Blue Bottle Coffee

Today our heroes cover a deal that might have more impact on life in Silicon Valley than AI, wearables and AR/VR combined… Nestle’s acquisition of Blue Bottle Coffee. Will hipster entrepreneurs and the VCs who love/need them continue to line up around the block for their minimalist coffee experience of choice, now that it’s owned by the Nesquik Bunny? Is this the beginning of Blue Bottle pod machines filling the empty counter space left by Juicero’s demise in VC offices throughout South Park? We investigate. Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Topics Covered Include: The rise of “Third Wave” coffeeBlue Bottle founder James Freeman’s “classical” (music) influences Venture capital and the coffee business Achieving liquidity when companies and founders’ don’t want to go public, and don’t want to sell their stakes Nestle’s position in single-serve coffee market and potential brand impact of Blue Bottle The Carve Out: Ben: There Never Was a Real Tulip Fever https://www.smithsonianmag.com/history/there-never-was-real-tulip-fever-180964915/David: iPhone SE https://www.apple.com/iphone-se/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Rosenthal?

  It can't be turtles all the way down.

• 0:04David Rosenthal?

  There has to be a pool at the bottom.

• 0:08Ben Gilbert?

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

• 0:24Ben Gilbert?

  Welcome back to episode 46 of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert.

• 0:31David Rosenthal?

  I'm David Rosenthal.

• 0:33Ben Gilbert?

  And we are your hosts. Today, we are covering an acquisition that the tech audience cares a lot about, even though it's not really a tech company. Nestle's acquisition of Blue Bottle. So.

• 0:47David Rosenthal?

  Shockwaves have gone through Silicon Valley.

• 0:50Ben Gilbert?

  Yes, yes. There have been lines around the block that are forming their own lines around the block. Just to hear the news.

• 0:59David Rosenthal?

  So great. Where, where will the VCs and entrepreneurs congregate now?

• 1:05Ben Gilbert?

  Yeah, I mean, what's the, what's the sort of like islandish one?

• 1:09David Rosenthal?

  Uh, Phil's.

• 1:10Ben Gilbert?

  Phil's.

• 1:11David Rosenthal?

  Yeah.

• 1:13Ben Gilbert?

  Fourth wave of coffee.

• 1:15David Rosenthal?

  Fourth wave. We'll get into it.

• 1:17Ben Gilbert?

  We will, we will. All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 1:38David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote unquote "shadow AI" running with no security review at all.

• 1:59Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes and cuts the time that you'd spend on vendor assessments in half.

• 2:21David Rosenthal?

  In half? Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor and Snowflake all stay audit ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 2:39Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance and the work to earn and prove trust. We're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V A N T A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you. All right. Well, David, that's all I've got for pre-show.

• 3:11David Rosenthal?

  All right. Well, before we dive in, I was thinking about this episode and it's kind of funny. We've got these series of like mini-series here on Acquired. We've done, we did the Disney trifecta and then the fourth, of course, with BamTech. We've done sports. We did the LA Clippers. That was, that was out there, 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.

• 3:42Ben Gilbert?

  Well, this is a, this is a, you know, primarily Seattle dominant podcast. So we do have to do multiple coffee episodes.

• 3:52David Rosenthal?

  Next, we'll have to do the Seahawks next.

• 3:54Ben Gilbert?

  Yeah, yeah.

• 3:58David Rosenthal?

  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. And we alluded to third wave of coffee, which really is kind of the reaction to Starbucks. Starbucks being second wave. If the first wave was kind of Folgers and Maxwell House and brew at home coffee. The second wave being Starbucks, an experience, a place you go to. The third wave is really all about the quality of the coffee. People, you know, it is, it is. Really the origin of hipsterdom.

• 4:41David Rosenthal?

  Starbucks sucks. It's super corporate. We're going to focus on the artisanal quality of-

• 4:46Ben Gilbert?

  Their coffee, it's burnt, it's dark, it's, you know, no care put into it. It's a factory. Everything is made exactly the same. You know, call it operationally efficient and, and, and, you know, praise their business model or, you know, hate on it because it's, it's systematized. But it's definitely, definitely a reaction to the, the mass market success of Starbucks.

• 5:08David Rosenthal?

  Yeah. And so third wave places like a counterculture was one of the first in, in Durham, Durham, North Carolina, Stumptown in, in, down in Portland, uh, which is now owned by Peet's, interestingly, uh, or Intelligentsia, which I think started in Chicago is also now majority owned by Peet's, um, Cafe Vita in Seattle, all these folks, they really focus on the drink itself and, and probably arguably, nobody focused more on the drink than Blue Bottle. So let's dive into, to Blue Bottle. So it was founded by a very interesting, interesting

• 5:47David Rosenthal?

  guy named James Freeman and, uh, highly recommend, we'll, 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. Uh, really fun to listen to. He basically, let's just say he starts it with an analogy to Murs Cunningham and John Cage, the sort of avant garde, you know, modern dance choreographer, Murs Cunningham and, and his partner, John Cage, who is an avant garde musician, and their work together as an analogy for his whole talk. And then he goes on to, to quote Sartre and, and Proust, very philosophical.

• 6:27Ben Gilbert?

  Honestly, David, one of my favorite like things about this show is learning about the insane and talented and driven people that start these companies. Like it is, there are no normal people that start enormous companies.

• 6:40David Rosenthal?

  No, and James is is no exception. He, unlike most of the founders we talk about, he is definitely not an engineer, not even remotely connected with the tech world, except for the fact that he lived in the Bay Area. He was a freelance clarinetist, a classical musician who played the clarinet. And he did that for until his mid 30s. And then he kind of woke up one day and he realized, you know, I'm never gonna be the best clarinetist. And maybe I should find something else to do with my life. And, and, and what else could he do? He, it turns out, he had this side hobby of

• 7:24David Rosenthal?

  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, and his, 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. So he started in the early 2000s. He quits the music world. And he lived in, I don't know if he actually lived in Oakland or if he started the company in Oakland. He was living in the Bay Area. Starts Blue Bottle in Oakland. And the

• 8:05David Rosenthal?

  original business plan is that he's going to keep doing what he's doing and, and deliver beans to, to people's houses. These great beans that he's roasted, you know, in his kitchen the day before, will deliver them to his friends' houses. So it kind of sounds like an on-demand startup.

• 8:23Ben Gilbert?

  Truly, truly. And hilariously, you know, that the part of the, the business, fast forward a little bit, they operate now, that's a coffee delivery service. They acquired another company to do that called Tonks, when they, they sort of moved into a bit of a different, different sector.

• 8:40David Rosenthal?

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

• 8:57Ben Gilbert?

  And it's hilarious, following the parallel 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.

• 9:12David Rosenthal?

  Yeah, exactly. And, and Freeman, sort of similar to, to the Starbucks story, where it wasn't the Starbucks founders who, who realized that there was this retail opportunity. It was Howard Schultz. Freeman himself kind of stumbles into it. So in 2003, he signs a lease for a roastery so he can get it out of his kitchen and, and start roasting in a commercial space. And then it's not until 2005 that he actually opens up his first retail location, which is in Hayes Valley in San Francisco. And it's in a friend's garage. 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

• 9:57David Rosenthal?

  instead of just selling beans, sell coffee there. James is, 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. He's actually more influenced by the sort of Japanese style of coffee. 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. And, and the Japanese approach to coffee is very third wave. It's all about the very, very meticulously crafted, perfect cup of coffee. And James talks about this in his, his ETL talk at Stanford, that part of his inspiration is

• 10:42David Rosenthal?

  this, this coffee shop in, 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 barista, he or she will, will go look at the wall and decide which cup, they're all different, is perfect for you.

• 11:00Ben Gilbert?

  Wow.

• 11:01David Rosenthal?

  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. It is very austere. There is very little in these, in the locations except for the coffee. There's no wifi. There are no power outlets. Uh, they do have some food, but very little. Um, it is truly all about the coffee. This, this idea of the cups James also talks about, uh, much later in, in the company's history, they had cups specifically made for, uh, Blue Bottle. These are, these are ceramic, you know, to stay cups. They, they don't like doing to go cups.

• 11:43Ben Gilbert?

  Of course.

• 11:43David Rosenthal?

  Um, that are, the, the cups are perfectly sized. They're not perfectly round, but they are sized exactly for the size drink that, that you get at Blue Bottle. There are no sizes. You just get, you know, you order whatever it is you order and it's one size.

• 11:58Ben Gilbert?

  David, I can't take it.

• 12:00David Rosenthal?

  It's so hipster.

• 12:04David Rosenthal?

  The, the synergies with the tech community are just too perfect.

• 12:08Ben Gilbert?

  So you pay software engineers more money and more disposable income and they wanna be better than everyone else and they wanna buy more pretentious things. They love coffee. They need coffee to be productive. I know.

• 12:22David Rosenthal?

  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.

• 12:30Ben Gilbert?

  Exactly. Exactly. It's like the Steve Jobs one outfit, reduce cognitive load thing.

• 12:34David Rosenthal?

  Exactly. Exactly. I mean, that is, that is Blue Bottle, which is very different from Phil's, which we'll, we'll come back to in a minute. Phil's is the competing Bay Area chain.

• 12:45Ben Gilbert?

  I should say like, Blue Bottle is freaking amazingly good. Like I,

• 12:49David Rosenthal?

  The coffee is really good.

• 12:50Ben Gilbert?

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

• 12:57David Rosenthal?

  It really is. I mean, you can't, you know, be from Seattle and not, not appreciate good coffee and it is very good coffee. So after the kiosk, the first very little store in Hayes opens up, it really starts to take off and spreads kind of by word of mouth. They start to open more locations in the Bay Area. Then they go to New York City. They go to Los Angeles and then they go to Tokyo, to Japan and, and the sort of inspiration for all of it. And so there's stores in all of these cities now. But they start to grow fairly rapidly. And in 2008, so this is very early in kind of the rise of sort of the

• 13:38David Rosenthal?

  modern startup and, and VC industry. I mean, arguably even maybe I would say before lots of capital, the, the sort of modern series A and, and beyond type startup. They raise a venture round and they raised $5 million from a firm called Kohlberg Ventures and Chris Saka and lowercase capital. This is just when Chris is getting going.

• 14:01Ben Gilbert?

  That dude gets into everything. Unfreaking believable. The nose on Chris Saka to find those early stage.

• 14:08David Rosenthal?

  Amazing. It was a $4 million fund. It was so tiny by today's standards, but he was in everything. Blue Bottle, Uber, Twitter.

• 14:18Ben Gilbert?

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

• 14:22David Rosenthal?

  So $5 million round from Kohlberg and, and lowercase in 2008. Then a few years later, in 2012, they raise a $20 million round led by Index Ventures and Google Ventures and then a whole bunch of other individuals. So Kevin Systrom, a number of other tech CEOs, Tony Hawk, the skateboarding legend, invests. I mean, this, this coffee, I mean, this is the thing. I think we talked, we might've talked about this a little bit in the Starbucks episode. You're literally selling drugs.

• 14:55Ben Gilbert?

  Yeah. Oh, my God. I was doing some, one of my favorite things to do research for this, this podcast is to go look at all the Quora responses to reactions around the deal A tease out what I think is a great point and you know, things I want to bring up on the show. And there was one really great quote that I was going to wait to wait to say later, but I think I think is worth bringing up now from from Daniel James on Cora. In this $20 million round, the question was something around like, you know, why is Blue Bottle getting all this investment? What are the VCCs? And he goes, "Coffee is a legal, addictive, unregulated, psychoactive drug with cheap ingredients, premium pricing, and a huge worldwide growth market.

• 15:37Ben Gilbert?

  Blue Bottle is a quality brand with a good team and a strong history of well-managed growth. To me, this seems much better than a VC bet with many consumer internet companies."

• 15:47David Rosenthal?

  I know, and it's so funny. 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. Who's going to use that? It was the same thing then. It's like, what are these VCs 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 Bottle, they're like, no, this is a 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, but like-

• 16:28Ben Gilbert?

  Reduce COGS and like lower variable costs? Like, nope, nope, none of that.

• 16:33David Rosenthal?

  No, no, this is a coffee company. And people are like, why are these VCs investing in this? Turns out, they did well, and particularly that round did very well, but we'll come back to all that.

• 16:46Ben Gilbert?

  It is worth pointing out, like, the super interesting, near self-fulfilling prophecy of this. 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 and they magnified each other. So you look at like, Siteglass, that was a couple of- Early Blue Bottle folks that left to start their own thing, like they co-founded that with Jack Dorsey. It was an early pilot for using Square at that that location. And you see the types of people that were attracted to Blue Bottle as a product and as a lifestyle and and put money into it.

• 17:30Ben Gilbert?

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

• 17:39David Rosenthal?

  Yeah, and this is something, I mean, we've talked about this on this show before, but like, especially if you don't live in in the Bay Area or in Seattle or LA or, you know, you're not kind of in the ecosystem. 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, like, these are real people and these companies exist in real locations. 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 and Mint Plaza is like two blocks away from the Twitter building. So like, well, you know, where do all the Twitter employees go when they want copy?

• 18:22David Rosenthal?

  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.

• 18:35Ben Gilbert?

  Yeah, I've I've thought about this as like a customer acquisition strategy of, if you have a company and you want people at another company to buy it for B two B 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 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? Because I feel like, well, 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 to put a physical location.

• 19:19David Rosenthal?

  It's interesting.

• 19:22David Rosenthal?

  That growth, growth hacking tactic doesn't work anymore.

• 19:25Ben Gilbert?

  Could you be digitally close? Yeah.

• 19:27David Rosenthal?

  Yeah, seriously. But it definitely worked for Blue Bottle. And I think Biz Stone was an investor. I don't know if F. Williams was. I don't think, you know, Jack was obviously an investor in SiteGlass, a competitor, but it worked. So 2014, they then raised another $25 million. And then in 2015, they raised $75 million 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. And then they keep expanding, you know, within those cities that I mentioned before, but grow to, you know, over 30 stores throughout both country and in Japan. And

• 20:11David Rosenthal?

  then, in surprise announcement, in the middle of September, on September 14, 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. We don't know the exact number, but it's been pretty widely reported that they paid about $425 million. And that was for 68% of the company. So they bought out the investors, and James and the rest of the management team are keeping their stake. So they keep 32% of the company, its own separate board.

• 20:51David Rosenthal?

  But all the investors are bought out. So the valuation on the company is $625 million, assuming that the $425 million figure is correct. And here we are.

• 21:03Ben Gilbert?

  Pretty amazing. I mean, I wonder, the first thing that comes to mind is, did the founders keep all their shares? Was there a little bit of a secondary there, where they took money off the table? They had to have taken something, right? Like, they had to...

• 21:15David Rosenthal?

  I don't know for sure, but they may not have. There had been some secondaries along the way. 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. So I actually don't know in this case whether Nestle paid out anything to any of the employees.

• 21:39Ben Gilbert?

  Yeah. 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, particularly for startups like this. I mean, they're a 40-store retail location, but you know, early-ish mid-stage company. 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, you know, grow in valuation. You know, there's sort of an interesting thing of like, it has to stay a separate company. Like, think

• 22:18Ben Gilbert?

  about this. How, if you're those founders, do you think about how your shares get valued now? Like, there's, there's not really a competitive market to do the next round. It's not going to, like, there's not a market to value your company. And it's certainly not anywhere near getting valued on a reasonable, sort of, price-to-earnings ratio. So, are you hoping that at some point Nestle just decides to buy you out? Is it actually in their best interest to do that? I love the incentive. I'm curious on the mechanics of how that works.

• 22:54David Rosenthal?

  I think you're hitting on all the right questions here, Ben. I think part of the reason this happened as it did is, and I have to wonder, I don't know anybody at Blue Bottle, you know, personally, but Freeman and Brian Meehan, who's the CEO, he came in and took over as CEO a number of years ago, but Freeman's still very, very involved. They both were very vocal about saying they never wanted to go public. They didn't think being public made sense for Blue Bottle as a company, and it also just was something they weren't interested in. And yet, the company continued to grow. But, but at the same time, they'd raised all this money, and in particular, in some of these later rounds, you know, bringing in folks like Fidelity. Like, Fidelity is a mutual fund.

• 23:39David Rosenthal?

  They're a public company investor. Like, they, you know, they, they want to return. All the investors want to return, but particularly them. And they want- Want liquidity. 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.

• 24:09Ben Gilbert?

  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, they were taking on investors that needed them to go public or needed to have a big liquidity event and in a reasonable timeframe. And like, they sort of were in a rock and a hard place.

• 24:27David Rosenthal?

  Yeah, I mean, that is the question. And I think the question for both for Blue Bottle and for us in terms of in the 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. But this type of dynamic is rampant these days. 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. And a lot of them also say they don't want to sell the company either. So like, what are you gonna do?

• 25:06Ben Gilbert?

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

• 25:11David Rosenthal?

  It does seem that way. It does seem that way. And it's so funny. It's also so.

• 25:17Ben Gilbert?

  Is that lip service, David? 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. And then like, you reluctantly do it so you don't seem power hungry? Like, is it like, oh, you know, we never want to sell out. And then like, you inspire your employees and you're mission driven forever. And then until the day that it happens, it's never going to happen?

• 25:36David Rosenthal?

  Yeah, I don't know. I mean, you could say so. 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, and 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. But I think it also like, there's a tension here. I mean, on the one hand, I think

• 26:21David Rosenthal?

  we've been painting it for the last few minutes as bad, or at least that this is a disconnect, which it is. 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, the state of the tech world right now, does it make sense for Blue Bottle to be a public company? I mean, it makes sense for Starbucks because Starbucks' goal is to be everywhere and on every corner. 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? I don't know.

• 27:00Ben Gilbert?

  Yeah, I mean, Blue Bottle has 40 locations, right? Like, they have plenty of growth ahead of them if they want to. I mean, Starbucks has 24,000 locations. You know, you don't need to be a public company to be a 40-location coffee shop. I'm actually very curious, too. They also have this, this online business selling directly to customers. I'm super curious what the revenue mix looks like. I would suspect a lot more of it is, is either buying coffee in the stores, you know, in liquid form, or buying the beans in the stores. And then the, the online subscription business is smaller. But interesting to think about that, too, because that, then you start to think about it. Still not an internet company. Like, I'm really sick of the fact that like, oh, we sell it online and like, people subscribe

• 27:43Ben Gilbert?

  to it. Like, that's a slight business model shift, but ultimately, like, fixed costs, distribution costs, like, still not an internet business. But then you at least drift closer to something where you're like, okay, this is different than all the brick and mortar stuff that exists today. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is no longer the hard part.

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• 29:26Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 29:35David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. We've posed some questions here, and I think James Freeman and the Blue Bottle team were 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. But I do think, in terms of where I come down on this, like, I'm not sure that that's the dichotomy that makes sense, right? Like, I think about Apple, right?

• 30:20David Rosenthal?

  Like, an Apple Store and a Blue Bottle Store are eerily similar. And Apple is maintaining...

• 30:27Ben Gilbert?

  Well, 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.

• 30:40David Rosenthal?

  Well, no, but you come, you walk into an Apple store and there, 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. It's more now, but it's certainly not relative to the number of square feet that they have. 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. You know, whereas as you point out, and you know, Blue Bottle has 40 stores.

• 31:09Ben Gilbert?

  I'm curious to get into acquisition category because I'd love to get your take here. Do you want to, you want to dive into that now?

• 31:15David Rosenthal?

  Yeah, let's do it.

• 31:16Ben Gilbert?

  All right. So I'm curious what you think. 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. You don't want to go for anything less. Do I think Nestle could create that? Probably. Like, do I think they could create that for way less than they paid for Blue Bottle? Certainly. Would it be successful? Almost certainly not. Like, I think ultimately what they've bought here is the brand and the prestige around the brand.

• 31:57Ben Gilbert?

  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, to really amp up the growth rate of Blue Bottle, to potentially sell other stuff in Blue Bottle, to sell Blue Bottle Coffee everywhere where they have store space. But they bought brand here. They bought coolness.

• 32:20David Rosenthal?

  Yeah, see, 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? 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. So this is something kind of new and different for them, 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. Like there's crossover potential, but there's so many landmines in there.

• 33:03Ben Gilbert?

  Yeah. I don't think I really considered that that much. The question is, I mean, if it's a business line, then it should be freestanding. And that means that you should believe that the summer future cash flows on this thing are going to be $625 million. That's a lot of growth.

• 33:20David Rosenthal?

  Yeah, yeah. But, you know, on the, on the other hand, so they, well, a foreshadow, we'll get into this more in tech themes. But this really is kind of like, it's so interesting. Like, this is a like Facebook style acquisition being done by Nestle, right? Like, they're keeping the team separate. All the rhetoric is that, you know, they're gonna let Blue Bottle just keep doing its thing. It's a separate board, the employees and James, the founder, still own a significant chunk of the company, you know, separate from Nestle. Yeah, I don't know. What do you think? Is it gonna work?

• 33:54Ben Gilbert?

  Well, I mean, so what are they gonna do? The question is, like, what are they gonna do with it? Are they gonna try and put Blue Bottle in more places? Because I believe Nestle can probably do that. 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. And a big capital infusion is a really good idea to do that.

• 34:18David Rosenthal?

  Yeah.

• 34:18Ben Gilbert?

  But I was reading this interesting-

• 34:19David Rosenthal?

  And, 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. Even they raised 75 million from Fidelity, but like-

• 34:33Ben Gilbert?

  100%.

• 34:33David Rosenthal?

  Nestle could, could write that in a week, you know?

• 34:36Ben Gilbert?

  Right, right. So I was reading this interesting Quora post that's like, it gives a good order of magnitude for what individual cafes sell. And I, I feel like I should have gotten the Starbucks comp because that would have been better. But this, this says, "In Australia, 60% of cafes sell between 200K and $2 million per year." 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. Like, that's a lot of stores to get to $625 million.

• 35:07David Rosenthal?

  Mm hmm, mm hmm. Well, it's not just revenue. I mean, back to your, your point a little while ago. This is not a tech company. Like, you know, let's say they have 40 stores doing 2 million of revenue in each. Right? Like, okay, they had 80 million in revenue, like, let's, let's say, but, you know, the, the margins on that are not software margins.

• 35:28Ben Gilbert?

  Right, right, right, right. I did read one interesting piece that, 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. And by the way, I have an espresso machine. We have one at work. These things are freaking awesome. 70% of the single-serve market in Europe is Nespresso. And they tried to penetrate in the US and completely lost to Keurig and Tassimo. And they have less than 5% penetration in the US on those single serves. 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, to win some of that back?

• 36:08Ben Gilbert?

  And the reason that it's important is because across Nestle's businesses, their margins are about 15%. And in their beverages, it's about 25%. 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, and this could be, you know, a huge missed opportunity if they have to forfeit the, the single-serve coffee market in the US as it just skyrockets in popularity.

• 36:38David Rosenthal?

  Yeah, interesting, interesting. So this is like the, uh, this is bad. But like the, the, the right way to do the, the Juicero.

• 36:51Ben Gilbert?

  Yeah, actually, dude, I tried the other day just squeezing my Nespresso pods and they made amazing coffee on their own. I don't know what I pay the hundred bucks for this thing for.

• 36:59David Rosenthal?

  Yeah. Well, you can't do that with coffee.

• 37:02Ben Gilbert?

  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, the brand may not be able to be leveraged into in the sort of single-serve home thing. Like, would they pit Nespresso against Blue Bottle and have two divisions making similar things selling against each other? I mean, maybe it'd be the same division and they would just, you know, sort of relabel the Nespresso stuff.

• 37:32David Rosenthal?

  Well, if Nespresso, and I agree, they really do make good, single-serve coffee, much better than Karrigs, but if they have such a small market share here, maybe they just rebrand the whole thing in the US as Blue Bottle.

• 37:49Ben Gilbert?

  Yeah, I wonder. And, you know, how much of a say do the Blue Bottle folks have in that? I mean, presumably Nestle makes the decisions now and has the controlling interest.

• 37:58David Rosenthal?

  Yeah. But again, remember, like, it's not a, they don't own 100%, like, the Blue Bottle team still, you know, has a large stake. Like, there's just a lot of complexity to this deal for so many reasons, as we've been talking about.

• 38:13Ben Gilbert?

  Yeah. I like your assessment of business line. I'm curious, I mean, it is that for now. I'm curious to see what sort of integration we start to see.

• 38:23David Rosenthal?

  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, and nobody else had for a while, I mean, what happens? 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. What happens?

• 38:52Ben Gilbert?

  Yeah. I mean, presumably another Nestle would have to come along in some amount of time. 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. And the, you know, Fidelities are like, we need to get out of this business. Like, we've seen great growth, but like, my God, we need a way to get out of this. You almost wonder, did Fidelity, you know, tee this whole thing up with Nestle?

• 39:15David Rosenthal?

  Well, and not just Fidelity too. I mean, don't forget, there've been VCs, you know, on the cap table here since 2008. So, almost 10 years. And, you know, venture capital funds, you know, have a, have a life cycle. 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. But the typical life of a venture capital fund partnership, limited partnership, is 10 years. And what that means is that from the time the fund was raised until, you know, whatever that date is, and again, typically 10 years, like you're supposed to wind up the whole fund and give all the money back to investors at that point. Now, in most cases,

• 39:58David Rosenthal?

  there will be provisions to extend the life of the fund. That almost always does happen. But still then, as 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.

• 40:16Ben Gilbert?

  And then what happens, David? This is a good little VC 101. 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?

• 40:26David Rosenthal?

  Well, what would happen then is those shares would get distributed out to the investors in the VC fund, the limited partners. 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, uh, index, right? Who led the Series B in, uh, in Blue Bottle. So instead of index as your investor and sitting on your board, now ratably, all the, in proportion to the, those investors in index, they all own like little bits of your stock now. And, you know, they're in totally different businesses. Like, they're not in the business of sitting on your board, helping you grow. You know, they may have different liquidity timeframes,

• 41:11David Rosenthal?

  return hurdles. Uh, it just turns into a nightmare.

• 41:15Ben Gilbert?

  And so then you could have, you know, 50, 100, 200 new entrants on your cap table?

• 41:21David Rosenthal?

  Yep, yep. And not just new entries, but new entries with wildly divergent, you know, interests.

• 41:27Ben Gilbert?

  Right, right, right. And, you know, presumably at some point, that starts to, starts to trigger some things that need to happen with the SEC because you have so many shareholders.

• 41:38David Rosenthal?

  Yeah, now the rules have changed on that a little bit with the Jobs Act. Um, but, uh, but still.

• 41:46Ben Gilbert?

  Not, no, no bueno.

• 41:48David Rosenthal?

  Yeah, no bueno. 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. 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. And maybe private equity is a path. So that might have been one thing that might have happened otherwise. You saw this with SurveyMonkey. So, similar situation. The company, Dave Goldberg, Sheryl Sandberg's late husband was the CEO, and he was adamant, never wanted to go public, but had raised all this money. And so, actually, several

• 42:30David Rosenthal?

  times, the various private equity firms came in and bought out the existing investors in SurveyMonkey. And then sometimes, and then even larger private equity firms came and bought out the smaller private equity firms.

• 42:42Ben Gilbert?

  There is a bigger fish for a while. At some point, they run out of big fish, and the public market is where you need to go.

• 42:50David Rosenthal?

  It can't be turtles all the way down.

• 42:54David Rosenthal?

  There has to be a pool at the bottom.

• 42:59Ben Gilbert?

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

• 43:04David Rosenthal?

  Love it.

• 43:05Ben Gilbert?

  Okay, one other VC 101 moment. So, why not, 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. 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?

• 43:31David Rosenthal?

  Well, some VCs do. So like, Sutter Hill is an evergreen fund. The thing about that, though, is that you have to...

• 43:43David Rosenthal?

  Everybody has to be aligned in the partnership, both the VC partnership and then the limited partners about wanting that. So all of the limited partners have to be able to say like, yep, we don't care about timelines and liquidity. 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. And, um, you know, most VCs, uh, some are, you know, very wealthy independently or have been VCs for a long time and have gotten liquidity and aren't as motivated. 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.

• 44:28David Rosenthal?

  You know, they're not, uh, um, you know, they're not in a position where they can just indefinitely go without liquidity either. So it really, it really, and especially, you know, as a, as a VC, an 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 dividend-ing it out to you. 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. You know, if there, if there is cash flow, you can dividend it out or you can do bonuses or whatnot. None of that money comes back to VCs.

• 45:07Ben Gilbert?

  Yeah. Yeah. Great point. Great point. Well, thanks for, uh, for sidetracking there with me.

• 45:16Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Legora, the agentic operating system that is redefining how the world's best legal teams work.

• 45:30David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Legora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 45:46Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 46:01David Rosenthal?

  And that's how you get features that customers love like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 46:25Ben Gilbert?

  And they recently launched Legora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 46:44David Rosenthal?

  And Legora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 47:14Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at legora.com/acquired and just tell them that Ben and David sent you.

• 47:39David Rosenthal?

  All right, should we dive into tech themes?

• 47:42Ben Gilbert?

  Yeah, yeah, let's do it. Let's do it. And one, here's one that I don't know if it's actually applicable, but I've been thinking more and more about. 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, but the return of brick and mortar in a different way than it was used before 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

• 48:12Ben Gilbert?

  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. And in many cases, they're doing the stores very differently. So like, you go to the Warby Parker store, you don't actually buy glasses there, you buy them on the website in the store, but you can kind of try it on. 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. Now, as I said, I was walking myself into a corner. This isn't quite the case with Blue Bottle, but it is sort of part of this boutique-ification of retail

• 48:56Ben Gilbert?

  away from the man.

• 49:00David Rosenthal?

  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 Blue Bottle for one specific thing, you're going to an Apple store for a one specific thing, like, there aren't thousands of SKUs just lying around on the floor. And so as a result, you can have a much better, purer experience of that thing in that store. And as a result, you can, if you're able to get distribution,

• 49:43David Rosenthal?

  now, this is where it breaks down a little bit, in the physical world versus aggregation theory on the internet, if you're able to have distribution wide enough, and you have that superior customer experience, you will win every time. 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 is an internet company, but it's not. Like, they need to have a store everywhere to do that. And that's going to require a ton of capital.

• 50:20Ben Gilbert?

  Yeah, it's pretty interesting. I mean, the way I like to think about internet companies being differentiated is the super low, if not zero marginal cost. You can have super high fixed costs, but low marginal costs, especially 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. Facebook is a winner take all business, and Amazon will be a winner take all business. And Amazon doesn't quite fit, but like maybe Amazon as the third-party seller group kind of fits. So the interesting thing here is like, coffee stores are not actually winner take all. Like, despite the fact that Starbucks,

• 51:02Ben Gilbert?

  it's not just the internet that allows you to quickly saturate a global market. It's many other factors of our world today, too. It's 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. So it's slower than if it were just bits, because it's in the real world. But 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,

• 51:46Ben Gilbert?

  you can't create the thing that's best for everyone under one single company.

• 51:52David Rosenthal?

  Well, you can, though, if you're a marketplace, right? And I think that's why Amazon can be a winner-take-all business in retail, because you can buy the, I don't know, what's some trivial example? Like, an iPhone dock, right? Like, you can buy the $3 iPhone dock from China on there, but you can also buy the $500 artisanal. You can get your Starbucks and your Blue Bottle on Amazon.

• 52:25Ben Gilbert?

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

• 52:29David Rosenthal?

  Yeah, exactly.

• 52:30Ben Gilbert?

  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.

• 52:35David Rosenthal?

  Yeah, right. So this is where, you know, the analogy breaks down in the physical world.

• 52:40Ben Gilbert?

  It's kind of interesting. I mean, like if you go back to 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. And like, Blue Bottle doesn't want to exist in a marketplace either, much like Southwest doesn't want to exist in a travel aggregator. Like, I don't want to be seen around all that cruft. I want to be in my own little thing and separated from all that. So I guess the tech theme I'm going with here, the theme I'm going with here is like, some things are uncraminable into these business models that are massive and winner take all and look super shiny from an investment perspective. And I think coffee may be one of them. Like Starbucks is killing it. They're doing great.

• 53:25Ben Gilbert?

  But like, are they the answer for everyone? No.

• 53:28David Rosenthal?

  I certainly agree with you in coffee as it exists today. But I'm thinking about like Airbnb though, right? Like you couldn't, a Holiday Inn was very different from a Ritz Carlton, right? There were segments there for sure, but, but both of those experiences and, you know, both below a Holiday Inn and above a Ritz Carlton exist on Airbnb. A platform like that actually can, you know, address, if not the whole market, you know, many, many segments. Part of it's tied to, maybe, maybe it's just the nature of the coffee market, but I think it is also tied to this like physical, physical nature of

• 54:11David Rosenthal?

  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.

• 54:24Ben Gilbert?

  Could, could Blue Bottle move down market at some point and open Starbucks competitors? And like, there's Blue Bottle Classics and then there's like, Blue Bottle something new?

• 54:35David Rosenthal?

  Well, it's interesting. Starbucks is doing this, right? With the roasteries. They're moving up market.

• 54:40Ben Gilbert?

  They're going up market. And like, can Starbucks actually win over the coffee snobs? I mean, that's a, 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 wifi. Like, then I feel like I'm almost one of the cool kids and I have the product that I actually want.

• 55:01David Rosenthal?

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

• 55:10Ben Gilbert?

  Go through the home instead.

• 55:11David Rosenthal?

  Yeah.

• 55:13Ben Gilbert?

  Yeah. Interesting. I mean, who, who knows what, what direction they'll go, but I'll, 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, and create that, that, a product for everyone when you have to think about cramming in the physical experience of it, too.

• 55:32David Rosenthal?

  I don't, 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.

• 55:46Ben Gilbert?

  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...

• 55:57David Rosenthal?

  Yeah, good point.

• 56:00Ben Gilbert?

  I, I'd say we may be nearing, no, I'm, I'm not going to go there, like, the pushback of this, of the one-size-fits-all, but in, in some ways.

• 56:10David Rosenthal?

  Well, okay, well, maybe Amazon can, right? Like, who wouldn't buy from Amazon? Because it's on the internet.

• 56:16Ben Gilbert?

  Environmentalist.

• 56:18David Rosenthal?

  Hmm, environmentalist, maybe. Yep.

• 56:21Ben Gilbert?

  I mean, I'm, I'm looking for corner cases in some ways, but I, 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.

• 56:31David Rosenthal?

  Yep.

• 56:33David Rosenthal?

  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? But like, there were whole segments of people that would never shop at Walmart. And likewise, you know, there was, um, you know, whatever high end equivalent of Walmart you want to pick that doesn't exist anymore.

• 56:54Ben Gilbert?

  Tarjay?

• 56:55David Rosenthal?

  Tarjay, right. Well, Tarjay is sort of more, I think more mid-market, maybe slightly upmarket, certainly from Walmart, but I don't think it's like, you know, the, the Neiman Marcus of, of, you know, big box stores. Just about every demographic, unless, unless, as you point out, you have a environmental concern, would shop on Amazon, right?

• 57:15Ben Gilbert?

  Yeah, I mean.

• 57:16David Rosenthal?

  Because again, you can get your $4 iPhone dock or your $500 iPhone dock there.

• 57:22Ben Gilbert?

  Yep. They're getting there anyway.

• 57:25David Rosenthal?

  Yep. All right.

• 57:27Ben Gilbert?

  You want a grade?

• 57:28David Rosenthal?

  Let's do it.

• 57:30Ben Gilbert?

  All right. Uh, you start, because I don't know.

• 57:34David Rosenthal?

  Well, ah, this is tough. I mean, it's kind of like everything worked out here, right? Like investors got a nice return, especially the early investors. The management team and James, you know, certainly seems happy. I mean, they're, they're leaving a ton of skin in the game, so they must be bullish on the future. You know, Nestle is getting potentially, well, they're getting a, a growing, um, brand there and a new business line to add, but they're also potentially getting something that could really be valuable to them in terms of rebranding their Nespresso, a single shot, uh, market. And that's a very big market. But there are these, like, it just feels like this whole thing wasn't the

• 58:17David Rosenthal?

  right fit, you know, as we've had this discussion. I think I, 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?

• 58:36Ben Gilbert?

  Yeah, I don't disagree. It does. It does feel like the my biggest takeaway is with the real the successful acquisitions we've seen, when you really dig in, you start to see like the one real reason this deal got done. 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.

• 59:05David Rosenthal?

  Not to mention.

• 59:06Ben Gilbert?

  Oh, that's what that deal is about.

• 59:07David Rosenthal?

  And they had an existential threat in losing mobile. Well, he was very clear what it was about.

• 59:14Ben Gilbert?

  Right. And, you know, there's, there's, there's others like there's, there's, you see exactly what Facebook, I'm sorry, what Disney wanted to do with Marvel, right? Like there's a, there's.

• 59:25David Rosenthal?

  The flywheel.

• 59:26Ben Gilbert?

  Their business is turning super valuable IP into dollars in 11 different forms. And boy, are they firing on all cylinders of all 11 of those pumping them into the Disney machine. 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 Nestle to own. You know, I can paint a story where the rebrand of the Nespresso makes lots of sense. I could 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, you know, open lots more stores very rapidly because they have all this capital. But like, do I see the like, one thing where this fits

• 1:00:07Ben Gilbert?

  perfectly in and there's internal alignment within Nestle of how they're going to leverage this asset? Like, I don't work there, but probably not. Like, I mean.

• 1:00:17David Rosenthal?

  I mean, I think the only dark horse being, being the Nespresso. I mean, that may just be a huge business and they needed a way to invigorate it.

• 1:00:28Ben Gilbert?

  Yeah, thank you to the Quora commenter who suggested that. It's pretty interesting. So I'll go B-, you know, maybe C+, but again, I think I've rated things that were way worse than this C's. So I'll go B-.

• 1:00:44David Rosenthal?

  Carve out?

• 1:00:45Ben Gilbert?

  Carve out. So I was on a flight to Ohio this weekend and had lots of free time, was clearing out my Instapaper. And this really interesting thing, I first heard about it like two years ago, the tulip mania story. There was a Dutch tulip bubble where people were going insane 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 gonna buy this bulb and 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.

• 1:01:28Ben Gilbert?

  And theoretically like crashed the Dutch economy and it was 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 this story pop up in more places, especially in the technocrat sphere where people love to wax philosophically about if we're in a bubble or not. There's even a movie coming out, I think it's Tulip Mania or Tulip Fever or something that like this month. And the Smithsonian magazine published a really interesting piece called "There Was Never Really a Tulip Fever."

• 1:02:02David Rosenthal?

  Oh, I've heard about this.

• 1:02:04Ben Gilbert?

  It was super interesting, like this thing that's gotten 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, 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 destabilized the whole economy. And it didn't throw anything into like a tailspin. It did not have these trickle down effects that are so often quoted when wanting to compare

• 1:02:43Ben Gilbert?

  a potential oncoming bubble or 2008 or 2000 to, to, you know, this Dutch tulip bubble. And it's like totally fascinating of analysis of why we wanted to believe that this, this mania created even more devastation than, than it actually did.

• 1:03:02David Rosenthal?

  Hmm. Interesting.

• 1:03:06David Rosenthal?

  Relevant to today's times.

• 1:03:09Ben Gilbert?

  Yeah. Yeah. And there are some cool little takeaways in that and suggestions of why we do want to believe it. But I'd say I'll leave it to the, the author who's way more eloquent at explaining that. So click the link in the show notes if you're, if you want to check it out.

• 1:03:20David Rosenthal?

  Cool. Uh, my carve out today is actually random seeming, but, um, is the iPhone SE. Classic. So I watched the Apple keynote a couple of weeks ago. We talked about it a lot on the HTC episode. It was really great. And, you know, coming out of it, uh, so I've, uh, for the last three years, I've been a plus model guy. I got the six plus and then I got the seven plus and coming about it, I just, I wasn't that compelled by any of the new hardware. Like I see where they're going with the iPhone 10. It's the future. It's amazing. But I was like, I'm not ready just yet because AR isn't like real yet. It will be in the next generation or two.

• 1:04:06David Rosenthal?

  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. It would be nice not to have such a big phone in my pocket anymore. And then I like, just kept looking at my seven plus and I was like, this thing is enormous. And like, I can't sit down with it. 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. And so I was like, you know, there's such an active like liquid secondary market for Apple products. I just sold it on eBay and I got a iPhone SE on eBay for way cheaper. And I am, I'm sure I will upgrade in the next generation, but I'm really happy to be back to having a small phone. I never thought I would say that.

• 1:04:48Ben Gilbert?

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

• 1:04:57David Rosenthal?

  That's me. That is me. No, it's so, I'm 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 realizing, maybe I'll probably change in a couple of years. But I was like, it's just nice to be back to, you know, being able to have my phone in my pocket.

• 1:05:16Ben Gilbert?

  I'm envious. I'm envious. You're so right on that. I think were it not for these cameras and sometimes when I want two-handed use of a larger keyboard,

• 1:05:27Ben Gilbert?

  I miss the crap out of that form factor.

• 1:05:29David Rosenthal?

  Swipe glide typing, though, on the G-Board, the Google keyboard, is pretty good. You know, and I think this is it for me. Like, I'm not much of a photographer. I don't take that many pictures, whereas I know you do. So it was like, the appeal of the cameras for me is AR in the future. And I just don't think it's there yet. So I'm going to enjoy my, you know, one or two years, probably one year with a phone in my pocket.

• 1:05:56Ben Gilbert?

  Well, David, enjoy your non-bionic phone.

• 1:06:00David Rosenthal?

  I know, I'm gonna miss the bionic. Are you, are you, are you going for a 10?

• 1:06:06Ben Gilbert?

  I mean, if I can get one, I'm gonna, I'm gonna, I'm gonna dual wield and have my, 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. I don't know. But I bet I'm into Q4, if not, or early Q1 next year.

• 1:06:27David Rosenthal?

  Well, but this is the thing about, about Apple products, right? Like, if you are an iOS person, like, there is so, like, the secondary market is so liquid. Like, yeah, you have to pay some transaction costs, but like,

• 1:06:39Ben Gilbert?

  It's crazy. It's really not much. And they keep their value incredibly.

• 1:06:42David Rosenthal?

  They keep their value, not like, you can swap out, like, for really not much money, in terms of economic impact. It's kind of crazy.

• 1:06:54Ben Gilbert?

  It is. It is.

• 1:06:57David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:07:04Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:07:14David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:07:35Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:07:47David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:07:58Ben Gilbert?

  Well, that's all I've got. Do you have anything else?

• 1:08:01David Rosenthal?

  That's all I got.

• 1:08:03Ben Gilbert?

  All right, listeners. If you aren't subscribed and want to hear more, you can subscribe from your favorite podcast client. If you feel so inclined, we would love a review on iTunes. Other than that, join us at acquired.fm. You can join the Slack. And that's all we've got. Have a great day.

• 1:08:21David Rosenthal?

  See you guys soon.