Philz Coffee Raises $15M to Expand Nationwide | Hacker News Reader

Philz Coffee Raises $15M to Expand Nationwide

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57 pointskyleowens1046 comments

I moved from Seattle to San Francisco a couple years ago, asked Yelp for the best coffee and was sent to Philz.

I experienced some culture shock learning that San Francisco's top coffee shop didn't serve espresso. The idea of a coffee shop without an espresso machine had never crossed my mind. I left confused, with a scalding hot pour over, and moved back to Seattle soon afterward.

Blue Bottle and Four Barrel Coffee were both excellent.

It's funny you say 'scalding'. Part of why I love Philz is they serve it the perfect temperature every single time. I get a cup in my hand and can start drinking immediately. At Starbucks I need to ask for ice to cool it down.

I was scoffed at during my first Philz trip for mentioning espresso. Then the followup to the scoffing was how it was abuse to the beans and that "fake coffee crap" of buring beans into liquid was vile. I'll just summarize this anecdote and say that these highly opinionated business models are how Apples type brand loyalties are created and enforced, as awkward as it can feel.

It bothered me too. I love espresso too much.

I'm surprised that I haven't seen this opinion expressed in the comments so far, so I'll just say it - I think Philz coffee tastes bad. They can't keep that many different kind of beans all fresh. They tend to overextract the coffee, making it bitter. Their claim-to-fame is coffee-based drinks, like mojitos, which don't really showcase quality coffee.

They get the brand right, but the beans are just not up-to-par. I hesitate to call them third-wave coffee because they don't push whole bean sales (at least here in SF), they don't have multiple brewing methods, and their brewing seems inconsistent.

I think that Blue Bottle is much better positioned to be a Starbucks competitor because of their excellent roasting, quality products besides coffee (e.g. Tcho chocolate, foods), and high-end feel that justifies the higher cost.

It's definitely a different taste than blue bottle/sightglass/stumptown -- darker, more old school. Somewhere in between a modern "overtones of fig with hints of wet grass and fog" or whatever and reallllly old-school burned-mud served to you by a wheezing italian dude.

But I think its pretty damn tasty, in it's own way. (I also like the lack of a "high-end" feel...it's friendly + funky, and reminds me of the hippie-run shops of my childhood in Oregon.)

I agree, but I also think Starbucks tastes pretty bad. Philz seems to have a well defined market, and their customers seem really devoted. Perhaps they'll be successful.

have you sampled a variety of branches?

Yes, four of them

phil on philz

Definitely HN newsworthy, especially since YC has backed coffee startups.

I personally think Philz is going to give third-wave coffee a run for their money. Definitely as approachable as Starbucks and easily replicable. The problem with third-wave is that the total applicable clientele for a company like Blue Bottle is far and few between. Even after saturating every corner of SF, NYC, LA, Chicago, it's going to be hard for BB to come up with hundreds of millions of revenue and retain quality (Blue Bottle raised $100M in cash). Blue Bottle has a "luxury good" perception.

Philz is unpretentious, reliable, and love in a 600-calorie cup of coffee, cream, and sugar. It's a formula that so far has proven to work in America. Third-wave coffee is excellent, but isn't as accessible as Starbucks. Philz, on the other hand, doesn't attempt to sell the virtues of high-brow single-origin coffee. They, however, make a really good cup of coffee, and reliably do at each location. I definitely believe it is repeatable even at scale because many Philz drinks rely on mint leaves, cream, and sugar--flavors that are the "MSG" of coffee.

User experience is inclusive and welcoming--although some locations are more fun than others (visit the 24th if you haven't and it will become abundantly clear why there are Philz phanatics). I love coffee shops like Four Barrel, the Mill, Saint Frank's--but those shops exude refinement and appear a little out of reach, even if priced similarly to Starbucks. I would hypothesize you could put a Philz in the Midwest and it would do well.

As of right now, every coffee shop compared to Starbucks pales in comparison. Starbucks boasts $70B in market cap. If anyone has a good shot of picking a fight with Starbucks, it just might be Philz.

> 600-calorie cup of coffee, cream, and sugar

Yikes you're not selling me on the company with that statement. I don't know, I think third wave coffee houses are doing a pretty good job of training people that sugary, creamy coffees are crap.

In the long run I think that people are trending toward healthy, high quality, authentic experiences in many areas, but especially food. I'm not sure where 600 calorie coffees fit into that.

I was just being blunt about the caloric intake :) Starbucks and Philz probably won't advertise their calories. In fact, the barista that I attempted to prod for calorie count pointed to his belly and exclaimed jokingly, "Do I look like I count my calories?" They might not sell to you, but they'll sell to the rest of America that just want something over the top to make a Monday morning better. #fatmeansflavor

Starbucks creamy drinks are also roughly the same amount. And the reason Philz will do well in America is that Americans gravitate towards the creamy and sugary and carby (Anheuser Busch, Nestle, Hershey). They even got sustainable San Franciscans on board! While some Americans care about eating and drinking healthy, most Americans will happily continue ordering a 600-calorie cup of morning joe, contributing to Starbucks' $15B revenue.

American dollars always go to the fat and sugary flavors. While a lot of fine dining artist-chefs will disagree with the data, burgers and fries sell.

Ok I'm sold on the idea that Philz has the means to compete against Starbucks in malls across America, but I'm less convinced that third-wave coffee is going to be impacted in its core urban market.

When you said that Philz would give "third-wave coffee a run for their money" did you more mean that you're skeptical that Blue Bottle will be able to take their brand national? I agree with that, that that could be hard. I think their best bet for non-urban areas would probably be to closely follow areas where Whole Foods has made inroads. Regarding expansion to urban areas, I wonder if too much good real estate for third wave coffee places is already taken up by local independents.

From what I've seen SF has surprisingly few third wave coffee shops. In Vancouver there are often several Blue Bottle quality independent coffee shops in each neighbourhood. When I saw that Blue Bottle got funding I wondered how successful they'd be in expanding to areas with well established locals. There's really not that much that they do different from others.

Yeah--I think it'll be hard for third-wave coffee shops to scale. The last number I heard about Blue Bottle was that they were making about $20M. That's a drop in the bucket compared to Starbucks' $15B, and Blue Bottle is very well known.

Truth be told, Blue Bottle's coffee and espresso quality has suffered from expansion.

I think big cities contribute to plenty of revenue, but Starbucks has built itself as common as a convenience store. That's really hard to compete, even with third-wave and Philz types. Even Tim Horton's revenue is $3B!

Hit me up next time you're in San Francisco--I don't think you got a very good tour of coffee here :) Aron Tzimas documents latte art around SF on his Instagram.

Pretty sure Starbucks shows the calory count for their drinks right on the board with the prices.

gah...I lost my appetite. central obesity is no joke http://en.wikipedia.org/wiki/Abdominal_obesity

There is no need to sell the milky, creamy, calorie shotgun of a drink, the majority of demand is for these. In fact Starbucks built an empire off of it(well validated) and whoever competes with Starbucks should have a comparable product.

I also agree with your trending statement with support from the rise of things like BulletProof Coffee(with grass fed butter) and high end pure coffee options which are growing in popularity versus the espresso + tons of sugar/cream/etc toppings.

What is that you see as unwelcoming about Blue Bottle?

I don't think I said Blue Bottle was unwelcoming. I just think it will be hard for them to scale like Starbucks without becoming Starbucks. Philz has a formula that is different from Starbucks but just might take massive market share from Starbucks.

I love Philz coffee to death, but I don't understand why this is treated like Silicon Valley start-up news. It's simply a great story of a good coffee shop succeeding and expanding its brand and locations.

It's a better business story than the vast majority of startups that come out of the Valley.

Why wouldn't it be? Hell I think a lot of the interesting startups out there don't employ programmers. "Hackers" have a lot of tools at their disposal beyond writing software.. so it seems rather pertinent to me.

Its funny how things we taken for granted in third world countries like India are becoming startups here:

In India, you can call up some neighbourhood grocer and he will deliver goods in 5 min. The best approximation for it in US is Instacart In India, you can go to a tailor, give him cloth, ask him to measure you. He will make a custom made shirt in 24 hours to 3 days. Here, its a YC startup Again in India, you go to ANY restaurant, they will give you coffee mixed with milk. Here, it has become a startup. Almost no one in India I know drinks coffee or tea without milk.

Different economics I guess

Yes that's mainly possible because there's a massive imbalance between the poor and the rich i.e. there's barely a middle class unlike what we have in the US (for now). I'm also going to guess that manufacturing is almost non-existent as well for that to happen

I'm not totally sure what this has to do with Philz Coffee though

The Indian middle class was estimated to be 250 million people in 2007, by McKinsey & Company.

Source: http://www.mckinsey.com/Insights/MGI/In_the_news/Next_big_sp...

What's your point? That's only 22% of the population. In the US the middle class forms about 60% of the population.

They have bunch of blends to choose from, and serve carefully-made single-drip "Third-wave" coffees. The order process is a bit chaotic, which makes the whole thing seem nice and quaint. Plus, they do little things like aerate the coffee and leave the right room for milk and sugar.

Personally, I'd prefer a nice single-origin coffee to their blends, but it definitely beats a Starbucks.

This isn't the first time Philz has received VC; according to Wikipedia, Summit invested in 2013.

Philz is the only shop to offer Turkish coffee. This is one of the oldest and most delicious coffee traditions completely ignored by mainstream US coffee drinkers.

Philz is my defacto office as well. I would invest in Philz and have been wondering about their growth plans (now we know!). Philz found a formula that creates high quality coffee in a repeatable way. Been expecting them to grow quite a bit over the next few years.

Well, they do make a decent cup of coffee, but I would wager that what made them special (for me) will be tougher to pull off at scale. Every time I walked into the Philz on the way to the office, the (same) guy behind the counter (a) remembered me, and (b) asked me what I didn't like about my last coffee.

And then, using some sort of caffeine-science, he managed to figure out the right combination of blend, milk, and sugar to produce something truly wonderful.

Doing that at scale will be tough. Do-able with technology to be sure, but the human element made it very special.

I like the coffee at philz, but the pour over coffee is too damn strong! they need to grind it more coursely or at least have the option to

you could always go for a darker roast, which generally has less caffeine :)

Unless he's talking about flavor, in which case a lighter roast would be better, albeit more caffeinated.

Cringe, is my only thought

A bit odd to see a coffee shop's funding on TC. I guess because its a valley company? A tech scene favorite? Based on the article it seems the draw is that they add milk and sugar for you? Is the coffee that bad that you have to drowned out the taste with fluff.

A couple years ago, Dunkin Donuts switched to their... barista? adding the cream/sugar for you. You just said either yes or no, and they've figured out the apparently right amount for the general populace (which is a little sweet for me but not as sweet as you'd expect from a donut shop).

They figured that replacing the station with all the add-ins was a faster and better experience for customer and employee. Can't disagree, since I went to Dunkin for the convenience. I don't know how big the market is for coffee with personal attention (the taste snobs seem to just make their own), but perhaps Philz is laying down the tracks for all sorts of motherly-service-as-a-product to bank the SF zeitgeist.

Hey, whatever happened to that grilled cheese startup?

Grilled cheese startup? Now I'm interested.

melt

Horton's has been doing this for years (adding in the fluff for you). I just don't get why people upvote this stuff.

No, the coffee is quite good. Their roasts are unlike anything at Starbucks or Peet's or Blue Bottle. They are distinctive and tasty. There's a definite Turkish spin to the flavor of most of their roasts. That's the best I can describe it.

They ask if you would like milk or sugar added. After they serve it to you, the person who prepared your cup waits for you to taste it and asks how it is. They'll make a cup of coffee exactly how you like it. It's somewhat quaint, but it's also part of their trademark service. Their default ratios for additives are well chosen. I don't normally take cream in my coffee but I usually do at Phil'z.

There should be another coffee startup that would ask you if they should automatically post the picture of the coffee on my Instagram. Now thats a time saver.

Didn't Blue Bottle Coffee raise money from VCs?

Google Ventures invested in Blue Bottle. Their (excellent!) designers-in-residence showcase the work they did to help:

http://www.gv.com/lib/behind-the-scenes-with-blue-bottle-and...

No, they actually do have really good coffee. First coffee shop where I could taste the difference between each of the beans/blends.

it's on HN because Philz is basically a math problem: mint mojito = worldwide domination. QED.

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