After Navigating ‘Major’ Changes in Restaurant Industry, Notch Closes $13.7M CAD to Fuel FinTech

Toronto-based supply chain software startup Notch has survived COVID-19 and turned the restaurant industry around, emerging from the pandemic with a focus on FinTech and helping restaurants and food distributors simplify the B2B ordering, invoicing and payment process.

Founded in 2015 as a marketplace between restaurants and wholesale distributors called ChefHero, Notch has had an eventful few years. Just like other food tech companies and the industries it caters to, Notch was hit hard by the pandemic when personal dining came to a halt amid the spread of COVID-19. As Notch CEO Jordan Huck previously told BetaKit, COVID-19 posed “an extinction-level event” for the startup.

As Notch prepares for another period of financial upheaval, the startup has raised capital and restructured its team.

In response to these conditions, Notch laid off employees, pivoted and changed its name from ChefHero, and changed strategies to help restaurants and food distributors bring their ordering, billing and payments online. Today, armed with a new focus, additional capital, a leaner, revamped team and a new FinTech product, Huck believes the startup is in a much better position.

“When you have to rotate in COVID, it’s a challenging place to be,” Huck told BetaKit in an interview. “I’m just very proud of the team’s resilience for some of the challenges we had to overcome, including multiple rounds of layoffs … pay cuts, all the things the companies did.”

As Notch prepares to navigate another potentially lengthy period of financial upheaval, the startup has raised C$13.7 million ($10 million) in new capital and restructured its team. As part of that, Notch reshuffled its management and laid off nearly 13 percent of its staff as it aims for “more measured growth” amid the downturn.

With its latest funding, Notch plans to expand into the United States (US) and deepen its efforts in FinTech as the foodservice software firm continues to reinvent itself, starting with the launch of its new restaurant payments offering.

The all-equity, all-primary round was led by new investor Portage Ventures, and closed in late December. It also saw follow-on backing from Golden Ventures, Math Ventures, Accomplice, Pre-Cursor Ventures, Garage Capital and Plexo Capital. Huck refused to reveal Notch’s valuation. The fresh capital brings Notch’s total funding to date to around $39 million CAD ($29 million USD).

RELATED: After pandemic hit, ChefHero rebrands and focuses on early success

Huck said Notch is not classifying this round, which comes after the company closed a nearly $3.5 million CAD Series A-1 round in March 2020 and $12.5 million in Series A-2 funding in July 2021. With this capital the CEO said the goal is to give Notch “optionality” over the next two years, putting the startup in position to either raise a larger Series B round or reach profitability by then.

As part of its move into FinTech, Notch first launched its Accounts Receivable (AR) Manager product for food distributors in July 2021. Since then, the startup says AR Manager has seen 800 percent year-over-year growth. To go along with its AR Manager offering for distributors, Notch has also built out a second FinTech product, an Accounts Payable (AP) Manager, to digitize restaurant payments for distributors. The company is launching AP Manager this week.

The growth Notch has seen since the COVID-19 hit, including its FinTech offering, is part of what prompted Portage to invest in Notch. “Their post-pandemic growth has been really impressive,” Portage partner Ricky Lai told BetaKit. “We are very excited about the renewed focus that Notch’s new solution for the market brings. The company has performed well as the hospitality market continues to recover from the pandemic.”

Shortly after closing that round, in early January, Notch laid off seven members of its 54-person team, or about 13 percent of its workforce, joining a number of other Canadian tech companies to shed staff amid the downturn. Although Notch’s funding was not contingent on the company making layoffs, Huck described the cuts as “the sensible thing to do” in light of current economic conditions. “We overstaffed coming out of the pandemic,” Huck said.

RELATED: Layoffs persist at Canadian tech companies amid bleak outlook for 2023

“The economic downturn has forced us to try to do more with less,” added the CEO. “This capital isn’t going to mean huge headcount growth for us here — it just isn’t — and I think most tech companies are going to follow that recipe.”

Notch has also restructured its leadership team, bringing in some experienced leaders of the restaurant technology industry in former Ritual VP of Growth Kurt Gooden as its new head of growth and marketing, and ex-DoorDash director of strategy and operations Justin Vermeer as VP of operations. The startup is also adding a new sales manager in the coming weeks.

Huck sees Notch’s “all-in-one approach,” which combines ordering, invoicing and payments, as a differentiator in the food service software space. Especially on the payment and FinTech side, the Toronto-based company sees a lot of room to grow.

Within the B2B restaurant and food distribution space, Huck said most payments still happen offline. “Today, accountants across Canada and the United States, across North America, feed paper invoices, take paper invoices and cut checks,” Huck said. “And Notch is going to change all that.”

RELATED: After rebrand, Notch raises $12.5M CAD to bring restaurant supply chain software to new markets

“In a post-COVID world, all businesses are looking to – especially hospitality with slimmer margins – drive as much efficiency as possible and the time is now for online payments,” he said.

As Notch looks to execute this vision, the startup will now do so with the help of FinTech-focused Portage. “We think Portage is the perfect partner,” Huck said, pointing to the VC firm’s financial services expertise and track record helping other startups land on FinTech solutions.

Asked why Portage was attracted to Notch, Lai, who is joining Notch’s board as part of the round, said Notch “fits a lot” of what Portage looks for in a FinTech company. “The company brings a technology-enabled solution to an antiquated money movement process — payments between restaurants and distributors — while simplifying the lives of the ‘CFOs’ … of those customers,” he added.

“In a post-COVID world, every business – especially hospitality with slimmer margins – wants to drive as much efficiency as possible, and the time is now for online payments.”
-Jordan Huck, Notch

As Lai noted, Portage has been exploring investment opportunities in both pure FinTech firms and companies that use technology to modernize outdated processes at small to mid-sized businesses. “Notch’s solution sits at the intersection of these ideas,” he said.

Longer term, Huck said he sees “downstream opportunities” for Notch to explore other financial services beyond payments, from lending, to buy now, pay later and card issuing.

Notch also intends to use some of this funding to support its geographic expansion plans. The startup currently serves all of Canada, and with this capital, Notch will begin pushing into the US later this year.

As Golden Ventures general partner Ameet Shah told BetaKit, the entire food tech industry underwent “a massive transformation” during COVID-19, and the sector continues to evolve. For his part, Shah has been impressed by Notch’s strength. “The entire Notch team has shown remarkable resilience and strength throughout the pandemic,” he added.

“The COVID that gave us the clarity that we needed to pivot to really help streamline operations for hospitality groups,” said Huck, who noted that today Notch’s products focus on helping restaurants operate more efficiently and distributors collect payment faster . “These are core issues that are going to matter if we go into a recession. That combined with a very lean team, I think we’re very well positioned to come out of this stronger than ever.”

Feature image courtesy of Notch.