9 ways one VC is disrupting the entire coffee industry
Written by Alan Clayton, SOSV
Firstly published on SOSV Medium
Over $1B was invested in the coffee industry last year, and just 15 months ago Nestle spent over $400M to get their hands on the Blue Bottle Coffee chain. But in an industry still relying on 25 million small producers to provide 80% of the beans, and more than 8 middlemen to get those beans to your cup, are there other ways to grind out a tasty return by investing less, but smarter, money?
There is opportunity in every link of the coffee value chain to improve not just the coffee and the investor returns, but more importantly the livelihoods of growers and others who remain impotent in the whole process. The international Fairtrade organization has been guaranteeing better returns for growers for 30 years, and Starbucks surprisingly buys more coffee on FT terms than any other coffee chain.
Recently I’ve seen a plethora of coffee investments at firsthand, every one of which graduated from an SOSV accelerator program. Our first investment is Coffee Exchange — an online coffee trading platform connecting coffee beans in Kenya, Ecuador, and Rwanda with coffee chains in China. They’re a graduate of the latest Chinaccelerator program.
But even before you harvest the beans, there is the issue of maintaining the best soil for the job. And whilst there are many startups in this space, our second investment is Nordetect (a HAX accelerator graduate) providing soil nutrient analysis in a box, from their base in Scandinavia.
Cultovo represents the third opportunity, providing crop insurers with uniquely combined satellite and ground data to improve risk analysis and reduce unnecessary farmer claims in the industry. Currently running trials with partners like NASA, they recently emerged from the Food-X program in New York.
Fourth up is Scantrust, using blockchain verification and copyproof QR codes to provide much sought-after transparency along the road to the consumer. The company has raised $5.5M in just a couple of years, including $4M from SVC. Scantrust is also a graduate from the Chinaccelerator program.
Biotech investors are not shy of the coffee industry either, as our fifth investment demonstrates. Afineur are currently raising $2M for their custom fermentation technology, developed at RebelBio, which unlocks a lot more than just the usual flavours from the beans. Their coffee beans are “less acidic and more fruity and chocolatey than you can imagine” (said an enthusiastic spokesperson for the company).
Further along the chain we see the final drinkable product. Bizzy Coffee launched organic cold brew shots that are #1 on Amazon, and on shelf in 1000+ grocery stores across the USA, generating seven figure revenues this year. Another graduate of Food-X.
The value chain wouldn’t be complete without a coffee machine for the home, so we saved Orenda until near last. Our seventh investment has a patented brew mechanism that delivers your personalised beverage. It’s app remembers your preference for strength, bitterness, caffeine and more, so you can go back time after time for immediate satisfaction. After raising $230,000 on Kickstarter and graduating from HAX, the machine has just shipped to backers, including inquisitive international retailers.
So now that the coffee has reached the customer, you’re may be wondering: What else is left to disrupt in this value chain? Well, if you run an independent coffee shop and can’t offer the same loyalty schemes, rewards, and payment options as Starbucks, you would’ve loved Crema, our penultimate investment. Born in Montreal and a 2016 graduate of Food-X, this app allowed consumers to be loyal to their favourite indie coffee shop at work, and at home, for everyone to get the benefits. It’s the only one of our nine investments that no longer thrives, but I mention it anyway because it’s an idea that someone else will copy, and because the founders remain very investable entrepreneurs.
The last of our nine investments solves the problem of when your favourite coffee is not in stock at the grocery store. Simbe builds robots that monitor empty spaces on retail shelves, managing stock replenishment and tracking promotional campaigns, so your coffee is always where you need it. Simbe has raised funding from Anorak Ventures, Comet Labs, Riot Ventures, Presence Capital and others. PS They just announced a non coffee related partnership with Decathlon.
With the coffee industry being disrupted on every level, from the soil to the store, there is quite the buzz around this industry, and the loyalty points are already paying off.