A restaurant tech company raising a few million dollars is usually not enough to warrant a story these days. But a recent funding round by Ovation stood out.
The company, which helps restaurants gather and respond to customer feedback, recently raised $3 million—every cent of which came from its own customers.
And not just a few of them. Almost a dozen operators ponied up to invest in Ovation, including Jim Bitticks, the CEO of Dave’s Hot Chicken, and Kyle Archer, owner and CFO of Cheba Hut franchisee Elevated Inc. (The others haven’t gone public with their investments.)
Provo, Utah-based Ovation has raised money before, and operators have always been among the contributors, usually for small amounts, said Zack Oates, the company’s co-founder and CEO. In the company’s last fundraise, a $2 million round in 2024, the former CEOs of Blaze Pizza and Native Foods pitched in.
After that, other operators started reaching out to Oates saying they’d like to participate in a future round. And eventually the list of interested investors became quite long. So Ovation started talking about doing a small, insider fundraise—maybe $250,000, depending on how much people were willing to put in.
But when Oates started asking operators about numbers, their offers surprised him.
“They were like, ‘Yeah, we want to invest $100,000, a quarter million, half a million, $2 million,’” Oates said. “I ended up having to decline taking all of the money that was on the table.”
A fully customer-funded round is highly unusual. Archer, a frequent investor in restaurant tech companies, said he’d never heard of one happening before.
“I believe it’s very rare, and I think that speaks a lot to Zack’s ability to connect with industry leaders, but also just how valuable the product is and their growth potential,” he said.
Elevated Inc.’s 25 Cheba Huts have been using Ovation for a couple of years. The main product is pretty simple: a two-question online survey that asks the customer how their experience was (on a scale of emojis) and why. It also allows the restaurant to text back and forth with the customer in real time.
At a time when more people are ordering online and getting their food to go, Ovation has given Cheba Hut another way to interact with customers, whether their experience was good or bad. Last year, Elevated named Ovation its partner of the year.
Archer said he decided to take the next step and invest because he believes Ovation is something that most of the industry could benefit from, and also because, as a customer, Elevated is in a position to give the company valuable feedback.
“You just have to put your money where your mouth is with some of these great companies,” he said.
For Oates, the “customer-pushed” funding round was his biggest honor since starting Ovation nearly 10 years ago. But he also admitted that it’s a little bit scary to suddenly have so many customers with a financial stake in the company.
“That just puts that additional pressure on you to make sure that you're delivering for them,” he said. “Because not only do I want to deliver for my customers, but I want to deliver for my investors and the people that believe in us.”
At the same time, the arrangement has a way of aligning incentives. Customer-investors could ask Ovation to do something that would benefit their brand, and they may have some added leverage by virtue of being an insider. But if the move wouldn’t benefit Ovation more broadly, it’s actually easier for Oates to say no. After all, that customer also wants to get a good return on their investment.
“That conversation is much more peer-to-peer because, at the end of the day, we're both trying to win with Ovation, not just with their brand,” he said.
The company has already invested much of the fresh capital in beefing up its revenue department, including hiring a chief revenue officer, ahead of what it expects to be a year of major growth. Currently, about 8,500 restaurant locations use Ovation, but that will soon more than double to 20,000, Oates said.
It has also tripled its investments in its technology, bringing in AI-savvy engineers to help improve its products.
Having customers as investors, rather than venture capital types, has been freeing in that sense, Oates said.
“The focus wasn't on, ‘We just want you to double [in size],’ right? Because sometimes investors are just like, ‘Oh, push, push, push, push, push,’” he said. “The customers were like, ‘Build something legendary,’ and that's been really cool to see that shift.”
Restaurant tech companies have generally had a hard time raising money recently. Since the boom years of 2020-21, the amount of venture capital flowing into the market has all but dried up. Could restaurants themselves provide a new source of funding?
Oates said that for restaurant brands that are doing well and have money to invest, putting it into a tech company they already use could be a good way to diversify their risk.
But he added that organizing a round funded solely by customers could be difficult to replicate.
“I actually have had probably a dozen other tech founders reach out to me like, ‘OK, what was your process?’” he said. “And I was like, literally they reached out to me … and of those people that said, ‘Let me know,’ I just literally kept them on a sheet. And I let them know. And that was the process.”
The reason all those customers wanted a piece of Ovation was not only because they liked the product. A lot of it has to do with the relationships Oates has built over the years. He is a road warrior, spending nearly a third of the year traveling to trade shows and meeting face to face with customers. With his bright patterned shirts and megawatt smile, he’s become a recognizable figure at industry events.
“It's a matter of, if you like the horse, and you like the race, then you got to like the jockey too, right?” Oates said. “So I feel like they can validate the first two, but the jockey, that's where the relationship comes in.”
Though Oates is the face of Ovation, he noted that the jockey in that metaphor is not just him, but the whole Ovation team, co-founder Derek Morgan, and even Oates' wife, who makes it possible for him to devote so much time to the business.
“I am so aware that the face is not the brains,” he said. “As [Branded Hospitality Ventures co-founder] Jimmy Frischling likes to say, ‘It takes a village.’ But it really does on the tech side.”