Author Archives: Lightspeed

Jason Richelson and his partner, Amy Bennett, lost thousands of dollars in sales after the server-based cash-register system crashed at Green Grape, their Fort Greene, Brooklyn-based business, in 2008. That disaster at the wine shop and gourmet food stores soon inspired Mr. Richelson to launch ShopKeep, a cloud-based point-of-sale system for high-volume retailers.

Fast-forward to today. The 180-employee firm has raised $37.2 million in venture capital from investors including Tom Glocer, a former CEO of Thomson Reuters. To max out the company’s valuation, it brought in Norm Merritt, former chief executive of iQor, a $550 million business-process outsourcing firm, as CEO and president eight months ago.

“They hired me to help them scale the business and get it to the next level,” said Mr. Merritt. That “next level,” they hope, is a lucrative exit, though Mr. Merritt said exactly what form it will take is to be determined. As Mr. Richelson, now chief strategy officer, told Tech Crunch last year, “There are no billion-dollar software-as-a-service businesses that have been born in New York City. That’s our goal.”

ShopKeep isn’t alone in making carefully calculated strategic hires and other moves with the hope of winning a billion-dollar valuation. More firms are doing so, thanks to inspiration from IPOs like OnDeck’s in December.

RAKING IT IN

New York’s largest venture-backed tech exits, 2012-2014

Source: CB Insights¹ IPO valuations used are as of the opening of trading.

OnDeck raised about $200 million and put the firm’s value at about $1.3 billion in the largest venture-backed tech exit ever in the city, according to CB Insights, which tracks privately held companies.

Meanwhile, there has been plenty of speculation about an IPO for database firm MongoDB, valued at about $1.2 billion, and online marketplace Etsy, based in Brooklyn, which could raise as much as $300 million in an IPO.

Yext, which allows businesses to manage their digital presence, had a $50 million round of fundraising in June and then hired a CFO in October who had guided both Pandora and Salesforce through their IPOs.

Outbrain, one of Crain’s Best Places to Work last year, is reportedly considering an IPO to raise $100 million, which would put its worth at more than $1 billion. One reason for these high valuations is that startups are waiting longer to exit than they have in the past and are using the time to scale up and raise lots of cash in the private markets.

Last year was a big one for M&A deals, too, with 184 venture-backed tech companies in New York City acquired, according to PrivCo, which provides data and financial research on privately held companies. That number was second only to Silicon Valley, which had about 280, according to PrivCo CEO Sam Hamadeh. In the recent past, he said, a good year for acquisitions in New York City meant 75 to 100.

“There is a lot of money in the system right now,” said Nick Beim, a partner at venture-capital firm Venrock. “It’s a great time to raise money in the private markets, and we are witnessing the rise of some of the fastest-growing companies we’ve ever seen.”

To position themselves for a dazzling exit, companies have changed their later-stage funding strategies to take advantage of the availability of investment capital. Some are turning to sources other than venture capital for that funding.

“A lot of these later rounds, which are so large, are being done by financial institutions like JPMorgan and Goldman, hedge funds and larger corporate entities,” said Jalak Jobanputra, founder and managing partner of FuturePerfect Ventures, an early-stage venture fund in Manhattan.

Building awareness

As they wait longer to exit, companies are putting their growth on steroids to maximize their value. “We’re pushing as fast and as hard as we can, because the greater the angle of your curve, the more valuable you are,” said Dane Atkinson, a co-founder and CEO of SumAll, a startup that gives customers, mostly businesses, the information about them collected online. SumAll has raised about $15 million and has had 1,000% growth year-over-year but is not profitable.

The 44-employee company, launched in 2011, is based in Manhattan’s financial district. About 340,000 businesses and 20,000 individuals currently use its tools.

An exit for SumAll is “years away,” said Mr. Atkinson, but an IPO, rather than an acquisition, is most likely. “We have upwards of a million active individuals using us, which means we’ve built a lot of brand awareness, so whenever we do a filing, we’re not just saying that 300 customers use us, it’s a million,” he said. To hit its goal, SumAll has hired a business-development executive who came from American Express and has experience building corporate partnerships.

ShopKeep is using a similar strategy. Mr. Merritt, the CEO, said the company is “on a tear now, growing rapidly, about 10% a month. We are getting as many merchants on board as we can and building our network, which creates a lot of value for potential investors.” The company is not profitable “by choice,” said Mr. Merritt, instead investing revenue in marketing to rapidly acquire customers.

Proving they have recurring revenue is critical for companies that want to hit it big. Chelsea-based Olapic—a visual-marketing firm that enables brands to find and use customer-generated images of their products—is focusing on building a strong financial base for a potential IPO. CEO and co-founder Pau Sabria said Olapic’s revenue is highly predictable and scalable.

“For an IPO, you have to have $100 million in revenue, and we are pretty much on track to do that in four years,” Mr. Sabria said. Olapic launched in April 2011 and now has 97 employees. Mr. Sabria would not disclose revenue but said the company has raised $6 million and isn’t yet profitable.

Many companies are also investing heavily in raising their profile in the current climate. Betterment, an automated investing service, has raised $45 million since launching in 2010, and its assets under management have grown almost 400% every year. The firm, headquartered on West 23rd Street in Manhattan, has 80 employees and manages about $1.2 billion in assets for 60,000 customers, but declined to disclose revenue or profitability.

When asked about exit plans, founder and CEO Jon Stein said he is “in it for the long haul,” but his company is also growing rapidly and doing more marketing than ever—outdoor advertising, television, National Public Radio, online and content marketing—to raise its visibility.

Hiring top talent

In angling for later, bigger exits, these organizations are also going into overdrive to attract top-notch executives and engineers. Betterment is filling out its leadership team with “growth executives” hired in the past year, said Mr. Stein. And many firms funnel their early investment capital into attracting and retaining the high-quality technical talent that raises a firm’s profile. “Engineers here can command almost the same kind of salaries they can in Silicon Valley, and it’s not just cash,” said PrivCo’s Mr. Hamadeh. “It’s also a bigger say in the direction of the company itself, loftier titles, a chunk of the company.”

Despite the number of startups aiming for a billion-dollar IPO, there is also a trend at the other end of the spectrum, toward startups going public earlier than expected, said Venrock’s Mr. Beim. “People have recognized the market is great for fundraising and exits right now, but they don’t know how long it will last, so in the last couple of years we have also seen tech companies go for an IPO sooner, when they are below $100 million in annual revenue.”

Misti Ushio, chief strategy officer at Harris & Harris Group, an early-stage, publicly traded venture firm in Manhattan, said there is now a “whole ecosystem of bankers, advisers and lawyers that understand how to do smaller IPOs—like $20 million or $50 million, not hundreds of millions. For those businesses, if they can access public -capital, that’s an enormous opportunity,” she said. “It gives a startup access to a huge market they wouldn’t have as a private company.”

To stave off an early acquisition or IPO and get a firm to $1 billion, some investors are pumping more investment capital into founders’ pockets. “Now I would say at least 20% of the B round goes to the founders so they don’t take the $12 million offer that comes around next week,” said SumAll’s Mr. Atkinson, who has built almost a dozen technology companies. “VCs often have a higher risk tolerance than we do, and they are looking for the best maximization.”

This month’s report focuses on the big announcements that came with the new year, focusing on increased security, new tablets, preparing for the future and innovation in software. To kick off the new year, we added three new players: Panasonic, PayPad, and UBA. We also updated ten new players: Anywhere Commerce, Bluefin’s QuickSwipe, CardFlight, Ezetap, iZettle, Ingenico, PayPal, Verifone, Wincor Nixdorf and Wirecard.

Here are the four key takeaways for this month:

1)Security Step-Ups: With many high profile data breaches in 2014, security is at the top of everyone’s mind. One key theme is the relevance of point-to-point encryption (P2PE) in a mPOS world. Even as more mPOS readers are emerging with EMV compatibility in preparation for the October 2015 EMV liability shift, new devices are being released with (P2PE) capabilities to add another layer of security.

2) Tablets Get Rough and Ready: As popular as mPOS is, it’s been reported that many merchants with mPOS don’t always use them. There are complaints that the devices are not rugged or designed for heavy use in retail environments or they have found flaws in the software. These claims haven’t fallen on deaf ears with announcements from major technology players about new, and rugged tablets.

3) Future-Proofing mPOS: What good is a durable piece of hardware if the software that powers it doesn’t accommodate the next generation of payments?

4) Software Innovations: Speaking of software, Flint Mobile has taken a decidedly different approach to mPOS that is all about software. Flint Co-Founder and CEO, Greg Goldfarb, tells PYMNTS.com how and why a software-centric approach enabled Flint to simplify payment acceptance for service-centric businesses by eliminating the hardware and using the camera to securely scan cards.

Looking for point of sale software? Ran a Google search and got overwhelmed with your options? Let me help you get started. I’ve compared five of some of the most popular POS systems available today, hopefully one of them will work for you.

Before we jump into it, let’s make sure we’re all on the same page vocab-wise. Each of the systems below is either locally installed, cloud-based, or a hybrid.

• Locally installed means that you can’t access your data etc. from anywhere except the registers/computers that the solution was installed on, but it is completely functional without any Wi-Fi, etc.
• Cloud-based is basically the opposite – data’s fully accessible from anywhere, but if the Wi-Fi’s out, you can’t do anything.
• Hybrid models attempt at being the best of both worlds: data is fully accessible and you can still make sales with the Wi-Fi out.

1. Lightspeed POS

Lightspeed is a well-established name in the POS world. They’ve been around for years and really know their stuff. They’re a cloud-based system and work really well for small to mid-sized retailers.

Pros: Lightspeed comes with expansive inventory management capabilities and integrates well with Shopify and MailChimp. Lightspeed’s inventory management allows you to categorize stock by whatever you want (month it was released, type, anything). Reviews find LightSpeed incredibly easy-to-use. It’s mainly intended to be run off a tablet, so its app functionality is extremely good. (It can also be run on a PC through a web browser for the traditional paystation.)

Cons: One thing mentioned in the above review is that it is very difficult to sell an item without scanning the barcode. This can be a real issue, of course, given how easy it is for barcodes to go missing (a problem I know is widespread from personal experience).

They’re the most expensive solution on this list for both software and hardware kits, so you need keep this in mind when budgeting.

Pricing:

• $76/month: 1 register, 5 employees
• $128/month: 2 registers, 10 employees
• $222/month: 4 registers, 20 employees
• POS Hardware Kit: $999, for iPad

After you hit the top level, you can continue adding a single register for $49/month with 3 employees, or add another employee for $10/month. You can add Lightspeed eCommerce for $49/month and if you want to run more complex reports, you can pay $21/month for advanced reporting.

2. NetSuite POS

NetSuite’s POS solution is really more of a retail management system, coming fully loaded with eCommerce, inventory management, and more! It’s a cloud-based solution aimed mainly at midmarket sized retailers, but it’s flexible enough to work for both smaller and larger retailers.

Pros: As I said, this is not just a POS system, it’s a retail management system. That means it has inventory management, eCommerce, CRM, marketing automation, order management, business intelligence, and financial software all on a single platform. Phew!

One of the most interesting things about this is that instead of forcing you to roll out the entire suite, NetSuite offers you the ability to roll out just the solution you need. As Brenda Whisenhunt, Netsuite’s Director of Vertical Marketing, filled me in: that means you don’t have to do an entire rip and replace all at once – you can replace bits and pieces of your old system as you go along. It also means if you’re a small retailer who doesn’t need all the features, you only have to buy what you need.

Other than that bundle of features:

• Because NetSuite has a complete CRM system, it’s able to provide you with a full 360-degree view of your customers – customer purchase history, what they like, what their email address is. All that good stuff.
• It’s developed for a touch-screen interface – PC or tablet. At this point in the game, as a mid – large-size retailer, if you aren’t using touchscreen, you’re in the dinosaur age.
• It’s cloud-based, so you check on the system from anywhere you can access the web. You can also ring anyone up from anywhere you can access the web.

Cons: It’s cloud-based – so if Wi-Fi goes down you won’t be able to access it. Some users have also complained about NetSuite’s customer service being poor and too expensive.

Pricing: Because NetSuite is extremely customizable, pricing is very customizable, so they have not released a standard pricing model like the other solutions on this list. Pricing is a monthly fee, and is based on the modules bought as well as a number of locations and registers. You can click on this link for some averages prices.

3. ShopKeep

ShopKeep is a great option for small and growing retailers. It was developed by a small retailer, so this company understands other small retailers intimately. The product is developed in a hybrid, cloud-based/locally installed model.

Pros: They’re on a hybrid model so you get all your information stored on the cloud, but you can still ring people up when the Wi-Fi goes out. In addition, this is another system that is a fully loaded retail management system, not just POS. Their inventory management features, in particular, are reputed to be extremely useful. The reporting feature is also very in-depth. You can look at reports from all sorts of angles, including visually.

It’s also widely held to be so user-friendly that any of the old ladies I used to work with at the women’s clothing store could use it.

Oh, I almost forgot! Shopkeep also offers incredible customer service – it’s 24/7 support via chat, phone and email. As put by Brian Zang, Shopkeep’s VP of Sales and Marketing, “Customer care [is] the core to who we are and … we invested a lot in this from the beginning…We believe that the system you choose to run your business should do more than just take payments and process transactions; it should help you grow your business and make your life easier.”

Cons: A fairly common complaint with Shopkeep is that they’re not as feature-rich as other solutions – they aren’t able to support multiple sales rates, for instance.

Pricing:

• $49/month/register. No contract; you just pay as you go.
• POS Hardware Kit: Starts at $669.

Shopkeep’s hardware seems to be a little more expensive than some products I’ve seen. This reviewer spent $1100 with Shopkeep to get fully outfitted – and that didn’t include the cost of the iPad. However, Shopkeep does make it very clear that the app is designed to be used from an iPad with absolutely no other hardware if necessary, so if your store is very small, that’s the option for you.

4. VendHQ

Vend is a New Zealand-based POS system that works for all sizes of retailers. They are very reasonably priced and even have a free version, ideal for small business retailers, but they have larger plans that can suit even an enterprise level retailer.

Pros: Vend has integrated inventory management and CRM. And the CRM comes with a customer loyalty program. Which is pretty awesome. Vend’s reporting capabilities, like Shopkeep’s, are also phenomenal. They’re in depth and you can set sales goals for employees. These guys also offer 24/7 customer support. You do have to pay monthly for the support, but they give not just support, but constant training and set-up assistance as well.

Cons: It’s cloud-based – so when the Wi-Fi’s out, you’re pretty much out of luck. The register will still have some limited functionality – it can still take cash sales. However, in this day and age, if you can’t take card sales for an hour, you’re pretty much not going to make a sale. Also, Vend has no employee management capabilities, even ones as simple as punching in and out.

Pricing:

• Free – 1 store, 1 register, 10 products, 10,000 customers, 1 user, only community support
• $59/month* – 1 store, 500 products
• $85/month* – 1 Store, Unlimited products
• $169/month* – Unlimited stores, Unlimited products
• $35/month* – Each register after the first free one.
• $19/month – Phone and set-up assistance, on-going training

*When billed annually.

5. Shopify POS

Shopify is best known for its pretty stellar eCommerce system, but their POS system is nothing to sneeze at. It’s a small business solution intended to be fully mobile, and while it’s technically a hybrid system, Shopify POS is more cloud-based than anything else.

Pros: Like I said, Shopify has a really great eCommerce system. Their POS was made with the intention of fully integrating with the eCommerce side. Basically, if you’re a small retailer looking for a POS solution that is going to seamlessly and easily integrate with an eCommerce store, this is one of the best solutions available.

Other pros:

• Shopify accepts a large array of payment methods, including store credit, gift cards, and split payments.
• You have complete store management features – that means order tracking and employee management.
• CRM integrated.

Cons:

• The biggest complaint people seem to have with Shopify is the fact that they charge fairly high credit card processing fees.
• Even though it’s technically a hybrid system, you can’t process credit cards when Wi-Fi is out.
• Another thing that can cause problems with the software is that the stock tracking feature does not alert you when an item is low or no longer available. That means you can technically sell products you no longer have. It’s not a huge issue, but it does mean you need to keep an eye on your products.
• Finally, the reporting can be costly –$50/month to get more than basic reports and another $100 on top of that to be able to customize your reports.

Price:

• $49/month – Unlimited products, unlimited staff, unlimited registers, 24/7 support, 2.7% credit card rate
• $99/month- All that plus gift cards and professional reporting, 2.4% credit card rate
• $199 – All of the $99 level plus customized reporting, 2.15% credit card rate
• $20/month – online store
• $649 – iPad hardware kit

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