How the tech elite's addiction to fancy coffee turned Blue Bottle into a tech startup

Blue Bottle's fancy coffee shops have long been a favorite haunt of Silicon Valley's movers and shakers.

So at some point, a who's who of prominent venture capitalists decided that since they were pouring money into everything else, they might as well fund their preferred baristas too. Never mind that they had little experience in the coffee business.

That act of "entrepreneurial camaraderie," as one investor described it to TechCrunch, set Blue Bottle on the cash-paved path that ultimately led to its reported $500 million sale to Nestle this week.

"They went from a cottage, taste-good artisan activity to a much more professionalized activity," one early investor told the Financial Times on Thursday. "That’s the huge change in the five years since we invested."

Blue Bottle isn't the only Bay Area coffee chain to benefit from the artisanal caffeine craze among tech's monied elite. You don't even have to look far to find evidence.

The curb outside Blue Bottle's shop in San Francisco's financial district is frequented by a Philz coffee truck, another formerly local institution that's raised a total of $75 million from another set of major funds and celebrities like Jonah Hill, Snoop Dogg, and Jamie Kennedy. A few blocks from Twitter's headquarters in the city's tech hub, former Blue Bottle employees operate a coffee shop called Sightglass with funding from Twitter and Square CEO Jack Dorsey.

Butter-infused Bulletproof coffee has raised $28 million in venture capital to build new shops, and the owners of a Bay Area coffee shop called Four Barrels told the San Francisco Chronicle that they are approached weekly by investors.

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A coffee shop might look a little odd next to companies like Snapchat, Slack, or Uber on a portfolio sheet. But at a time when everything from vegan mayonnaise to condoms in the mail are considered tech startups, the defining line seems to often come down to what investors think is a good idea.

And while they might profess a cold, calculating eye for business potential, tech investors are humans too, and their own personal tastes undeniably shape the flow of tech money in the country's startup capital.

A venture capital group bought the Golden State Warriors in part because many of the investors are basketball fans. Well-funded non-tech Silicon Valley oddities like Soylent's nutrient mush, AllBird's knit wool loafers, Nootropix's supposed brain supplements all locked down funding on the strength of their popularity in the tech community.

This tendency is also the source of a common complaint about the industry: its output seems biased toward products for wealthy metropolitan people like its own cloistered decision-makers. When Silicon Valley decides to launch their own favored fads and fashions into national consumer businesses, they are in some sense projecting their taste out on the rest of the country.

In some cases, the good grace of venture capitalists has pushed existing chains to think more like tech companies. Blue Bottle now offers a subscription service that delivers freshly roasted beans to customers' doors. Philz CEO Jacob Jaber started describing coffee shop tables as "the original social network."

The millions in funding have also allowed Blue Bottle and Philz to start to balloon into countrywide operations after years of serving only the Bay Area.

Bold attempts to apply tech principles to totally unfamiliar businesses don't always have a happy ending, though.

A grilled cheese shop called The Melt, for instance, started as the second act of early Silicon Valley bigshot Jonathan Kaplan, who claimed to have "developed a set of technology that allows us to make the perfect grilled cheese." Funded by top venture firm Sequoia Capital, the sandwich startup was to grow to 500 shops in half a decade, he boasted in 2011.

But despite help from NASA consultants, a Michelin-starred chef, and the renowned inventor of the Apple Store, The Melt only ever made it to 18 restaurants.

In the years since its founding it's stumbled in the face of the usual challenges of running a fast-casual eatery that the tech talent was unequipped to address, as chronicled at length by Backchannel.

In those cases, startup-ification takes a bit more than a good taste in coffee.