If you’re a fan of coffee, spend time in fancy cafes, or have a kickstarter love, chances are you’ve come across Fellow at some point. The nine-year-old hardware startup just closed a $30 million round of funding, and I decided to speak to the founder to find out why the company decided to go down the venture capital route after so many years of bootstrapping.
The company began life on Kickstarter with the duo Coffee Steer in 2013, followed by the now legendary Stagg Electric Pour Over Kettle in 2016 and the Ode grinder a little later, in 2019. In addition to the Kickstarter campaigns, the company has launched a range of caffeine intake products including mugs, vacuum sealed storage containers and more.
The company announced a $30 million Series B funding round led by NextWorld Evergreen. Funding will be used to accelerate product innovation, strengthen educational content, expand retail and recruit additional top talent. Benchmark’s Peter Fenton and other angel investors also attended the round.
I spoke to Jake Miller, the company’s founder and CEO, to get more details on how the plan is progressing and how the company got to where it is today.
“Over the years we’ve learned that achieving our mission of helping customers brew exceptional coffee at home is more than just great product design; it’s also about giving them access to the best quality beans and providing them with instructions on how to use those products,” says Miller. “This new funding will allow us to expand our operations and position our brand in that position.”
It’s one hell of a market the company is chasing. In the past year alone, Americans spent more than $2 billion on coffee makers and home-brewing supplies and consumed nearly 15 billion cups of coffee. As a result of the pandemic, coffee lovers have doubled down on making coffee at home, and there has been a new wave of interest in making coffee that’s actually fun at home.
The company raised its first small round of capital in 2014 and claims it has doubled in size every year since.
“I would like to believe that we were the overnight success that only lasted nine years. In 2013, none of the institutional investors looked at us. I had about 75 no’s. I walked up and down Sand Hill Road, said, “Hey, do you want to invest in a coffee maker,” and was essentially laughed at, in the most polite way possible. So we just said, okay, we’ll do this alone,” Miller explains. “We’ve grown 100% annually for eight straight years and have been profitable for the past five years. So the flywheel really got going and we went from two to four employees to 10 to 20 to 30. Today we have 85 employees.”
The company’s CEO explains that the company has been on a steady course since its $7.6 million (!) angel round in early 2021 and 18 months later is ready to step on the gas.
“For us, the fundraiser just accelerates what we had already planned. Now we can do it in the next three years instead of the next 10 years,” Miller explains, citing the shift in investor attitudes toward the company: “’Hey, this is a real deal,’ they said. The market and the industry have developed well: there are a number of other coffee-espresso success stories.”
However, it was not an easy journey. Miller explains that it cost the company a lot more to deliver the first Kickstarter campaign than it originally thought.
I think entrepreneurs have to have something special. Jake Miller
“Back then it was just me and we sold $200,000 worth of products. I think it took 15 months to ship the product to our backers and it cost $330,000 to ship the $200,000 Kickstarter campaign,” Miller laughs, shaking his head. However, the initial financial problem could not stop him: “Fellow is just the perfect mixture of my innate desire to create. I’m an entrepreneur, and you know, I think entrepreneurs have to have something unusual; There has to be that desire to expose yourself to that pain. Combine that with a personal love for coffee and product design. There was another motivator: I just promised 2,000 backers that I would give them a product. I didn’t want to be the TechCrunch article that says, ‘Fellow doesn’t ship a coffee maker.’”
Fellow is slowly building a reputation as a company to watch in the coffee space, and it achieved this by focusing heavily on product design.
“For example, we have a second generation grinder set that we originally designed in-house,” he says of the drop-in replacement for the Ode grinder set that the company will be releasing soon. “It was 23 different cutter designs before we landed on the cutter that we are going to launch.”
Baristas also seem to like the brand, which you’ll have noticed if you’ve walked into a Third Wave coffee shop or watched a coffee championship.
“I think three or four of the last world champion barista brewers use the Stagg kettle. That’s our goal: beautifully functional products,” says Miller. “On the functional side, the most important thing is the temperature control. It’s the only kettle we know of that has solid state TRIACs. A typical kettle only has a mechanical relay that switches on and off. With our kettle, it switches to TRIAC when it comes within seven degrees of the setpoint. And then we can do real pulse width modulation. This means we can hold temperatures more accurately and much closer to set point.”
With $30 million in the bank, it will be interesting to see where the company plans to expand next. The company’s CEO proposes teaming up with roasters to offer more subscription offerings (expanding the Fellow Drops program) and investing heavily in education to help people brew better coffee at home. The company already does this in its San Francisco and will soon be opening a showroom in Venice, California. It is also considering putting some of this educational content online.
I had to ask Miller if I could expect a Fellow espresso machine next… “I can’t comment on that,” he says with a lopsided smile.