If coffee and venture capital seem an unusual combination – at least at a first glance – a new deal announced this week in Brazil is here to prove that this mix may not be obvious, but it can certainly be a good one. From the Brazilian southern city of Curitiba, coffee shop chain The Coffee has announced a $5 million Series A deal led by São Paulo-based VC firm Monashees.
With thirty stores spread across several Brazilian cities – located, in addition to Curitiba, in São Paulo, Belo Horizonte and Fortaleza, to name only a few – The Coffee expects to reach 100 stores by the end of 2021, supported by the brand new investment. Behind the expansion plans are three founding partners – and brothers – with a shared passion for Japan.
“We’ve always wanted to start a business together and have always been very passionate about Japan,” tells me Alexandre Fertonani in an interview with LABS. With experience in sales, Alexandre and his brothers Carlos and Luis, respectively from careers in technology and design, founded The Coffee in March 2018 with an initial investment of BRL 50 thousand. From there on, the founders bet on a franchise model to scale the business, as the trio did not have own equity to back the venture’s growth.
“We spent the money opening the first store and then we didn’t need to capitalize the company anymore,” the exec recalls. “It started to spin like a wheel.” Fertonani credits to the small cafes of Japan the inspiration that gave The Coffee its minimal design, small stores and short menu. But the recipe for success had another key ingredient: technology.
With a self-service system on tablets at the cafes’ front desk – which do not have tables and chairs inside, as they only work on a takeaway model – The Coffee was also born cashless. If the company did not accept cash as a payment method when it was founded, in 2020 this model makes even more sense.
We were about to put the entire operation on hold. Not by closing stores, but by freezing any new investment or hiring. And then they [Monashees] gave this signal
Alexandre Fertonani, coFounder and Chief expansion officer at The coffee
“The second [round] started in July this year. It even surprised us, in the middle of the pandemic.” The new investment is not the first of São Paulo-based VC firm on The Coffee. In mid-2019, Monashees, well known for backing firms like ride-hailing app 99, 2020’s first Brazilian unicorn Loft and the logistics startup Loggi, approached the Curitiba-based entrepreneurs with what became a few months later, the first seed round raised by The Coffee, an amount of US$ 500 thousand. A year later came to conclusion a “slightly” more significant series A round: US$ 5 million.
“We were about to put the entire operation on hold. Not by closing stores, but by freezing any new investment or hiring. And then they [Monashees] gave this signal,” he says. If the first investment allowed The Coffee to reach, in just over two years, thirty stores – two of their own and twenty-eight franchisees – the second will, literally, expand their horizons. In the expansion plan, Europe and the United States are the next stops.
“Our goal is to open a hundred stores by the end of next year. Half of them must be owned and half franchised. Basically, we will accelerate a lot our own stores now,” Fertonani explains. In the plan of a hundred new units, some of them already have a destination. The Coffee will open two stores in Lisbon, Portugal and four in both Madrid and Barcelona, Spain. Next, another unit in Los Angeles, California, where, “in a few days we start building,” he says.
Beyond the opening of new stores and international expansion, the new contribution, 90% raised via Monashees and 10% via funds like Norte Ventures and Shift Capital will also fuel The Coffee to invest in new distribution and roasting centers, as well as in online sales.
The coffee shop chain, which besides the self-service system in cafes, also has an app so that customers can place orders and pick them up once ready, aims at expanding product portfolio. “We are importing products from the US and China and we are going to sell them in physical stores, on the app and on our website,” he says, with no further details.
“We’re also concluding our blend with a farm in Minas Gerais.” Currently, according to the executive, the beans from all shops at The Coffee come from a supply farm in Cornélio Procópio, Paraná state’s countryside. “At the beginning of next year we’ll then have our own coffee blend. It will be very important for our brand”.
From the minimalist logo to the neutral tones that fill small stores and menus, attention to details and thoughtful investments in The Coffee’s branding was also responsible for catching the eyes of investors.
“It’s branding, it’s retail – but it’s also technology,” he summarizes. In an ecosystem filled with deals from the new economy, The Coffee seems to have the recipe to secure their own share of the pie.
