

Philz Coffee Raises $15M to Expand Nationwide - kyleowens10
http://techcrunch.com/2015/02/18/philz-coffee-funding/

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j10t
I moved from Seattle to San Francisco a couple years ago, asked Yelp for the
best coffee and was sent to Philz.

I experienced some culture shock learning that San Francisco's top coffee shop
didn't serve espresso. The idea of a coffee shop without an espresso machine
had never crossed my mind. I left confused, with a scalding hot pour over, and
moved back to Seattle soon afterward.

Blue Bottle and Four Barrel Coffee were both excellent.

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seeingfurther
It's funny you say 'scalding'. Part of why I love Philz is they serve it the
perfect temperature every single time. I get a cup in my hand and can start
drinking immediately. At Starbucks I need to ask for ice to cool it down.

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philip1209
I'm surprised that I haven't seen this opinion expressed in the comments so
far, so I'll just say it - I think Philz coffee tastes bad. They can't keep
that many different kind of beans all fresh. They tend to overextract the
coffee, making it bitter. Their claim-to-fame is coffee-based drinks, like
mojitos, which don't really showcase quality coffee.

They get the brand right, but the beans are just not up-to-par. I hesitate to
call them third-wave coffee because they don't push whole bean sales (at least
here in SF), they don't have multiple brewing methods, and their brewing seems
inconsistent.

I think that Blue Bottle is much better positioned to be a Starbucks
competitor because of their excellent roasting, quality products besides
coffee (e.g. Tcho chocolate, foods), and high-end feel that justifies the
higher cost.

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nazgulnarsil
have you sampled a variety of branches?

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philip1209
Yes, four of them

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jasonjei
Definitely HN newsworthy, especially since YC has backed coffee startups.

I personally think Philz is going to give third-wave coffee a run for their
money. Definitely as approachable as Starbucks and easily replicable. The
problem with third-wave is that the total applicable clientele for a company
like Blue Bottle is far and few between. Even after saturating every corner of
SF, NYC, LA, Chicago, it's going to be hard for BB to come up with hundreds of
millions of revenue and retain quality (Blue Bottle raised $100M in cash).
Blue Bottle has a "luxury good" perception.

Philz is unpretentious, reliable, and love in a 600-calorie cup of coffee,
cream, and sugar. It's a formula that so far has proven to work in America.
Third-wave coffee is excellent, but isn't as accessible as Starbucks. Philz,
on the other hand, doesn't attempt to sell the virtues of high-brow single-
origin coffee. They, however, make a really good cup of coffee, and reliably
do at each location. I definitely believe it is repeatable even at scale
because many Philz drinks rely on mint leaves, cream, and sugar--flavors that
are the "MSG" of coffee.

User experience is inclusive and welcoming--although some locations are more
fun than others (visit the 24th if you haven't and it will become abundantly
clear why there are Philz phanatics). I love coffee shops like Four Barrel,
the Mill, Saint Frank's--but those shops exude refinement and appear a little
out of reach, even if priced similarly to Starbucks. I would hypothesize you
could put a Philz in the Midwest and it would do well.

As of right now, every coffee shop compared to Starbucks pales in comparison.
Starbucks boasts $70B in market cap. If anyone has a good shot of picking a
fight with Starbucks, it just might be Philz.

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Tiktaalik
> 600-calorie cup of coffee, cream, and sugar

Yikes you're not selling me on the company with that statement. I don't know,
I think third wave coffee houses are doing a pretty good job of training
people that sugary, creamy coffees are crap.

In the long run I think that people are trending toward healthy, high quality,
authentic experiences in many areas, but especially food. I'm not sure where
600 calorie coffees fit into that.

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jasonjei
I was just being blunt about the caloric intake :) Starbucks and Philz
probably won't advertise their calories. In fact, the barista that I attempted
to prod for calorie count pointed to his belly and exclaimed jokingly, "Do I
look like I count my calories?" They might not sell to you, but they'll sell
to the rest of America that just want something over the top to make a Monday
morning better. #fatmeansflavor

Starbucks creamy drinks are also roughly the same amount. And the reason Philz
will do well in America is that Americans gravitate towards the creamy and
sugary and carby (Anheuser Busch, Nestle, Hershey). They even got sustainable
San Franciscans on board! While some Americans care about eating and drinking
healthy, most Americans will happily continue ordering a 600-calorie cup of
morning joe, contributing to Starbucks' $15B revenue.

American dollars always go to the fat and sugary flavors. While a lot of fine
dining artist-chefs will disagree with the data, burgers and fries sell.

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Tiktaalik
Ok I'm sold on the idea that Philz has the means to compete against Starbucks
in malls across America, but I'm less convinced that third-wave coffee is
going to be impacted in its core urban market.

When you said that Philz would give "third-wave coffee a run for their money"
did you more mean that you're skeptical that Blue Bottle will be able to take
their brand national? I agree with that, that that could be hard. I think
their best bet for non-urban areas would probably be to closely follow areas
where Whole Foods has made inroads. Regarding expansion to urban areas, I
wonder if too much good real estate for third wave coffee places is already
taken up by local independents.

From what I've seen SF has surprisingly few third wave coffee shops. In
Vancouver there are often several Blue Bottle quality independent coffee shops
in each neighbourhood. When I saw that Blue Bottle got funding I wondered how
successful they'd be in expanding to areas with well established locals.
There's really not that much that they do different from others.

~~~
jasonjei
Yeah--I think it'll be hard for third-wave coffee shops to scale. The last
number I heard about Blue Bottle was that they were making about $20M. That's
a drop in the bucket compared to Starbucks' $15B, and Blue Bottle is very well
known.

Truth be told, Blue Bottle's coffee and espresso quality has suffered from
expansion.

I think big cities contribute to plenty of revenue, but Starbucks has built
itself as common as a convenience store. That's really hard to compete, even
with third-wave and Philz types. Even Tim Horton's revenue is $3B!

Hit me up next time you're in San Francisco--I don't think you got a very good
tour of coffee here :) Aron Tzimas documents latte art around SF on his
Instagram.

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ghayes
I love Philz coffee to death, but I don't understand why this is treated like
Silicon Valley start-up news. It's simply a great story of a good coffee shop
succeeding and expanding its brand and locations.

~~~
themagician
It's a better business story than the vast majority of startups that come out
of the Valley.

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rgovind
Its funny how things we taken for granted in third world countries like India
are becoming startups here:

In India, you can call up some neighbourhood grocer and he will deliver goods
in 5 min. The best approximation for it in US is Instacart In India, you can
go to a tailor, give him cloth, ask him to measure you. He will make a custom
made shirt in 24 hours to 3 days. Here, its a YC startup Again in India, you
go to ANY restaurant, they will give you coffee mixed with milk. Here, it has
become a startup. Almost no one in India I know drinks coffee or tea without
milk.

Different economics I guess

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chaostheory
Yes that's mainly possible because there's a massive imbalance between the
poor and the rich i.e. there's barely a middle class unlike what we have in
the US (for now). I'm also going to guess that manufacturing is almost non-
existent as well for that to happen

I'm not totally sure what this has to do with Philz Coffee though

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asavadatti
The Indian middle class was estimated to be 250 million people in 2007, by
McKinsey & Company.

Source:
[http://www.mckinsey.com/Insights/MGI/In_the_news/Next_big_sp...](http://www.mckinsey.com/Insights/MGI/In_the_news/Next_big_spenders_Indian_middle_class)

~~~
chaostheory
What's your point? That's only 22% of the population. In the US the middle
class forms about 60% of the population.

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sparkman55
They have bunch of blends to choose from, and serve carefully-made single-drip
"Third-wave" coffees. The order process is a bit chaotic, which makes the
whole thing seem nice and quaint. Plus, they do little things like aerate the
coffee and leave the right room for milk and sugar.

Personally, I'd prefer a nice single-origin coffee to their blends, but it
definitely beats a Starbucks.

This isn't the first time Philz has received VC; according to Wikipedia,
Summit invested in 2013.

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grandalf
Philz is the only shop to offer Turkish coffee. This is one of the oldest and
most delicious coffee traditions completely ignored by mainstream US coffee
drinkers.

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tzm
Philz is my defacto office as well. I would invest in Philz and have been
wondering about their growth plans (now we know!). Philz found a formula that
creates high quality coffee in a repeatable way. Been expecting them to grow
quite a bit over the next few years.

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donw
Well, they do make a decent cup of coffee, but I would wager that what made
them special (for me) will be tougher to pull off at scale. Every time I
walked into the Philz on the way to the office, the (same) guy behind the
counter (a) remembered me, and (b) asked me what I didn't like about my last
coffee.

And then, using some sort of caffeine-science, he managed to figure out the
right combination of blend, milk, and sugar to produce something truly
wonderful.

Doing that at scale will be tough. Do-able with technology to be sure, but the
human element made it very special.

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hagope
I like the coffee at philz, but the pour over coffee is too damn strong! they
need to grind it more coursely or at least have the option to

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yurisagalov
you could always go for a darker roast, which generally has less caffeine :)

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ghayes
Unless he's talking about flavor, in which case a lighter roast would be
better, albeit more caffeinated.

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tremner
Cringe, is my only thought

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ryanSrich
A bit odd to see a coffee shop's funding on TC. I guess because its a valley
company? A tech scene favorite? Based on the article it seems the draw is that
they add milk and sugar for you? Is the coffee that bad that you have to
drowned out the taste with fluff.

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jkestner
A couple years ago, Dunkin Donuts switched to their... barista? adding the
cream/sugar for you. You just said either yes or no, and they've figured out
the apparently right amount for the general populace (which is a little sweet
for me but not as sweet as you'd expect from a donut shop).

They figured that replacing the station with all the add-ins was a faster and
better experience for customer and employee. Can't disagree, since I went to
Dunkin for the convenience. I don't know how big the market is for coffee with
personal attention (the taste snobs seem to just make their own), but perhaps
Philz is laying down the tracks for all sorts of motherly-service-as-a-product
to bank the SF zeitgeist.

Hey, whatever happened to that grilled cheese startup?

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shitlord
Grilled cheese startup? Now I'm interested.

~~~
veemjeem
melt

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SocksCanClose
it's on HN because Philz is basically a math problem: mint mojito = worldwide
domination. QED.

