Get Started with ShopKeep's #1-rated register. It's quick and hassle-free.
Hey there! To begin, tell us a little about your unique business.
He’s worked in finance on Wall Street, as a software analyst at PricewaterhouseCoopers, and as founder of a dotcom funded in 1999 with $10 million. But Jason Richelson attributes his success today at the helm of a 10,000-customer, 100-employee software company to his experience running a wine shop in Brooklyn.
Richelson is co-founder and CEO of ShopKeep, a provider of cloud-based iPad point-of-sale and small business management software. He developed the product in 2008 in the back room of his store, the Greene Grape, to resolve his frustration with a Microsoft Windows point-of-sale system that he says contracted viruses and crashed often.
When most retail shop managers go in search of a POS system, they consider two choices, he explains: Buy a cash register for $300 and a credit card terminal for $200, or invest in a Microsoft or QuickBooks system for upwards of $5,000. ShopKeep users instead invest $1,200 for an iPad, stand, swiper, and software, and pay $50 a month to subscribe to ShopKeep’s data analytics and on-call customer service.
Richelson says his system reduces the hazards of accepting cash and credit cards on old-school registers that lack any customer tracking mechanism. And it eliminates the virus and crash issues that come with other operating systems. But more importantly, he says, ShopKeep adds value by accumulating a retailer’s data on the cloud and returning useful analysis via the ShopKeep dashboard on a smartphone or web browser.
He sees his business as being at the leading edge of a sea change in how the retail and restaurant industries transact. To be sure, ShopKeep is much more than an iPad cash register: “We’re about helping our customers run a better business—our software helps them manage inventory and employees, track customers, do e-mail marketing, and integrate with their accounting software,” he says. “And the power of cloud-based analytics gives them data to make smarter decisions.”
For instance, he says, “Say your wine store just got in a great Cabernet Sauvignon. ShopKeep can pull up the names and email address of every customer who has purchased a similar product and send them a heads up that the new wine is in stock.” Or, the tool can let a manager know how heavy sales are by the hour—crucial information for efficient staffing in restaurants and cafes.
The more data a business gathers, the more useful the analytics become, Richelson points out. And as new technology comes along, he says ShopKeep will change with the times. “When EMV chip and PIN comes to the U.S., we’ll enable it,” he says. “If a better way to do analytics comes along, we’ll employ that.”
Winning technology aside, Richelson says his company’s core values are what keep ShopKeep customers loyal. “Retail is a service business, and the best advice for any retailer is to make sure every customer has a great experience in your store. We treat our employees and customers the same way. We think of ourselves as a service business.”
In fact, Richelson says his management philosophy—some of which he shares in an online resource called Small Business 101—evolved from his retail experience. “Building a business is all about people, and about understanding how to make people happy and motivated,” he says. “The most important thing is to make sure our team is happy and loves to come to work every day. A lot of companies don’t think that way, and it took me a long time to learn that.” He gleaned many ideas, he says, from studying Warren Buffett and great companies such as In-N-Out Burger, Whole Foods, and Zingerman’s.
How does he keep employees motivated? “We have a big, open office environment, and I sit out on the floor with everyone else. It’s about them being able to talk to me and really understand our vision. It’s up to me to let employees know what a hard thing it is to open a retail business,” Richelson says. “When team members understand that ShopKeep exists to help small businesses and that customer care is super-important, they know it’s a worthy goal and then they’re really happy to come in.”
With revenues and customers tripling year-over-year since 2010, and a $25 million round of venture funding for a ShopKeep expansion raised just last week, the approach seems to be working.
Shopkeep, a New York-based startup that builds point-of-sale software for mobile devices, has raised $25 million in its third round of funding. The new capital thrusts the company to the forefront of a busy pack of upstarts looking to rethink the point-of-sale. It also sets the stage for a drawn-out fight between a handful of well-funded startups, the legacy point-of-sale providers who control much of the market, and a number of other tech giants looking in.
With the rapid growth of Shopkeep and competitors like Boston-based Leaf, which raised $20 million earlier this year, it’s clear that cloud computing is really making an impact on the business technology industry. By building software which runs remotely, rather than on a servers located in a store, these startups can dramatically reduce costs, opening up new markets and erasing much of the maintenance and service fees that drive a large portion of legacy firms’ revenue.
ShopKeep was founded in 2008 by Jason Richelson, who owned a independent grocery store and an accompanying wine shop in Brooklyn, serving the borough’s growing professional class. The store was a success, but the back office was a mess, he says, and he wanted to create a better way to manage the store’s inventory. So, in 2009, he left the grocery businesses, hired a developer and began to build his own POS system.
Fast forward three years, and the company’s software is now used by over 10,000 businesses across the U.S.. In January, the company rolled out a iPhone and iPod touch version of its application to help it serve food truck vendors and other more-mobile service providers, with whom Square has become synonymous.
To date, the company has focused on small, independent retailers with under $1 million in annual revenue — a market, which Richelsen says remains overlooked by some of the larger institutional players and underserved by existing resellers who peddle often outdated PC-based software.
“Shopkeep has built a big brand around customer service for smaller merchants, and that’s why we’ve been able to acquire these smaller business that (Micros and NCR) don’t want,” said Richelson.“[The small business market] has always been attacked by value-added resellers, but that’s really a broken model.”
The company plans to use the funding to expand its existing footprint internationally, and build out additional features unique to a cloud service. For instance, Richelsen says some of the capital will go toward building out an analytics products for merchants, which could algorithmically identify potential theft or missing inventory.
However, the company faces an increasingly crowded and complex competitive landscape, anchored by legacy point-of-sale companies such as Micros and NCR, which remain flush with cash and which are increasingly aware of the opportunity in these new markets, and the potential threat of the startups opening them. Both firms have invested heavily in cloud-based point-of-sale technology in an attempt to stem the tide of startups like Shopkeep and Square, and expand their products a previously unserved segment of very-small and mobile businesses.
“The difficulty cloud-based POS startups will have moving forward is that Micros and NCR have not been asleep at the wheel,” said Alan Hayman, a former Micros executive who now runs Hayman Consulting Group, about the shakeup in the industry. “Moving up market will be much harder for POS startups because operators are much more savvy, the competitors are extremely capable, and their solutions are very comprehensive”
What’s still unclear is whether these companies can fully themselves off of a business model, which traditionally relied on large upfront sales and large service and maintenance revenues. Cloud-based software reduces a lot of the hands-on service costs, removing potential complications with the hardware in-store and allowing the provider to maintain software remotely.
Meanwhile, another competitor, Square, faces challenges of its own. The mobile payments company, which has pressed its own software into more established retail environments, appears to be hemorrhaging cash and has shopped around for a potential buyer, according to a recent report by the Wall Street Journal. The article, which the company has denied, says the company recorded a loss of roughly $100 million dollars in 2013.
Square’s struggles appear to validate the decision by Shopkeep, and other tablet POS startups like Leaf, not to build a payment-processing business. The company works with a number of payment processors, and in doing so, has been able to not only avoid, but profit, on the price wars, which appear to be draining the capital of many in the industry.
Adding to the chaos, reports surfaced in January that Amazon planned to offer retailers a check-out system that uses the company’s Kindle tablets. The project remains in its early stages, but a potential entry of Amazon and Apple into mobile payments complicates what already is a confusing and fluid industry.
Square competitor ShopKeep POS has raised $25 million in new funding, led by Thayer Street Partners with participation from existing investors Canaan Partners, Tribeca Venture Partners, TTV Capital and Contour Venture Partners. It’s now raised a total of $37.2 million.
New York-based ShopKeep sells iPad point-of-sale and retail management software, but unlike Square, Shopify and other startups that are turning the tablet into register, ShopKeep isn’t processing payments. Instead it’s acting more like a traditional point-of-sale equipment vendor – just one that runs its services in the cloud. It’s selling small businesses the transaction tools to ring up sales, track inventory and manage staff. But it’s letting businesses pick their own financial partners to handle the actual card transactions, rather than stay locked down to another all-in-one provider’s set rates.
ShopKeep’s small business-facing iPad interface (Source: ShopKeep)
According to ShopKeep that model has proven popular to 10,000 businesses in the U.S. and Canada so far, tripling both its customer base and revenues between 2012 and 2013. It’s software is now managing $1.8 billion in transactions a year, the company said, compared to the $30 billion Square is processing annually.
Originally published on mashable.com.
“I don’t have a credit card,” Jason Richelson’s roommate told him. “I can’t spend any money on this Internet thing.”
That thought helped pave the way for InternetCash, a financial technology company that offered prepaid cards for online shopping. InternetCash was a failure. The company launched in 1999, just before the Dot Com bubble burst. It hired too many people, purchased unnecessarily expensive software systems and invested “crazy amounts” in marketing that didn’t work.
“We made every mistake in the book,” Richelson, one of the company’s four co-founders, recalls. “InternetCash went out of business like everyone else back then.”
When Richelson decided to launch ShopKeep, another financial tech startup, nearly a decade later, he tried to apply many of the lessons he learned from the mistakes at InternetCash. Chief among those lessons: focus on growing “slowly and measured.”
Richelson started ShopKeep, a service that provides iPad point-of-sale systems to independent retailers and restaurants, in 2008 after struggling with the point-of-sale software available for the two wine shops and a grocery store in Brooklyn that he operated at the time. The startup was privately funded for the first two and a half years and was staffed with contractors. Then in late 2011, it pulled the trigger, raising outside funding for the first time and broadening its customer base.
On Thursday, ShopKeep announced that it raised a $25 million Series C round of funding. The round was led by Thayer Street Partners and brings the startup’s total funding to more than $37 million.
ShopKeep currently processes more than $1.8 billion in payments annually and is used by more than 10,000 businesses in the U.S. and Canada.
The goal, according to Richelson, is to use the latest round of funding to open up a new office on the West Coast, expand its presence in the U.S. this year through additional investments in marketing and its product teams, and later expand its operations in Europe.
Though the company is sometimes compared to Square, a mobile payments service, Richelson is quick to point out the difference.
“Square has done a really great job of making it easy to accept credit cards,” he says. “Our service is to support retailers and restaurants and help them run a better business.. Credit card processing is just one thing.”