I’d Fund That: Blue Bottle Coffee

Scott Francis
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I saw this article on TechCrunch almost a month ago-  on the fund raise that Blue Bottle Coffee just did.  I think the folks at TechCrunch were understandably surprised that Blue Bottle raised $25M in a series B investment from some pretty high-ranking VC’s and investors (including Morgan Stanley):

“In addition to former investors Index Ventures, Google Ventures and True Ventures, Instagram’s Kevin Systrom, Twitter and Medium co-founder Evan Williams, Twitter investor Chris Sacca, WordPress founder Matt Mullenweg, Flickr and Hunch founder Caterina Fake, investor Joanne Wilson (Fred Wilson’s wife) and a16z partner Lars Dalgaard joined the round.”

There seemed to be general puzzlement in the media about the investments in Blue Bottle.  Why are these tech investors investing in a low-tech retail and coffee startup?  In fact, it isn’t a startup by most VC definitions, because it doesn’t “scale” without people.

But the answers are pretty simple:

  • Blue Bottle’s coffee is so good that people go visit it like a tourist destination in the Ferry Building.  And write blogs about it.
  • Blue Bottle’s general population of workers are actually friendly and coffee snobs at the same time.  In other words, rather than look down their nose at you when you ask a stupid coffee question, they jump at the chance to convert you to their Blue Bottle coffee religion.  I asked what kind of coffee they’d recommend I get for a friend back home as a gift, to which they asked me, “how do they make their coffee?”  Shoot, I never thought to ask such a personal question! “French Press of course”….
  • Blue Bottle is innovating, in its own way.  Its stores aren’t like “normal” coffee shops. They experiment with layout, with materials, and with menu (food!) in a way that feels more honest and integral to their mission than the way Starbucks and other bigger chains have rolled out dining options.
  • Their branding is understated.  Some mistake this for arrogance but I think it is only the arrogance of thinking that a little branding goes a long way.
  • Blue Bottle is to San Francisco startups what Hobees was to South Bay startups.  A place for hiring, meeting, and getting a good coffee (or breakfast).

As for myself, I’ve made money investing in Starbucks, Peet’s coffee, and Green Mountain Coffee (as public companies).  I’d love to be an investor in Blue Bottle at this valuation, or in Houndstooth in Austin, for similar reasons. I can relate to the entrepreneurial journey, I love the product they serve, I love the way they serve their customers, and they are both incredibly “startup-friendly”.  (Houndstooth hosts monthly “open coffee” meetings for entrepreneurs).  However, I probably can’t afford the minimum buy-in.  Such is life. I’ll just have to keep advocating for these great businesses by being a patron.

Okay, one confession. I also like Blue Bottle and Houndstooth because they have coffee-process-religion.  You can see it in the way they make their coffee: measurement, timing, and professional attention to detail.  They are like the Jiro Dreams of Sushi for coffee.