March 8, 2014
Leaf, a Cambridge-based POS, cloud and payment platform startup, was founded in 2011, and serves as central hub for small businesses commerce in US.
Lets Talk Payments interviewed Aron Schwarzkopf, Founder and CEO of Leaf, to discuss about the developments in the POS industry in US, discuss about his amazingly well funded firm Leaf and how they are helping small businesses.
Q.1. What was the idea behind the company
As a student, Aron Schwarzkopf was inclined to the idea of revolutionizing the way small businesses do business in a world progressing towards cloud storage and computing. He had no background in the payments industry. Having no experience and having fresh ideas works to your advantage sometimes. You think about solutions in a way that have not been thought before says Aron.
Since he passed out of college in 2011, he has led Leaf from a vague idea on paper to the launch of an Android tablet for business in 2012, and to a cloud based platform that processes over $40Mn payments a year now. The company is focused on getting rid of the segregation of devices and platforms that existed in the industry. Thus they have been focusing on a vendor agonistic service, that gives the merchant the flexibility of using their own performance data and to improve the way in which they reach the end customer. As a part of the solution they also provide BI and analytics to small businesses.
Aron clearly says that Leaf is not a Payments company. They are into aggregation of data for small business with a platform around POS that provides useful BI and Analytics. And Payments and receipts is a small part of the big equation. Their solution connects with most of the payment processors in the business.
Aron said POS is undergoing a similar technology disruption that Phones saw...POS is probably reaching the stage in POS where Blackberry was introduced..as one of the first smartphones
Q.2. How did the team of founders get together to start the firm and what is their background?
Leaf was founded in January 2011 by Aron Schwarzkopf and Sebastian Castro. Aron graduated from Babson College with a degree in entrepreneurship in 2010. And Sebastian Castro completed MS in mechanical Engineering from Massachusetts Institute of Technology in year 2010. Castro is passionate about developing exciting technologies, services, and products that bridges the gap between online experiences and the offline world. Sarah McCrary was hired later and is the COO of the company. Prior to Leaf, McCrary held a variety of IT project and product development leadership roles at Heartland Payment Systems.
Q.3. What are the problems that your product solves for small businesses?
The company focuses on helping small businesses, especially in Food services and Restaurant industry across the country. They help these firms use their own performance data to grow the business, as well as improve their reach and connection with the end customers. The company delivers digital receipts, helps in integration across social platforms and helps in getting consumer feedback in real time, with the focus on delivering smooth customer experience and convenience.
A few years back the only option these companies had apart from cash register and paper was the POS system but that was too expensive for them. LeafPresenter does the job for them now and provides many additional features such as analytics, BI and bill anywhere facility with their highly mobile tablet POS.
Q.4. How is the company growing and how are you funding that growth?
The company is growing rapidly and is seen by the industry to be at the forefront of the revolution in changing the way brick and mortar merchants do business. In the initial days, the company was questioned about its distribution capability to compete against the likes of Square but it has slowly and gradually built a great reseller and distribution footprint. And investors believe in that story. The company has received $26Mn funding so far, which includes a $6Mn angel funding in 2012 and a 20Mn venture round funding in 2013 from Heartland Payment Systems, a publicly traded payments processing company that does $2 billion in revenue annually. Interesting to note is that amongst some of its initial resellers and partners was Heartland Payment Systems which went ahead and put its faith into the company by investing a sizable amount into it.
LTP view - The restaurant industry is huge and is growing at a decent pace. From Opentable, Google, Paypal and NCR big players are trying to provide offerings across the value chain as we discussed in our earlier article. It will be interesting to see how Leaf is able to compete with them and with players like E La Carte, GoPago and Vivonet. The company is focusing on one critical area - analytics and business management for small businesses, providing them with the BI to take critical business decisions and help them become more efficient by lowering the costs of inventory, managing the supply chain and other good stuff.
Q.5. How big is your team? Any growth plans
Leaf’s team is fast growing and currently comprises of about 60 members: a diverse group of young, passionate and successful entrepreneurs, engineers, and developers from all over the world. Many of them are also dancers, pilots, athletes, sports fans, and artists full of interesting stories, various languages, and fascinating backgrounds.
Leaf is headquartered at Boston and most of team is there. But through their resellers and partners they are pretty much present across the globe. It plans to double in size in 2014, and there are dozens of job openings for software engineers, product managers, relationship managers and many other positions.
Q.6. What keeps you awake at night? Are there any challenges
'Before we got the investment people had doubts about our approach. We had to prove ourself. We have few day to day challenges which are typical of growth phase of any company.'
$20 M investment has posed us with some unique challenges so far – talking about the growth challenges that a company like Leaf faces, expectations after funding from everybody and their open platform approach Vs. taking money from one of the reselling partners
Besides, POS is one of the most expensive and substantial investment a small business makes. So, it is a difficult solution to sell and up-sell. There is always the challenge of distribution and reaching the prospective merchants. We have learned our way through these challenges.
Q.7. Do you see any competition in this area?
Over the last two years, hundreds of new players have jumped into the segment of enterprise services business, focusing on lucrative solutions like payments and loyalty. In the POS industry, apart from the big names like Square and Groupon, many smaller players have come up, that are focusing on partnering with payment and other service providers, to provide iPad-based solutions.
Since the management team at Leaf comprises of all first time entrepreneurs, it was not easy to reach here. Many of the competitors comprise of members that are second time and third time founders, often payment veterans.
So, there have been fair amount of challenges and competition for the company. But they have been doing reasonably well for them. The young company had done business with more than 100 merchants by the end of year 2013. They don't reveal the numbers publicly.
Q.8. Any new product launch up your sleeve? (or any upcoming product/service launch)
The company aims to grow larger than any other player existing in the space in the next few years. To achieve this target, the company had set a two-prolonged strategy. The first part was to focus on providing Open APIs for developers to develop further features on top of what Leaf already provides. The app store has been rolled out, and it allows developers to build on top of the company’s tablet platform, using the company’s merchant data, and bundle their services with the Leaf’s hardware.
The second part of their strategy - The fact that Leaf is not focusing on payments as a standalone stream to generate revenue. They want to sell different types of services (like loyalty, inventory, offers and payment processing) and bundle them with Leaf’s POS. The company gives incentives to people in financial domain (in gift and card processing) to adopt mobile, and then to bundle Leaf with their existing core services. Thus, there are many merchant acquirers that sell Leaf’s products.
Answering to an off the track question, Aron said Consolidation is bound to happen in the technology side of restaurants. When and how is yet to be seen – talking about large Tech companies’ growing interest in this sector. When asked about the players like Open Table and Paypal trying to provide everything from Reservation, Menu/Ordering to Payments and Loyalty.