Q&A with Tabbedout co-founder and CEO Rick Orr

By Editor May 17, 2011

TabbedOut logo 

Tabbedout, a service that allows diners to pay tabs at restaurants and bars via mobile phone, just closed a $5.75 million Series A round of funding. Co-founder and CEO Rick Orr tells StartUp Beat that the idea for the company came from his own frustrating experience and that he believes customers are ready for a paradigm shift in the way they pay for dining. The Austin, TX-based company was founded in 2009.

SUB: Please briefly describe Tabbedout’s service and the value proposition you offer to restaurants and to customers.

Orr: Tabbedout is the mobile payment solution that makes mobile payment widely available so bars and restaurants can spend more time with their customers. The free Tabbedout app for iPhone and Android enables consumers to open a tab with their mobile phone, view their tab in real-time and pay the tab anytime, anywhere—you can even split the check paying just your portion directly from the app. Our mobile payment solution integrates directly with the merchant’s point-of-sale (POS) system and does not require additional hardware or changes to their accounting. This allows Tabbedout merchants to serve more people and turn more tables, especially during peak hours. Tabbedout also provides payment assurance by providing validated payment info when a tab is first opened.

For the consumer, our app means no more forgotten credit cards after a night on the town and no more missing out on a good time. Our service maximizes time with friends—instead of waiting on a server to bring the bill or waiting in long lines to order a drink, patrons can securely open, view and pay their tab at any time. The Tabbedout app stores credit and debit card information encrypted securely on the user’s phone, not on external servers—and offers further protection via a custom password.

SUB: What is your business model? How do you (or how do you plan to) make money?

Orr: Our service is completely free to the guests of Tabbedout venues which pay a nominal monthly fee for the service.

SUB: Where did the idea behind the Tabbedout come from?

Orr: Eight years ago, I found myself waiting nearly an hour to close out my tab at a restaurant. I realized there had to be a better way to improve the payment process—both for patrons and merchants– at bars and restaurants. Thus, the concept for Tabbedout was born.

SUB: When was the company founded, and what were the first steps you took to establishing it? 

Orr: The company was founded in June of 2009. Once my co-founder, Dave Lemley, and I left our day jobs, we began work on a prototype to determine if our idea was truly feasible and viable. In parallel, I began reaching out to Austin angel investors who were immediately responsive to the concept and provided us the capital to build a small team and bootstrap our idea into a commercial product.

SUB: How many customers do you currently have?

Orr: We have locations in 90 cities across 20 states, and we are rapidly expanding our presence with the help of strategic national partners such as MICROS, the industry leader for POS. Per our recent announcement, the Tabbedout software is now embedded in the MICROS POS software, making it easier for bars and restaurants to offer Tabbedout to their patrons. We also have relationships with other major POS vendors including Future POS, Dinerware, Agilysys and others. It’s these relationships that enable us to expand and are proof points and validation that our solution is the most secure and effective way to offer mobile payments today using existing technology.

SUB: How are you marketing the service?

Orr: We have identified key markets where we will expand our service. We are creating strategic marketing programs targeting each of these markets to increase consumer adoption. These plans include direct and event marketing at our locations, social media and traditional advertising, public relations, and partnerships with key groups and influencers in each market.

SUB: Who do you consider to be your competition?

Orr: Mobile payments conversations these days tend to center around upcoming technology such as peer-to-peer payments and counter-service. Our model leverages the existing and widely deployed infrastructure of our point-of-sale partners to enable mobile payments today on a merchant’s existing system. As such, we are focused on maximizing the time our customers can spend with friends rather than anxiously searching for the server to close out a check which is a relevant and unique complement to the existing POS infrastructure.

SUB: Last week, you announced that you have closed a $5.75 million Series A round of funding. Do you have specific plans for the funds?

Orr: We plan to support the growth we’ve experienced and build consumer awareness and adoption in key markets, as previously mentioned. This includes creating strategic marketing programs, hiring additional staff as needed and ramping sales efforts. We will also continue to invest in our mobile payment solution and bring to market a customer relationship platform that will change the way merchants and patrons interact.

SUB: Do you plan to seek more outside funding in the new future?

Orr: At this time we have enough funds to deliver on our growth plan. We will continue to monitor the market closely and will review our growth options on an ongoing basis.

SUB: Where do you see Tabbedout in about a year from now?

Orr: Having more than doubled our network in the past six months, we will push to increase growth to 3-to-4 times that with the new capital we just received and through our POS partnerships. Additionally, as we now increase our focus on generating consumer adoption and awareness in key markets, we hope to shift consumer behavior towards paying for bar and restaurant tabs with their phone rather than handing their credit card to a stranger.

SUB: What do you think is going to be the most important factor for Tabbedout’s success, moving forward?

Orr: Consumer adoption and advocacy are critical to our long-term success. Consumers are ready for a change in the way they pay and we are intent on being the technology and brand that accelerates this inevitable paradigm shift by making mobile payments a secure and convenient process.

SUB: Finally, a question I always ask: As an entreprene
ur who has navigated the waters of the down economy, what advice do you have for those just now starting a business?

Orr: My advice is to find a strong experienced co-founder with a different but complementary skill set, be generous with the cap table early on to find those rare employees with an entrepreneurial spirit who can weather the chaos of an early stage startup, and take only the smallest amount of money you need to create something tangible. Early on, you need the autonomy and freedom to operate penalty free while you are figuring things out. Once you have it nailed, go big or go home. There is money out there for those who are seeking to solve a real problem in any market; however, you have to have a narrow focus and strong resolve to see your idea through. I’m a first-time CEO and principal and typically describe the experience as blissfully stressful with more emphasis on “bliss”, but a bottle of Rogaine is highly recommended for the male entrepreneur.

Tabbedout – www.tabbedout.com