Dive Brief:

• SpotOn, a cloud-based payments system that caters to restaurant and retail merchants, closed on $125 million in a round of fundraising last week, the software company said in a May 26 press release. Silicon Valley stalwart venture capital firm Andreessen Horowitz led the round with participation from other SpotOn investors as well.
• The San Francisco-based company, which focuses on small and mid-sized businesses (SMBs), has raised $325 million in total now and plans to use the latest injection of capital to penetrate larger metropolitan markets, among other aims, SpotOn Co-CEO Zach Hyman told Payments Dive. Among its 30,000 current business clients are local companies including Mile High Spirits club in Denver and Northeast Auto Imports in Hudson, New Hampshire, according to the company's web site.
• The company competes with Toast on the restaurant side and Square on the retail side, but views the slew of businesses without any cloud-based payment system as the big market opportunity. "It is an extremely competitive space, and we knew that when we founded the company in 2017, but we created our company to be different," Hyman said in an interview. "We're taking clients off of legacy platforms and moving them to cloud-based platforms."

Dive Insight:

SpotOn offers a package of software services that lets the merchant connect its point-of-sale (POS) hardware and cloud-based payments processing, as well as an a la carte menu of other services including reservations, online ordering, data analysis, and marketing services. About 95% of the company's customers have a store-front.

The company's edge is in not requiring merchants to sign long-term contracts, Hyman said. Merchants pay a flat fee per credit card swipe that is 1.99% of the transaction plus 20 cents, or 2.99%, plus 20 cents for corporate, international, American Express or keyed cards. Its basic monthly platform cost is $25, but that rate rises with additional services.

SpotOn will process your credit cards for less, or maybe slightly more, than competing services, but the hope is that customers see how the company's services are more valuable to their business, Hyman said in the interview last week.

SpotOn is mainly focused on the U.S. market for the moment, but also has a pocket of clients in Mexico City and plans to expand in the southern neighbor as well as Canada, Hyman said. SpotOn has about 1,200 employees working from four cities in the U.S., including Chicago, Detroit and Denver, in addition to its headquarters in San Francisco, plus two international locations, Mexico City and Krakow, Poland.

Although Square is a direct competitor of SpotOn, that bigger rival is aiming to target larger retailers in the market, according to comments made during Square's first-quarter earnings call.

To help the company grow, SpotOn purchased the reservation management technology company Seatninja last year. As for more acquisitions, Hyman said: "We're always looking for companies to partner with or acquire. It's always a question of build versus buy."

SpotOn didn't go looking to raise money before the latest round of fundraising. Rather, Andreessen Horowitz professionals, who knew some of the company's existing investors, got in touch with SpotOn management. There was no reason for a road show or pitch to a dozen investors — the only conversation was with Andreessen Horowitz and the whole fundraising took a couple months, Hyman said.

At the moment, the company has no immediate plans to sell stock to the public as a means to keep growing, Hyman said. "Fortunately, investors aren't pushing us for liquidity," he said. "We're sitting on a very healthy balance sheet right now." Where the company is at right now with respect to capital, gives it options. "We love optionality," he said.

The company is now valued at about $1.88 billion, based on the latest round of fundraising, SpotOn said in the press release.