At the height of the COVID pandemic, opening a coffee shop might not sound like a wise business decision. Yet, Blank Street coffee did just that, and now with 14 micro-outlets, raised a whopping $25m in series A funding from a consortium of Venture Capital investors.
Series A funding is the first major funding round after seed or angel investment and is typically made by a Venture Capital firm that see an opportunity for fast growth and a 10x or more return on investment over five years.
The funding values the business at $98m, and the company is already seeking to take advantage of a hungry investor appetite, to do another raise, although details of this are not yet available.
Two friends, Vinay Menda and Issam Freiha who immigrated to the U.S. to attend college, and co-founded a venture capital company to invest in fast-expanding food businesses in Asia, determined through this research that New York, representing a greenfield opportunity, would be an ideal place to mirror the successful strategies they had observed in Asia.
When the founders were students, they chose coffee shops based on quality versus affordability. They wanted to use small-footprint stores to save costs while still serving speciality coffee at an affordable price.
When asked about their market position, they stated that their coffee “is 20-30% cheaper than Starbucks, and roughly the same as Dunkin’s,”
I grew up in a culture where we mostly drank coffee at home, so it was a revelation to come to NYC, one of the most caffeine-saturated cities on earth, and see coffee vendors on every street corner.
I noticed my friends going to Starbucks for the convenience, Dunkin’ for the price point, and specialty coffee shops for the quality. But as students, we couldn’t afford a $6 cappuccino every day. What we needed was a one-stop shop: a place to get exceptional coffee at an accessible price point, crafted with speed and efficiency.co-founder Issam Freiha
Part of their expansion strategy is partnering with small local retailers who can accommodate their coffee carts or micro-outlets, stating that adding their speciality coffee will ‘elevate’ those local businesses.
They achieve this by providing the infrastructure and software, including sophisticated analytics that small businesses would struggle to otherwise do themselves.
The founders facilitated the buying experience through an app that allows customers to order ahead, and some of the cash raised will go into further development.
The investment will also fuel a new “Powered by Blank Street” wholesale partnership program that helps local vendors sell in new neighborhoods without paying upfront costs.