From its early days, Olo had a knack for predicting the future. In 2005, it pioneered the idea of using your phone to pre-order from a restaurant, allowing customers to “skip the line”—a then-novel concept that is now ubiquitous.
No one could have predicted the pandemic, of course. But Olo was ahead of the curve then, too. When COVID hit, online ordering became a must-have for restaurants overnight. From 2020 to 2021, 15,000 new restaurant locations began using Olo, and its annual revenue jumped by 52%. The company parlayed the surge into a $450 million IPO in March 2021. The future of online ordering looked promising.
Four years later, the company has fallen short of that promise, at least in the eyes of the stock market. On Thursday, Olo announced plans to sell to the big tech investor Thoma Bravo for $2 billion in cash, or $10.25 per share. That’s 65% more than it was worth on April 30, before reports emerged that it was for sale, but 65% less than its IPO price of $29.80. The deal will take Olo private.
At first glance, Olo’s lack of stock market success is a bit surprising. Even after its pandemic pop in 2021, the company has generated average annual revenue growth of 24%. It has developed innovative new products. With more than 750 customers, it remains the industry’s largest online ordering supplier, and continues to land big brands like Dutch Bros and Waffle House. It turned a profit last year. And yet investors have been largely unenthused.
Olo is not without its warts. Total location growth has slowed, in part due to the loss of a pair of large customers, Subway and Wingstop, which left Olo to build their own alternatives. Though it dominates online ordering, its revenue remains somewhat modest: It generated $285 million last year, or about as much as Cinnabon. Its operating expenses have also trended higher than average for a software company, but it has made an effort to cut costs in recent years, including by laying people off.
But its problems as a public company may have more to do with how the restaurant tech market has evolved since the pandemic. In 2020, Olo had the thing everyone needed. But by last year, all but one of the 50 largest U.S. restaurant chains had online ordering. Its core offering has quickly become a commodity, a standard feature in most restaurant tech packages.
It's also not entirely clear how much bigger online ordering can get. Despite its growth since the pandemic, less than 20% of all restaurant transactions are digital, and there are a lot of vendors competing for that slice of pie. And recently, consumers have been gravitating back to in-person dining, spelling success for full-service concepts like Chili’s and Texas Roadhouse. Starbucks, a mobile ordering trailblazer, is now focusing on making its cafes more welcoming for in-store customers. It prompted my colleague Jonathan Maze to wonder whether the takeout boom that Olo helped create is over.
Olo saw this coming too. As early as 2021, founder and CEO Noah Glass was thinking about how to push digital ordering beyond takeout. “Digital is going to touch every transaction in this industry over the long-term,” he said in an interview on Olo’s IPO day. “We now think of our opportunity as every transaction in our customers’ business.”
In March of 2023, Olo published a video titled “Introducing the Restaurant of the Future” that demonstrated what that might look like. It reimagines the restaurant as a digital, data-driven operation that can seamlessly anticipate the needs of individual customers, whether they’re dining in or taking out. In Olo’s world, the restaurant of the future will have license plate readers, facial recognition and menus that change based on the customer. It’s all powered by Olo’s technology, including online ordering as well as two newer products, customer engagement and payments.
The three-pronged approach was designed to allow restaurants to digitize every order and then use the data to provide customers with better service and more effective marketing. And for Olo, it expands the addressable market beyond just online orders to every single restaurant transaction. The company has dubbed the strategy “hospitality at scale,” even going so far as to trademark the phrase.
Olo has reported promising results from the new offerings, particularly Olo Pay, which has grown quickly since it was launched in 2022. And yet Pay is still very small, touching less than 2% of the $160 billion that flowed through Olo last year. And while Olo is the king of online ordering, it is a small fish in the big payments pond.
Olo has a long road ahead of it to achieve its goals. But the company has always seemed to relish the journey, perhaps because it is still led by its founder 20 years in. One of its mottos, displayed prominently on its website, is “We have miles to go before we sleep,” a reference to a Robert Frost poem. But public investors are not exactly known for their patience, or their appreciation of poetry. How do you properly value a company that, by its own admission, has so much left to accomplish?
Olo will get a reprieve from public market pressure under Thoma Bravo, which appears to be a good enough match on a business level. The Chicago-based firm has a history of investing in market leaders like Olo. It tends to get good returns on its holdings, in part by cutting costs via layoffs and other measures. It has also occasionally consolidated companies that serve the same vertical, although Olo is the only restaurant-specific company in its portfolio for now.
Thoma Bravo may be getting Olo for a steal at $2 billion. There are only a handful of restaurant tech companies with Olo’s scale and industry ties, and most of them are worth a lot more. The deal has already drawn scrutiny from law firms that believe $10.25 per share may be too little for Olo.
In a press release announcing the deal, buyer and seller said all the right things. Olo believes Thoma Bravo will help accelerate its vision to make every restaurant customer “feel like a regular.” Thoma Bravo sees “tremendous potential” ahead for Olo and underscored the company’s “impressive vision.”
For Olo, it's a new chapter in what has already been a momentous restaurant tech story. Here’s hoping a new owner can help see that story through. Olo has promises to keep.