Episode 46: Blue Bottle Coffee

**David Rosenthal** (0:00)
It can't be turtles all the way down. There has to be a pool at the bottom.

**Ben Gilbert** (0:08)
Oh man, I'm using that as the teaser quote for this episode. Welcome back to episode 46 of Acquired, the podcast about technology, acquisitions and IPOs. I'm Ben Gilbert.

**David Rosenthal** (0:31)
I'm David Rosenthal.

**Ben Gilbert** (0:33)
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.

**David Rosenthal** (0:47)
Shockwaves have gone through Silicon Valley.

**Ben Gilbert** (0:50)
Yes, yes, there have been lines around the block that are forming their own lines around the block, just to hear the news.

**David Rosenthal** (0:59)
So great. Where will the VCs and entrepreneurs congregate now?

**Ben Gilbert** (1:05)
Yeah, I mean, what's the sort of like islandish one?

**David Rosenthal** (1:10)
Fills.

**Ben Gilbert** (1:10)
Fills.

**David Rosenthal** (1:12)
Yeah.

**Ben Gilbert** (1:13)
Fourth wave of coffee.

**David Rosenthal** (1:15)
Fourth wave. We'll get into it.

**Ben Gilbert** (1:17)
We will. We will. This is a great time to tell you about one of our very favorite companies, Crusoe.

**David Rosenthal** (1:24)
So Crusoe, as listeners know by now, is a clean compute cloud provider specifically built for AI workloads. NVIDIA is one of their major partners and literally Crusoe's data centers are nothing but racks and racks of A100s and H100s. And because Crusoe's cloud is purpose built for AI and run on wasted, stranded or clean energy, they can provide significantly better performance per dollar than traditional cloud providers.

**Ben Gilbert** (1:50)
Yes, we talked about that on our ACQ2 episode with Crusoe's CEO Chase Lockmiller.

**David Rosenthal** (1:55)
The other element that makes Crusoe special is the environmental angle. Crusoe, of course, locates their data centers at stranded energy sites. So think oil flares, wind farms that can't use all the energy they generate, etc. And uses that power that would otherwise be wasted to run your AI workloads instead.

**Ben Gilbert** (2:13)
Yep. Obviously, it's a huge benefit for the environment and for customers on costs since Crusoe doesn't rely on the energy grid. Energy is the second largest cost of running AI after, of course, the price you pay NVIDIA for the chips. And these lower energy costs get passed on to customers.

**David Rosenthal** (2:30)
It's super cool that they can put their data centers out there in these remote locations where quote-unquote energy happens, as opposed to the other hyperscalers such as AWS and Google and Azure, who need to build their data centers close to major traffic hubs where the energy net happens because they are doing everything in their clouds.

**Ben Gilbert** (2:46)
Yep. If you, your company or your portfolio companies would like to use the lower cost and more performant infrastructure for your AI workloads, go to crusocloud.com/acquired. That's crusoecloud.com/acquired, or click the link in the show notes. All right. Well, David, that's all I've got for pre-show.

**David Rosenthal** (3:07)
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 mini-series here on Acquired. We did the Disney trifecta, and then the fourth, of course, with Bam Tech. We've done sports, we did the LA Clippers, 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.

**Ben Gilbert** (3:39)
Well, this is a primarily Seattle-dominant podcast, so we do have to do multiple coffee episodes.

**David Rosenthal** (3:48)
We'll have to do the Seahawks next.

**Ben Gilbert** (3:51)
Yeah.

**David Rosenthal** (3:54)
So coffee, we talked quite a bit in the Starbucks episode with Dan Levitin about waves of coffee and the parallels between the coffee world and the tech world. And we alluded to third wave 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 really the origin of hipsterdom. Starbucks sucks, it's super corporate. We're gonna focus on the artisanal quality of...

**Ben Gilbert** (4:43)
It's burnt, it's dark, it's no care put into it. It's a factory, everything is made exactly the same. Call it operationally efficient and praise their business model or hate on it because it's systematized, but it is definitely, definitely a reaction to the mass market success of Starbucks.

**David Rosenthal** (5:04)
Yeah, and so third wave places like Counter Culture was one of the first in Durham, North Carolina, Stumptown and down in Portland, which is now owned by Peets, interestingly, or Intelligencia, which I think started in Chicago is also now a majority owned by Peets, Cafe Vita in Seattle, all these folks, they really focus on the drink itself and probably arguably, nobody focused more on the drink than Blue Bottle. So let's dive into Blue Bottle. So it was founded by a very interesting, interesting guy named James Freeman and highly recommend, 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, really fun to listen to. He basically, let's just say, he starts it with an analogy to Merce Cunningham and John Cage, the sort of avant-garde, modern dance choreographer Merce Cunningham 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 quote Sartre and Proust, very philosophical.