Blackbird Secures $50M for Blockchain Restaurant App

A New Funding Round for Restaurant Technology Innovator

A serial entrepreneur, known for developing solutions that enhance the connection between restaurants and potential customers, has secured $50 million in funding for his newest venture. This new company is reimagining the concept of customer loyalty programs.

Blackbird Labs: A Payments and Loyalty Platform

Blackbird Labs has created a platform that integrates payments, loyalty rewards, and blockchain technology. This aims to help restaurants cultivate repeat business and streamline transaction processes. Currently serving approximately 1,000 restaurants, Blackbird intends to utilize this new capital to launch "Blackbird Club," a cross-restaurant points system.

Expansion beyond its current markets – New York, San Francisco, and Charleston, South Carolina – is also planned.

Charleston: A Strategic Test Market

CEO Ben Leventhal explained the choice of Charleston as a key market. “Charleston punches above its class,” he stated in an interview. He further described it as a valuable “test market” for Blackbird, drawing a parallel to Meta’s use of New Zealand.

Investment Details and Key Backers

Spark Capital is leading this funding round, with additional participation from Coinbase Ventures, Amex Ventures, and Andreessen Horowitz. These latter three firms also invested in Blackbird’s $24 million Series A round in 2023.

While the current valuation remains undisclosed, PitchBook estimates the startup was valued at around $124 million during the previous funding round. To date, Blackbird Labs has raised a total of $85 million.

Strategic Partnerships and Past Ventures

The involvement of Coinbase and Amex is particularly noteworthy. American Express previously acquired Resy, a reservation platform founded by Leventhal, in 2019. While no immediate integration is planned, Leventhal indicated that a future collaboration is likely.

Prior to Resy, Leventhal founded Eater, a food blog that was later acquired by Vox. Currently, there are no concrete plans for a partnership between Blackbird and Vox.

Flynet: A Blockchain-Based Payment Service

Blackbird’s Flynet payment service operates as a layer-three transaction protocol built on Coinbase’s Base blockchain. Diners can use the Blackbird app to pay for meals and redeem loyalty points at participating restaurants.

The Role of Blockchain Technology

The necessity of incorporating blockchain technology is a valid question. Numerous loyalty and payment programs already exist, including competitors like Punchh, Toast, and Lightspeed, which utilize traditional financial infrastructure.

Leventhal acknowledges that blockchain isn’t strictly essential, comparing its foundational principles to those of Visa’s network. However, he believes it will unlock future opportunities.

Future Opportunities and Ownership

Leventhal highlighted the potential for enhanced customer profile management and activity tracking. “Consumers will be able to continue to own that profile,” he explained. Furthermore, Blackbird envisions a future where restaurant customers become shareholders in the company.

Addressing Challenges in the Restaurant Industry

Despite a surge in consumer interest fueled by social media, the restaurant industry faces significant financial challenges. The economy and evolving consumer behaviors have created a difficult environment for restaurant owners.

According to the National Restaurant Association, average restaurant profitability is currently below 5%, a substantial decrease from around 20% in the early 2000s.

A Disconnect Between Popularity and Profitability

There's a noticeable gap between the public's enthusiasm for restaurants and the industry's actual profitability. This is exacerbated by rising costs and increased price sensitivity, issues that may worsen with potential tariff increases.

“There is a disconnect in the restaurant industry between the popularity and the intensity of consumer love for restaurants and ultimately the profitability of the industry,” Leventhal noted.

Opportunity for Disruption

This disconnect presents a significant opportunity for innovation. The restaurant industry comprises millions of small, locally-owned businesses.

Arianna Simpson, a general partner at a16z, emphasized that these restaurants are often vulnerable to the fees charged by existing technology platforms. “Those restaurants are at the mercy of tech platforms that can charge a large, and often growing, percentage of a restaurant’s margin,” she stated.

Blockchain's Potential to Improve Margins

Simpson believes blockchain technology can address this issue by improving margin structures. “Ben’s vision is for a network that is owned by the restaurants and the diners themselves, which is something that only blockchains enable,” she said. Blackbird is already reportedly saving its restaurant clients 3-4% in payment processing fees.