Square Competitor Leaf Scores $20 Million Investment From Payments Giant Heartland
For a while, it wasn’t clear how payments startup Leaf would get the distribution it needed to compete against Square and others trying to reinvent point-of-sale technologies for small and medium-size businesses. Just this summer, CEO Aron Schwarzkopf said in an interview that his young company had signed on fewer than 1,000 customers.
Now we have an answer.
The Cambridge, Mass.-based startup has raised a $20 million strategic investment from Heartland Payment Systems, a publicly traded payments processing company that does $2 billion in revenue annually. Heartland isn’t Starbucks, the glitzy partner of Square, but it has a huge and valuable base of small-business customers to which it can introduce the Leaf system.
Like Square, Leaf makes software that helps small businesses sort, track and analyze their in-store transactions and access that information anywhere from the cloud. But unlike Square and others, Leaf actually makes and sells its own tablet that runs on a custom version of Android so it can have end-to-end control over the experience the merchant receives.
Yet despite wanting to own how the hardware and software interact, Leaf is attempting to build an open platform on top of which others can build apps. Leaf doesn’t actually process payments; it lets its customers choose from several payment processors, including Heartland and some of its competitors. But Heartland CEO Bob Carr said he is a fan of the open approach.
“We have done some work in POS before … but it’s not the most modern architecture so we began looking around at good platforms that were consistent with our architecture,” Carr said in an interview. “We looked at many, many competitors of Leaf and felt like Leaf had the best architecture and most importantly had a shared philosophy where they have a platform that allowed merchants to do business with any number of vendors, and some of our competitors, so merchants could get exactly what they wanted.”
Earlier this year, before the investment, Heartland signed on as a reseller of the Leaf system. With the investment, Heartland will have even more incentive to sell the system and, if things go well, the company plans to ultimately retire its own point-of-sale product and recommend that its customers switch over to Leaf.
For that product handoff to take place, Leaf will have to expand its capabilities to serve different kinds of categories. Right now it is popular with companies that conduct business at a counter, such as cafes and small retail shops.
Yet the category of business that is top of mind for Heartland is table-service restaurants, of which Heartland counts more than 60,000 in the U.S. as customers. If Leaf can build the technology to support such businesses, Heartland will feel comfortable recommending the Leaf system to those customers.
Carr said that Heartland is also working to integrate some of its payroll technologies into the Leaf POS system.
Schwarzkopf said the new funds will be used to increase the size of the staff, which now totals about 50, and to invest in R&D for both hardware and software. The startup previously raised $6 million from a group of angel investors, Schwarzkopf said. The company charges $250 per tablet and $50 a month for the rest of its service.
The funding news was first reported by Bostinno.com this evening.