Determining employee hourly wages or salaries is relatively straight-forward. Determining tips, however, requires more nuance than calculating the difference between when a worker clocks in and out.
The Seattle-area startup just raised a $1.1 million pre-seed investment round from SeaChange Fund to help bolster its software used by more than 300 restaurants to automate tip distribution.
The investment and traction is a welcome sign for a company that nearly shuttered last year after the pandemic crushed the restaurant business.
After launching in 2018 and seeing steady growth, Tiphaus only earned one sale in 2020 and was at a breaking point. Its founders had burned through life savings and given up hundreds of thousands of dollars to go all-in on Tiphaus. They came close to calling it quits.
But by February of last year, the company saw sales come back as COVID-related restrictions loosened. It brought on more employees and now has 15 full-time workers.
“It’s amazing what you can overcome when you are in the trenches with people you respect and care for,” said CEO Leif Magnuson.
Before launching the company in 2018, Magnuson was consulting for restaurant groups and kept seeing a recurring trend: difficulty managing tips.
He couldn’t find existing software solutions to address that pain point. Thus, Tiphaus was born.
The software aims to help restaurants reduce errors related to tip distribution and increase transparency for employees. It also lets waiters send tips to hosts and others that helped them during the shift.
Tiphaus is preparing to launch an “earned tip access program” that immediately sends tips to direct deposit at the end of the night rather than at the end of a pay period.
The company’s other leaders include co-founders Taylor Birkeland, vice president of engineering, and Mac Gainor, chief technology officer, in addition to Kirk Grogan, chief operating officer.
Grogan previously worked in the service industry. He would go two weeks without seeing his tips, with little transparency on whether he got the correct amount during his pay period.
“It’s really the employees that love us and the employees that we try to satisfy, because ultimately employee turnover is always an issue in the restaurant industry,” Grogan said.
Tiphaus provides its software services for $99 per month, or $69 per month for quick service restaurants.
We caught up with Magnuson and Grogan to learn more about Tiphaus and what’s next for the company in the latest Startup Spotlight.
The biggest thing we look for when hiring is: Personality first and foremost. The tools can be taught, so we are looking for someone with a good cultural fit who has charisma and is enthusiastic to grow with the startup. A lot of empathy is required on the sales side.
We differentiate from our competitors by: Besides serving a fairly niche market, we differentiate ourselves by an employee-centered culture. The team is fully remote yet engages more than most offices I had previously worked in. The team is accommodating to employees that need to leave early or take care of their mental health. In return, we have a loyal employee team that is willing to work hard during important projects.
The biggest challenge facing our business is: COVID-19 was a near death sentence for us. There were months where the startup mentioned very little revenue when restaurants were not offering in-person service. Kirk left a high paying job to work on developing Tiphaus and Gainor lost hundreds of thousands of dollars during this time to work with Tiphaus. API integration with the variety of point of sales systems used by restaurants is also a significant challenge we are working to overcome.
The smartest move we’ve made so far: Committing to developing talent and empowering employees. We spend an absurd amount of time making sure our employees are happy, informed, and always improving their own skills. Often companies fear training employees until they can leave, and we view that as a great thing. You want employees so talented they can leave, and it’s up to your leaders to create a culture they never would actually want to leave.
The biggest mistake we’ve made so far: Rushing some technology partnerships out of desperation. When COVID-19 hit, the service industry got turned upside down, and we spent a lot of time developing partnerships that ultimately didn’t lead to any results. Thankfully, we recognized this early by most standards, and were able to focus on core objectives and get more strategic with partnership choices.
What one piece of advice would you give other entrepreneurs: As silly as it sounds, get good business insurance as soon as you can. You’ll know you made it when the billion-dollar competitors you are winning business from start coming at you in the courtroom. You have to remember, a lot of these companies know that you did nothing wrong, but still want to bury you in legal fees. Our business insurance has been 10x its weight in gold and were able to provide us a legal team that easily and clearly demonstrated we followed all the laws and didn’t infringe upon intellectual property. Without insurance, just defending ourselves would have bankrupted our company.
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