Last August, payments startup Square acquired San Francisco-based food delivery startup Caviar for a reported $90 million. Since then, the company has been growing fast, both in terms of order volume and the size of the internal team.
For Square, the acquisition follows a trend of diversifying the company’s portfolio of products and services. As it moves beyond just providing a card reader and processing payments for SMBs, the company has added inventory, invoicing, analytics, and financing products.
On the consumer side, the company has launched apps that enable customers to place orders at local restaurants ahead of time, as well as to easily exchange cash. But its acquisition of Caviar is perhaps its biggest bet on wooing new customers to using its products, both on the consumer and enterprise side.
“It is part of our strategy to provide a suite of services that can help businesses grow,” Square product engineering lead Gokul Rajaram told me in an interview at Square’s offices. He said part of the reason Square made the acquisition was that during due diligence, every partner restaurant they talked to reported significant increases in businesses after working with Caviar.
That’s given them confidence to make a big investment in the food delivery service. On top of the reported $90 million it paid to acquire the startup, Square has also been throwing a lot of resources behind Caviar since it came in-house. A year ago, the company had just 10 employees, and was at a headcount of 40 when Square acquired it. But the team has grown to well over 100 and now occupies a separate floor in Square’s Mid-Market office building.
In the short term, Square’s support of Caviar has been about accelerating its expansion to new markets and adding new products. The service is now available in 15 markets, including the San Francisco Bay Area, Boston, Chicago, Los Angeles, Manhattan and Brooklyn, Philadelphia, Portland, Seattle, and Washington D.C.
Square’s backing has also enabled the company to move a lot more quickly on product rollouts. When Caviar was acquired, it had a web-only ordering system, but it was able to launch an iOS app four months after being bought. That product focus continues with the launch of an Android app, which rolls out today.
Due to the number of new markets it serves, as well as the recent availability of a mobile app, it’s not a big surprise that order volume is accelerating. According to Caviar founder Jason Wang, the number of orders it delivers has tripled in the past six months since acquisition, and that volume shows no sign of slowing down.
Despite the demand — or maybe because of it — Caviar has actually been able to reduce its average order delivery time by 20 percent. As more orders come in, it’s necessary to have more couriers to service that demand, which means it’s more likely orders will be picked up, and delivered, more quickly.
For now, both Rajaram and Wang say Caviar is laser-focused on the task at hand — that is, making its service as widely available as possible. And why not? People have to eat, and food is a $1.6 trillion market opportunity, according to Rajaram.
That said, It’s not hard to see how the use of Caviar in different restaurants could lead to adoption of other Square products and services — e.g. its register point-of-sale system, or its accounting and analytics offerings. One could also Caviar restaurants becoming integrated into Square’s Order app, or Caviar logistics being applied to enable deliveries from merchants using that app.
Who knows? Given the order volume it sees, Square could possibly even extend financing to eligible Caviar restaurant partners through its Square Capital offering.
The possibilities are seemingly endless, but Wang downplays any integration between Caviar and Square’s other products, at least in the short term. After all, he says, any engineer he commits to building links with Square apps is one less engineer he has to work on Caviar’s core products.
Until they get that down, you can expect Caviar to continue operating more or less as an independent entity within Square. And that seems to be just how each side likes it.
UPDATE: An earlier version of this story said Caviar had 10 employees when it was acquired. That was the headcount from a year ago. At the time of acquisition, Caviar had about 40 employees.