Making Sense of Squarespace's Acquisition Of Tock
What’s the angle? Is there a bigger play here?
By Jamie Mah @grahammah
In a week which saw Spotify purchase Clubhouse competitor Locker Room to help them compete in the emerging live audio sphere, Squarespace, the prominent website builder for startups, chose to one up this move with their own acquisition of the restaurant reservation platform Tock.
From Bloomberg:
Website-hosting service Squarespace Inc., a $10 billion company that has confidentially filed for an initial public offering, is buying restaurant-services provider Tock for more than $400 million.
Squarespace paid a mix of cash and stock for the Chicago-based company, which provides technology for online reservations, takeout and other services, according to a statement Wednesday obtained by Bloomberg News.
“E-commerce within the restaurant and hospitality industries is a large and growing market opportunity,” Anthony Casalena, Squarespace’s chief executive officer, said in a statement. “I’ve long admired Tock’s vision to re-imagine how reservation-based businesses connect with their customers.”
The acquisition helps Squarespace, which is known for helping consumers build websites, move into the hospitality technology space.
Spotify’s purchase makes sense in so many ways. Clubhouse was emerging within the new arena of live audio. Even though it doesn’t look as if they are now.
Regardless, Spotify wants to own all audio as evidenced by their aggressive moves to take over podcasting. Jumping into this sphere while it’s still developing makes total sense. But Squarespace buying Tock? Did anyone see that coming?
Now, I’ll be the first to admit that Nick Kokonas and his team at Tock have pivoted extremely well since the beginning of the pandemic.
From Builtinchicago:
Before the COVID-19 pandemic, Tock was facilitating reservation, table management and carryout operations for nearly 3,000 restaurants, wineries and pop-ups in 28 different countries. However, as shelter-in-place orders forced many of these businesses to shutter their doors indefinitely, the company launched Tock to Go, a tool that helps users deliver their food right to customers’ doors, similar to DoorDash or GrubHub. Tock says it charges businesses a flat 3 percent for the service, though, while other third-party delivery apps charge upwards of 25 percent.
“We were impressed with Tock’s system, innovations, and rapidly expanding raving-fan customer base throughout 2019, but we were blown away by its rapid development and deployment of Tock to Go amidst this terrible pandemic” Valor Siren Ventures fund manager and Tock board member Jon Shulkin said in a statement. “Tock revealed true grit and entrepreneurial spirit, and is helping thousands of restaurants build a bridge to the future.”
A lot of my restaurant friends use Tock To Go and love it. Some have had issues in dealing with their reps, but that’s another story altogether. Overall they’ve developed as a major player in the reservations and to go arena. Opentable still dominates, but that has more to do with legacy than anything. I don’t see their grip lasting forever. I discussed as much in a column from last year. These numbers bear remembering.
OpenTable was founded in 1998. It has a two-tier plan for restaurants in Canada. Their basic model is called Connect. It has no monthly fee, but you pay $2.50 per network cover. Then there’s Guest Center, their premium model, which has a $279 monthly fee + $1.25 per network cover. In Vancouver, there are 233 restaurants using their service. Notables are Osteria Savio Volpe, Botanist, Wildebeest, Glowbal Group, Earls and The Keg.
Resy was founded in 2014 by entrepreneurs Gary Vaynerchuk and Eater co-founder, Ben Leventhal. Resy offers a three tier package for restaurants, ranging from $249 per month to $899 per month. No charge per seated cover. In Vancouver, there are just 12 restaurants using their service. Notables are St. Lawrence, Como Taperia, Royal Dinette, Annalena and Burdock co.
Tock was founded in 2015 and is co-owned by Chicago restaurateur Nick Kokonas (Alinea, Next). Tock offers two different plans for restaurants: The first is $199 per month plus a three percent fee for prepaid reservations, or a flat $699 per month. In Vancouver, there are nine restaurants using their service. Notables are: The Mackenzie Room, Say Mercy, Vij’s Rangoli, Bauhaus, Cuchillo, and Ancora.
The $2.50 per cover is huge. Tock has room to grow their market share in this respect because of this cost, and with a new influx of capital from Squarespace, they easily should.
In looking at the deal itself, plenty of restaurants use Squarespace as their landing page. Integrating Tock as the default reservation and To Go platform is smart. Why not offer the service similar to how they’ve partnered with Stripe, Paypal and Square? Take decisions out of the equation and the acquisition pays for itself.
What’s interesting though is if this purchase was a signifier of a bigger play down the road. I could definitely see Squarespace being bought by another company in the near future. Microsoft possibly? Owning Tock just gives them more leverage if this is on the table. Seed investors are probably itching to get some or all of their money back once they go public. I guess we’ll see.
For Kokonas and his team, this is definitely another win no matter which way you slice it. He keeps his company and he gains a new partner with cash flow. It’ll be fascinating to learn how Opentable handles this. What move their parent company might make to keep their market share? Being there for restaurants during this trying time will benefit whoever is seen as being the best partner. Tock’s brand is sky high right now. Savvy move by Squarespace to grab them while they are on the rise. I like it all around.