
Blue Bottle Coffee Gets Caffeinated With $25.75 Million in Funding - rajbala
http://recode.net/2014/01/29/blue-bottle-coffee-gets-caffeinated-with-25-75-million-in-funding-from-internet-stars-and-morgan-stanley/
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redwood
I can't stand this kind of thing. Why? Because artisanal at scale is no longer
artisanal.

Not in food and beverages, anyway. Sure fancy electronics are made at scale
and we consider some of them to be best of breed.

But in food and beverages, best of breed is never, can never, should never be
at scale.

Thus this just means another chain of coffee. Great. Even if it's an
improvement on existing chains: it's bad for independent artisanals (just like
Blue Bottle was) everywhere it goes. Which is bad for all of us.

I guess I just don't like "selling" the uniquely artisanal concept when it's
no longer uniquely artisanal. It feels hollow and deceptive.

~~~
bpodgursky
I guess I just don't understand this mindset. I prefer food that tastes good,
and don't really care whether 10 or 1,000,000 other people are able to enjoy
it as well. Doesn't hurt me if they can reproduce it on a mass scale.

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w1ntermute
Yeah, this "not wanting to share" mindset of hipsters is probably the most
repulsive thing about them to me.

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spikels
Blue Bottle's secret to success is great PR and a lighter roast than most of
their competitors which results in a milder, sweeter cup of coffee. Otherwise
they buy their green coffee from the same sources and use the same equipment
and techniques (however they were an early cold brew adopter). And I think
their service is subpar - slow and not particularly friendly - but people put
up with it.

$26 million seems like a lot but perhaps this is enough to build a
brand/business around. Both Starbucks and Peets had similar origins and are
now worth $55 billion and $1 billion, respectively. And it always helps when
your product is addictive.

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antr
I'm trying to figure out why a VC, who has a very high cost of equity, invests
in this type of business rather than the more "traditional" PE growth fund...
or if revenue/cash flow growth is so high... why not go the debt financing
route.

Anybody has any insight?

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bhousel
from TFA:

(For more, here is a blog post on the whole shebang by True Venture’s Tony
Conrad — who is, IMHO, the coffee hipster poster boy — in which he notes
loftily: “What we saw and why we got involved is that James and his team are
part of a handful of people who are founding a movement around coffee … We
believe Blue Bottle Coffee is at the forefront of a ‘consumer movement’ or
mega-trend in which consumers are moving to higher quality, artisanal micro-
roasters of coffee, where quality, attention to detail, beauty and a
distinctive experience are being sought over more mainstream alternatives.”
Viva la siphon, apparently!)

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dakrisht
_" We believe Blue Bottle Coffee is at the forefront of a ‘consumer movement’
or mega-trend in which consumers are moving to higher quality, artisanal
micro-roasters of coffee, where quality, attention to detail, beauty and a
distinctive experience are being sought over more mainstream alternatives.”_

Yeah, maybe on Market Street, Tony. The majority of the country (and the
world) isn't going to pay $6 for a cup of coffee. That's reality.

Seems like a purely hype driven VC play to invest in BB. They make a great
product, yes, but the SF micro-niche coffee clientele will have a very tough
time scaling to profit in a country where Dunkin Donuts is considered great
coffee - and Starbucks.

Also, not sure why BB would raise this cash from VC vs. debt financing. Whole
thing is hilarious.

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bhousel
Because Blue Bottle Coffee is going to try to get acquired by a Dunkin Donuts
or Starbucks that wants to operate these higher margin stores in affluent
areas. They aren't trying to scale up to "the majority of the country". The
VCs will make their money back when the acquisition happens.

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joseph_cooney
This is the first thing I've read in this thread that explains the VC
involvement in a way that makes sense.

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state
Blue Bottle does seem to be a great company. I have (and have had) may friends
who have worked there over the years. It isn't quite clear to me how they're
going to bring in VC-needed returns on this kind of investment.

Anyone else care to comment? It just doesn't intuitively make sense to me.

~~~
arfrank
My gut reaction is that if you could get in early enough on the next Starbucks
it could return a large enough payoff to be worth the risk.

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bnejad
With a bunch of big investors they certainly have enough hype to give it a
shot.

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arfrank
Also what % return are mutual fund and mutual fund-like investors looking for
over the next decade? If 5-year average is (5-25)% loosely then you're either
looking at an investment that blows that return out of the water, or doesn't
really impact your overall fund at all.

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jowiar
I remember reading something a while ago that there aren't actually enough
coffee beans produced of a high enough quality to produce Starbucks-level
quantity at current Blue Bottle-level quality. I'm curious whether this is the
problem Blue Bottle intends to solve, or if they plan to be "Yet Another
Starbucks".

~~~
dasil003
I don't know too much about raw coffee quality, but what I do know is that
roasted coffee goes stale very quickly. If you freeze it you can preserve some
flavor for a time, but generally the best thing is to grind directly before
brewing and finish the beans within a week or two of roasting.

The reason starbucks is bad is because they let their coffee sit around for
months in the supply chain, and they over-roast in order to compensate for the
lost flavor as well as the tremendous amount of cream and sugar they put in
every drink.

Again, I don't know how much good quality beans there are out there or even
how you grade raw beans, but I suspect that average quality beans if roasted
locally and brewed quickly (which was sort of the hallmark of Blue Bottle if I
recall) will be an order of magnitude better than Starbucks right off the bat.
If they organize their logistics around that I think they can scale a much
better quality coffee than Starbucks.

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adamio
"... part of a handful of people who are founding a movement around coffee …
We believe Blue Bottle Coffee is at the forefront of a ‘consumer movement’ or
mega-trend in which consumers are moving to higher quality, artisanal micro-
roasters of coffee"

Mega-Trend? I'm assuming their exit is via Starbucks

~~~
antr
I think an offline retail business like this one is a perfect LBO candidate.

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yanowitz
I'm very interested in seeing how they can scale their training when opening
new cafes. It's some of the best coffee I've had in SF/NYC.

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mmagin
Well, good for them, but I hope it doesn't ruin the product the same way
Hershey's ruined Scharffen Berger chocolate.

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ratscabies
It'll never play in the UK.
[http://en.wikipedia.org/wiki/Calliphoridae](http://en.wikipedia.org/wiki/Calliphoridae)

~~~
k-mcgrady
It won't play anywhere but small pockets of a few cities where people have a
lot of money and want to pay crazy amounts of money for a cup of coffee. I
really don't understand why people are investing so much money in this and why
it needs that much investment. I see very nice coffee shops open all the time,
sell perfectly fine coffee for a quarter the price and they don't need
millions in investment.

