Deals

Blue Bottle gets $26M to hook more Americans on fancy hipster coffee

Above: Pour-overs and beards. There is a hipster joke to be made here.

Image Credit: Flickr user NiallKennedy

The tech industry runs on coffee, which is perhaps why a bevy of venture capitalists and investment bankers are throwing more money at Blue Bottle.

The artisanal coffee chain announced today it has received a $25.75 million round led by Morgan Stanley Investment Management along with a number of well-known venture capital firms and a glittering assortment of angel investors.

So why might tech-focused venture capitalists be drawn to coffee, you might be asking?

Perhaps it’s because Blue Bottle has a devoted following amongst San Francisco’s startup community. Entrepreneurs can’t seem to get enough of these fancy beans. Without them, they couldn’t stay up coding all night, be alert for morning meetings, or find an excuse for an afternoon break.

But really, the investors are in it for the money.

83% of adults in the U.S. drink coffee. It is a $30 billion a year industry, and these numbers are growing. Also growing is the interest in gourmet coffee, not the mainstream, run-of-the-mill stuff you might find at, say, Starbucks. Well-paid tech employees are more than willing to shell out an extra dollar or two for a high-quality cup of joe, with a dash of milk and some snob appeal.

“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,” said True Ventures partner Tony Conrad. “In addition, we believe the Blue Bottle Coffee brand and products appeal to — and are accessible to — a large audience of coffee drinkers who are increasingly interested in expanding their appreciation for fine coffee.”

Like many fellow English majors that graduated from college in 2008, I’m a trained Blue Bottle barista. I can say from experience that the company really, really cares about every step of the sourcing, production, and selling process.

Blue Bottle roasts its beans in small batches using vintage roasting machines, packs them in compostable bags, and sells them within 48 hours of roasting. You can either consume Blue Bottle in espresso form or as a one-cup-at-a-time drip.

Blue Bottle now has 11 cafes in the Bay Area and New York City. Re/code reported that it plans to open more stores in Oakland, Manhattan, Brooklyn, Palo Alto, and Los Angeles in the next 12 months.

Last year, Blue Bottle signed a deal with hot payments startup Square to use its point-of-sale technology in all its locations, so there is none of that ugly cash register nonsense. Most Blue Bottle cafes have a minimalist, industrial-chic vibe going on — the kind beloved by hipsters, tech nerds, and the many people that can be described as both. You often find bearded, tattooed, denim-clad men behind the counter, painstakingly drawing you a foam heart.

Blue Bottle’s popularity and growth opportunities attracted a $20 million investment in October 2012 to expand its cafes around the country. The vision is to turn it into a national chain that “doesn’t suck.”

Existing investors Index Ventures, Google Ventures, and True Ventures participated in this round, along with a glittering assortment of angel investors, including Instagram’s Kevin Systrom, Twitter cofounder and Medium founder Ev Williams, Chris Sacca, Matt Mullenweg, Caterina Fake, Joanne Wilson, Lars Dalgaard, and skateboard legend Tony Hawk.

This is not the only example of tech investors backing consumer goods. Conrad is also an investor in Stoneyfield Farms yogurt, Sequoia invested in grilled cheese chain The Melt, and Twitter cofounder and Square founder Jack Dorsey invested in Sightglass, which is similar to Blue Bottle.

High growth opportunities are high growth opportunities.

Blue Bottle is based in Oakland, Calif.

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