San Francisco fintech SpotOn has long seen itself as a rival to Square, helping merchants handle more than payments by offering a menu of services. Like Square, SpotOn is eager to build on its strengths serving small to mid-sized businesses, or SMBs, to offer more services to larger companies.
On Monday, SpotOn said it raised $300 million in a Series E round that allowed the company to buy Los Angeles startup Appetize, which provides a digital and mobile commerce platform for larger operations and so-called enterprise businesses, including sports and entertainment venues, theme parks, zoos and college campuses. Exxact terms were not disclosed, but SpotOn is paying $415 million in cash and stock, Techcrunch reported.
“Appetize is just a perfect fit for so many reasons,” SpotOn Co-CEO Zach Hyman told me Monday. “No. 1, an unbelievable team; No. 2, their product suite is very robust and forward thinking and one that will scale up on our existing product stack.
“Bringing the two together, we’re able to deliver enterprise-level solutions to the SMB market and vice versa,” Hyman said.
SpotOn was able to take advantage of strong investor interest in the company to avoid borrowing money to buy Appetize.
“We’d rather be a debt-free company that’s focused on really fueling growth,” Hyman said. Despite the pandemic hitting so many of its restaurant and retail clients so hard, SpotOn has seen revenue triple in the last 18 months, Hyman said, though he did not provide dollar numbers.
The latest financing round valued SpotOn at $3.15 billion, up almost 60% from the company’s valuation of $1.875 billion in its $125 million Series D round that closed less than four months ago.
The Series E round was led by Andreessen Horowitz. The round also included new investors Wellington Management and Coatue Management. Existing investors also participated, including DST Global, 01 Advisors, Dragoneer Investment Group, Franklin Templeton and Mubadala Investment Co. Splunk CEO Douglas Merritt and Snowflake Chief Financial Officer Mike Scarpelli made individual investments as part of SpotOn’s latest financing.
The transaction is expected to close this month.
Appetize’s 300 employees will join SpotOn’s workforce of 1,300. SpotOn also has openings for 200 positions. About 250 SpotOn employees, including much of the executive team, are based in the Bay Area.
“Bringing these two companies together, we’ll now have about 500 people on our product team developing software solutions for any size and sophistication of customer,” RJ Horsley, SpotOn’s chief operations officer, told me. “We want to be able to be the end-to-end solution to help businesses run and grow their business.”
In 2018, Zach and his brother Matt Hyman invested $20 million in SpotOn to go up against Square. The two had founded fast-growing San Rafael-based Central Payment which was sold to giant payments processor Total System Services, often referred to as TSYS.On Monday, I asked Zach Hyman to reflect on the journey in building SpotOn. He’s especially proud that SpotOn avoided layoffs and pay cuts as the pandemic hit many of their restaurant and retail clients last year.
“When I look back, I think about building a company where we’re talking to local businesses about putting software first and taking advantage of digital technology to help their business grow, connect with customers and manage their business more efficiently,” Zach Hyman said. “It’s been quite the ride. And I know it’s cliche to say it, but I feel like we’re just getting started.”
