Episode 46: Blue Bottle Coffee

[0] It can't be turtles all the way down.

[1] There has to be a pool at the bottom.

[2] Oh, man. I'm using that as the teaser quote for this episode.

[3] Welcome back to episode 46 of Acquired, the podcast about technology acquisitions and IPOs.

[4] I'm Ben Gilbert.

[5] I'm David Rosenthal.

[6] And we are your hosts.

[7] Today we are covering an acquisition.

[8] that the tech audience cares a lot about, even though it's not really a tech company.

[9] Nestle's acquisition of Blue Bottle.

[10] Shockwaves have gone through Silicon Valley.

[11] Yes, yes.

[12] There have been lines around the block that are forming their own lines around the block just to hear the news.

[13] So great.

[14] Where will the VCs and entrepreneurs congregate now?

[15] Yeah, I mean, What's the sort of like islandish one?

[16] Fills.

[17] Fills.

[18] Fills.

[19] Fourth wave of coffee.

[20] Fourth wave.

[21] We'll get into it.

[22] We will.

[23] We will.

[24] Okay, listeners, now is a great time to thank one of our big partners here at Acquired, ServiceNow.

[25] Yes.

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[40] And when you get in touch, just tell them Ben and David sent you.

[41] Thanks, ServiceNow.

[42] All right.

[43] Well, David, that's all I've got for pre -show.

[44] All right.

[45] Well, before we dive in, I was thinking about this episode.

[46] And it's kind of funny.

[47] We've got these series of like mini series here on Acquired.

[48] We've done, we did the Disney.

[49] trifecta and then the fourth of course with with Bamtec we've done sports we did the LA Clippers that was that was out there but but fun we've done a bunch of gaming episodes and now we've got our second coffee episode on the heels of the Starbucks episode so well this is a this is a you know primarily Seattle dominant podcast so we do have to do multiple coffee episodes.

[50] We'll have to do the Seahawks next.

[51] Yeah, yeah.

[52] So coffee, we talked quite a bit in the Starbucks episode with Dan Levitan about waves of coffee and the parallels between the coffee world and the tech world.

[53] And we alluded to third wave coffee, which really is kind of the reaction to Starbucks.

[54] Starbucks being second wave, if the first wave was kind of Fulgers and Maxwell House and brew at home coffee, the second wave being Starbucks, an experience, a place you go to.

[55] The third wave is really all about the quality of the coffee.

[56] People, you know, it is, it is really the origin of hipsterdom.

[57] Starbucks sucks.

[58] It's super corporate.

[59] We're going to focus on the artisanal quality of...

[60] It's burnt.

[61] It's dark.

[62] It's, you know, no care put into it.

[63] It's a factory.

[64] Everything is made exactly the same.

[65] You know, call it operationally efficient and, you know, praise their business model or, you know, hate on it because it's systematized.

[66] But it's definitely, definitely a reaction to the mass market success of Starbucks.

[67] Yeah.

[68] And so third wave places like a counterculture was one of the first in Durham, Durham, North Carolina, Stumptown, down in Portland.

[69] which is now owned by Pete's, interestingly, or intelligentsia, which I think started in Chicago, is also now a majority owned by Pete's, Cafe Vita and Seattle, all these folks.

[70] They really focus on the drink itself.

[71] And probably arguably, nobody focused more on the drink than Blue Bottle.

[72] So let's dive into Blue Bottle.

[73] So it was founded by a very interesting, interesting guy, named James Freeman and highly recommend we'll link to this in the show notes but he did the Stanford entrepreneurial thought leader talk he gave a talk there last year really fun to listen to he basically let's just say he starts it with an analogy to Merce Cunningham and John Cage the sort of avant -garde you know modern dance choreographer Merce Cunningham and his partner John Cage who is an avant -card musician and their work together as an analogy for his whole talk.

[74] And then he goes on to quote Sartz and Proust, very philosophical.

[75] Honestly, David, one of my favorite things about this show is learning about the insane and talented and driven people that start these companies.

[76] Like, it is, there are no normal people that start enormous companies.

[77] No. And James is no exception.

[78] He, unlike most of the founders we talk about, He's definitely not an engineer, not even remotely connected with the tech world, except for the fact that he lived in the Bay Area.

[79] He was a freelance clarinetist, a classical musician who played the clarinet.

[80] And he did that for until his mid -30s.

[81] And then he kind of woke up one day and he realized, you know, I'm never going to be the best clarinetist.

[82] And maybe I should find something else to do with my life.

[83] life and and and what else could he do he turns out he had this side hobby of roasting his own coffee beans in his oven at home so he would he would buy beans and he would roast them at home in his kitchen in his oven apparently made lots of smoke and his wife at the time was not a fan of this hobby but he he made these these beans and he would drink the coffee himself and he would give it to his friends and people loved it and he thought well, maybe I'll turn to coffee for my life.

[84] So he started in the early 2000s.

[85] He quits the music world.

[86] And he lived in, I don't know if he actually lived in Oakland or if he started the company Oakland.

[87] He was living in the Bay Area.

[88] Starts Blue Bottle in Oakland.

[89] And the original business plan is that he's going to keep doing what he's doing and deliver beans to people's houses, these great beans that he's roasted, you know, in his kitchen the day before will deliver him to his friend's houses.

[90] So it kind of sounds like an on -demand startup.

[91] Truly.

[92] Truly.

[93] And hilariously, you know, that the part of the business, fast forward a little bit that they operate now.

[94] That's a coffee delivery service.

[95] They acquired another company to do that called Tonks when they sort of moved into a bit of a different sector.

[96] Yep.

[97] So he's sort of, the company is back to its, to its origins now with that acquisition.

[98] later but he he does that for a little while and then and then they kind of realize like probably not going to become a really large business if he's roasting you know roasting coffee in his own kitchen and it's hilarious following the parallel to to Starbucks like both started with this model of beans only and you know selling those and focusing exactly on on that and then realizing boy there's this whole other you know retail coffee experience to be created yeah exactly and and Freeman sort of similar to to the Starbucks story, where it wasn't the Starbucks founders who realized that there was this retail opportunity.

[99] It was Howard Schultz.

[100] Freeman himself kind of stumbles into it.

[101] So in 2003, he signs a lease for a roastery so he can get it out of his kitchen and start roasting in a commercial space.

[102] And then it's not until 2005 that he actually opens up his first retail location, which is in Hayes Valley in San Francisco.

[103] And it's in a friend's garage.

[104] So So he has a friend who loves his coffee, and his friend has this garage on a little side street in Hayes, and says, why don't you come open up a kiosk and actually, instead of just selling beans, sell coffee there.

[105] James is excited about this, and he's sort of approached to coffee, even though the name Blue Bottle comes from Blue Bottle Coffee in Vienna, which was one of Europe's first coffee houses.

[106] he's actually more influenced by the sort of Japanese style of coffee.

[107] So whereas Howard Schultz was influenced by his time in Italy and the Italian coffee houses, the whole approach at Blue Bottle is very, very Japanese -centric.

[108] And the Japanese approach to coffee is very third wave.

[109] It's all about the very, very meticulously crafted, perfect cup of coffee.

[110] And James talks about this in his ETL talk at Stanford, that part of his inspiration, is this coffee shop in Japan where the first thing you do that the barista does when when you order a cup of coffee is they have a wall with all these cups on it and and the brista he or she will go look at the wall and decide which cup they're all different is perfect for you wow and uh and so that's the inspiration for blue bottle and if listeners if you've been to blue bottle if you live in the bay area i'm sure you have or travel there often this is the the anti Starbucks.

[111] It is very austere.

[112] There is very little in the locations except for the coffee.

[113] There's no Wi -Fi.

[114] There are no power outlets.

[115] They do have some food, but very little.

[116] It is truly all about the coffee.

[117] This idea of the cups, James also talks about much later in the company's history.

[118] They had cups specifically made for a blue bottle.

[119] These are ceramic, you know, to stay cups they don't like doing to go cups of course that are the cups are perfectly sized they're not perfectly round but they are sized exactly for the size drink that that you get a blue bottle there no sizes you just get you know you order whatever it is you order and it's one size David I can't take it it's so hipster the synergies with the tech community are just too perfect so you pay software and engineer is more money and more disposable income and they want to be better than everyone else and they want to buy more pretentious things they love coffee they need coffee to be productive I know I'll sell them really expensive coffee that they don't have to think about because they're thinking about writing the code so we do the thinking for them but it's really good exactly exactly it's like the steve jobs one outfit reduced cognitive load thing exactly I mean that is that is a blue bottle which is very different from Phil's, which we'll come back to in a minute.

[120] Phil's is the competing Bay Area chain.

[121] I should say, like, blue bottle is freaking amazingly good.

[122] The coffee is really good.

[123] I'll rip on it for, like, this whole episode, but, you know, it's an unbelievable product.

[124] It really is.

[125] I mean, you can't, you know, be from Seattle and not appreciate good coffee, and it is very good coffee.

[126] So after the kiosk, the first very little store in Hayes opens up.

[127] It really starts to take off.

[128] It spreads kind of by word of mouth.

[129] They start to open more locations in the Bay Area.

[130] Then they go to New York City.

[131] They go to Los Angeles.

[132] And then they go to Tokyo, to Japan.

[133] And the sort of inspiration for all of it.

[134] And so there's stores in all of these cities now.

[135] But they start to grow fairly rapidly.

[136] And in 2008, so this was a lot of.

[137] is very early in kind of the rise of sort of the modern startup and VC industry.

[138] I mean, arguably, even maybe I would say before lots of capital, the sort of modern series A and beyond type startup, they raise a venture round and they raise $5 million from a firm called Colberg Ventures and Chris Saka and lowercase capital.

[139] This is just when Chris is getting going.

[140] That dude gets into everything.

[141] unfreaking believable the nose on Chris Sokha to find those early stage.

[142] Amazing.

[143] It was a $4 million fund.

[144] It was so tiny by today's standards.

[145] But he was in everything, Blue Bottle, Uber, Twitter, many, many more.

[146] And then bought up a bunch more of Twitter that he could on the second market.

[147] So $5 million round from Colberg and lowercase in 2008.

[148] Then a few years later, in 2012, they raised a $20 million round.

[149] led by Index Ventures and Google Ventures, and then a whole bunch of other individuals.

[150] So Kevin Sestrum, a number of other tech CEOs, Tony Hawk, the skateboarding legend, invests.

[151] I mean, this is the thing.

[152] I think we might have talked about this a little bit in the Starbucks episode.

[153] You're literally selling drugs to your customers.

[154] Oh, my God.

[155] I was doing some, one of my favorite things to do research for this podcast is to go look at all the Quora responses to reactions around the deal and sort of tease out what I think is a great point and, you know, things I want to bring up on the show.

[156] And there was one really great quote that I was going to wait to say later, but I think, I think is worth bringing up now from Daniel James on Kora in this $20 million round.

[157] The question was something around like, you know, why is blue bottle getting all this investment?

[158] What are the VCC?

[159] And he goes, coffee is a legal, addictive, unregulated, psychoactive drug with cheap ingredients, premium pricing, and a huge worldwide growth market.

[160] Blue Bottle is a quality brand with a good team and a strong history of well -managed growth.

[161] To me, this seems much better than a VC bet with many consumer internet companies.

[162] I know, and it's so funny.

[163] I mean, I actually think, and I remember this round, the 2012 round, nobody really paid attention to the 2008 one, but the 2012 round was like, you know, it was sort of similar when we were starting rover and people are like this is a sign of the apocalypse like Airbnb for dogs like who's going to use that it was the same thing then it was like what are these BCs thinking like they're investing in a coffee company and to be clear like there was never any even pretense that this was like going to be an internet company it was like you know James and blue by they're like no this is the coffee company we make coffee we have stores people come they buy the coffee they drink it like there's you know we have a website like reduce cogs and and like lower or variable costs.

[164] Like, nope, nope, none of that.

[165] No, no. This is a coffee company.

[166] And people are like, why are these VCs investing in this?

[167] Turns out they did well, and particularly that round, did very well.

[168] But we'll come back to all that.

[169] It is worth pointing out, like this super interesting, near self -fulfilling prophecy of this.

[170] The sort of Twitter family and Blue Bottle was, was joined at the hip very early, and they got a lot of sort of, because they were both, at least very early on, incredibly product -focused companies with, like, sort of super tasteful visionary founders, like, they attracted the same sort of people, and they magnified each other.

[171] So you look at, like, site glass that was a couple of early Blue Bottle folks that left to start their own thing, like they co -founded that with Jack Dorsey, and was an early pilot for using Square at that location.

[172] And you see the types of people that were attracted to Blue Bottle as a product and as a lifestyle and put money into it.

[173] I mean, it is like they just won over the most valuable segment as customers and then brought them on as investors.

[174] Yeah.

[175] And this is something.

[176] I mean, we've talked about this on this show before.

[177] But like, especially if you don't live in the Bay Area or in Seattle or L .A. or, you know, you're not kind of in the ecosystem.

[178] it's easy to forget, you know, you read about these companies in the press, they become so valuable, they're almost like these celebrities.

[179] Like, these are real people and these companies exist in real locations.

[180] So I don't know if it was the second, but the first sort of canonical blue bottle store, you know, larger than the kiosk that was in Hayes, was in Mint Plaza.

[181] And Mint Plaza is like two blocks away from the Twitter building.

[182] So like, where do all the Twitter employees go when they want copy?

[183] like they go to the blue bottle in mint plaza and it's just like these ecosystems like everybody's you know everybody's right there and and that's how these things sort of feed on one another yeah i've thought about this as like a customer acquisition strategy of um if you have a company and you want people at another company to buy it for b to be purposes like buy all the facebook ads of the employees at that company so that you can like get get their attention you know even And even outside of typical channels, like if you aren't right next to the Twitter building, but you're interested in doing, you know, attracting Twitter people, you know, could you, could you target them all over the place digitally as well as having a physical location there?

[184] Because I feel like while Blue Bottle sort of pioneered that, I feel like that's no longer novel to, you know, put something right outside of a company that, anyway, to put a physical location there.

[185] It's interesting.

[186] That growth hacking tactic doesn't work anymore.

[187] Could you be digitally close?

[188] Yeah.

[189] Yeah, seriously.

[190] But it definitely worked for Blue Bottle.

[191] And I think Bistone was an investor.

[192] I don't know if F. Williams was.

[193] I don't think, you know, Jack was obviously an investor in Sight Glass, a competitor.

[194] But it worked.

[195] So 2014, they then raise another $25 million.

[196] And then in 2015, they raised $75 million.

[197] from Fidelity, and that was like, wow, you know, this is like a lot of money from like a real, you know, public markets investor.

[198] And then they keep expanding, you know, within those cities that I mentioned before, but grow to, you know, over 30 stores throughout, throughout both the country and in Japan.

[199] And then in surprise announcement, uh, in the middle of September and September 14th, 2017, it is reported that Nestle, comes in and the large conglomerate and buys out a majority stake in the company for reported $425 million.

[200] We don't know the exact number, but it's been pretty widely reported that they paid about $425 million.

[201] And that was for 68 % of the company.

[202] So they bought out the investors and James and the rest of the management team are keeping their stake.

[203] So they keep 32 % of the company its own separate board.

[204] but all the investors are bought out.

[205] So the valuation on the company is $625 million, assuming that the $425 million figure is correct.

[206] And here we are.

[207] Pretty amazing.

[208] I mean, I wonder, the first thing that comes to mind is did the founders keep all their shares?

[209] Was there a little bit of a secondary there where they took money off the table?

[210] They had to have taken something, right?

[211] Like, they had to...

[212] I don't know for sure, but they may not have.

[213] There had been some secondaries along the way.

[214] So I believe some of the money from some of the later rounds was secondary sales that the founders and management team were taking money off the table.

[215] So I actually don't know in this case whether Nestle paid out anything to any of the employees.

[216] Yeah.

[217] Well, I will say, you know, as I, for lots and lots of reasons, believe that full acquisitions are better than these sort of majority buyouts.

[218] particularly for startups like this.

[219] I mean, there are 40 -store retail location, but early -ish mid -stage company.

[220] But if you're going to do it in this manner where you're not acquiring the entire company, I love the idea of it running independently and the founders still having a ton of skin in the game to make this thing grow in valuation.

[221] There's sort of an interesting thing of like it has to stay a separate company.

[222] Like think about this.

[223] how, if you're those founders, do you think about how your shares get valued now?

[224] Like, there's not really a competitive market to do the next round.

[225] It's not going to, like, there's not a market to value your company.

[226] And it's certainly not anywhere near getting valued on a reasonable sort of price to earnings ratio.

[227] So are you hoping that at some point Nestle just decides to buy you out?

[228] Is it actually in their best interest to do that?

[229] I love the incentive.

[230] I'm curious on the mechanics of how that works.

[231] I think you're hitting on all the right questions here, Ben.

[232] I think part of the reason this happened as it did is, you know, I have to wonder.

[233] I don't know anybody at Blue Battle, you know, personally.

[234] But Freeman and Brian Mehan, who's the CEO, he came in and took over his CEO a number of years ago.

[235] But Freeman's still very, very involved.

[236] they both were very vocal about saying they never wanted to go public.

[237] They didn't think being public made sense for a blue bottle as a company, and it also just was something they weren't interested in.

[238] And yet the company continued to grow, but at the same time, they'd raised all this money.

[239] And in particular, in some of these later rounds, you know, I'm bringing in folks like Fidelity.

[240] Like, fidelity is a mutual fund.

[241] They're a public company investor.

[242] Like, they, you know, they want to return.

[243] All the investors want to return.

[244] turn, but particularly them, and they want liquidity.

[245] And so I can only imagine the tension that must have been building as they were making these decisions to take these partners on along the way, these partners as investors, who just had sort of fundamentally different goals than what it sounds like James and the team did.

[246] Yeah, okay, so here's the question is, you know, did that dichotomy just continue to grow and grow and grow where they were diametrically opposed to going public.

[247] They were taking on investors that needed them to go public or needed to have a big liquidity event and in a reasonable time frame.

[248] And like they sort of were in a rock and a hard place.

[249] Yeah.

[250] I mean, that is the question.

[251] And I think the question for both for Blue Bottle and for us in terms of in this show, like looking at what's going on in the tech world, like Blue Bottle, we were joking in the beginning of the show that it is unapologetically not a tech company.

[252] But this type of dynamic is rampant these days.

[253] I mean, so many founders of tech companies have raised all this money and yet are, you know, adamant that they never want to be public.

[254] And a lot of them also say they don't want to sell the company either.

[255] So like, what are you going to do?

[256] Yeah.

[257] I mean, seems like that would have been a nice thing to be aware of upon investing.

[258] It does seem that way.

[259] It does seem that way.

[260] And it's so funny.

[261] It's also so...

[262] Is that lip service, David?

[263] Like, is it like how, if you want to run for president, you're supposed to say, like, I'm not interested in being president?

[264] And then, like, you reluctantly do it so you don't seem power hungry?

[265] Like, is it like, oh, you know, we never want to sell out.

[266] And then, like, you inspire your employees and your mission driven forever.

[267] And then until the day that it happens, it's never going to happen.

[268] Yeah, I don't know.

[269] I mean, you could say so.

[270] But then, like, you know, we've talked about this in so many episodes, you know, whether about Snap and or about Facebook, you know, these companies, the majority of them, obviously not Snap and Facebook, but have been private for so long now and they just keep staying so, you know, Uber, Airbnb, you know, all these companies, many, many others certainly could be public companies and probably should be, but the founders are, for whatever reason, either delaying or even, you know, saying they don't want to.

[271] But I think it also, like, there's a tension here.

[272] I mean, on the one hand, I think we've been painting it for the last few minutes as bad, or at least that this is a disconnect, which it is.

[273] But on the other hand, if you go back to sort of what blue bottle is and this whole third wave of coffee, which we're using as an analogy for, you know, the state of the tech world right now, does it make sense for Blue Bottle to be a public company?

[274] I mean, it makes sense for Starbucks, because Starbucks's goal is to be everywhere and on every corner.

[275] But if Blue Bottle's goal is to be about the cup of coffee and what is actually in the cup, does it make sense to be as big?

[276] I don't know.

[277] Yeah, I mean, Blue Bottle has 40 locations, right?

[278] Like, they have plenty of growth ahead of them if they want to.

[279] I mean, Starbucks has 24 ,000 locations.

[280] You know, you don't need to be a public company to be a 40 location coffee shop.

[281] I'm actually very curious, too.

[282] They also have this online business selling directly to customers.

[283] I'm super curious what the revenue mix looks like.

[284] I would suspect a lot more of it is either buying coffee in the stores, you know, in liquid form or buying the beans in the stores and then the online subscription business is smaller.

[285] But interesting to think about that too, because then you start to think about it, still not an internet company.

[286] Like, I'm really sick of the fact that, like, oh, we sell it online and, like, people subscribe to it.

[287] Like, that's a slight business model shift.

[288] But ultimately, like, fixed costs, distribution costs, like, still not an internet business.

[289] But then you at least drift closer to something where you're like, okay, this is different than, you know, all the brick and mortar stuff that exists today.

[290] We've posed some questions here.

[291] And I think, you know, James Freeman and the Blue Bottle team were, we're.

[292] very clear what side they came down on of those questions, which was that Blue Bottle can't be a public company and maintain its ideals and also that it's not an internet company.

[293] But I do think, you know, in terms of where I come down on this, like, I'm not sure that that's the dichotomy that makes sense, right?

[294] Like, I think about Apple, right?

[295] Like an Apple store and a blue bottle store are eerily similar.

[296] An Apple is maintaining.

[297] Well, an old, what Apple store used to be anyway, like, I think the days of believing that an Apple store is a sparse, simple location is far over.

[298] Well, no, but you come, you walk into an Apple store and there, you know, you can count on, well, you used to be able to count on both of your hands the number of products they were selling there.

[299] It's more now, but it's certainly not relative to the number of square feet that they have.

[300] The number of products that they're selling is way smaller, but that has been able to scale and touch just about everyone in the world, whereas, as you point up, and you know, Blue Bottle has 40 stores.

[301] I'm curious to get into acquisition category because I'd love to get your take here.

[302] Do you want to, you want to dive into that now?

[303] Yeah, let's do it.

[304] All right.

[305] So I'm curious what you think.

[306] The thing that I have bolded in my show notes of our categories, people technology, product, business line, asset, or other is product because they are this, you know, it's a really fantastic product, a lot of care in every cup, truly differentiated in terms of, you know, once you have it, you kind of want to go every day to that.

[307] You don't want to go for anything less.

[308] Do I think Nestle could create that?

[309] Probably.

[310] Like, do I think they could create that for a way less than they paid for a blue bottle?

[311] Certainly.

[312] would it be successful?

[313] Almost certainly not.

[314] I think ultimately what they've bought here is the brand and the prestige around the brand.

[315] And they're going to try and leverage that into all sorts of, well, I think they're going to try and leverage that into all sorts of interesting ways of, you know, using their supply chain to really amp up the growth rate of Blue Bottle, to potentially sell other stuff in Blue Bottle, to sell Blue Bottle coffee everywhere they have store space.

[316] But They bought brand here.

[317] They bought coolness.

[318] Yeah.

[319] I was going to go business line because, yes, there are all those things that Nestle could do with Blue Bottle, but there's such a risk if they do that they destroy the brand, right?

[320] And I don't know that Nestle, I don't know the full ins and outs of their corporate structure, but I don't think they have anything quite like Blue Bottle, which is like a, you know, a physical retail experience.

[321] So this is something kind of new and different for them.

[322] But I think you also you know, raised a great point that like this is a business line, but it's not one with a ton of crossover.

[323] Like there's crossover potential, but there's so many landmines in there.

[324] Yeah.

[325] I don't think I really considered that that much.

[326] The question is, I mean, if it's a business line, then it should be freestanding.

[327] And that means that you should believe that the summer future cash flows on this thing are going to be $625 million.

[328] that's a lot of growth.

[329] Yeah, yeah.

[330] But, you know, on the other hand, so they, well, a foreshadow will get into this more in tech themes.

[331] But this really is kind of like, it's so interesting.

[332] Like this is a like Facebook style acquisition being done by Nestle, right?

[333] Like they're keeping the team separate.

[334] All the rhetoric is that, you know, they're going to let Blue Bottle just keep doing its thing.

[335] It's a separate board.

[336] The employees and James the family.

[337] still own a significant chunk of the company, you know, separate from Nestle.

[338] Yeah, I don't know.

[339] What do you think?

[340] Is it going to work?

[341] Well, I mean, so what are they going to do?

[342] The question is, like, what are they going to do with it?

[343] Are they going to try and put blue bottle in more places?

[344] Because I believe Nestle can probably do that.

[345] Like, if that's the goal and, you know, it's really just create a ton of the exact same blue bottle experience in more places, yeah, they can probably do that.

[346] And a big capital.

[347] infusion is a really good idea to do that.

[348] But I was reading this interesting.

[349] You know, I mean, Nestle has more, can be a much larger capital provider than even, you know, however much money, Blue Bottle could raise as an independent company.

[350] You know, even they raise $75 million from Fidelity.

[351] But like Nestle could write that in a week, you know.

[352] Right, right.

[353] So I was reading this interesting Quora post that's like, it gives a good order of magnitude for what individual cafes sell.

[354] And I feel like I should have gotten this.

[355] Starbucks comp, because that would have been better.

[356] But this, this says in Australia, 60 % of cafes sell between 200K and $2 million per year.

[357] So let's say that on the revenue side, you know, that's, that's $2 million of revenue per store that that blue bottle generates.

[358] Like, that's a lot of stores to get to $625 million.

[359] Mm -hmm.

[360] Mm -hmm.

[361] Well, and it's not just revenue.

[362] I mean, back to your point a little while ago, this is not a tech company.

[363] Like, you know, let's say they, have 40 stores doing two million of revenue in each.

[364] Right.

[365] Like, okay, they had 80 million in revenue, like let's, let's say.

[366] But, you know, the margins on that are not software margins.

[367] Right.

[368] Right, right, right.

[369] I did read one interesting piece that I thought was pretty interesting that said that basically Nestle, Nestle had to do something in coffee because they have dominance in Europe with nespressos.

[370] And by the way, I have an espresso machine.

[371] We have one at work.

[372] These things are freaking awesome.

[373] 70 % of the single -serve market in Europe is Nespresso.

[374] And they tried to penetrate in the U .S. and completely lost to Kyrig and Tasimo, and they have less than 5 % penetration in the U .S. on those single -serves.

[375] And so the question is, if they came out with a blue bottle single -serve thing at home, you know, would they be able to win some of that back?

[376] And the reason that it's important is because across Nestle's businesses, their margins are about 15.

[377] percent and in their beverages it's about 25 percent so any way that they can that you know make more of their business lines beverage business lines they can generate you know much higher margins and this could be you know a huge missed opportunity if they have to forfeit the the single serve coffee market in the u .s as it just sky rockets in popularity yeah interesting interesting so this is like the uh this is bad i but like the the the right way to do the the juicerro yeah actually i tried the other day just squeezing my espresso pods and they made amazing coffee on their own i don't know what i pay the hundred bucks for this thing for yeah well you can't do that with coffee no no it is you know so let's paint this scenario if it is a separate business line like this is a totally new thing that may or may not work which is a leveraging of the brand into something that the brand may not be able to be leveraged into in the sort of single serve home thing.

[378] Like, would they pit Nespresso against Blue Bottle and have two divisions making similar things selling against each other?

[379] I mean, maybe it'd be the same division and they would just, you know, sort of relabel the Nespresso stuff.

[380] Well, if Nespresso, and I agree, they really do make good single serve coffee, much better than Carrig's.

[381] But if they have such small market share here, maybe they just rebrand the whole thing in the U .S. as Blue Bottle.

[382] Yeah, I wonder.

[383] And, you know, how much of us say do the Blue Bottle folks have in that?

[384] I mean, presumably Nestle makes the decisions now and has the controlling interest.

[385] Yeah.

[386] But again, remember, like, it's not a, they don't own 100%.

[387] Like, the Blue Bottle team still, you know, has a large stake.

[388] Like, there's just a lot of complexity to this deal for so many reasons as we've been talking about.

[389] Yeah.

[390] I like your assessment of business line.

[391] I'm curious, I mean, it is that for now.

[392] I'm curious to see what sort of integration we start to see.

[393] I feel like we've talked a bit about what would have happened otherwise, but, you know, I guess if Nestle hadn't come in and acquired Blue Bottle or nobody else had for a while, I mean, what happens?

[394] So like Fidelity's sitting there, on their cap table at a very large stake and is, you know, they're not in the business of owning, you know, shares in private companies for 20 years.

[395] What happens?

[396] Yeah, I mean, presumably another Nestle would have to come along in some amount of time.

[397] I mean, you can really see the dynamic here play out, right, where the founders are like, we don't want to sell and they end up keeping all their shares.

[398] And the, you know, fidelity is like, we need to get out of this business.

[399] Like, we've seen great.

[400] growth, but like, my God, we need a way to get out of this.

[401] You almost wonder, did Fidelity, you know, tee this whole thing up with Nestle?

[402] Well, and not just Fidelity, too.

[403] I mean, don't forget, there have been VCs, you know, on the cap table here since 2008.

[404] So almost 10 years.

[405] And, you know, venture capital funds, you know, have a have a lifestyle.

[406] This is something that, you know, I think a lot of people don't really understand unless you're, you know, an insider in the business.

[407] but the typical life of a venture capital fund partnership, limited partnership, is 10 years.

[408] And what that means is that from the time the fund was raised until, you know, whatever that date is, and typically 10 years, like, you're supposed to wind up the whole fund and give all the money back to investors at that point.

[409] Now, in most cases, there will be provisions to extend the life of the fund that almost always does happen.

[410] But still, then, as the, the VC, you're having to go back to your investors every year and keep asking for an extension and eventually they're going to get tired until you know.

[411] And then what happens, David?

[412] This is a good little VC 101.

[413] Like, what if the LPs say no and there's still, you know, shares owned of these private companies that haven't got liquidity yet?

[414] Well, what would happen then is those shares would get distributed out to the investors in the VC fund, the limited partners.

[415] And that would be really bad for the company, too, because now all of a sudden, instead of, you know, XYZ VC, say, you know, let's say index, right, who led the series B in Blue Bottle.

[416] So instead of index as your investor and sitting on your board, now rattably all the, in proportion to those investors in index, they all own like little bits of your stock now.

[417] and, you know, they're in totally different businesses.

[418] Like, they're not in the business of sitting on your board, helping you grow.

[419] You know, they may have different liquidity timeframes, return hurdles.

[420] It just turns into a nightmare.

[421] And so then you could have, you know, 50, 100, 200 new entrants on your cap table.

[422] Yep, yep.

[423] And not just new entrants, but new entrants with wildly divergent, you know, interests.

[424] Right, right, right.

[425] And, you know, presumably at some point, that's, starts to trigger some things that need to happen with the SEC because you have so many shareholders.

[426] Yeah.

[427] Now, the rules have changed on that a little bit with the Jobs Act, but still.

[428] Not, no, no, bueno.

[429] Yeah, no, bueno.

[430] So, you know, I kind of think, we talked about this before, but, like, we're going to see a bunch of this in the coming years.

[431] Like, if some of these companies don't get public or acquired, like, there's going to have to be some sort of transaction that takes place.

[432] And maybe private equity is a path.

[433] So that might have been one thing that might have happened otherwise.

[434] You saw this with SurveyMonkey.

[435] So similar situation.

[436] The company Dave Goldberg, Cheryl Sandberg's late husband was the CEO and he was adamant, never wanted to go public but it raised all this money.

[437] And so actually several times the various private equity firms came in and bought out the existing investors in survey mucky and then sometimes and then even larger private equity firms came and bought out.

[438] Right.

[439] At some point, there is a bigger fish for a while.

[440] At some point, they run out a big fish in the public market is where you need to go.

[441] It can't be turtles all the way down.

[442] There has to be a pool at the bottom.

[443] Oh, man. I'm using that as the teaser quote for this.

[444] episode.

[445] Love it.

[446] Okay, one other VC 101 moment.

[447] So why not?

[448] So, of course, every day is a day that goes by where it would be nice to have a return on your capital so you could invest it elsewhere.

[449] But why don't VCs more typically do an evergreen fund so they don't have these sort of artificial fund vintage triggers to, you know, force this to happen?

[450] Well, some VCs do.

[451] So like Sutter Hill is an evergreen fund.

[452] The thing about that, though, is that you have to, everybody has to be aligned in the partnership, both the VC partnership and then the limited partners about wanting that.

[453] So all of the limited partners have to be able to say, like, yep, we don't care about timelines and liquidity.

[454] But then even more importantly, you know, the general partners, in the VC fund have to also be willing to say like, I don't care about liquidity either.

[455] And, you know, most VCs, some are, you know, very wealthy independently or have been VCs for a long time and have gotten liquidity and aren't as motivated.

[456] But, but really if, you know, if you look around the industry, especially in these multi -generational firms where the folks that are running the show or making investments now maybe aren't necessarily the founders, you know, they're not, you know, they're not in a position where they can just indefinitely go without liquidity either.

[457] So it really, it really, and especially, you know, as a VC and investor in these types of companies, it's not like, you know, if the company is making, generating positive cash flow, it's not like they're dividending it out to you.

[458] So, you know, whereas if you're a founder of a company, you can do things, you can start to pay yourself a lot more.

[459] You know, if there is cash flow, you can dividend it out or you can do bonuses or whatnot.

[460] None of that money comes back to VCs.

[461] Yeah.

[462] Yeah, great point.

[463] Great point.

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[485] All right.

[486] Should we dive into tech themes?

[487] Yeah.

[488] Yeah, let's do it.

[489] Let's do it.

[490] And one, here's one that I don't know if it's actually applicable, but I've been thinking more and more about.

[491] And I think what I'm going to do here is walk myself into a corner where I say, actually, this is not a tech theme for this episode.

[492] But the return of brick and mortar in a different way than it was used before.

[493] is really interesting to me, where, you know, the story of the decade or the last two decades is Amazon making, you know, taking 97 % of retail growth, Walmart growing a little bit, and everyone else shrinking, and especially big box stores shrinking, and this return of kind of boutique retail where even the online companies, Warby Parker, Bonobos, the sort of direct from internet to your doorstep companies, are opening stores.

[494] And in many cases, they're doing the stores very differently.

[495] So like you go to the Warby Parker store, you don't actually buy glasses there.

[496] You buy them on the website in the store, but you can kind of try it on.

[497] It's more like it's almost like a marketing expense, like a brand awareness expense and a way to make the experience a little bit better.

[498] Now, as I said, I was walking myself into a corner.

[499] This isn't quite the case with Blue Bottle, but it is sort of part of this you know, boutiqueification of retail away from the man. To invoke Ben Thompson a little bit, like, it is a little bit of aggregation theory in that what these experiences, new retail experiences, do have in common is they are a superior customer experience versus, you know, you are going to Warby Parker for one specific thing, you're going to BlueBottle for one specific thing.

[500] You're going to an Apple store for a one specific thing.

[501] Like there aren't thousands of skews just line around on the floor.

[502] And so as a result, you can have a much better, purer experience of that thing in that store.

[503] And as a result, you can, if you're able to get distribution, now this is where it breaks down a little bit in the physical world versus, you know, aggregation theory on the internet.

[504] if you're able to have distribution wide enough and you have that superior customer experience, you will win every time.

[505] I mean, if there's a blue bottle next to a Starbucks, like, I'm going to the blue bottle, you know, but in the physical world, and I think this has also been what you were talking about in the beginning of the episode, like blue bottle's been valued like it, you know, is an internet company, but it's not.

[506] Like, they need to have a store everywhere to do that.

[507] and that's going to require a ton of capital.

[508] Yeah, it's pretty interesting.

[509] I mean, the way I like to think about Internet companies being differentiated is super low, if not zero marginal cost.

[510] You can have super high fixed costs, but, you know, low marginal cost, especially, you know, not businesses like Apple that make hardware, but like Internet companies, as you sort of look around at those businesses, they tend to be winner take all.

[511] You know, Facebook is a winner take all business and Amazon will be a winner take all business.

[512] Amazon doesn't quite fit, but maybe Amazon as the third -party seller group kind of fits.

[513] So the interesting thing here is like coffee, you know, coffee stores are not actually winner take all.

[514] Like despite the fact that Starbucks, you know, it's not just the internet that allows you to quickly saturate a global market.

[515] It's many other factors of our world today too.

[516] It's, you know, our ability to do logistics at mass scale, our ability to do single advertising campaigns at large scale, where you quickly make a brand understood by many, many people.

[517] So, you know, it's slower than if it were just bits, because it's in the real world.

[518] But, you know, Starbucks, while expanding to a global market fairly quickly, I mean, 24 ,000 stores, it turns out there actually are segments, and it's not a one -size -fits -all for everyone to create the best experience when you're in the real world, and maybe even when you're in software, too.

[519] You can't create the thing that's best for everyone under one single company.

[520] Well, you can, though, if you're a marketplace, right?

[521] And I think that's what Amazon, that's why Amazon can be a winner take all business in retail, because, like, you can buy the, you know, I don't know, what's some trivial example, like an iPhone doc, right?

[522] Like, you can buy the, you know, $3 iPhone dock from China on there.

[523] But you can also buy the like $500 artisanal, you know, you can get your Starbucks and your blue bottle on Amazon.

[524] Well, that works on a product perspective, but doesn't work in a physical experience perspective.

[525] Yeah, exactly.

[526] I mean, even if I could get exactly blue bottle coffee, like if I'm going to a Starbucks to get that, like it's not the same.

[527] Yeah, right.

[528] So this is where, you know, the analogy breaks down in the physical world.

[529] It's kind of interesting.

[530] I mean, like, if you go back to a. a traditional version of marketplace, like before it was this category of VC investable businesses, it was large square footage areas where multiple merchants were in a single place.

[531] And like BlueBottle doesn't want to exist in a marketplace either, much like Southwest doesn't want to exist in a travel aggregator.

[532] Like, I don't want to be seen around all that cruft.

[533] I want to be in my own little thing and separated from all that.

[534] So I guess the tech theme I'm going with here, the theme I'm going with here is like some things are uncramminable.

[535] into these business models that are massive and winner take all and look super shiny from an investment perspective.

[536] And I think coffee may be one of them.

[537] Like Starbucks is killing it.

[538] They're doing great.

[539] But like, are they the answer for everyone?

[540] No. I certainly agree with you in coffee as it exists today.

[541] But I'm thinking about like Airbnb though, right?

[542] Like you couldn't, a holiday inn was very different from Ritz Carlton, right?

[543] There were segments there for sure.

[544] But both of those experiences and, you know, both below a holiday and above a Ritz Carlton exist on Airbnb.

[545] A platform like that actually can, you know, address, if not the whole market, you know, many, many segments.

[546] Part of it's tied to maybe it's just the nature of the coffee market, but I think it is also tied to this like physical, physical nature of these businesses like you can't do the same with coffee right because the experience of sitting in a Starbucks is very different from the experience of sitting in a blue bottle they can't kind of coexist could could blue bottle um move down market at some point and open Starbucks competitors and like there's blue bottle classics and then there's like blue blue bottle something new and what's interesting Starbucks is doing this right with the restries uh they're moving they're We're going upmarket.

[547] Yep.

[548] And like, can Starbucks actually win over the coffee snobs?

[549] I mean, that's a, that's a tougher battle than, like, suddenly there being a $4 latte that's available from Blue Bottle in a larger location that has Wi -Fi.

[550] Like, then I feel like I'm almost one of the cool kids and I have the product that I actually want.

[551] Well, maybe the way they have to do it, though, is what we were saying earlier, which is through the single -serve packaged coffee.

[552] go through the home instead Yeah Yeah interesting I mean Who knows what direction they'll go But I'll put the flag in the ground And say I just don't think you can You can do a winner take all business And create that A product for everyone When you have to think about Craming in the physical experience of it too I can't think of an example That is not an internet business That can serve everyone Like Google can serve everyone and Facebook can serve everyone and Instagram can serve everyone and Airbnb and Uber But I mean even Even actually not Instagram and even not Facebook Like there's so many people that want to select Into their social network Because Facebook's too public for me Or Instagram's too You know limited or Yeah good point I'd say we may be nearing No I'm not going to go there Like the pushback of the one size fits all But in some ways well okay well maybe amazon can right like who wouldn't buy from amazon because it's on the environmentalists hmm environmentalists maybe yep i mean what i'm looking for corner cases in some ways but um do i believe that amazon will be able to solve the problem of shipping products to environmentalists yes like that that's a bet i'd make yep but i think you're i think you're on to something like it only works because you don't have to go physically shop at amazon Because before Amazon, there was Walmart, right?

[553] But, like, there were whole segments of people that would never shop at Walmart.

[554] And likewise, you know, there was, you know, whatever high -end equivalent of Walmart you want to pick that doesn't exist anymore.

[555] Targe.

[556] Targe.

[557] Right.

[558] Well, Targee is sort of more, I think, more midmark, maybe slightly upmarket, certainly from Walmart.

[559] But I don't think it's like, you know, the Neiman Marcus of, you know, big box stores.

[560] just about every demographic, unless, as you point out, you have an environmental concern, would shop on Amazon, right?

[561] Yeah, I mean.

[562] Because, again, you can get your $4 iPhone doc or your $500 iPhone doc there.

[563] Yep.

[564] They're getting there anyway.

[565] Yep.

[566] All right.

[567] You want to grade?

[568] Let's do it.

[569] All right.

[570] You start because I don't know.

[571] Well, this is tough.

[572] I mean, it's kind of like everything worked out here, right?

[573] Like, investors got a nice return, especially the early investors.

[574] The management team and James, you know, certainly seems happy.

[575] I mean, they're leaving a ton of skin in the game, so they must be bullish on the future.

[576] You know, Nestle is getting potentially, well, they're getting a growing brand and a new business line to add.

[577] But they're also potentially getting something that could really be valuable.

[578] to them in terms of rebranding their espresso, a single shot market, and that's a very big market.

[579] But there are these, like, it just feels like this whole thing wasn't the right fit, you know, as we've had this discussion.

[580] I think I give it a B right now, because like this certainly was like a good outcome for everyone, but I just wonder if it was like the right path and what would have happened if maybe Blue Bottle had made some different decisions along the way.

[581] You know, I don't disagree.

[582] It does, it does feel like the, my biggest takeaway is with the successful acquisitions we've seen, when you really dig in, you start to see like the one real reason this deal got done.

[583] And, you know, with Instagram, it's like, oh, my God, they can, Facebook can unlock even more supply, like even more ad inventory and push all of their advertisers into, you know, a crap ton more ad slots.

[584] to mention Facebook had...

[585] Oh, that's what that deal is about.

[586] And they had an existential threat in losing mobile.

[587] Like, it was very clear what it was about.

[588] Right.

[589] And, you know, there's others.

[590] Like, there's, there's, you see exactly what Facebook, I'm sorry, what Disney wanted to do with Marvel.

[591] Right.

[592] Like, there's a, there's, their business is turning super valuable IP into dollars in 11 different forms.

[593] And boy, are they firing on all cylinders of, of all 11 of those pumping them into the Disney machine.

[594] and like what I can't see here is like what's the one reason they did this like I I think I think it's probably a good idea like it seems like a good thing for for Nestle to own you know I can paint a story where the rebrand of the espresso makes lots of sense I can paint a story where you know instead of growing 50 % year over year and projected to grow 70 % year over year next year like they actually really turn it on and are able to do um you know open lots more stores very rapidly because they've all as capital but like do do I see the like one thing where this fits perfectly in and there's internal alignment within nesley of how they're going to leverage this asset like i don't work there but probably not like i i mean i think the only dark course being being um the uh nespresso uh i mean that may just be a huge business and they needed a way to invigorate it yeah thank you to the the cora commenter who suggested that it's pretty interesting um so i'll go b minus know, maybe C plus, but, uh, again, I, I think I've rated things that were way worse than this C's.

[595] So I'll go B minus.

[596] Carve out.

[597] Carve out.

[598] So, uh, I was on a, a flight to, uh, to Ohio this weekend and had lots of free time, was clearing out my insta paper.

[599] And the, this really interesting thing, um, if I first heard about it like two years ago, the, the, the tulip mania story, there was a Dutch tulip bubble, uh, where people were going in sane for for buying tulips and it grew to a religious fervor where people were paying unbelievable amounts for certain special types of tulips and highly speculative you know I'm going to buy this bulb and it'll it'll be beautiful in some number of years from now and like total mania right the same way that we see bubbles that exist today and it's kind of like the first macroeconomic bubble that people cite and it you know theoretically like crashed the dutch economy and and it was you know incredible despair and people lost fortunes and all this stuff And the interesting thing was over the last few years, I've actually seen more and more of the story pop up in more places, especially in the, you know, technocrat sphere where people love to wax philosophically about if we're in a bubble or not.

[600] There's even a movie coming out.

[601] I think it's tulip mania or tulip fever or something that, like this month.

[602] And the Smithsonian magazine published a really interesting piece called There Was Never Really a Tulip Fever.

[603] Oh, I've heard about this.

[604] it was super interesting like this thing that's gotten quoted and quoted and quoted and quoted and like referenced over and over again like somebody wrote this book and did a bunch of research and tried to figure out like okay let's you know who were these people that lost their fortunes and as they dug into it they realized like of course there was over speculation here and you know the people um you know a lot of like very wealthy people put lots of money in and lost that but it never actually affected the working class and it never actually disabled the stabilize the whole economy and it didn't throw anything into like a tailspin and the it it did not have these trickle down effects that um are so often quoted when wanting to compare a potential oncoming bubble or 2008 or 2000 to to to you know this dutch tulip bubble and it's like totally fascinating of a analysis of why we wanted to believe um that this this mania created even more devastation than than it actually did Hmm.

[605] Interesting.

[606] Relevant to today's times.

[607] Yeah, yeah.

[608] And there are some cool little takeaways in that and suggestions of why we do want to believe it.

[609] But I'd say I'll leave it to the author who's way more eloquent at explaining that.

[610] So click the link in the show notes if you want to check it out.

[611] Cool.

[612] My carve out today is actually random seeming, but is the iPhone SE classic.

[613] I watched the Apple Keynote a couple weeks ago.

[614] We talked about it a lot on the HDC episode.

[615] It was really great.

[616] And, you know, coming out of it, so I've, for the last three years, I've been a plus model.

[617] I got the 6 plus and then I got the 7 plus.

[618] And coming about it, I just, I wasn't that compelled by any of the new hardware.

[619] Like, I see where they're going with the iPhone 10.

[620] It's the future.

[621] It's amazing.

[622] But I was like, I'm not ready just yet because AR isn't.

[623] like real yet.

[624] It will be in the next generation or two.

[625] And then I realized I was like, I was looking at the iPhone 10 and I was like, oh, it's really, it is smaller.

[626] It would be nice not to have such a big phone in my pocket anymore.

[627] And then I like just kept looking at my 7 plus and I was like, this thing is enormous.

[628] And like I can't sit down with it.

[629] And like for the last three years, every time I've like had lunch or dinner or gone out, like I always put my phone on the table because I can't have it on my body.

[630] And so I was like, you know, there's such an active liquid secondary market for Apple products.

[631] I just sold it on eBay and I got an iPhone SE on eBay for way cheaper.

[632] And I am, I'm sure I will upgrade in the next generation.

[633] But I'm really happy to be back to having a small phone.

[634] I never thought I would say that.

[635] This just in venture capitalist decides not to partake in new high tech technology and rolls back to the Stone Ages.

[636] That's me. That is me. No, it's so, I mean, like, I'm always, like all my whole life I've been a bleeding edge adopter but you know the form factor I just kind of realize again maybe I'll probably change in a couple years but honestly it's just nice to be back to um you know being able to have my phone in my pocket I'm envious I'm envious you're so right on that I think were it not for these cameras and um sometimes when I want two -handed use of a larger keyboard um I miss the crap out of that form factor swipe glide typing though on the Gboard, the Google keyboard, is pretty good.

[637] You know, and I think this is it for me. Like, I'm not much of a photographer.

[638] I don't take that many pictures, whereas I know you do.

[639] So it was like, the appeal of the cameras for me is AR in the future.

[640] And I just don't think it's there yet.

[641] So I'm going to enjoy my, you know, one or two years, probably one year with a phone in my pocket.

[642] Well, David, enjoy your non -bionic phone.

[643] I know.

[644] I'm going to miss the bite.

[645] Ionic.

[646] Are you, are you, are you going for a 10?

[647] I mean, if I can get one, I'm going to, I'm going to, I'm going to, I'm going to, I'm going to, I'm in a, have my, um, my browser open and try and order online and have my Apple store app on my phone open and see if, you know, maybe I'll end up with two.

[648] I don't know, but, uh, I, I, I bet I'm, I'm, I'm into Q4 if, if not, or early Q1 next year.

[649] Um, well, but that's, this is the thing about, about Apple products, right?

[650] Like, if you are, like, an iOS person.

[651] Like, there is so, like, the secondary market is so liquid.

[652] Like, yeah, you have to pay some transaction costs, but like, it's crazy.

[653] It's really not that much.

[654] And they keep their value incredibly.

[655] They keep their value.

[656] Not like, you can swap out like for really not much money in terms of economic impact.

[657] It's kind of crazy.

[658] It is.

[659] It is.

[660] Our sponsor for this episode is a brand new one for us.

[661] Statsig.

[662] So many of you reached out to them after hearing their CEO, VJ, on ACQ2, that we are partnering with them as a sponsor of Acquired.

[663] Yeah, for those of you who haven't listened, Vijay's story is amazing.

[664] Before founding Statsig, Vijay spent 10 years at Facebook where he led the development of their mobile app ad product, which, as you all know went on to become a huge part of their business.

[665] He also had a front row seat to all of the incredible product engineering tools that let Facebook continuously experiment and roll out product features to billions of users around the world.

[666] Yep.

[667] So now Statsig is the modern version of that promise and available to all companies building great products.

[668] Statsig is a feature management and experimentation platform that helps product teams ship faster, automate AB testing, and see the impact every feature is having on the core business metrics.

[669] The tool gives visualizations backed by a powerful stats engine unlocking real -time product observability.

[670] So what does that actually mean?

[671] It lets you tie a new feature that you just shipped to a core metric in your business and then instantly know if it made a difference or not in how your customers use your product.

[672] It's super cool.

[673] Statsig lets you make actual data -driven decisions about product changes, test them with different user groups around the world and get statistically accurate reporting on the impact.

[674] Customers include Notion, Brex, OpenAI, FlipCart, Figma, Microsoft, and Cruise Automation.

[675] There are like so many more that we could name.

[676] I mean, I'm looking at the list, Plex and Versel, friends of the show at Rec Room, Vanta.

[677] They like literally have hundreds of customers now.

[678] Also, Statsig is a great platform for rolling out and testing AI product features.

[679] So for anyone who's used Notion's awesome generative AI features and watched how fast that product has evolved, all of that was managed with Statsig.

[680] Yep.

[681] If you're experimenting with new AI features for your product and you want to know if it's really making a difference for your KPI's Statsig is awesome for that.

[682] They can now ingest data from data warehouses.

[683] So it works with your company's data wherever it's stored so you can quickly get started no matter how your feature flagging is set up today.

[684] You don't even have to migrate from any current solution you might have.

[685] we're pumped to be working with them.

[686] You can click the link in the show notes or go on over to stat sig .com to get started.

[687] And when you do, just tell them that you heard about them from Ben and David here on Acquired.

[688] Well, that's all I've got.

[689] Do you have anything else?

[690] That's all I got.

[691] All right, listeners, if you aren't subscribed and want to hear more, you can subscribe from your favorite podcast client.

[692] If you feel so inclined, we would love a review on iTunes.

[693] Other than that, join us at Acquired fm you can join the slack um and uh that's all we've got have a great day see you guys soon