Booker Raises $35M More From First Data, Bain Capital and Others
Small business may not be a favored market in Silicon Valley, but investors elsewhere are placing their bets on companies that can reach mom-and-pops. New York-based Booker, a software firm that built a big business selling to the service industry, has raised $35 million more from a range of investors, including existing investors Bain Capital and Steve Case’s Revolution Ventures as well as a strategic investment from payment-processing giant First Data.
The round, which brings the company’s totally funding to over $75 million dollars, will position the firm as one of the better-capitalized players in a messy and fragmented small business software market. A handful of companies have raised meaningful growth rounds, including Square, Revel Systems and Shopkeep — but the majority of the market is spread between legacy terminals and an array of smaller business management applications.
“We found that investors in Silicon Valley are much more oriented toward enterprise software than small business products,” said Josh McCarter, Booker’s chief executive. “That’s one of the reasons we have really honed our investment around customers that have SaaS or small business experience.”
The strategic investment by First Data is an interesting ripple in the funding. The Atlanta-based payment processor has made a series of strategic investments and acquisitions over the past two years as it looks to find a new way to monetize its core payment-processing business. The thesis, more or less, is to strengthen its processing revenues, which have seen increased competition, by building a suite of business managements software products directly on top of the data stream.
McCarter declined to comment on the details of the deal, but he said the two companies plan to release details about a separate partnership in the coming months. A deal with First Data could offer Booker access to the company’s payments data through an exclusive integration; but it could also open up a distribution deal that would provide Booker with access to millions of small businesses.
“The first part is looking at it through the lens of how do we serve more merchants in different types of categories and that certainly ties into the role of why a strategic investor such as First Data would be interested,” said McCarter. “We’re effectively looking at how do we get out to the three to four million small businesses in the U.S. that are service-based in categories that are underrepresented by technology.”
The company has spent the past two years pushing deeper into the front-office, building a new suite of tools that use a business’s operational data — booking data, payment information and the like — to engage with existing customers, and in some cases, find new ones. McCarter says the company now plans to spend more engineering resources on tailoring these products to individual business categories in an effort to compete with a range of vertical-specific players.
To an extent, the small business software market is at the end of a two-stage process in its development. In the first stage, companies such as Booker have used the cloud to develop cheaper, and often more effective, alternatives to incumbent software that often ran locally. The competitive advantage was mostly focused on price and accessibility as the industry shifted to a SaaS model.
The second, and substantially more impactful phase, is automation. With a single database holding all of the information about a business, these companies will begin to create efficiencies between products. A booking by trigger an email or a payment may file a bonus for an employee. These products will create network effects within the sector causing relatively quick consolidation among the mid-tier players.
Steven Jacobs is Street Fight’s deputy editor.