as well as free access to its software for online ordering, takeout, gift cards and marketing.
Toast’s rebound has been so rapid that investors on the secondary market have recently put in bids well above the $8 billion valuation, said people familiar with the matter, and the company is viewed as a potential 2021 IPO candidate. It’s also hired back some of the people it let go.
The secondary share sale closed last week, according to people who participated. Leading up to the purchase, current and former employees were sent emails from the company inviting them to join one of several Zoom sessions where they could learn about the mechanics of the offer as well as some of the tax implications involved, the people said.
— CNBC’s Kate Rooney contributed to this report.