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Hotel Food & Beverage Software Articles

Founded by a rockstar restauranteur and fueled by Hyatt's legacy, Tock is taking Opentable head on

by
Jordan Hollander

Entrepeneur Nick Kokonas is no stranger to the hospitality business.  Mr. Kokonas is arguably at the top of the food chain in what is widely regarded as America's #1 'foodie' city, Chicago.  Nick is the visionary behind iconic hospitality concepts such as Next, Alinea and The Aviary.  If you haven't experienced these concepts - they alone warrant a trip to the Windy City.  If you decide to go check out his luxury cocktail lounge concept The Aviary, for example, you'll need to book ahead of time since they fill up months in advance.  Given the massive demand for his restaurants and limited capacity of physical space Kokonas realized that cancellations on platforms like Opentable were extremely costly to his businesses.  Like many great entrepreneurs, Kokonas set out to solve a problem that was personal to him and started pre-selling experiences at his restaurants and bars.  In a stroke of genius, Kokonas had figured out how to turn costly cancellations into his most profitable reservations - Tock was born and his restauranteur friends couldn't get enough of it. As disruptive innovation often plays out, Kokonas started in a relatively niche market: ultra luxury hospitality concepts.  Opentable (owned by Booking) wasn't threatened as it wasn't their core market.  Tock continued to broaden it's feature set building rich guest profiles, a dynamic CRM and offering traditional reservation functionality for their partners and is now on pace to dethrone the behemoth that no longer can afford to look the other way.  Today Tock's product is simply better than Opentable, plain and simple.     Since it's 2014 founding Tock has processed $290M of prepaid transactions and millions of reservations in 18 countries around the world.  The company is now helping not just restaurants but hotels, nightlife venues, wineries and even museums to create, market and sell incredible experiences to guests. Key to Tock's success, Kokonas leveraged his network to secure financing for Tock from top venture capitalists like Pritzker Group Venture Capital - funded by the family behind Hyatt and Two Roads Hospitality.  Pritzker VC has an extremely entrepeneur-centric approach to investing given it's evergreen fund structure and has a clear competitive advantage in the hospitality market given the Pritzker family legacy.   Tock founder and rockstar restauranteur Nick Kokonas   Pritzker VC has had some major exits in the travel and hospitality space such as Single Platform and Tickets Now.  The firm also has live investments in: Shiftgig (an hourly labor recruitment marketplace), SpotHero (a parking lot management solutions company), Upserve (restaurant point of sale solutions) and Eved (B2B payments for the meetings and events industry). To learn more about Tock, we sat down with Pritzker Group Venture Capital's Justin Malina to learn about Pritzker Group's perspective on venture investing in the hospitality space, cutting edge trends in the market and why he's excited about the journey ahead for Tock.  Justin is truly representative of Pritzker's hands on approach as he was recruited from one of their portfolio companies.  Justin is not your typical armchair investor - he's held key roles at massively successful startups such as Sittercity and Instacart so he brings an extremely unique perspective that blends venture investing and startup operations strategy.     Pritzker VC's Justin Malina   Tell us about your personal journey from working in tech startups to become a venture capitalist My first job out of school was in investment banking, though I knew that wasn't something I wanted to do for the rest of my career. Most of my colleagues left after 2 - 3 years for private equity, but I was interested in working with high-growth companies and thought that working in venture capital or at a startup would be a better path for me personally. I started networking with folks in the Chicago tech ecosystem and a lot of the feedback I received was to go join a startup and gain operating experience vs. jumping right into VC . I took that advice and spent several years as an operator at a couple of consumer tech companies, Sittercity (also a PGVC portfolio company) and Instacart, where I focused on operations and strategy. While at Instacart I learned of a potential opportunity to join the PGVC team. It was tough decision to leave a company on a rocketship, but ultimately I wanted to get some experience on the other side of the table as well as broader exposure to the Chicago tech ecosystem. I also knew that opportunities to break into venture were very rare, especially in the smaller tech ecosystems outside of the Bay Area, and I wanted to take advantage of this unique learning opportunity.   What makes Pritzker Group Venture Capital unique? Unlike the typical venture firm, PGVC is an evergreen fund with no LPs. We are solely backed by J.B. and Tony Pritzker and therefore have more flexibility in terms of how we invest. We take a long-term view without any sort of artificial exit timeframes and our check size can range from $500k to $50M. Our investment sweet spot, however, is the Series A/B stage with a check size of $3M - $8M. Ultimately, our goal is to deploy $15M - $20M across the investment life cycle of our most successful companies. The thematic areas we invest in are consumer, enterprise, digital health and a category we call emerging tech (e.g., IoT, AR/VR, drones). We are a national firm, though our core geographies are Chicago, Los Angeles and New York City. We believe the best form of capital is supporting our companies in generating revenue and therefore, we’ve invested in resources such as venture partners, sales bootcamps and a network of customers / partners to help drive growth.   What series investment did you participate in? We invested in the Series A, which was a $7.5M round led by Origin Ventures.   How is Tock disrupting the restaurant management software market? Tock's value prop to businesses is that its software enables them to offer unique experiences (e.g., tasting menus, special tables, standard reservations), exceptional hospitality and reduce no-shows, all of which ultimately drives sales. For guests, Tock allows them to book the best culinary experiences at restaurants, bars, wineries, pop-ups and events globally. The big vision for the company is to reimagine how reservation-based businesses connect with their customers. Tock's product is a modern SaaS platform that enables a) advanced CRM functionality, b) custom, high-margin upsell experiences and c) prepaid bookings. Significantly, the company's cloud-based platform offers superior functionality relative to OpenTable's legacy tech. Tock offers three pricing editions of its software, ranging from a purely metered plan (% of prepayments, no monthly SaaS fee) to a pure SaaS offering. The company initially targeted high-end restaurants that offered only paid reservations, but Tock has since expanded its focus to typical restaurants that offer free reservations.   Read why hoteliers rate Tock the #1 restaurant software on Hotel Tech Report   How did you come across the investment? Matt McCall led the deal for PGVC and we had an opportunity to invest based on his relationship with CEO Nick Kokonas.   What's one piece of advice you have for hotel tech entrepreneurs when raising capital? In general I'd say be sure to do your homework on the firms / investors you're pitching. Look at the companies they've invested in, the boards they sit on and the stage at which they typically invest. This will help you to be efficient with your time, ensuring that you're focused on the right potential partners.   It's helpful to get to know our firm (or any firm for that matter) before you start actively fundraising. Ideally we prefer to start building relationships with entrepreneurs early and track progress over time, which helps our committee get comfort with the team and ultimately the investment opportunity.   How do you think the hotel technology space will change over the next 5-years? I think we will increasingly see hospitality businesses look to differentiate themselves through leveraging data, which will allow them to offer users more personalized experiences. This is what Tock is doing with its built-in CRM. For example, a guest that has visited a restaurant with multiple locations can easily be identified when visiting a new location. This gives the business an opportunity to delight guests through better communication and hospitality.   People often say that hotels are a bit slow to adopt technology.  Do you agree? While that may have been true historically, I think that is quickly changing as these business look for new ways to differentiate their brands and ultimately drive revenues. I think Airbnb in particular has compelled hotels to increase their investments in technology as they compete for the loyalty of mobile-first, tech-savvy millennial customers. In the past, hotels may have been afraid to experiment and negatively impact the customer experience, but I think they're realizing that they're going to need to innovate to remain competitive in today's environment.   What's the most suprising thing that you found when performing due dilligence on the hospitality tech market? Although businesses are increasingly experimenting with and adopting new technologies, there is still a surprising amount of legacy technology in use today. OpenTable is a great example of that--its Electronic Reservation Book software was originally built in 1998.   If you were leaving venture capital tomorrow to start a hotel technology company - what would it be and why? Personally my background / expertise is mostly in consumer tech, coming from Sittercity and Instacart, so it would likely be something guest-facing. Going back to my point earlier on leveraging data, I think there are a lot of opportunities to use data to provide guests with more personalized experiences. Though I think Tock is pretty well-positioned to do this for hotels in addition to restaurants, so I don't think I'd want to try and compete with them.   What is the most interesting or surprising thing that you've learned from investing in hotel tech? There are so many companies tackling problems in innovative ways that I never would have thought about. For example, one of our portfolio companies, Journera, is working to improve the travel experience through building a data exchange for travel providers. The complexities of competitor relationships in the space make this a difficult problem to solve, but we believe this team has the industry knowledge, relationships and proven track record needed to convince travel leaders to buy-in.   What is the best book you've read lately? I'm currently reading Bad Blood and I'm fascinated by the history of Theranos. It provides an interesting perspective on why the "move fast and break things" mantra isn't always the right approach. I think it also underscores the importance of always asking the hard questions and trusting your instincts   What is your favorite podcast It's hard to choose a favorite, but the one I listen to almost daily is NPR's Up First. It's short (less than 15 minutes) but gives me a great rundown of the news on my walk to work.   What is one thing that most people don't know about you? Most people don't know that I participated in the National Spelling Bee in 8th grade and was on ESPN. So I've always been sort of a nerd.