Aug 21, 2024 · 1h 7m · news
Aman Narang: 5 Lessons Scaling Toast to $14BN Market Cap | E1192 · 20VC with Harry Stebbings
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this deep-dive interview, Toast co-founder and CEO Aman Narang details the grueling journey of scaling Toast from early VC rejections and software pivots to a successful public company, emphasizing critical lessons in product focus, rapid iteration, leadership humility, and structural execution.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 21.3% of the talking time here. How this is scored →
Harry as informed peer 2.6 Guest teaching 2.7 Guest disagreement 1.2 Harry pushing back 2.5
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 55:35 Aman questions Harry's critique of Toast's core values
Aman pushes back against Harry's assertion that 'lead with humility' is an empty corporate slogan, asking 'Why are you laughing?' and defending why grounding leaders prevents hubris.
Hardest push from Harry ▶ 54:05 Harry challenges the validity of Toast's cultural valuesHarry refuses to accept 'lead with humility' as a distinct company value, arguing that effective corporate values must be opinions where an organization could plausibly take the opposite stance.
Biggest teaching moment ▶ 16:20 Aman illustrates early startup resourcefulness with the Google Voice call storyAman reframes Harry's assumption that startups are perpetually at a support disadvantage by recounting how he routed 24/7 support calls to his personal phone to close a major restaurant group.
Harry holds his own ▶ 14:06 Harry challenges the assumption that startups can offer superior productsHarry utilizes his knowledge of startup unit economics and R&D budgets to challenge Aman's premise that early-stage companies can be both cheaper and feature-superior to entrenched incumbents.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Aman Narang's Upbringing and Boarding School Experience | 2 | 2 | 1 | 1 | Harry asks biographical questions about upbringing, boarding school bullying, and early angel checks. Aman reflects on learning grit from tough childhood experiences and getting their first seed check from Endeca's founder. | |
| Choosing the Idea and Co-Founder Dynamics | 2 | 2 | 1 | 2 | Harry asks about co-founder picks and whether speed is the ultimate zero-to-one metric. Aman explains how iterative practical building beats over-analyzing user requirements. | |
| Early Mistakes: Underestimating the Value of Management | 2 | 2 | 1 | 1 | Harry asks about early mistakes regarding speed. Aman admits to initially underestimating management leverage and relying on the Horizons framework from Zones to Win. | |
| Knowing When to Scale (Putting the Pedal Down) | 2 | 3 | 1 | 2 | Harry explores when to bring in specialists. Aman outlines recognizing when to put the pedal down and details pivoting away from failed QR codes to POS systems. | |
| Overcoming Switching Friction and the Google Voice Story | 4 | 4 | 2 | 4 | Harry pushes back on startup competitiveness, asserting startups have nil R&D and support compared to incumbents. Aman counters with a story about landing a big client using a Google Voice number to fake 24/7 support. | |
| The Bessemer 'No' and Learning to Fundraise | 3 | 3 | 1 | 3 | Harry brings up Bessemer's initial rejection. Aman admits to pitching poorly and arguing with his co-founder mid-pitch, leading Harry to probe sales efficiency vs customer love. | |
| Scaling Pains and Bringing in a CEO | 2 | 3 | 1 | 3 | Harry asks what broke during rapid growth and directly probes why Aman didn't take the CEO role earlier. Aman candidly admits he wasn't given the role. | |
| The Power of Focus: Saying 'No' to Retail | 3 | 2 | 1 | 2 | Harry asks about strategic missteps. Aman highlights turning down Urban Outfitters' request to build retail POS software, while Harry shares a parallel lesson from 20VC. | |
| The Android Platform Decision and Hardware Challenges | 3 | 3 | 1 | 3 | Harry queries hardware return issues and asks Aman whether Toast is fundamentally a SaaS or Fintech company. Aman explains how embedded payments power Toast Capital's underwriting. | |
| Tinkering vs. Scaling and Product Flops | 2 | 3 | 1 | 2 | Harry asks about failed product expansions. Aman outlines the organizational divide between tinkering and scaling teams and details why building a proprietary phone system failed. | |
| Segment Expansion and Replacing Legacy POS Systems | 3 | 3 | 1 | 3 | Harry discusses segment expansion into SMB and enterprise. Aman explains that mid-market regional chains have higher adoption than massive enterprise accounts running legacy on-prem systems. | |
| Local Sales Flywheels and Hands-on Rep Onboarding | 3 | 3 | 1 | 2 | Harry probes the local sales flywheel. Aman explains micro-density on city blocks and describes Toast's policy requiring all new leaders to spend a quarter doing direct sales. | |
| IPO Valuation, M&A Strategy, and the Decadal Play | 3 | 3 | 2 | 3 | Harry asks about M&A strategy and playfully probes how much juice can be extracted from restaurants before hitting a ceiling. Aman reframes the premise around value creation over extraction. | |
| Leadership, CEO Self-Reflection, and the Humility Value | 4 | 3 | 3 | 6 | Harry directly challenges Toast's cultural value 'lead with humility', arguing a real value must have a defensible opposite side. Aman defends the value, questioning Harry's framing and explaining why hubris kills companies. | |
| Quick-Fire Insights: Pivot, Fundraises, and Trusting Instincts | 2 | 2 | 1 | 2 | In a quick-fire round, Harry asks about near-death moments, dream board members, initial investor pitches, and fundraising advice. Aman warns founders against raising too much capital. | |
| AI Innovation and Driving Efficiency in Restaurant Operations | 3 | 3 | 1 | 2 | Harry asks whether AI is public market story-telling or genuine innovation. Aman shares practical AI use cases in menu pricing, yield management, and voice ordering. | |
| Personal Sacrifices, Marriage, and the Work-Life Equation | 2 | 2 | 1 | 1 | Harry asks about personal sacrifices, maintaining a marriage as CEO, and the path to a hundred billion dollar market cap. Aman highlights focus on core U.S. share and sub-vertical expansion. |
Statements from this episode (38)
Narang: Refusing to delegate to domain experts is a major founder mistake
“And one of the mistakes most founders make is you don't want to give up any control because you're like, well, I need to know what the heck's going on. And the reality is you can benefit from people that are domain experts and specialists in specific areas, bu…”
Endeca founder Steve Papa wrote Toast's entire $500K angel round
“I remember we did, like, eight or 10 VC meetings, and maybe we just were naive, and, like, everybody said no, and so one of the big yeses was the founder of Ndeca, right, who wrote the whole check. He wrote, like, a half a million dollar check, and At what pri…”
Narang: Founders underestimate practical engineers who build with high velocity
“At Indeca, I met Steve and John, and you know, these were these proverbial TEDx engineers, which I think people underestimate. You need people that can build with velocity and are practical.”
Narang: 80% of upfront product problem permutations are irrelevant
“In product management, one of the things I find is there's so much work that happens to describe all of the permutations of the problem when you realize, like, 80% of those are not relevant, or at least not relevant now.”
Narang: Toast would not exist if its initial launch took two years
“If we had taken two years to get the first thing, you know, into the hands of customers, we wouldn't exist.”
Narang: Early Toast refused to hire management to rely solely on founders
“So I had zero value for management early on. I just wanted to hire people that could sell, that could code, that could, and that's it. And I was like, I'll do all the management. Steve will do all the management. We don't need any other managers.”
Narang: Managing and running a startup fundamentally gets easier over time
“Yes, for sure. I mean, I think, There's always new challenges, but it does, I think, fundamentally, you know, get easier.”
Narang: Generational companies require both specialists and entrepreneurial generalists
“And so there's this balance, I always say, like, you want to have a company that's got a balance of, like, specialists and entrepreneurs, and so one of the things I love is this, and actually Chris, our old CEO, brought this to us, this is the Zones to Win boo…”
Narang: Toast had to halt sales early on due to product stability
“Ah, for toast, we made a bunch of starts and stops there. In fact, there were these times where I remember, and you can imagine, right, you're like trying to raise capital and grow, and having a meeting, we're like, well, we need to stop selling. It's like, wh…”
Narang: Hire specialists over generalists only when ready to scale
“Recognizing when you can put the pedal down is really important in companies. And so when you start to put the pedal down back to your question, that's when you, I think you can really benefit from the specialist because I've got muscle memory and I've seen gr…”
Narang: Toast started as a failed QR code app before pivoting
“So we started with these QR codes you see today at restaurants. That's before we had this platform, and it didn't go anywhere. We couldn't scale it, and so we pivoted”
Narang: Direct customer signal matters more than a theoretically grand idea
“And like one of the learnings for me and for the team was, you know, oftentimes you think of like startups and it's like, well, what's the Tenex idea? And like rebuilding POS does not sound like a Tenex idea. But getting signal from customers is like a good si…”
Narang: Startup products must be both cheaper and better than incumbents
“No, it's not just cheaper. It's gotta be cheaper and better.”
Narang: Toast was enabled by Android, cloud, and embedded payments
“Toast wouldn't exist without Android and cloud and, you know, and embedded payments. Like those were the three trends that really drove the beginnings of Toast.”
Narang: Toast generated at most $200-$300 monthly per customer early on
“We were making two, 300 bucks a month on the software at most”
Narang: Functions moving too far ahead of infrastructure breaks scaling companies
“And so one of the expressions I've heard is like, you've got to make sure in an organization, everything's kind of in sync and something can be ahead of another thing, but it can't be so far ahead. That the whole thing starts to fall apart.”
Narang: Toast was at $2 million ARR when bringing in external CEO
“No, it was like two million ARR, pretty early. Yeah, two years in.”
Narang: Toast turned down Urban Outfitters' request to build retail software
“Like I remember one of our early customers was this I think it was Urban Outfitters. They had other restaurants in their retail stores. And they wanted us to do that. You're doing such a great job, do all our retail. And I'm glad we said no, right? And really …”
Stebbings: Regrets pursuing celebrity guests on 20VC during creator economy hype
“We saw the creator economy hype of like the easy wins that you get from having big famous people on the show. And it's like very easy to get big numbers and be very famous, but actually that's not who we are. We are incredible shows with the best entrepreneurs…”
Narang: Nearly all early Toast hardware was returned within 90 days
“I mean, I remember there was one time when we were shipping out hardware to restaurants, every piece of hardware, like close to, it felt like every piece of hardware that we shipped came back in 90 days, and we're still selling it because we're like, we need t…”
Narang: Toast chose Android over iOS simply because it seemed easier
“One of the things that was a crucial decision that we made was we built this platform on Android versus iOS, and it was not, in hindsight, it's like, feels like a strategic decision, but in reality, it was simply because we thought Android was an easier platfo…”
Narang: Software, not fintech, is why customers choose Toast
“Customers care deeply about our software. That's why they picked Toast. Found it fundamentally. So maybe, maybe that's what I'll say.”
Narang: Point of sale is a restaurant's central nervous system
“I've got point of sale, I've got payments, I've got a loan, I've got online ordering, I've got scheduling, I've got inventory, I've got gift cards, loyalty, a website, and all this stuff has to integrate in some way to the point of sale, because that's the cen…”
Narang: Processing payments enables superior small business credit risk assessment
“And what we realized was, because we're the payments partner, We could do a better job of assessing risk. We could make the process of getting the loan out, you know, really simple.”
Narang: Toast processes $160 billion in annual transaction volume
“The fintech business, for example, we've processed like a hundred sixty billion in volume every year”
Narang: POS integration alone cannot sell commodity add-on products
“It's not good enough to just build commodity products because it's integrated on the point of sale.”
Narang: Toast has higher market penetration in mid-market than SMB
“In fact, we have more market penetration within mid-market than we even do in SMB today.”
Narang: Massive enterprise restaurants mostly rely on legacy or homegrown POS
“A lot of it is still on either custom homegrown or legacy on-prem solutions, because these solutions are so wired into everything else these chains do.”
Narang: Local customer density accelerates word-of-mouth sales flywheels and conversions
“As you get more restaurants you get better word of mouth, and you get more referrals, and you get more top of funnel, you convert better, you grow faster.”
Narang: Toast mandates all new sales hires sell directly for one quarter
“Everyone that joins the company, whether you're an IC, a BDR you know, outbound prospecting, or a rep closing deals, or a manager, you have to go sell. If you're a district manager, it's great that you've managed people before in running sales team, but you go…”
Narang: Toast requires its POS platform to remain central in all acquisitions
“That's the one rule that we've kind of stuck to, which is the central nervous system has to be toast.”
Stebbings: Working more hours directly drives greater business success
“And I believe that more hours leads to more success.”
Narang: Founders should refrain from raising too much capital
“Don't raise too much capital. I think there's all this perspective where we've got plenty of runway that's healthy, that's good. On the other, on the one hand, like, you know, VCs aren't stupid. So if you're gonna raise too much capital, you get diluted early …”
Narang: Founders should prioritize hiring interviews over closing deals
“If you're going to prioritize, like, an interview versus a deal versus, let's say, you know, like an internal meeting, you really want to make sure there's one thing you prioritize, it's like the interview, because especially early on when you're founding the …”
Narang: Unlike airlines or hotels, most restaurants cannot optimize yield
“Most restaurants don't optimize yield. They don't know, like, how do you maximize the right guests in the tables? Like, you know, you think an airline or you think a hotel, they're optimizing yield all the time. Restaurants don't have no ability to do that.”
Narang: Toast holds 13% to 14% US restaurant market share
“We've got 13 or 14% share in the U.S. In restaurants.”
Narang: Restaurants are resilient during recessions because consumers keep dining out
“We went and studied some previous recessions and what you see is restaurants are largely very resilient because people love to go out to eat.”
Narang: Toast connects over 100M guests and 100,000 suppliers on platform
“Today we've got a hundred million plus Guests that dine at Toast restaurants. We've got millions of employees working at Toast restaurants. You've got, you know, 100,000 of suppliers on the Toast platform that interact through our supplier and accounting produ…”