Piggyback the venture capital that’s finding its way into the coffee business.

June 13, 2013 by

coffee fundingThe gourmet coffee business is still relatively young, and the funding of new coffee ventures has generally been on a fairly small scale.

Yes, there are some big companies that have gone public and raised money through the markets. But we are also seeing a new wave of coffee entrepreneurs who are taking a quality, artisanal approach to coffee, and creating products and companies that serve the interests of serious coffee drinkers.

This is the post-Starbucks wave of coffee businesses. These companies are turning their backs on coffee as a vehicle for cream and sprinkles and focusing instead on very high-quality beans and exacting brewing methods.

Over the last few years many of these enterprises have been founded on modest budgets.

A new coffee shop might find funding from friends and family.

A new roaster might get started the same way, or through a crowdfunding site like Kickstarter.

Even entrepreneurs looking to raise tens of thousands of dollars to tool up to make a new kind of coffee brewer have found success at crowdfunding sites.

But more recently we are seeing something entirely different moving into this third wave. Venture Capital firms, better known for investing in high-tech startups, have been dipping their toes into the coffee business.

For example, Oakland’s Blue Bottle Coffee has received over $20 million in funding from venture capital firms. Stumptown coffee has also been heavily funded. Plenty of other coffee companies, all part of this new wave, are also finding funding by the same route.

This signifies a significant shift in the evolution of the specialty coffee business, particularly at the high end where companies are serving customers who don’t want the cream and sprinkles, but will pay a big premium for a truly excellent coffee.

To wrap your mind around his shift, think of the wine business. For many people a decent house wine will do the job. Others want something a little better and look at the store shelves for a wine they have heard praised by their favorite chef on TV. At the top end, real wine enthusiasts go for really high quality wines you would never find locally, and they'll pay top dollar.

This is what’s happening in specialty coffee, and the funding is going into that top end right now.

For small roasters, retailers and coffee shops, there is an opportunity here.

These funded companies are going to spend millions on marketing, persuading people to try more expensive coffees, and growing this high-end market.

Your opportunity is to ride on the coat tails of that money being spent. More and more of your customers will be hearing about these amazing, top-end coffees, and your job is to make them available.

Slipstream the money being spent by the big guys, and start offering a few very high-end coffees through your own business.

2 Comments

  1. Nick Fielden

    I love the image of venture capitalists 'dipping their TIES into the coffee business'. Hope they're careful not to allow hot coffee dripping into their laps - ouch!

    • Nick Usborne

      Me and typos! Thanks for the catch. I almost didn't correct it because, as you say, the image of a venture capitalist dipping his tie into a cup of coffee is just wonderful. : )

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