Philz Coffee CEO Jacob Jaber hopes to conquer all of America with his slow serve, pour-over coffee, a favorite of the Silicon Valley tech set. But despite a recent infusion of cash, his projected takeover will be deliberate and methodical.
In an interview last week, Jaber said that his company had raised $45 million in a round led by private equity firm TPG. He declined to give a valuation for the San Francisco-based chain of java houses, but said that the money will be used as part of an on-going effort to push his family's business outside of the Bay Area. By 2017, Philz will have stores in Boston, according to Jaber, its second East Coast market after its expansion into Washington, D.C. earlier this year.
"To grow and reach new milestones, you have to have capital and have great people behind you," he said. "We have productive paranoia. We’re always thinking ahead."
In Silicon Valley, it's become the norm for any fast-growing company to take on investment from venture capital and private equity firms and coffee shops have been no different. Oakland-based Blue Bottle has raised more than $120 million, which included a $75 million round in early 2015, while other smaller companies inlcuding Sightglass Coffee, count heavyweights such as Jack Dorsey among their investors.
With the latest round, Philz, which began out of a Mission district corner market in 2002, has raised a total of $75 million and built out 34 locations in the last 15 years. By the end of 2017, Jaber and his father Phil, who founded the company, aim to have more about 50 locations across four major metropolitan markets.
Like most tech CEOs looking to project confidence, Jaber said that the company "didn't need to go out and raise new money," but took the opportunity to "accelerate growth" after meeting with TPG in May. The firm, whose partners often frequented a Philz truck outside their office, had followed the brand for years, and was introduced to the Jabers through Philz board member and former Apple executive Ron Johnson. TPG's Sanjay Banker, who is now on the board with fellow partner Jim Coulter, would go on to spend more than 100 hours over the summer with Jacob, learning of Philz' business and eventually investing.
Jaber said that the firm's with experience with retail and consumer companies, such as J. Crew and Burger King, will help in sussing out future business opportunities, but stressed that Philz was far from selling out. He and his father still maintain voting control over the company, and he will not permit practices that he feels are antithetical to Philz' focus on product quality, including franchising and licensing goods to other retail locations.
While that may prevent it from becoming a close competitor to Starbucks in the near term, the calculated approach to expansion may translate to longevity for a business that is doing more than $50 million in sales a year by FORBES estimates. Instead of opening any store anywhere, the Jabers have focused on affluent, metro areas, preferring to establish multiple Philz locations in a given region, before focusing on the next city. In Los Angeles, the company will soon open its fifth and sixth shops in the span of two years, while the two current D.C. stores will soon have neighboring locations in Maryland and Virginia.
Boston is Philz' next target, said Jaber, who cited the city's young, college-aged demographic as its main attraction. While the town is the home of Dunkin' Donuts, Philz CEO noted that there's opportunity for a higher-end coffee chain to coexist with other established players.
"We know and we respect local brands but what we’re trying to do is something different," he said. "It's a different environment and a different culture. We don’t spend time focusing on them."