TouchBistro Inc. has hired a veteran financial services executive to replace founder Alex Barrotti as chief executive officer, making the Toronto restaurant software firm the latest prominent Canadian technology “scaleup” to bring in a seasoned professional to lead its next stage of growth.
The company told staff Wednesday that TouchBistro chairman Samir Zabaneh had been named CEO as it tries to stop falling further behind Toast Inc., the Boston-based market leader in cloud-based technology for restaurants. Both companies have found pandemic-related shutdowns less damaging to their customer bases than anticipated.
“I am very proud and happy about where I’ve taken the company … but if I have to be honest, I don’t have the skillset to [keep building a big company] – that’s not in my DNA,” Mr. Barrotti said in an interview, adding that he participated in the board’s decision to change leadership.
Mr. Zabaneh has served as a chief financial officer for public and private companies in Canada and the United States, including Q9 Networks, Fortress Investment Group, Moneris Solutions, Heartland Payment Systems and Element Fleet Management. He was most recently the executive vice-president of global business services with First Data Corp.
“The evolution from startup to scaleup requires a more operational, experienced set of hands, and I think Samir is the right person to lead this company,” said Peter Misek, a board observer and partner with TouchBistro investor Framework Venture Partners.
Mr. Barrotti follows Mike McDerment, a co-founder of accounting software provider FreshBooks, and Mike Silagadze, a co-founder of digital textbook seller Tophatmonocle Corp., in relinquishing the CEO roles of their Toronto companies this year to seasoned executives. Mr. Barrotti built and sold a tech company during the dot-com boom and lived in Turks and Caicos for years before returning to Toronto in 2010 to start TouchBistro. He will become vice-chairman and manage external partnerships for the company. “Alex will be my go-to guy as a sounding board across many areas,” said Mr. Zabaneh, a friend of the outgoing CEO.
TouchBistro is one of the Ontario Municipal Employees’ Retirement System’s largest and highest-profile technology investments in Canada. OMERS’s growth equity arm invested $100-million in 2019, the year after its venture capital division and JPMorgan Chase & Co. co-led a $72-million financing.
At the time, TouchBistro had thousands of restaurant customers, primarily in Canada, the U.S., Mexico and Britain. It offered a variety of software tools, including a table-side ordering system on tablets for waiters, kitchen-management display systems, and reporting and analytics for managers, displacing conventional fixed terminals. It also had payment revenue-sharing deals with JPMorgan Chase in the U.S., Barclays in Britain and Mexico’s Evo.
But the 11-year-old company, which built its platform on Apple’s iOS operating system, has grown up in the shadow of Android-hosted Toast.
While TouchBistro raised more than $270-million – a lot for a Canadian startup – and ranked among Canada’s fastest-growing companies, Toast brought in US$900-million, allowing it to spend more and expand its business at a faster clip. TouchBistro’s 2019 financing established its worth at $500-million; Toast was valued at US$8-billion last fall and is looking to go public this year, The Wall Street Journal reported in February. Toast has more than 2,000 employees, compared with TouchBistro’s 456.
“The management team behind Toast has a lot of experience building the outbound sales force that really fuelled a lot of their growth,” said Mark Shulgan, managing director and head of growth equity at OMERS. “We feel great about the [TouchBistro] product but recognized that we needed to bring on an operator who had the experience to really scale a sales force and be competitive in the U.S. market.”
Mr. Zabaneh said, “Toast has made massive bets they’d spend to gain market share. That could have gone different ways, [but] it worked out very well for them. I’m absolutely respectful for what they’ve accomplished. But it’s not one-winner-take-all. The market is so immense, and what gives me absolute confidence in what we’re doing is that we win more [deals] than we lose” in competitive bids.
Both companies were hit by the pandemic. TouchBistro’s growth rate fell from about 50 per cent-plus to roughly 10 per cent in 2020. It lost about a tenth of its customers, and hundreds more asked for a break in fees. It laid off 131 employees and introduced features such as virtual gift cards and online takeout and delivery options to help restaurants stay afloat. Toast suffered a steep drop in sales initially, halved its work force and introduced similar features to help clients.
But “while it’s been a challenging year for everybody, it hasn’t been as catastrophic as we had feared,” Mr. Barrotti said. TouchBistro still added hundreds of restaurants, and growth is now returning to prepandemic levels, particularly in the U.S., with revenues running at about US$40-million annually.
Mr. Zabaneh said he would focus on scaling up sales and distribution and making the customer-onboarding process as seamless as possible. Mr. Shulgan said TouchBistro also needs to focus on increasing its share of revenues from restaurant transaction payments.
Mr. Zabaneh did not rule out the possibility of an IPO this year. “The focus is just heads-down on the business itself, [but] at the same time making sure we’re ready when and if we decide” to go public, he said.
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