“How to Work a Triple-Sided Marketplace”

Interview with Cheq Founder & CEO Tom Lapham.

CHEQ Founder & CEO Tom Lapham

Show Notes

Mobile ordering and contactless ordering have changed the food and beverage industry in a short period of time. But on-premise efficiency within the food and beverage industry still leaves much to be desired. However, that could be changing thanks to tech startup CHEQ, which is changing the way food and drinks are ordered in stadiums and restaurants, making those businesses more efficient while helping consumers enjoy themselves more.

CHEQ founder and CEO Tom Lapham recently joined startup coach Roland Siebelink on the Midstage Startup Momentum Podcast to talk about how the on-premise experience is becoming more efficient for operators and more focused on consumers. They also discussed CHEQ’s early traction and quick rise to being one of the most promising startups in the world.

  • How starting a renewable energy company in China helped to inspire CHEQ.
  • How CHEQ effectively addressed the cold-start problem.
  • Why CHEQ went after high-profile enterprise clients and how they did so effectively.
  • Why taking the land-and-expand approach was the best option for CHEQ.
  • The need for startups to pull back on their ambitions during the early days.
  • The difference between iterating a product and iterating the go-to-market.

Transcript

Roland Siebelink: Hello, and welcome to the Midstage Startup Momentum Podcast. My name is Roland Siebelink and I’m a coach for fast-growing startups all around the world, one of which is in our studio today. I’m so honored to have with us our long-term friend and client, Tom Lapham, the CEO and founder of CHEQ. Hello, Tom. How are you today?

Tom Lapham: Roland, it’s great to be here and thank you for having me.

Roland Siebelink: Of course. This has been long in the planning. I’m so glad we could finally make it happen because you folks at CHEQ have been very, very busy and I can’t wait to tell the world more about it. First, Tom, the typical question every founder gets is the elevator pitch. What does CHEQ do, who do you serve, and what difference are you making in the world?

Tom Lapham: Sure, Roland. And thank you for helping me kick it off there. CHEQ is a marketplace for on-premise transactions. We allow people to use the mobile device that they’ve got with them all the time to purchase food and beverages anywhere they go. Whether they’re at a restaurant and not wanting to wait for a server who never comes to their table, or they’re at a sports stadium and not wanting to wait in line for 20 minutes for an overpriced beer and a hotdog, we allow those experiences to become friction-free with mobile payments and let our users get back to the real experience that they’re trying to have, which is enjoying a meal with their families at a restaurant or enjoying a game at a stadium or otherwise having a social experience where the technology enhances it and melts into the background, so they can really have the fun that they’re looking to have.

Roland Siebelink: Okay. If I’m putting on my hat of hearing about this for the first time, what I hear is that it’s like online ordering but for the real world. In a situation where orders are available, just use your phone instead of calling a waiter or standing in line, and then your order will be delivered seamlessly without friction, so you can keep focusing on your company and whatever you’re doing.

Tom Lapham: That’s exactly right. The thing that we are doing is bringing this mobile technology to the real world, to the on-premise experience. Unlike ordering something from Amazon, from your computer or ordering something on DoorDash from your home, we are allowing that experience to take place when you’re out at a venue, so that the technology can support you in those situations in addition to when you’re at home, and frankly, you don’t have such a sense of urgency. There’s not a great sense of urgency when you’re sitting in front of your computer buying something on Amazon. But there could be if you’re sitting inside of a restaurant and maybe you’ve gotta get somewhere and you can’t get someone to come help on the timeframe that you wanted. We believe that there’s actually more of a need for this in the on-premise environment than anywhere else.

Roland Siebelink: Okay. Very cool. Tom, of course, especially during the pandemic, we’ve seen many restaurants and other venues already roll out what they would call contactless ordering, also a QR code, a smartphone, things like that. What makes CHEQ different from those solutions that have turned standard in the last two, three years.

Tom Lapham: For sure. Two years ago, or almost two years ago, when we started the company, this was still a pretty novel idea in the United States to do contactless ordering from your table. But the big difference between us and others is that the contactless solutions that you’ve probably seen before, which is a QR code on a table, is very passive. From the restaurant’s perspective, by the time somebody gets to the table at your establishment, you’ve already got them as a customer. They’re unlikely to get up and walk unless there’s something really, really wrong. The value proposition for contactless ordering in that situation is they’re increasing efficiency of the customers that you already have. But we turn that on its head and help restaurants and other F&B venues drive demand.

People can look at the CHEQ app for discovery and see all the restaurants nearby and maybe decide that they want to go to your restaurant, where they might not have known it was an option before. We’re able to help drive demand through our marketplace. And then the other key differentiator is that once people are inside the venue, because we are also a very social peer-to-peer app, we allow people to communicate with the rest of their friends. And one of the main use cases for CHEQ is people who are out in a social setting - maybe out for drinks on a Friday - posting on the CHEQ app or on other social media, “Hey, I’m at such and such a place,” and actually allowing them to get drinks or food and beverages sent from their friends who are outside the venue.

Roland Siebelink: Now that’s a differentiator. I’m sure that all ears are perking of the listeners of this podcast right now. How can I get free drinks sent to me right when I’m at my favorite bar?

Tom Lapham: Exactly. Obviously, it’s a great thing for the restaurant operator because you’re getting more traffic and then you’re getting more sales from the traffic that you do have because not only are they ordering on behalf of themselves, they’re getting orders from their friends. From an operator’s perspective, it’s wonderful. But from the user’s perspective, what we found is people are using this technology in all sorts of creative ways.

We’ll have groups of friends who will go out and they’ll have a CHEQ’s night out on the town. They may may go to either three or four establishments, and at each one they’ll post on social media: “Hey, I’m at this place.” And they’ll get a bunch of drinks sent to them by their friends, and some of them even turn into a competition. Who got the most drinks sent to them? We’ve had people who in a period of a half hour have gotten as many as 18 drinks sent to them.

Roland Siebelink: Oh, that’s awesome. I love that idea of a CHEQ’s night out or CHEQ on the town as I think you called it. This is really a sign when an app is taking off and people are starting to find their own users that you may not have anticipated in full detail.

Very cool. And I wanna talk about the triple-sided marketplace that I think you seem to be describing. But first let’s talk a little bit about the history of CHEQ. Many people start tech startups right out of college or because they were enamored with certain technology. Your history has been a little bit different, right, Tom? Can we talk a little bit about your entrepreneurial history and then also how did you come to found this tech company and what are the differences between previous entrepreneurial experience and the tech sector as you’re seeing it now?

Tom Lapham: Absolutely. You’re right that I have always been an entrepreneur at heart and I’ve started a couple of businesses in the past. The most recent two I started and brought to an exit through trade sales. I had a renewable energy company that I started in the Pacific Northwest, which is where I’m from. And I built that up to a nationwide footprint starting in 2008. In 2014, sold that to Shell, so it’s part of Shell New Energy now. And then stayed on for a bit running North American operations of that business unit for them but realized pretty quickly that I much preferred being an entrepreneur than being a mid-level manager in a big conglomerate.

In 2015, I got the bug and decided to do it again, this time in a different geography and moved with my family in 2015 to Beijing and started another renewable energy company in China.

In my time in China and having spent several years there really was part of the inspiration for CHEQ because I came back to the US after being completely immersed in life in Asia and realized that while I’d been gone, that everything in the mobile payments and digital payment space had moved by leaps and bounds in China but felt it had stayed rather the same in the US.

Being at a restaurant and having to wait maybe 15, 20 minutes for a table and another five or 10 minutes for a server and the server coming over and saying, “Hey, can I get you started with some drinks,” and having to tell them “No, we need to put the whole order in right now; my kids are gonna melt down.” They’ll be put out: “Hey, you’re ruining my flow. I just wanted to stop by your table and get your drink order.” And I was thinking to myself, “Well, shouldn’t you be fitting into my flow? I’m the customer here.” The whole experience felt broken from there.

And I knew there was a better way from my time in Asia. And that’s what got me obsessed with trying to solve this problem of having a good on-premise experience and having the ability to share that with friends.

Roland Siebelink: For those of us that have not been in China recently, how does this stuff work in China? What’s so different? I sometimes hear people being incredulous that China might be ahead of the Western world in some of their apps and mobile phone technology. How did you experience that when living there?

Tom Lapham: Just to give you a sense of it - a few stories that always stuck with me. I can remember the first time after we opened an office in Shanghai in this skyscraper in the middle of the city, coming down from our office on the 48th floor to the city streets, and there was a man on the side of the road asking for money. He didn’t have a can, he had a QR code. That’s the extent to which it’s a cashless society.

It truly is a mobile-first society in China today. And as an end user, I would say in most ways that makes your life better because you can communicate with your friends quickly and easily. You can send money peer-to-peer quickly and easily. You can order things in restaurants or any place that you might wanna buy something all with your phone and. Frankly, the last 12 months I was living there, I didn’t even carry my wallet. I just had my phone.

Roland Siebelink: Going back to the CHEQ marketplace, you called it a marketplace right in the beginning because you serve both venues and then patrons or consumers. But now you were talking about this use case where friends can send each other drinks. In a sense, you are even serving three audiences, those that are at the venue, those that want to send them something, and then the venues themselves. That must be a real difficult, cold-start problem to get through. Where do we even get started? How has CHEQ been dealing with that?

Tom Lapham: Well, I think you described the problem accurately because it’s one of those technologies that once it gets going, it works very well. But it’s a bit of a catch 22 because you need to have venues in order to gather users. You need to have users in order to entice venues. And how do you get it started? For us, our go-to-market strategy was we wanted to go after very high-profile enterprise clients to get started so that they would increase our brand awareness. Then the other restaurant or F&B clients would be willing to give us a chance because somebody who they knew and respected was using us. And then guests who came into those venues would see our technology, would like it, and would start using it. And then we could get the whole flywheel spinning.

What happened for us - and I think this was a combination of being in the right place at the right time and having some really fantastic people on our team like our chief revenue officer, who had great industry connections - much earlier than we had originally thought possible, about six months into our journey, we were able to sign a professional sports team. And that was the Miami Marlins in Florida. We signed last year at the all-star break, so the relationship with them is approaching a year. And that was really the transformative moment for us, where we got to plant a flag at the top of the hill and gather great market recognition through being in a stadium that has tens of thousands of people coming through every night. And that was the break for us that helped us get that flywheel spinning.

Roland Siebelink: That’s a high risk, high-profile strategy to get into the market. Has that been something that you’ve been able to replicate?

Tom Lapham: Luckily for us, the enterprise of the large professional sports teams all know each other and talk with each other. And late last year, the Miami Dolphins, the football team, and the senior management went to a Marlins game and saw our technology in action and thought that it looked pretty attractive and reached out to us. We’ve been in conversations with them these past few months and actually recently announced a deal to become their mobile payments partner. We were able to get a second one. We’ve got our first MLB team. We’ve got our first NHL team. And although the information’s not yet public, within the next month, we’re going to be announcing three more professional sports deals, all in key markets for us.

We’ve definitely found that our land-and-expand approach, where we get a professional sports team and then light up the network around them, is working. And I think by the end of the year, we’ll have eight to 10 professional teams who use us exclusively as their mobile payments and social payments partner.

Roland Siebelink: Tom, the world has changed a lot - first with the pandemic as we discussed, and now also less credibility of the tech sector - I do wanna ask everyone who comes on the podcast, how are you dealing with this new normal? What has changed for CHEQ? How are you making changes? How are you putting accents differently in the way you lead your business?

Tom Lapham: It’s really forced us to double down on and focus on this land-and-expand approach, where we utilize our high-profile clients to get more clients and utilize them to get users with the ultimate goal of growing with reducing our CAC. If we’ve got restaurants who see us in a stadium and those restaurants reach out to us, now we don’t need to have a big sales team. We just need to have a success team and an onboarding team. And that materially reduces our customer acquisition cost. And then if we’re utilizing our restaurant partners to get all of the people who come through the restaurant transacting with us to become our users, that further reduces the customer acquisition cost for users. Using that stadium play is our superpower to grow without having to raise those huge sums of money that VC-backed companies did in the recent past.

Roland Siebelink: And what would be your advice for founders that are a year or two, three behind you, that are just hitting some degree of product-market-fit, some are just starting to think about their go-to market, where would you tell them to look?

Tom Lapham: If you’re just starting out, the temptation will be to try to build a perfect solution, and to work on it for a long, long time before you bring it to the market because you want it to be good enough. And remembering that advice that if you’re not embarrassed by the first version of the product that you put out, then you waited too long. That can be a hard one to internalize as a founder, but I think it’s absolutely true. You have to get MVP out and start getting feedback. I think that’s crucial.

And then the second one, which has also been challenging for us and we continue to wrestle with it, is to pair back. Even though it sounds counterintuitive, pair back your ambitions of serving lots of different market segments and focus on one segment that you can really delight and turn into super fans. And once you’ve got that segment of super fans who love you, it’s much easier to expand to the next adjacent market segment rather than trying to go after everything at once and getting a very thin layer of acceptance, but not a very sticky user experience.

Roland Siebelink: Even if you wanna think big long-term, you still have to start small with a small segment of people who will really love you before you can expand from that.

Tom Lapham: It’s exactly right. And there’s so many examples of it. You could take Amazon starting with books and then eventually getting to where they are, which is almost doing everything. But if they tried to do that from the very beginning, they surely would’ve failed. Our version of that had been to think of restaurants and then to move to more places. But we realized even that was too broad, that we needed to have a very, very specific segment. And it turned out just because of our own good fortune that the first segment we got was stadiums, a product that delights them, which means that we had to forgo features that would’ve delighted different segments. For example, the formal dining segment wanted a whole different list of features than stadiums.

Roland Siebelink: Slightly different atmosphere, right?

Tom Lapham: Yes. For us, what’s the immediate adjacent after stadium? It’s something more like QSR or counter service type restaurants because they have a similar experience. Once we’ve got a product that delights stadiums, we can move to a product that delights counter service. But if we had tried to build something universal that every single F&B establishment would’ve loved out of the box, we never would’ve been able to do it because the task would’ve been too big to get started on.

Roland Siebelink: A question I often ask, are you really iterating on a product or on a go-to market?

Tom Lapham: Yeah. I love that. I love that question because it’s something that we ask ourselves as a leadership team quite often. Just to take the earlier example of our product, which works well for stadiums and also works well for counter-service restaurants. While the feature set is similar, the go-to market is completely different. On the one hand, we need a small group of very well connected professional enterprise sales people, and on the other, we need a large team of people who are smiling and dialing and knocking on doors. Building up those go-to-market strategies is very different, even if the feature sets are similar.

To answer your question, we’ve chosen to start with the former because we can have a smaller team and we can get larger contracts going with stadiums. While the feature set isn’t terribly different, the go-to market is very different. We’ve had to spend a lot of time thinking through and iterating on the go to market strategy.

Roland Siebelink: We had a quote in the book that Doug and I wrote a few years ago, Scaling Silicon Valley Style, the quote was: “Technology may scale, go-to market doesn’t.” How do you respond to that?

Tom Lapham: Well, I think in most cases, it’s true. In fact, I think a very easy trap to fall into is to only look at your product through the lens of the market features and not through the go-to-market approach. And they’re equally important. You can’t have one without the other.

Roland Siebelink: It’s also a trap that I see a lot of tech founders fall into where they think they’re building a product company, but really what they need to iterate on most is the go-to market and learning about that and building a sales machine, essentially.

You and I have been working together for a while, but you have also worked with different coaches in your previous companies. And I’d love to hear a little bit about your experience with coaching, signing up a coach as an entrepreneur, what to look for. What value does it give but also when you would recommend people not to get a coach?

Tom Lapham: I’m a huge believer in bringing in outside coaches to help with growth, particularly early on. Maybe not in the very, very initial stages when you’re doing ideation and you don’t yet have a product; that might be a little bit too early. Maybe when you’re a publicly traded company, you’ve gotten past it. But I think there’s a long period of scaling up in the middle where having a coach can be really beneficial. I used a scaling up coach for my business in Asia. I credit them with helping us really put a lot of the processes in place that allowed us to scale up effectively.

Roland Siebelink: Awesome. Okay. Well, thank you for that, I really appreciate that. Tom, going back to CHEQ, what, if anything, can listeners to this podcast help you with? What are you looking for? For what should they reach out? Where can they find more information? What should they download?

Tom Lapham: Absolutely. For people who live in the Pacific Northwest and who live in South Florida, they can download our app and use it at restaurants and stadiums. We are soon to be adding more geographies to that. And for people who live outside those areas, if you happen to have any friends who live there, you could still use our app. If your friends are out having a night on the town, you could send them something special, just as a fun way to interact. The app is just called CHEQ, C H E Q. And if you look for it on the Android or iOS store, I think you’ll find it right away.

And our website is CHEQplease - C H E Q please.com. You can even send a drink through the website. And you can look there to see all the new stadiums that sign up once they come online. And if it’s a stadium in your geography, you can expect that there’ll be lots of restaurants and bars and fun venues around the stadium being lit up sooner rather than later.

Roland Siebelink: Awesome. Okay. If you have a friend visiting, I believe you said the Marlins and the Dolphins. And there’s a few more stadiums coming down the pipe. Then make sure to remember to send them a drink or a snack through the CHEQ app. And from there, anyone looking to invest in this amazing model or look perhaps for a job at CHEQ, you can always ping me as well, and I can introduce you directly to Tom.

With that, Tom, thank you so much for the amazing explanations, all your experience that you’re pouring into this podcast, and for your time and your energy. I really appreciate it.

Tom Lapham: Thank you for hosting, Roland. It’s been a pleasure doing the podcast with you. And more importantly, working with you as a coach and really excited to see how far we can get together going forward.

Roland Siebelink: Up toward unicorn status soon, huh? See you soon, Tom.


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