Square Buys OrderAhead to Grab Pickup Business at Restaurants

(Bloomberg) -- Square Inc. said it acquired startup OrderAhead's dining pickup website and app that allow people to place take-out orders and skip the line at restaurants.

The deal gives the payments processor access to more diners and eating establishments for its Caviar food-delivery service, which Wednesday announced its own restaurant pickup program. Terms weren't disclosed. 

OrderAhead was valued at $30 million in December 2013 when it raised about $8 million, according to Pitchbook Data Inc. Square won't take on any of the San Francisco startup's employees, according to a person familiar with the matter.

With the acquisition of OrderAhead, Square is trying to capitalize on the trend of customers choosing their food online before stepping into a restaurant. San Francisco-based Square is betting the new pickup feature will drive more orders to restaurants affiliated with its Caviar and increase the number of payments processed on its platform.

Starting Wednesday, Caviar users will be able to order pickup in select cities on the West Coast and will soon expand to all of its markets, Square said in a statement. Researcher Crone Consulting LLC estimates that in five years half of all sales at quick-services chains will be generated by online order-ahead customers.

This isn't the first time Square has experimented with food pickup. The company rolled out its own app that allowed customers to pre-order food in 2014, but shut it down a year later. Gokul Rajaram, who leads product engineering at Square, said the company now is much more prepared for the business because it owns a delivery unit that can leverage its existing restaurant relationships.

“We aren't playing the same game as other food-delivery companies,” Rajaram said in an interview. Caviar is “going beyond food delivery to have a broader suite of offerings. Pickup is one.”

While Square is increasing its investment in Caviar, after trying last year to sell the business, other Silicon Valley food-delivery startups have shown signs of trouble. Pressure has also increased as giants like Amazon.com Inc. and Uber Technologies Inc. have entered the market.

OrderAhead was backed by the Y Combinator startup accelerator, and has raised funds from investors including Mark Benioff, chief executive officer of Salesforce.com Inc., Eric Schmidt, Alphabet Inc. chairman, and Reddit Inc. Chairman Alexis Ohanian, according to Pitchbook.

To contact the reporter on this story: Selina Wang in New York at swang533@bloomberg.net.

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Andrew Pollack