After the success of restaurant software provider Olo’s initial public offering (IPO), industry analysts seem more bullish on the industry’s future.
Olo announced its IPO on March 8, saying it would offer over 18 million shares of Class A common stock at between $16 and $18 per share. On Olo’s first day of trading on March 19, the stock was listed at $25 per share. This gave the company an overall valuation of $3.6 billion. By day’s end, the stock skyrocketed to $37.45 per share, earning the company over $450 million.
Before the IPO, Olo had raised just $100 million in funding since 2005, according to its regulatory filings. For comparison, DoorDash raised a war chest of $2 billion before going public.
The company’s CEO, Noah Glass, told CNBC that the IPO could help launch the company into the limelight. Olo already partners with over 64,000 restaurants across the country and over 400 brands such as Shake Shack, Wingstop, and The Cheesecake Factory. It also integrates with over 100 other tech platforms.
“For us, we are so well known within the restaurant industry but so unknown outside the restaurant industry, certainly by public investors, so it’s important for us to meet with as many investors as we could,” Glass told the news outlet.
Glass later told Restaurant Dive that the decision to go public was made before the pandemic because customers were looking for better on-demand food service.
While Olo has made significant strides to achieve this aim, its IPO should also be a sign that brighter days lay ahead for the restaurant industry.
Investors are paying attention to tech
As the pandemic weighed down the industry, many restaurants turned to technology to connect them with their customers. This came through third-party delivery and e-commerce solutions.
Investment firms caught wind of this trend and began investing in swaths of restaurant tech companies. These firms often acquire businesses for the sake of taking them public in order to earn a return on their investment. This strategy essentially puts a company’s growth trajectory into overdrive.
According to the National Venture Capital Association, 2020 was a record year for investors in consumer goods and retail. In all, investors flooded the industries with over $1.5 billion in new investment, helping companies such as Olo on their meteoric rise.
Meanwhile, ruminations of other well-known restaurant technology brands going public are generating bullish sentiments from industry analysts as well.
Toast, which makes restaurant POS software, said in February that the company is planning for an IPO at some point in 2021, according to The Wall Street Journal. The IPO could give the company a valuation of $20 billion, even though a report from November valued the company at $8 billion. Goldman Sachs and J.P. Morgan Chase are backing the IPO.
Meanwhile, Instacart is reportedly hatching a plan to go public in 2021. The company has yet to file its S-1 or S-3 registration forms, analysts at personal finance website NerdWallet say the IPO is exciting because the company raised $225 million at a valuation of $13.7 billion during its last round of funding, and is a symbol of how the pandemic changed consumer behavior.
The future is digital
Increased investments in restaurant technology can only help businesses in the future. According to the Boston Consulting Group, a global business intelligence firm, digital transactions are a $100 billion lifeline for restaurants. The firm anticipates restaurant sales revenue from digital ordering, delivery, and off-premises sales to grow nearly 50 percent within the next two years.
Similarly, research by e-commerce analytics firm Incisiv suggests that digital sales will make up 54 percent of quick-service and fast-food businesses by 2025. This would mark a 70 percent increase from pre-COVID estimates.
There’s no denying it: technology has revolutionized the restaurant industry. And it will only continue to do so. This requires business owners and managers to become more adept with new technology and keep a sharp eye for emerging concepts.