Small-format specialty coffee chain, Blank Street, has raised $25 million in a series A round led by General Catalyst and Tiger Global, only months after it closed $7 million seed through three venture firms. Now the company, whose post-money valuation has exceeded $98 million according to PitchBook, is fundraising for its next series B round due to mounting investor interest.
So what makes this Brooklyn-based startup that launched only a year ago such a darling among large institutions? Cofounders Vinay Menda and Issam Freiha conclude marrying “high quality products, ultra convenience, and fair prices” is what has made the company overall successfully carve out a sweet spot in a very saturated coffee space, adding how Blank Street’s top-line revenue has increased by 15 times since January 2021.
“The same way how Starbucks
Indeed, Blank Street immediately partnered with EV Foods at the iconic Wythe Diner in Williamsburg upon debuting its first battery-powered mobile coffee cart last August, and has since evolved to be a mix business model that also includes micro-footprint brick-and-mortar spaces.
Operational Efficiency Powered By Technology
Currently operating 15 locations throughout New York City with a goal of expanding to 100 by the end of 2022, Blank Street offers a variety of products, including those from Gertie bagels, King Street Baking Co., and King David Tacos, in addition to Parlor Coffee.
All these locations are technology-enabled, allowing Blank Street to streamline its operations through mobile payments for customers while offering premium food items at an affordable price. “[Our coffee] is 20-30% cheaper than Starbucks, and roughly the same as Dunkin’s,” Menda explained. “The main technology we use in stores, such as espresso equipment, is fully automatic, so baristas can focus most of their time engaging with customers, enhancing their in-store experience.”
Future specialty items will also be offered at a lower price through a wholesale partnership between Blank Street and local vendors, called “Powered By Blank Street,” according to the duo. The goal is to help these vendors expand footprints into new markets without the hassle of finding expensive storefronts, providing their own labor, or managing day-to-day operations, while enabling them to build businesses using data and analytics provided by Blank Street’s internal software.
Similar to Blank Street, food and beverage startups leveraging technology to ramp up their operational efficiency are gaining unprecedented investor interest as traditional consumer and retail sectors have been grossly affected by the pandemic, forcing many of them to shut down retail shops or rethink their supply chain strategies.
“Foodtech is one of the sectors most profoundly affected by the pandemic, which has revealed the weaknesses in the traditional supply chain and accelerated adoption timelines for new technologies,” PitchBook analyst, Alex Frederick, said recently.
“Venture investors poured $3.7 billion into foodtech startups in Q2 , an increase of roughly 28% at a time when dealmaking has sharply dropped elsewhere.”
Hitting Profitability Within The First Two Months
On the retail side, Blank Street’s storefronts are also much smaller than larger competitors – each 200-square-foot location is equipped with kiosks and minimum staff, making their upfront expenses more predictable and profit return period shorter.
“We benchmark [our performance] against the regular payback period of publicly traded coffee companies like Dutch Bros or Starbucks,” said Freiha. “Although our net income margin might be similar since we’re obviously underpricing, we’re about 20-30% faster in getting returns.”
Menda added: “Because we have very low overhead for stores with one or two employees [at each location], and a lot less space to rent, our stores can actually hit profitability within the first two months.”
As Blank Street plans for national rollout across major metropolitan areas in the future, its team says mobile carts and retail spaces will be strategically placed based on locations. “Carts are great for places like parks, building lobbies, or cases where you traditionally can’t have a retail footprint,” Menda noted, “and retail is obviously good for those very high-traffic areas, where you need more throughout per store.”
The latest fundraise, which is also supported by strategic investors including online retail company Warby Parker’s cofounders, Neil Blumenthal and Dave Gilboa; the founder of Harry’s, Jeff Raider; and Joey Zwillinger, founder of Allbirds, is expected to drive Blank Street’s revenue to grow at a similar rate in 2022 as this year, Menda predicts.