
Ask HN: Blue Bottle Coffee Co just raised $70M. What makes them so unique? - mosquito242
Like the question says, Blue Bottle Coffee Co just raised a huge amount of money in a Series C, and I&#x27;m having trouble understanding what makes them so unique and so strong, other than just their brand.<p>Is there a unique distinguishing competitive advantage that makes Blue Bottle Coffee so attractive?
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adventured
Rhetorical: what made Pinkberry so special that it became a long-line craze in
California?

Pinkberry was just frozen yogurt, right?

What makes Shake Shack special, such that it inspired a craze in NYC? What
differentiates it from the 37 other semi-premium burger joints that have
boomed in the last decade, like Five Guys.

Here's the answer: they're not all that special. They're providing a quality
service, and people get bored of the same-old same-old Starbucks & Co. or
typical fast-food burger (even the nicer ones).

These are massive physical industries. The physical services world doesn't
lend itself to the easy monopolization that you see in software / Internet.
Meaning, there is a lot of space for other competitors. Starbucks owns 25%-30%
of their segment depending on which metrics you use, after all of these years
and their vast success. Dunkin has another ~15% or so. I'd say 60% of the
market is available to be fought over (much like in burgers, start-ups can
absolutely steal back share from Starbucks).

Companies like Shake Shack, Blue Bottle, Pinkberry, and a zillion others, also
play to the human desire to find new, trendy things to experience; the desire
to not do what everyone else is doing; to seek out a different culture, or
simply a slightly different tasting cup of coffee. That desire is perpetual,
it will never cease, and that will also constantly break down dominant players
over time (eg: McDonald's is rotting).

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brudgers
Suppose they are using the money for real estate? The $70 million substitutes
for mortgages and construction loans and the real estate acts as an asset
securing the transaction via a liquidation preference. In other words, the
downside would basically be the risks associated with writing a series of
mortgages on the new locations. The potential upside would be equity that
turns into an IPO or a big acquisition in lieu of ordinary interest spread out
over 30 years.

The key to understanding the valuations used for Venture Capital investment is
that the risks are offset by liquidation preferences. A $10 million investment
for 10% equity with a 1x preference in a company with $18 million in assets is
not as risky as the headline grabbing $100 million valuation might make us
believe.

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mosquito242
The liquidation preferences helps makes the investment make a whole lot of
sense.

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x0x0
It's genuinely good coffee; they carefully maintain their brand (in order to
sell blue bottle, you have to pass tests; you can't sell it ground; their
trainers will show you how to make good pour-over); good marketing and
salesmanship; they showcase interesting ways of making coffee and the
different flavors you get from them (pour-over, chemex, siphon; kyoto iced).

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cycomachead
In SF, aside from the great coffee there are many who love the startup aspects
of Blue Bottle. They went from selling at local farmer's markets to small
kiosks to full shops.

I think that, in addition to what others have said, Blue Bottle has pretty big
plans for itself. Aside from SF, BB runs cafes in NYC and now Tokyo. They've
acquired an LA based coffee shop and now also have LA shops, Tonx Coffee and
now do mail order subscriptions. Those two were maybe a year ago? Recently
they acquired / merged with Tartine Bakery which is also a lovely SF
establishment.

So, I don't know why, but I've got to assume someone giving them money knows
something. ;)

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calbear81
I think what's interesting is that they have an opportunity to be the next
Starbucks which makes $70M pretty reasonable since it costs a lot of money to
land and expand physical operations.

It's still a relatively boutique operation and the merger with Tartine will
allow them to push a full cafe/bakery experience like La Boulange did but with
higher quality coffee and baked goods. Starbucks is now the "everyday" coffee
and Blue Bottle will do to Starbucks what Starbucks did to coffee shop coffee.

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greendata
Venture capital is very "cheap" right now and easy to get. We're in a private
equity bubble.

