Tabbedout Finalizes $5.7M Round for Restaurant Bill Pay

UPDATED. Tabbedout, an innovative Austin, Texas startup tackling the problem of closing out bills at restaurants and bars, said it has completed its Series A round with an additional $3.7 million, raising the total to $5.75 million for the round. New Enterprise Associates, which already chipped in $2.05 million last October, is supplying the additional money in the round. Altogether, Tabbedout has raised $6.5 million from NEA, Trellis Partners and angel investors. The new money will go toward building out the company’s staff and accelerating the marketing of Tabbedout to customers and business owners.

Tabbedout has a cool take on mobile payments, because it focuses on a specific goal, to make the process of settling a tab easy and quick. Users who download the mobile app store their encrypted credit card information on their device. When they arrive at a participating restaurant or bar, they just start a tab for that location and their payment information is sent directly into an establishment’s payment system, so the waiter never has to take or swipe the card. That’s good, because it cuts down on fraud from sneaky waiters. But it also means that a consumer is charge of their bill. When it’s time to settle up, they just pay through the app. A 99-cent fee is assessed for each transaction.

“This gives customers a great deal of control,” said Tabbedout CEO Rick Orr. “This removes the chance of waiter fraud. Now I can see my tab throughout the night. At the end of the evening, I can open the tab, set the tip and pay, or if I forget, the venue can close me out.”

Orr came up with the idea after enduring an almost hour-long wait for a bill. He said Tabbedout helps consumers get out quickly and also helps them split bills between a group. And it also benefits busy restaurants, freeing up wait staff to service customers and taking the payment responsibility out of their hands.

Tabbedout has a ways to go before it’s a mainstream hit. The company has just 200 restaurants and bars lined up in 90 cities. But it’s done a lot of back-end work to set up some quick growth. It previously signed deals with point-of-sale providers Future POS, Jumpware and others and is now embedded with MICROS System’s point-of-sale offering, which is used in 130,000 restaurants and bars. Tabbedout still needs to convince business owner to turn the system on, but it’s a simple software update to enable Tabbedout.

I like where Tabbedout is going. It’s an elegant solution for restaurants that take credit and debit cards, but want to streamline the payment process for themselves and their customers. While offerings like Square work well for the 27 millions merchants who don’t take credit cards, Tabbedout makes sense for the many establishments that do. Orr said he’s also considered allowing customers to order ahead through Tabbedout. But he said that introduces a lot of questions about how to get orders to the right person and how to take care of custom orders.

There are a lot of companies approaching restaurant owners and merchants these days to help them optimize their business. But with the spread of smartphones and the rising familiarity of mobile payments, I think Tabbedout could find fast acceptance now that it has the money and the right partners in place.