Blue Bottle Coffee Takes a $70 million Shot of VC Cash

The Blue Bottle Coffee, the Bay Area foodies’ favorite coffee house, merged with the Tartine Bakery and Café in April. Now, the combined artisan food company has raised $70 million in venture capital to be the “next big thing.”

The company raised $70 million in Series C venture funding, led by Fidelity Management and Research, on June 4, 2015, putting the pre-money valuation at $420 million on the deal. Hedge fund Tetragon Financial and existing investors Index Ventures, True Ventures and Google Ventures also participated in the round.

By gaining another 1.2 percent of market share at the expense of at-home grocery sales this year, restaurants now command 39 percent of consumer food purchases. Venture capitalists that are always on the look-out for the next disruptive change now see eatery chains as businesses that are scalable in a vast and expanding market.

Merging wildly popular Blue Bottle Coffee with the wildly popular Tartine Bakery in April gave the combined company a base of 20 stores in four cities on two continents. Both gained the synergies of complimentary product expertise, without compromising on customer perception of quality. Cross-selling Blue Bottle’s ultra-premium coffee and Tartine’s French laminated and pastries gave the integrated company tight control over what it calls their “extreme artisan” menu offerings.

Blue Bottle’s founder/CEO James Freeman and Tartine’s CEO Chad Robertson have known each other from the San Francisco restaurant business for over a decade. Locals were wondering if the two would “hook-up” after Freeman raised $25.75 million in venture capital last year from prominent investors, like Morgan Stanley and Bono of U2 Bono. Shortly thereafter, both companies announced they were opening stores in Tokyo that would cross-sell their each other’s products. 

Freeman told the San Jose Mercury News that he is a compulsive perfectionist. He described one of his Blue Bottle Brazilian blends as having “beautiful brightness and layers and layers of flavors” that might cause its joyful taster to think about his or her “wedding day.”

Blue Bottle bought Tonx and Handsome last year, and has been opening coffee houses in trendy San Francisco locations like Twitter Town in South Market; the Montgomery Street Financial District; and the iconic Heath Building. Plans are also coming together to jump down south and open a string of Los Angeles outposts in the newly-renovated Bradbury Building early next year.

Baker and serial entrepreneur Robertson, who works with his pastry chef wife Elisabeth Prueitt, said he is comfortable with the raising of outside money: “We had investors that helped us start Tartine, and we needed new investors to go forward on what we’re doing.”