Why does Capstreet invest in hospitality?
Capstreet sees technology changing how people order, manage, track and pay for hospitality and foodservice. It also sees a fragmented sector with fast innovation, which it thinks suits its Capvalue Framework®.
Capstreet states its view this way on its What We Do page:
We believe the provision of hospitality and foodservice is yet another industry that is being rapidly transformed by technology as consumers increasingly leverage electronic mediums either to order, manage, track, or pay for their services. We also believe the sector is highly fragmented and experiencing rapid innovation, which provides the ideal scenario for businesses to benefit from our Capvalue Framework® to rapidly accelerate growth.
Notice the two parts of the thesis. First, customer behavior is moving online. Second, the sector has many small players. Capstreet connects both to its own method for building platforms.
The firm does not list sub-segments for hospitality. That is helpful: it keeps the door open for point of sale, ordering, loyalty, payments and related tools, as long as the company serves hospitality or foodservice.
What kinds of hospitality businesses fit Capstreet?
A fit is a technology business in hospitality or foodservice that helps merchants or consumers order, manage, track or pay. A fragmented niche with fast innovation is a plus.
| Area | What Capstreet describes |
|---|---|
| Order | Online and mobile ordering tools |
| Manage | Software that runs daily operations |
| Track | Reporting and visibility into orders and performance |
| Pay | Payments and merchant services |
| Market | A fragmented sector with rapid innovation |
Capstreet’s own list is short, so use the portfolio below as your guide. Then test your company against the firm’s criteria, including EBITDA and ownership.
How do Capstreet’s criteria apply to hospitality companies?
Capstreet publishes five criteria, and they apply to hospitality owners the same way they apply to every other industry. Each one is listed below.
- Entrepreneur-owned businesses services companies
- $3 to $15 million of EBITDA
- Primarily majority investments
- Entrepreneurs reinvest alongside Capstreet
- Ability to apply the Capvalue Framework®
The firm also says it looks for “a tenured team of owners or managers seeking a majority capital partner, with solid financials, a defensive business model, untapped growth potential, and competitive advantages within their market niche.” Fragmented markets can reward a platform that grows through acquisitions. Capstreet runs a buy and build strategy; see buy and build for the definition. Whether your niche supports that path is a question to explore in a first call.
A fragmented industry has many small players and no clear leader, which can leave room for a consolidator. Capstreet’s approach often uses buy and build: buy a platform, then add companies to it. Its $3 to $15 million EBITDA range sits in what many call the lower middle market.
Which hospitality companies has Capstreet backed?
Capstreet lists one hospitality company in its portfolio. It is a current investment. Status is shown as Capstreet publishes it on its portfolio pages.
- HungerRush: Current, Fund IV. A provider of integrated point of sale software for restaurant and other hospitality merchants in the United States. Its solutions include point of sale, online ordering, loyalty, reporting, merchant payment services and financing. Formed in 2018 and headquartered in Houston, TX.
What does Capstreet do after it invests?
Capstreet applies its Capvalue Framework® in three steps: Research, Build Scalable Platform, and Drive Business Transformation. Across its history, the firm reports 50+ Platform Acquisitions and 200+ Add-on Acquisitions.
- Research. Perform deep research to identify markets and build relationships with key entrepreneurs.
- Build Scalable Platform. Invest in top talent and technologies, and provide functional expertise for scale.
- Drive Business Transformation. Develop a long-term strategic roadmap and execute a buy and build strategy.
The firm says its Capvalue Framework® helps businesses in this sector accelerate growth. Read how the framework works.
There can be no guarantee that Capstreet will be successful in applying its Capvalue Framework®.
Next step
If your company serves hospitality, read the full deal criteria, then start a confidential conversation through the contact page. You can also call 713-332-2700 or email connect@capstreet.com. See all industries Capstreet lists.
Frequently asked questions
What hospitality companies does Capstreet invest in?
Capstreet invests in technology businesses in hospitality and foodservice. It points to electronic ordering, managing, tracking and paying as the trend. The firm also likes the sector's fragmentation and rapid innovation, and wants owners with $3 to $15 million of EBITDA.
Does Capstreet invest in restaurants?
Capstreet's published thesis is about technology for hospitality and foodservice, and its portfolio company sells point of sale software to restaurants. If you own restaurants rather than technology, ask the firm directly before assuming a fit.
What is HungerRush?
HungerRush is a Capstreet portfolio company, listed as current in Fund IV. It provides integrated point of sale software for restaurant and other hospitality merchants, with online ordering, loyalty, reporting, payment services and financing. It was formed in 2018 and is based in Houston.
Why does Capstreet like fragmented sectors?
Capstreet says a highly fragmented sector with rapid innovation is the ideal scenario for its Capvalue Framework®, which aims to build scalable platforms and drive business transformation. Fragmentation can leave room for a platform to grow.
