Toronto-based supply chain software startup Notch has survived COVID-19 upending the restaurant industry and come out of the pandemic with a focus on FinTech and helping restaurants and food distributors simplify the B2B ordering, invoicing, and payment process.
Founded in 2015 as a marketplace between restaurants and wholesale distributors called ChefHero, Notch has had an eventful past few years. Much like other food tech companies and the industry it caters to, Notch was hit hard by the pandemic when in-person dining halted amid the spread of COVID-19. As Notch CEO Jordan Huck previously told BetaKit, COVID-19 posed “an extinction-level event” for the startup.
As Notch gears up for another period of economic upheaval, the startup has raised capital and restructured its team.
In response to these conditions, Notch laid off staff, pivoted, and rebranded from ChefHero, shifting strategies to helping restaurants and food distributors bring their ordering, invoicing, and payments online. Today, armed with a fresh focus, additional capital, a leaner, revamped team, and a new FinTech product, Huck believes the startup is in a much better position.
“When you have to pivot in COVID, that’s a challenging place to be,” Huck told BetaKit in an interview. “I’m just really proud of the perseverance of the team for some of the challenges that we had to overcome, including multiple rounds of layoffs … pay cuts, all the stuff that companies were doing.”
As Notch gears up to navigate yet another potentially prolonged period of economic upheaval, the startup has raised $13.7 million CAD ($10 million USD) in fresh capital, and restructured its team. As part of that, Notch shuffled its leadership and laid off nearly 13 percent of its staff as it targets “more measured growth” amid the downturn.
With its latest financing Notch plans to expand into the United States (US) and deepen its push into FinTech as the food service operations software firm continues to reinvent itself, starting with the launch of its new restaurant payments offering.
The all-equity, all-primary round was led by new investor Portage, and closed in late December. It also saw follow-on support from Golden Ventures, Math Ventures, Accomplice, Pre-Cursor Ventures, Garage Capital, and Plexo Capital. Huck declined to disclose Notch’s valuation. The fresh capital brings Notch’s total funding to date to about $39 million CAD ($29 million USD).
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Huck said that Notch is not classifying this round, which comes after the company closed a nearly $3.5 million CAD Series A-1 round in March 2020, followed by an additional $3 million from BDC that July, and $12.5 million in Series A-2 convertible note funding in July 2021. With this latest capital, the CEO said the goal is to give Notch “optionality” over the next two years, putting the startup in a position to either raise a larger Series B round or reach profitability by that time.
As part of its move into FinTech, Notch first launched its Accounts Receivable (AR) Manager product for food distributors in July 2021. Since then, the startup says AR Manager has seen 800 percent growth year-over-year. To fit alongside its AR Manager offering for distributors Notch has also built out a second FinTech product, an Accounts Payable (AP) Manager, to digitize restaurant payments to distributors. The company is launching AP Manager this week.
The growth Notch has seen since COVID-19 hit, including that of its FinTech offering, are part of what drew Portage to invest Notch. “Their post-pandemic growth has been truly impressive,” Portage partner Ricky Lai told BetaKit. “We are very excited by the renewed focus brought by Notch’s new solution for the market. The company has executed well as the hospitality market continues recovering from the pandemic.”
Shortly after closing this round, in early January, Notch laid off seven members of its 54-person team, or approximately 13 percent of its headcount, joining a host of other Canadian tech companies to shed staff amid the downturn. Although Notch’s funding was not contingent on the company making layoffs, Huck described the cuts as “the prudent thing to do” in light of current economic conditions. “We over-hired coming out of the pandemic,” said Huck.
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“The economic downturn has forced us to try to do more with less,” added the CEO. “This capital is not going to mean huge headcount growth for us here—it’s just not—and I think most technology companies are going to follow that recipe.”
Notch has also restructured its leadership team, bringing on some experienced restaurant tech industry executives in former Ritual VP of Growth Kurt Gooden as its new head of growth and marketing, and ex-DoorDash director of strategy and operations Justin Vermeer as VP of operations. The startup is also adding a new head of sales in the coming weeks.
Huck views Notch’s “all-in-one approach,” combining ordering, invoicing, and payments, as a differentiator in the food service operations software space. On the payments and FinTech side in particular, the Toronto-based company sees plenty of room to grow.
Within the B2B restaurant and food distribution space, Huck said most payments still take place offline. “Today, accountants across Canada and the US, across North America, feed paper invoices, take paper invoices, and cut cheques,” said Huck. “And Notch is going to change all of that.”
“In a post-COVID world, every business is looking to—especially hospitality with slimmer margins—drive as much efficiency as possible, and the time is now for payments to come online,” he said.
As Notch looks to execute on this vision, the startup will now be doing so with the help of FinTech-focused Portage. “We think Portage is the perfect partner,” said Huck, pointing to the VC firm’s financial services expertise and track record helping other startups layer on FinTech solutions.
Asked why Portage was attracted to Notch, Lai, who is joining Notch’s board as part of the round, said Notch “fits a lot” of what Portage looks for in a FinTech company. “The company brings a tech-enabled solution to an antiquated money movement process—payments between restaurants and distributors—while also simplifying the lives of the “CFOs” … of these clients,” he added.
“In a post-COVID world, every business is looking to—especially hospitality with slimmer margins—drive as much efficiency as possible, and the time is now for payments to come online.”
-Jordan Huck, Notch
As Lai noted, Portage has explored investment opportunities in both pure FinTech firms and companies using tech to modernize outdated processes at small-to-medium-sized enterprises. “Notch’s solution sits at the intersection of those ideas,” he said.
Over the longer-term, Huck said he sees “downstream opportunities” for Notch to explore other financial services beyond payments, from lending, to buy-now, pay-later capabilities and card issuance.
Notch also intends to use some of this funding to support its geographic expansion plans. The startup currently serves all of Canada, and with this capital, Notch will begin pushing into the US later this year.
As Golden Ventures general partner Ameet Shah told BetaKit, the entire food tech industry underwent “a massive transformation,” during COVID-19, and the sector continues to evolve. For his part, Shah has been impressed by Notch’s strength. “The whole Notch team has shown remarkable resiliency and fortitude throughout the pandemic,” he added.
“COVID that gave us that clarity that we needed to pivot to really help streamline operations for hospitality groups,” said Huck, who noted that today, Notch’s products focus on helping restaurants operate more efficiently and distributors collect payment faster. “These are core issues that are going to matter should we go into a recession. That combined with a very lean team, we think we’re really well positioned to come out of this stronger than ever.”
Feature image courtesy Notch.