OLO, the New York-based online and mobile ordering platform for restaurants, has raised a $5 million Series B round of funding from PayPal and existing investors, David Frankel, RRE Ventures, and Core Capital Partners. The company had previously raised $8.75 million in outside funding. Exactly a year ago today, as it turns out, the company announced reaching the milestone of 1 million customers, and now that number is nearly 2.25 million, according to CEO Noah Glass.
“We started in June 2005, so it took us six and a half years to go from zero to a million users,” Glass says. “It’s incredible in less than 12 months we’ve gone from 1 million to 2 million, but it’s indicative that the market is really heating up and customers are excited about ordering from their mobile devices,” he explains.
That trend has PayPal excited, too. The company has been expanding its payments platform into the offline world in recent months. Also a year ago, PayPal made its first foray into in-store payments through a pilot program with Home Depot which saw its technology integrated into Home Depot’s point-of-sale systems. That program expanded in spring 2012, when PayPal added 15 more brick-and-mortar retail chains, and by the end of the year, it had signed up 23 national retailers and had gone live in some 18,000 stores across the U.S. It also established a partnership with point-of-sale hardware manufacturer NCR just this month, too.
But with PayPal’s strategic investment into OLO, it now has the capability to expand into yet another offline vertical: dining.
This includes both sit-down restaurants and quick-serve restaurants, as OLO counts both among its partners, which, combined, is now around 3,000 individual restaurants. This year, however, that number is about to explode. Glass tells us that OLO has four large quick-serve chains in various stages of closing deals with his company, each with over 5,000 locations domestically, and combined, totaling 27,000 units across the U.S.
“Our pipeline is crazy. We’re looking at a year where we could very easily multiply that [3,000] by five or 10,” he says. “With these very big chains, we have the potential of just massive scale.”
These new, larger QSR partners will have another effect on OLO’s business as well – no, not profitability; OLO hit that milestone mid-2012. Instead, the QSRs will help push OLO even further into mobile than before, and help establish it as a major player in the customer loyalty and rewards space, too. Glass explains that’s because online ordering doesn’t make sense for quick-serve chains, but mobile does.
2012 was already a big year for mobile adoption at OLO, he adds. For example, Five Guys Burgers, which has just over 1,000 stores here in the U.S., saw its OLO-powered mobile app downloaded over 625,000 times. Starbucks-owned bakery La Boulange also debuted an OLO-backed mobile app during the year. “Mobile used to be 10 percent of our total order volume,” says Glass, “and now, for hundreds of the restaurants we work with, it’s more than 50 percent of the order volume.”
On mobile, OLO’s restaurant partners will soon be able to better target customers with offers, discounts, and rewards that can be even more personalized than those from loyalty card startups which track transactions alone. Because OLO is an end-to-end ordering solution, it can know not just when, how often and what a customer buys, but it can also help identify their favorite dishes and preferred menu customizations, as well. For example, Glass explains, if a customer always adds bacon to their burger, the restaurant could set up a promotion that would tell them about the new BLT when the customer was within a five-mile radius and offer them a coupon to try it.
As for PayPal’s involvement, obviously OLO will now be adding it as a payment option that its restaurants can choose to integrate, alongside credit, debit, gift cards, and, more recently, Google Wallet. But, as noted above, PayPal’s investment speaks to more than just another partnership – it’s about changing the way customers think about its brand in the offline world.
“Since June 2005, I thought that mobile commerce was a huge and compelling idea, but for it to really gain mainstream adoption, we had to find the right application for it. It had to be an everyday use case. It had to be high frequency to really change user behavior,” says Glass. “PayPal’s thinking is about being an online-plus-mobile account…it’s become clear to me that the thinking with PayPal is incredibly aligned,” he says.
Glass couldn’t disclose the portion of the new investment that was PayPal’s, but did confirm that the investment didn’t involve any new board members. The funding will be used to expand OLO’s current team of a dozen to 20, if possible – mainly engineers.