SPEAKER_01: Hey, everybody, I was in Miami all week doing meetings went really well, thanks for asking. But I didn't get a chance to record a new liquidity episode, you know, we talked about what's happening in venture and startups and with limited partners. So you guys have given me so much amazing feedback on the liquidity series that I figured I do a little market update for you just a little quick market update. And then we have after the quick news hit an amazing interview with the CEO of Terra cafe. How do I know this founder? Well, I bought this incredible super deluxe espresso machine that I love the design was amazing. So I wound up investing in the company. And we have a great talk about how to build a hardware company how to have world class design, and just you know, the ups and downs of startups right now. So this is gonna be a great show. Let's get started.
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SPEAKER_01: What's late stage VC this is after the seed round, y combinator, our accelerator found a university, you get to a series A. And then if a company starts to scale, I'd say getting past 1020 million in revenue, that sort of indicates it's a later stage startup now in VCs. In the late stage, start investing in what you would hear somebody call a B round to C round to D round. And so a lot of statistics have been coming out and people are trying to figure out what's going in the market. So let's just go through a couple of charts here. According to the Financial Times, we call it ft in the industry, US VCs are sitting on 311 billion dollars of what we
call in the industry dry powder. That is a record amount. Take a look at this chart. It's unbelievable. The dollars keep building up. So what you're probably hearing as a startup is where's all this money going? What Why? Why are the VCs not investing this money? Well, in order to explain this, you have
to understand how the LP and the VC sometimes called GP relationship works. LPS will give this money to VCs. But these funds are earmarked for typically three to four years of primary investment. And then they move into 678 years of harvesting those investments. The typical life of a fund is stated to be 10 years, they can go as long as 15 before all of the investments are returned and exited. So think about that 10
year window. And there's four years of primary investment, you
have to do something called a capital call you ask VCs, the VCs ask LPS, hey, can you send us some money and we'll invest it? Why don't they just take all the money down at once? Well, because it's easier to do it over a period of time. And the LPS can keep that money, you know, in an interest bearing account, or in the public markets, right? So they're making some amount of money on it. At today's interest rates, maybe they're making five 6% on it. So the next thing that we
want to look at here, and we'll pull up this chart is looking just at how much money exited the system, right? So LPS give VCs money, VCs built companies with founders, those companies go public, or get sold. And then an exit occurs, there's a little tiny third way after the IPO, the main way, second way, M&A mergers and acquisitions, somebody buys your company. And the third way, there could be what's called a secondary transaction, somebody else wants to own the shares, and people
sell them in private companies. So let's take a look at this chart. Just to explain this chart, there's a bar chart, it has the exit value. And then there's the exit count, the number of startups, companies that exited. And if you see cruises right around 1000 a year, but it peaked at 1900 startups a year, and close to $800 billion in 2021. This was a
bunch of IPOs a bunch of sales of companies, and it has plummeted since 2022. There were 1400 exits, but only for $78 billion. And then it came back came down to in 2023 999. And then it just plummeted down to 61 billion. Why? We all know the IPO window has been closed for two years now. And the current regulatory regime, ie. I mean, a con has been very hawkish on M&A, you may have seen figma had there and that happened largely because of regulators in the European Union and in the UK. They are just blocking M&A transaction. So either you IP home, or you probably don't get an exit. And if you look at these, the average exit value from 2013 to 2023 per year was $185 billion. But if you take out the 2021 boom year, that number drops and you have an exit value of about $125 billion a year. So we are seeing half of what the average has been for the last 10 years. Now, if you're a VC, you got to call
capital. And these LPS are getting half as much as the average and a massive decrease from P. That means they can't recycle money. So the whole system has basically indigestion, we need to sell more companies so that VCs can return capital to LP so LPS can then invest in the VCs next funds. So the whole system has been locked up for two years. And now it's just starting to crank back up. And one of the things that will, you know, kind of get this unstuck is IPOs. We're waiting on the stripe IPO, you may have seen instacart went out, it was a little bit of a disaster for the later stage investors and Reddit is about to go out. And that is at maybe half their valuation in the private markets 5 billion instead of 10, according to reports. Now, another article came out. So I want to dovetail
all these issues. And this one is Lightspeed. Lightspeed is a very big venture firm, late stage, largely, they have $25 billion in a um, that's assets under management, take all of their funds, put them together. That's how much they have in assets under management. Well, there's a really interesting
thing that's occurring since there's no M&A. And since IPO window has been the IPO windows been closed. They've started something called continuation funds. What are these, these are new funds, where the firm will sell shares in the private companies in their portfolio. So in this case, according to these reports, Lightspeed is selling about a billion dollars worth of stakes in 10 of its portfolio companies. Now, who are they
selling it to other investors. And what these are designed to do is to give liquidity to LPS so that the VCs can get back to
work. And so this could be interpreted in the most cynical fashion as what is that some kind of shell game, you're selling these shares to another group, you're resetting the clock. But what it really is, is there has to be a buyer who wants these shares, and they have to price the shares at a price that they think will get them a return. So a new set of investors is coming in, they're looking at these private companies and saying, Yeah, I want to own them. But you can be
certain that they're looking at them. And they've really sharpened their pencils, they've really done the math and said, This is what I want to pay. So that might not be, you know, that might not feel great to Lightspeed or their LPS, you know, these prices that the new people will pay. But it is and this is I think my interpretation of this and this would be the most generous interpretation of events that are occurring here with this continuation funds is that we have a high functioning market. And people are being realistic
about what's going on. So hey, these companies have been private for a long time, we know there's not going to be M&A until maybe there's a regime change in Washington. And if Biden wins again, maybe it's another four years of not being able to have M&A looks like the stock market will open back up to some new inventory. Great. But it's still going to be a bit of a slog. So we want to get liquidity for folks. And in this case, you know, it looks like Lightspeed is going to give LPS a choice of liquidating or holding to get a better return. So that's really interesting. And here's what Lightspeed's chief business officer told the Financial Times EFT quote, VCs
can't just use the excuse that the IPO window is closed, they need to take a page out of the private equity playbook and build more consistent liquidity that LPS can count on. So some questions will emerge out of all of this. The number one question is, are we going to have more of these down round IPOs in 2024? Reddit at half price Instacart, I think went out at 25% of its peak private market valuation. And the answer to that is clearly yes, we're going to see a ton of down rounds, IPOs, but it's better to get out better to have that fitness of being a public company and the maturity of being a public company, and the scrutiny and the liquidity for everybody involved. Now,
some companies will wait it out. So if you're stripe, and you've got a ton of cash, and the business is doing great, maybe you wait, maybe you wait until 2025. And you hope your valuations bounce back to those 2021 levels, people will make those hard choices. And eventually, the market rebound will catch up with the market being overheated in 2019 2020 and 2021. Or the distance between those two numbers will be such that it'll be an easy decision to make. So how much value destruction are we going to see for late stage VC firms, that's going to be the interesting thing to watch. And what is that going to do to LPS appetite in the growth stage what I'm seeing in the market LPS are really interested in going a little bit earlier. We do pre seed and seed at our fund launch, we do the founding university, which is pre seed, we do our accelerator and direct investments, which is considered seed. Pre seed typically means before your product launches, see your products in market series a product's got a couple million in revenue. That's an easy way to sort of think about it. And so yeah, a lot of LPS are going to be either pencils down, they're not going to write checks, or they might be looking earlier and maybe to write smaller checks. So you can check out those FT stories in our links. And next up the terror cafe interview enjoy. Right now
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welcome back to this week and startups. As you know, Americans
including myself are obsessed with coffee. 65% of us drink coffee every day. And the average coffee drinker three cups a day. No surprises there. But brewing from home. It's
brutal, right? People have drip machines, they do pour over coffee pods destroying the environment. I've always wanted to have a great one touch automatic coffee machine is super automatic. And you know, I was looking for one of these.
And I came across one called Terra cafe and people were losing their minds over it. I wound up meeting the founder and
I love this product so much that I invested in the company. So welcome to the program. So Honda dill dill my god. So hot
dill my god, thanks for that. I get it right. So how you nailed
SPEAKER_01: it. You know that I you know, we have a name like Cala tennis has
SPEAKER_01:
always told people you have an obligation to at least give it a shot to get the difficult or more than two syllable non American names. Correct. It's not that hard. So I take a lot
SPEAKER_02: of I take a lot of pride in the name being so difficult for baristas to write down on the cup that, you know, oh, yeah.
SPEAKER_01: It's such an inspiring moment that I had to start my own
SPEAKER_02: company to offset that pain point.
SPEAKER_01: So you made this gorgeous coffee machine. We were lucky enough to invest in it from our fund. And I, you know, we were not big on
direct to consumer. It's a really hard space, right? founders to crack and then, you know, especially in consumer electronics, appliances. That's a very crowded space as well. So why don't we start from the beginning? I know you you're launching the TK to the terror cafe to I have the terror cafe one can't wait to get the two. But maybe we step back for a second here and you could just tell the audience. What was the inspiration for the company? And then how did you assess as a founder? This is the important question that you should go after this opportunity, knowing how hard it is to create a direct consumer slash physical product in the real world as an entrepreneur.
SPEAKER_02: Why am I a glutton for punishment?
SPEAKER_01: Basically, why did you want to just put your hand on the table and smash it with a hammer every day?
SPEAKER_02: On top of the already prototypical slog of a journey that is entrepreneurship? Yeah, yeah, you just increase the degree of difficulty. Yeah,
SPEAKER_01: yeah, exactly. I just I just throttled it up to the max. No,
SPEAKER_02: I think that it has to always go within that trifecta of kind of passion, competency and opportunity you not holistically or any sort of absolutism by any measure, but you have to be able to check those three boxes before starting on any journey, let alone something within the hardware space. Because as we all know, every sort of path has a different varying degree of you know, challenges and hurdles to overcome. But just as far as you know, the early days from the inspiration from getting started, I will say as much as you know, it is the the starting point kind of dates as far back to kind of culturally like,
basically, I joke that the rule not the exception is that if you're Persian, hot drinks and dried fruits basically are the
social nucleus of your life. So I had pretty much every gadget under the sun that average household in the US I believe
has around two coffee machines per household or 1.8. So I'm rounding up a little bit but I like to think my household contributes as a pretty big outlier to that average. So we had we had everything under the sun and as somebody who deeply,
deeply loved just as an enthusiast as a hobbyist, the space, I would say that, you know, when I started digging in looking for a new machine, exactly, as you said, in that area where you have the best of both worlds of ease of use, push button brewing, have the convenience factor that we need on a daily basis in our mornings. And then the higher quality that we were getting used to out of home, especially with the third wave coffee movement, the elevation of craftsmanship throughout coffee, people drinking more espresso based beverages than ever before. So we saw 2017 latte became the most ordered drink in the US surpassing drip coffee, and that kind of continues to climb. So as much as you know, maybe people like to dunk on Starbucks here and there, you know, you got to pay a bit of reverence, a bit of respect to their three and a half and decade growth of what is kind
of known as the EBP category or espresso based beverage category. And seeing how much that was growing, seeing how much we were looking for that convenience, but didn't want to resort to single use plastic aluminum pods or capsules. It became very clear to me when I looked at that intersection of super autos, what was out there, it was this incredibly dated, incredibly antiquated assortment of only a few incumbent brands that were serving this space, nothing spoke to the modernity that we came to expect of appliances, consumer electronics, automotive, and so on. You know, I kind of like to say that we we created the apple of our category where you know, the five or six incumbents were, you know, the blackberry but, you know, I kind of feel like that's an insult to blackberry, it really felt like it was more of a, you know, the the Sega Genesis or Game Boy Color at the time and really wanting to stand out in the early days with the hardware design and an attractive price point. Not cheap per se, but a great value for money from what we were seeing where the average selling point when we started was over $2,000.
SPEAKER_02: There was Jura I had a Jura at some point my my brother in law
SPEAKER_01: had the Sica Sica Sago. Yeah, Saco. And you know, at the time
SPEAKER_02:
SPEAKER_01: 10 years ago, they were okay. But what I found was, I didn't get consistent flavor that I was looking for from espresso. Tons of work to maintain them. And you know, any espresso machines a bunch of work, just by the nature of pulverizing a bunch of grounds. But you came out with this, I think when the TKO one came out originally, it was maybe 795. Now it's 895 a little bit of inflation. We're in the 700s. Exactly. Yeah. And now you
SPEAKER_01: have the TKO two coming in for 1495. Can't wait for that. I think that's going to be shipping soon.
SPEAKER_01: And so we started shipping. So did. Oh, wow. Just started
SPEAKER_02: getting the first units out the door, people have just started receiving them over 10,000 units of demand in just the pre order alone, waitlist, you know, 5000 plus and growing. So it is, you know, beyond exciting, if anything, the demand that ended up coming our way for the for the O2 really did exceed our
SPEAKER_02: forecast, because we didn't know we look, I didn't want to do a race to the bottom. I was looking at, you know, we have seen some new entrants come in. And it really ends up being this kind of you have like this four or $500 engine model that really is, you know, just in a hunk of junk, and then you have this four or $5,000 category, which is prohibitively expensive. And it was again, in that kind of sweet spot that we saw an opportunity to say, Okay, look, the pod based systems, yeah, of course, the upfront cost is going to be cheaper. But actually, if you look at what you're paying in the lifecycle of the product, you're that's how they're obviously their business model is designed. And where we wanted to enter in was being an amazing value for money, the V one great entry model, you know, the original super auto that we came out with still a great bargain for what it does. And then the V two, I just want to blow everything else out of the water. So again, me doubling down on the hardware design, but then using the software and the data as how we're going to kind of carry the torch forward because it's OTA updateable. So it's going to keep improving as we get more of that information back from the customers and kind of having those feedback loops on a regular cadence.
SPEAKER_01: And when you're, you know, just being to mean apples to apples, oranges, oranges, using a pod system, what are these pods charging per pod of coffee? And then if you buy the equivalent coffee bean and grind it fresh, in a in a super automatic machine, what are we looking at, you know, apples apples cost,
SPEAKER_02: you're gonna be saving anywhere from 50 cents to $1 per cup. Depending on which pods you buy, because there are differences between them. So you can get some, you know, the virtuopod, for example, or any of the kind of like seasonal like pods that you see come out, you're going to be saving basically per cup, you know, anywhere from 50 cents to $1. You, depending on how
SPEAKER_00:
SPEAKER_02: many people are in the household, you have to imagine, especially with, you know, the stats you shared at the beginning, you know, three cups a day, you're having, you know, on average, you know, the, the number of people in the household, you're having two people use this device every morning, really, it depends on how many of those cups are in home versus out of home. But you are essentially if you're comparing this to out of home coffee, you're paying back this machine in a matter of months, not years.
SPEAKER_01: So yeah, you save 50 cents a dollar per cup, three bucks a day, two bucks a day, four bucks a day, over a year, it pays for itself. And this is like, and also thinking about the environment is one of the things that makes me crazy. I'll go to an Airbnb, or I'll stay at a hotel, and I'll use these pods under duress. But I mean, I was in Italy, and I had an Airbnb. And they had a pod based system there. I don't know which one this is. There's like K cups. And then this one was like so much plastic, it had like a hard plastic was sort of like a cylinder. Have you ever seen those ones? I think it's a delta, the delta. I know, you know, I love Ili. Yeah, I love
SPEAKER_01:
Ili. And, you know, God bless them. You know, it's delicious espresso, but you can buy the beans, you know, and they had these pods and I was throwing and I drink five cups a day or six, six,
SPEAKER_02: finish a full sleep in one day in one morning. And I'm just like, Come on, this is the most. This is the most
SPEAKER_01: abusive thing. Is there any way that you can justify the use of these pods? In your mind? Like, it just seems unconscious. And
the way I like to talk about is it's that like the evolutionary
SPEAKER_02: scale of coffee graduation, like you, you have this trajectory where nobody is really kind of starting out even oftentimes with any of the pod based systems, a lot of times, it's going to be a pot of coffee approach. You know, even at
times, instant coffee, depending on which geography you're in, and you kind of graduate, you graduate, you graduate. And a lot of what we saw was when we got started six years ago was there was this level of saturation around the pod based system where people were looking to graduate. The problem is when the jump goes from a $500 $400 system upfront with a long
running cost to a, you know, what we were seeing for $5,000 machine or device that is a very challenging step function for most people. Now if people kind of graduate away from us, let's say in the interim in the early days, into a llama, so Kalini and many, they want to spend $5,000 for the machine, another $2,000 for the grinder, that's beautiful. If you want to take that time every morning to do that, and you want to make that investment for your coffee corner, that's great. That is not the lion's share of the market. That is not what that actually looks like you're going to the vast majority of people are holding it to the pot ecosystem. For one factor, all the surveys empirically show convenience, it's easy to use it
SPEAKER_02: is important when it comes to the morning coffee that you have
it get, you know, delivered in a seamless away as possible. You
SPEAKER_02: cannot overestimate convenience in that moment.
SPEAKER_01: I have at the ski house this millet in wall unit now that was I didn't purchase that it's a fancy fancy owner had the house before me and spent a bunch on the appliances. Yeah, this thing
is millet or Millie I don't know what kind of pronouncing it
Millet. Yeah, Millet. Yeah, is the bane of my existence. The
thing costs like five grand. It's breaking constantly. Yeah.
SPEAKER_01: In the amount of maintenance and the amount of messages it gives me now Listen, I understand you got to clean the thing. You got to fill the beans. You got to fill the water. They're steps to this. It's nothing's free. But my lord, this thing costs five
SPEAKER_01: large. And your new one cost 15. I could buy three of yours. Yeah.
Yeah, that is Christmas presents. Six of the TKO ones. I can tell you right now. The espresso from the TK one is as good as better than the Millet and it's less maintenance. So what what is the secret in these super automatic machines to making great tasting espresso at the core? Is it the temperature? Is it the the grind? Is it the amount of coffee? Is it all of those things? What comes into having that perfect crema delicious espresso that I get from your machine?
SPEAKER_02:
So to the first part of what you said, I will say that we took a lot of the insights from the old one and fed those into the O two development process to write so 10s of 1000s of O ones in field learning from that learning what mattered most people it was obviously enhancing the customization enhancing the technology, the precision, the reliability, but frankly, what you just hit on about the maintenance, the cleanliness, ease of use, that was one of the most critical elements to keep enhancing, enhancing, enhancing, to stand out from anything else out there. So from the front loading water tank, waste bin, everything from the front facade, having everything kind of dialed in where you don't have to access the pruning or anything like that any further. So from a reliability standpoint, covering all of that, having, you know, technology built into it that provides a proprietary level of precision makes huge difference. To your question, I will say investing in the components is critical. So that in terms of not just quality at first brew, but over time, so the quality of the grinder, one of the most important things, quality, the precision, you know, the not just the components, but then also the firmware code and logic around the thermal blocks, the flow meters, everything. That is where we invest a lot in the V two. And where I say I want it to be like crossing the Sahara Desert to get to the next best option after the V two. Because you know, I looked at the melees the melee connected melee machines, such you know, the connectivity again, it's, it's almost generous to call it a connected device at this point, but it's it's it's $6,000. You know, the year looking at
SPEAKER_02: 1000 Yeah, because they don't have a battery. So we have you
SPEAKER_01: looked at them with the 6000 wall unit and thought to yourself, maybe I should get in on that. Or is it just, you
SPEAKER_01: know, when you look at it, how many people are going to hire a contractor to put this thing in the wall? That's like what the that's one percenter madness. Most people are gonna put it in compliance on their counter like me. Yeah, we're the roadmap. But
SPEAKER_02: what it accounts for right now is just the level of inbounds we're getting we have no shortage of opportunities. Because coffee shows up everywhere, whether that's in an office space, whether that's in a retail showroom, whether that's enough, it can be a university campus, a hospital, you name it, a car dealership. You know, it's showing up in so many places when that inevitably ends up happening is the V2 from a durability standpoint is going to be incredibly powerful. And you know, again, leaps and bounds beyond anything else. So we look at a lot of these commercial environments, sometimes that can be working with developers for spectin unit. But in terms of, you know, immediate opportunity and pipeline, the amount of commercial activity that doesn't require a new product, but instead actually looking at the software and how we can layer in things like fleet management over time, how we can use the data that is actually valuable to them in terms of maintenance and repair, just things that are ultimately going to reduce the overall product cost for both
SPEAKER_02: PK and the end user, as well as just having a longer term seamless experience is where I think we don't just win today, I want to win when somebody has this on their countertop on year five. This is just the best thing. So from a lifecycle testing standpoint, putting a bar so high up there that you know, I think that's ultimately how you build the customer intimacy, loyalty, goodwill that you would see in a brand like an apple.
SPEAKER_01: Yeah, I always tell folks when they get this TKL when I sent one to chum off as a as a Christmas present at some point and, you know, like he loves it, right. And you know, he can
have your choice of machine out of the wall. No, I think those
SPEAKER_01: of us who have them, you know, might be a little frustrated with them or whatever. You know, I almost want to rip it out of the wall, be totally honest, because then I have guests over and the guests can't figure it out. And they can figure out how to repair Do they have to send someone over or so what is
SPEAKER_02:
there's like they have their own fleet of people who fix it.
SPEAKER_01: Yeah, and they'll troubleshoot it and you know, you're in for $800. And when people see you have that device, it's like you
SPEAKER_01: live in a certain zip code or you have a certain appliance like I had these melee dishwashers as well, man, man, they see you coming and they're just like this is a whatever it's a $1500 dishwasher, we're gonna charge you 800 to fix it, you know, whatever it is, whatever the problem is, and
SPEAKER_02:
they just add a zero to whatever they were initially basically basically, you got a nice American brand all of a sudden
SPEAKER_01: they're just like, Oh, yeah, boom. Yeah, no problems. You know, 150 bucks to fix it.
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SPEAKER_02: Yeah, I think you know, the guidance that we generally give people on the one is when you see you're brewing in excess of 40 cups a day, then you know, it's time to like check whether or not you're in the right category. And then for the me too, you're looking at about 80 to 100. And so you also have a
SPEAKER_02: bigger water tank, bigger waste bin easier to clean. Bean Hopper
SPEAKER_03:
SPEAKER_02: can hold more beans also a cleaner geometry. So no beans will ever get stuck behind a grinder dial. So automating and actuating the grinder dials what allows us to do true drip coffee to taking that out and having a controlled means we can automate the coarseness setting. So when you're doing drip coffee, you're getting true drip coffee. That was one of the biggest functionality to do does drip.
SPEAKER_01:
Yeah. Oh, fantastic. So you're not just doing Americano. Hey, here's your two espressos with six ounces of hot water in it. Correct. Some people do like that flavor. That's like a thing some people like some people hate it. It's a it's a two
SPEAKER_02:
partner decision when you buy this product. So it could be that the person who's actually buying it is a latte lover, a flat white lover, a cortado lover, but their partner only drinks drip or they'll say I drink normal coffee is what they'll say. Yeah, they won't even know how to articulate it. And that's fine. That's fine. But given it's a two partner decision, it's really important for us to hear that with all of our own customers, the value of D to C, the value of direct relationship is knowing how valuable that was to them in terms of it. When you invest in this product, you want it to serve everyone, whether it's the whole household or the whole office, you want it to serve everyone. And so being able to do that actually has a true drip function where you know, it does take longer because again, it's true. So it's truly running the process where it's letting gravity do the work. That is
SPEAKER_02: where things get very exciting, because it opens up a new optionality in terms of brewing. And then we actually bifurcated the way that the brewing works, it's espresso profiles, and then your custom drinks. So we wanted to think about it, what we learned was it's kind of think about it like how you would go to a cafe. Now with espresso profiles, roasters can, you know, upload their own recipes and profiles to the machine. So you know, you can have a bean type. But of course, the average user does not think about it like, Oh, what is the bean? When I go to a cafe, I don't think what bean am I getting? You think I'm going to Stumptown. And then when you're brewing,
SPEAKER_02: and you're ordering your drink, you're thinking I want a flat white, I want a latte, I want to just straight espresso, you're not thinking 20 grams at this temperature for this long
SPEAKER_01: of a poll, which is what baristas do great.
SPEAKER_01: We wanted to make the science that kind of like, we want to
SPEAKER_02: demystify it in the sense that it matches exactly the user experience you're used to when you want that ease of use that convenience. But the science that the precision behind it is is all happening within the machines, you don't need to dial that in. You can play with the settings and we're even playing with ideas like a pro mode where you can get more analytics on the usage and stuff like that. So again, the number of sensors, the amount of information we have, you can basically, you know, create so many different profiles and views of data as it's actually extracting the drink. You know, but it's, it's one of those areas where, you know, I want to be measured with how much you know, we share on the pipeline side of things, because of course, we have a prioritization first units in field, we're getting feedback, the priority right now is making sure everything we're hearing from people be layered into our product development process, our program and planning on how we're making changes, because again, it's going to keep getting better with time. So
SPEAKER_02: everything everyone's experiencing right now is truly the V one if anybody, you know, has electric vehicles or any of the connected vehicles in the automotive industry, they've seen version after version how the software can improve. And when you're in a bull startup, that's where you really get to
stand out.
SPEAKER_01: So you're going to be able to upgrade the firmware here through an app. If things are need to be tweaked, you can do that. You don't have to put it I don't know how you do it. How
would you upgrade the TK 01? Is that like you have to put a thumb drive?
SPEAKER_02: Yeah, you would have Yeah, exactly. You would need the device back to actually like plug into the PCB and just like you can, in a way that that unlocks so much by way of
SPEAKER_02: different use cases we can tap into with the device is it unlocks so much by way of customization that we can create
over time. And then I think just the most importantly is that when people say, Hey, we want, you know, we would like it to be able to do this, or we would like, you know, the drinks to come out in, you know, this way, like we can play with those parameters and how we can use them. Of course, safety is critical. So from a testing standpoint, and also from a certification standpoint, we always have to be listening to, you know, our CMS or tier one suppliers, certification agencies, and so on. But with adequate testing, yeah, you, you just take all of that feedback. And we want to set up stuff doing like feedback Fridays, let people vote almost in like a Reddit esque way. What do you want to see built out as a new feature into the device? And we'll, you know, put that into our Kanban boards.
SPEAKER_01: The most important thing for great espresso is the grind and the amount of the beans and the temperature. Yeah. Those three things.
SPEAKER_02:
Yeah. And then you just want consistency as much as possible.
SPEAKER_01: Okay, it's always been helpful to have great snacks around the house if you have kids. Or if you like to host people like me, it's a great look to have a bunch of awesome snacks for guests ready to choose from. So let me tell you about nuts.com. It's your one stop shop for freshly roasted nuts, dried fruits, sweets and pantry staples. nuts.com has something for everyone cashews, almonds, pistachios, classic candies like butterscotch fudge and licorice. Also, they have the great dried fruits, which I love to pair with my nuts and so much more. Here's the most important part at nuts.com quality is the top priority. They roast their nuts and pop their corn on the same day it ships. So when it arrives, it's deliciously fresh and they have gluten free organic and other diet friendly products. So here's your call to action right now nuts.com is offering new customers free gift with every purchase and free shipping on orders of $29 or more at nuts.com slash twist get that free shipping get that free gift at nuts.com slash twist and you're going to receive that free gift and free shipping when you spend $29 more one more time nuts.com slash twist. Well, this is amazing. It's been great to invest in the company in in terms of channels. You're I noticed that you're in some stores now and how is that going? You know, I presented you as a direct to consumer company because I think most of the sales come from the website majority majority but then how do you think about having it on Amazon or in William Sonoma or whatever you know and you know, channel conflicts or just in general dealing with channels,
SPEAKER_02:
discipline channel strategy over everything we we are very fortunate that we sell well direct we're not dealing with a lot of the challenges I know after iOS 14 a lot of people got hit with a sledgehammer. You know, I do think just by virtue of the brand we build the product features functionality price point in white space. We still perform incredibly well
direct and we're fortunate in that manner. So we don't feel like we need to rush into any sort of given channel for purposes of volume or hitting some sort of vanity top line metric. But I will say that we obviously recognize that this
product is still a product that is largely bought in brick and mortar in retail. It's experiential people want to see it they want to taste it they want to smell it. So we have been having more conversations you know, we were delighted to know that we were you know, I think it was Nordstrom's number one product in kitchen and dining in spring of last year when we launched we are you know, Saks is number third product in kitchen and dining just behind the Le Creuset pot and KitchenAid blender, which is you know, we're in good company there. And so we scaled up a lot of that but it was the discipline channel strategy was incrementality. I want us to constantly be scaling it up. But honestly, the most important thing is we're not sacrificing our brand equity, our reputation, or our narrative to customers when we're doing that. So with the O2, as you can probably guess, we've gotten a lot of inbounds. And you may have mentioned some of the names that we're having conversations with, in terms of people are interested in it. But ultimately, I want to make sure that we're getting the right deals for the business because I've seen a I've heard a lot of horror stories of other brands that have rushed this sign on to things that aren't sustainable. So we have leverage in that regard, we need to use it to our advantage. Because we know we have newness in the category, we have a unique product. And frankly, it's not a small tam, it's not a small market. There are a lot of people that are looking for something like this. So we want to take advantage of them. Yeah, my experience with this is slow and steady wins the
SPEAKER_01: race being thoughtful. Throw it up on target, or you throw it up
on Amazon or Walmart, you know, you you, okay, you reach a lot of people, but they're going to grind you down on the margin, so to speak. And, you know, coffee pun, yeah, coffee, but I'm gonna
SPEAKER_01: grind you down. And they're going to drip, drip, drip your earnings away. So you got to think this through, right? And you're not a mass market device, even though most people could benefit from it. And it's within reach. And this is one of the things I try to explain to people I had a my cleaning lady at the house, I said, please use my coffee. I started coming with Starbucks in the morning. And I'm just thinking like, I know how much you're getting paid. I know how much that latte cost as begging her please let me use my coffee, use my tk one, please
SPEAKER_02:
SPEAKER_01: don't order Starbucks. It's so expensive that heads up. I don't order Starbucks when I'm going to go out for the day I take my Contigo cup, I take my $7 a cup, it's great. And you also
SPEAKER_01: have to give a tip and then the line and everything. And I'm just like, you know, once in a while I'll treat myself to Starbucks, of course, at an airport or something, if I have to, but I just take a Contigo cup, I make myself a nice latte, and I bring it with me. And so I just, I think people need to be thoughtful about putting in the total cost of ownership like you do with an electric car, you know, hey, you're not going to gas stations anymore here. You're not ordering pods, you're saving two or three bucks a day, you're not going to Starbucks, if you order two Starbucks a day, you know, now you're saving 10 bucks a day, eight bucks a day, you know, this thing pays for itself right quick.
SPEAKER_02: It's actually funny that it's January 26. Because based on averages of average income in this country and average spend on coffee, for the average household up until January 23.
SPEAKER_03: Everything you've earned has just gone towards coffee. I was
SPEAKER_02:
always you know, we're always kind of joking and turning like we ever had the budget for Super Bowl ad, it would be perfect timing to just hit that note, it's the amount you're spending is obfuscated, I promise. And if you invest in something that does provide you an even better consumable, better experience,
SPEAKER_02: you know, it's gonna be pennies on the dollar over time. And it actually has longevity tied to it. You're not just having an enhanced experience, you actually are saving money, but it does take investment. And we were trying to always come up with more interesting ways to kind of expand the market so that we can give it a bit more of that, you know,
SPEAKER_02: accessibility approachability. And so there's a lot of pay later, I would think that you offer that on the website, find
SPEAKER_01: out pay later. And do people take that option or no, absolutely. That's exactly one of the areas that we were, you
SPEAKER_02:
know, we were very, he's a firm or something or we use Klarna,
SPEAKER_02: we use Klarna. So we've been working with them for a long time, honestly. And how does that work on economics? Like,
SPEAKER_01:
yeah, so for for example, I mean, it's not stood up on the
SPEAKER_02: on the v2 yet, since it's still only on whitelist. So encourage everyone to go sign up for the waitlist for the TKO two. And then for the v1, you're looking at 90 bucks a month. You know, that is if you do the math, it's given it's you know, pennies on the dollar for each cup, you really are looking at basically three bucks a day to serve the whole household.
So you pay it off within whatever number of months, 10
SPEAKER_01: months or something. But for you, who do you pick up the the extra cost of that and the potentiality of somebody not not paying or does we don't we don't assume the risk of that.
SPEAKER_02:
So yeah, so we work with them, they obviously are, you know, hugely valuable in that sense that they help us be able to reach more customers and without us kind of assuming their credit risk. We also did built into the app for the TKO to how much
SPEAKER_02: people are saving with the device. So for each cup, we have a waste savings calculator, which includes both the kind of ecological environmental waste as well as the economic savings.
SPEAKER_02: And so and we can then you know, have fun with it a Spotify year and review of all the drinks you brewed if you make a Chewbacca cappuccino on your machine or whatever you want to do you can just what's a Chewbacca cappuccino I don't even know
SPEAKER_01:
what to say. I don't know. Okay, great. Yeah. Well, you can name
SPEAKER_02: everything on the screen. So that's what we learned with the V one everyone wanted you know, we said hey, everyone in the household has a cappuccino or everyone has a quartet on it. You can just change the entire home screen of your TK to to be can be my cortado which you know, might you want to do a
SPEAKER_01:
double shot. Someone else wants to do a hotter drink somebody
SPEAKER_02: else wants to do more coffee than you know, what what have you so stronger dosage. Just letting people customize it but you know, it's as seamless as you want it to be or as out of the box as you want it to be you can just start brewing right away. But the deeper you want to go we wanted to let that kind of profile that persona that wants to tweak and toggle them having the optionality to do so. I love that clarinist stuff. I think
SPEAKER_01: this is where it makes sense to me like I was giving them a hard time a firm or somebody in Florida was doing like groceries and I was like, Hey, I don't advise people buying groceries on this. Listen, I know if you're stuck, you don't
SPEAKER_02: want to finance a few bananas. Yeah, I thought that was kind of
SPEAKER_01: weird. We got into it a bit on the Twitter or whatever. But I do think for an appliance that does save money. Ultimately,
SPEAKER_01: paying a little bit in interest or whatever it winds up being whoever picks that up, it is worth it, you know, and that's where like a Tesla, they to have in there what your savings in terms of versus gas, and the total cost of ownership super important. And of course, if you care about the environment, I have stopped with straws in the house, I have them the metal straws I have stopped with pods, I've got the TKO one, I'm getting the TKO two, hopefully, you can move the list. And you know, you know that I do cold brew coffee now myself. Yeah, because I was
ordering those like, cartons from blue bottle that were four bucks each. And I was like, this is crazy. Like I'm ordering 20 of these a month 100 bucks in blue bottle a month, and I could just make it myself in a pitcher and then not have all that cardboard. So really just thinking about the environment,
SPEAKER_01: I think is so important. And pods are just so bad for the
environment. Please stop doing them folks ban the pod. They're terrible. All right, listen, everybody go to Tara cafe. And
you know, order one, if you're into coffee, I guarantee you're gonna love it. It's the greatest. I love it. Thank you
SPEAKER_01: for making it. Thanks for letting us invest. Great job.
Yeah, you have to fight through COVID. Not easy, as a founder, supply chains and all kinds of stuff. But you're you survived it all. Right?
SPEAKER_02:
Yeah, I mean, just trying to get through. What did they say it was not a black Swan. I mean, it's a block of black swans. It was supply chain crisis, the COVID crisis, you know, great resignation through like there was a minute, every everything
SPEAKER_02: from, you know, getting the components to just making sure they can get you know, the product out into the market. It's, it's just, it's been, I think, incredible to demonstrate
resilience through this period. And I think it will present as its own moat over time, I just think, you know, I completely empathize with everyone that had to go through building a startup over the last five, six years, because it's just, you just got to stay on your toes, but use the nimbleness to your advantage.
SPEAKER_01: Yeah, I mean, if you survive it, you went from a zerp environment where people are throwing money at you, you experience that, then nobody wants to pick up the phone, everybody thinks it's the end of the world. And then here we are somewhere between the two, which is, hey, is this a really viable business? What's the margin? And are you controlling spending? And that's one of the great things, you know, I read your your updates to investors, and you really did a great job. I want to give you credit for that, of navigating a really tough situation. And making sure the company's fit and lean, that there's margin in the business. So really great to work with you as an entrepreneur, everybody go to Tara cafe, just search for it on Google, t e r r a cafe k a f f e era cafe. I love thank you.
SPEAKER_02: Thank you for the support. Thank you for everything. Yeah, it's
SPEAKER_01:
great. I mean, I try to stay away from physical products in the real world. Unless I feel they're differentiated. I just felt like you're a differentiated founder with a great vision with a great passion for this. And I know you're always going to give your best effort and then the love you get from I mean, I've never seen a coffee machine have
people like, you know, sharing it on Instagram and sharing it
on tik tok. I mean, people are bonkers. How do you create that? Like, how do you get like the fandom going? Or is it just the
SPEAKER_02:
only heavy dogmatism and a guy hold us towards differentiated design. I think I always wanted us to stand out for the tastemakers tastemaker. I didn't want to go after the GQ reporter. I wanted to go after the person that he follows. He or she makes his maker what a great lens. So the GQ reporter
SPEAKER_01: follow somebody on Twitter, or Instagram or tik tok, who's a design? Why not? They follow? Yeah, are they? That's their finger on the
SPEAKER_02: pulse. And they're following on Twitter. Yeah, yeah, I want to
SPEAKER_02: know, are you still there? Hard is sits with like, who their favorite sits with? And can we can we win their their favor in
SPEAKER_02: our brand? Can we get their vote of confidence and every time that happened, you would it would be very hard to actually that times because those people are not transactional. They don't want the if you want to say, Hey, I'll pay No, they're not interested in payment. You need to impress me more than you
SPEAKER_02: need to pay me. And that is where we started to see some
really big W's for the business. And I think that is what materialized into the you know, fandom and flywheel of everyone sharing their experience. And then you know, even to a certain extent where I would tell people that would share it, I would say that is not a good enough picture. Please don't post it like that again. Yeah, like,
SPEAKER_01: tighten it up over here. Right. Proper lighting for our machine. But is it German design Berlin? Is it in Berlin? So yeah, so it was basically a lot of my my
SPEAKER_02:
network when I was working in electric vehicles in Germany that were either designers or engineers and being surrounded by these people. Look, I will give credit where it's due to my parents. I'm the son of two architects.
SPEAKER_02: So I think that, you know, must have through osmosis seeped into my brain, but when I was a child, and I asked my parents about architecture, they said, whatever you do, just don't be an architect. It's a it's a brutal journey. But it is, I think, you know, being surrounded by sculpting books, you know, interior design, architecture, everything as a child, kind of growing up, even though I had a finance
SPEAKER_02:
background, and then a much more kind of startup entrepreneurial, you know, journey for a while before starting Terra Cafe, I think all of those experiences kind of the alchemy or the amalgamation into respecting what that means in terms of whether consciously or subconsciously how it influences our day. And then what is more important in terms of influencing the day than your morning coffee. It's the morning is the childhood of the day. If it's, if you treat it right, if you treat it well, you're carry yourself better, make better decisions feel better. And so
SPEAKER_02: I think it's just so beautiful. Yeah, the energy is beautiful to
SPEAKER_01: interact with the machine and see it on your, you know, counter. And you know, not everything is beautiful on the counter. And I do. It's a sculpture about that. It's a
SPEAKER_01: sculpture. And I can always tell when something's thoughtful when
I look at the topography and the fun. And exactly type I love
SPEAKER_02: typography. I'm so into it. I'm so into that the TK one is the
SPEAKER_02: Rothko the the TK two is the Piet Mondrian. So it is I have no
SPEAKER_01: idea what that means. But yeah, sure, I agree with Google that
SPEAKER_01: later and look at those banners. But my Lord, I just I was looking at it today. You know, when it when it boots up, because I was in anticipation of being here with you. I was watching it boot up and I it shows you like the side of the machine and it's doing it dramatic blue. It looks like an architect's blueprint.
SPEAKER_02: That was the exact one. So shout out to mom and dad. All right.
SPEAKER_01: We'll see you all next time on this weekend. So go buy a terror cafe. Go buy one for your mom. Okay. Next time. Bye bye, everybody. Bye.
SPEAKER_01: Hey, everybody. I talked to a lot of founders here on this weekend startups and as an investor, and they tell me the same thing over and over again, they want two things from me more FaceTime and money. They want me to invest in their companies, and they want to spend time together. So we've been working here on a new meetup program. We call it founder Fridays and founder Fridays are an event by founders for founders. This is an event that is hosted in cities by people like you if you're listening to this weekend startups, you're a founder. So what are you going to do at founder Fridays, you're going to get together with other founders in your community, it could be four or five of you, it could be maybe up to 30 or view in a location, pick a cafe, pick a co working space, I like to go to a great Mexican joint or maybe a dim sum restaurant, you know, we can do shared food, have a couple of cocktails, maybe you do it on a Friday, you get together and you host it. Now, why is it important for founders to get together? Shouldn't you be at home just focusing? Shouldn't you be in the office just focusing on your startup? Well, if you get together with other founders, true founders who are in the arena building like you are, you're going to get a lot of value from that because you can trade notes with that other founder about what's working at your startup and what's not working. The truth is, if you're facing a problem, there are hundreds of founders out there who have probably solved it already. And instead of you banging your head against the wall, when you sit there and you talk to three or four founders, you're having some dim sum, you're, you're splitting the quesadilla, some prahitas, somebody say, Oh, you know what, I had that same human resources problem. Oh, I had that same technical problem. Oh, I had that same marketing problem. And they might tell you about a tool or a service that'll solve that problem for you. This happens over and over and over again, when I do founder Fridays with our portfolio companies. Now we're going to give you that same experience. But here's what I need you to do. I need you to host this in your city. So you're going to go to this week in startups comm slash meetups. That's it. And you'll see a landing page where you can sign up and you can say I want to host in my city. Now your city may already be hosting so you can just join that person. And what if you go to this event, and you learn some go to market strategy that 10 x is your growth that might unlock funding, or you might be talking to somebody, they say, Hey, I'm a marketplace to I'm not a competitive marketplace, your marketplaces for used cars, my marketplaces for hairstylists, whatever your jam is, whatever you're working on, but they give you some technique that you didn't know about to increase your supply side or get more demand in your marketplace. And you 10 x your business. I see this happen all the time. And founders are like mutants, right? And I'm like Professor X here, I'm trying to put on Cerebro and find all the founder mutants in the world, and then have you get together and do your own little meetup. And here's what you're not going to have to deal with. You're not gonna have to deal with a bunch of service providers trying to sell you software or services. And you're not going to have to sit through a bunch of passive speakers, you can listen to this week in startups and get the greatest speakers in the world on your own time. And you're not going to have to pay for a ticket to a conference or get on a plane or fly somewhere. No, this is about having an intimate experience with 510, maybe two dozen other founders in your city. Please go to this week in startups comm slash meetups. If you are a founder, this is for founders by founders only. If you are not a founder, this event is not for you. You can start your own meetup for lawyers, accountants, recruiters, this is for founders by founders, we vet everybody to make sure you're a founder. And if you host it, it's a non commercial event. Our first founder Friday will start on February 2. So please mark your calendars and we're going to do these on a rolling basis. You can join an existing meetup if it's already occurring in your city, or you and one or two other founders can start your own. We're using a wonderful piece of software that we've invested in called river, you can sign up for a river account just by going to this week in startups comm slash meetups. We've already got hosts and attendees lined up in San Francisco, New York City, Toronto, Los Angeles, Las Vegas, London, and even in India. So this is your chance to connect. And if you didn't hear your city name, you can start your city go to this week in startups comm slash meetups
