Coffee paraphernalia co Fellow brews up a round of funding

If you're a fan of coffee, spend any time in fancy coffee shops or have a penchant for Kickstarter, you'll probably have stumbled across Fellow at some point along the way. The nine-year-old hardware startup just closed a $30 million round of funding, and I decided to have a chat with the founder to figure out why, after bootstrapping for this many years, the company chose to go the venture capital route.

The company started its life on Kickstarter with the Duo coffee steeper back in 2013, followed by the now-iconic Stagg electric pour-over kettle in 2016, and the Ode grinder a bit later, in 2019. In addition to the Kickstarter campaigns, the company has launched a suite of products for caffeine intake, including cups, vacuum-sealed storage containers and much more.

The company announced a $30 million Series B funding round led by NextWorld Evergreen. The funding will be used to accelerate product innovation, bolster educational content, expand retail and recruit additional top talent. Benchmark’s Peter Fenton and other angel investors also participated in the round.

I spoke to Jake Miller, the company's founder and CEO, to get some more details about what the plan is going forward, and how the company got to where it is today.

"Over the years, we’ve learned that achieving our mission to help customers make exceptional coffee at home is more than just about great product design; it’s also about giving them access to the best quality beans and equipping them with guidance on how to use those products," says Miller. "This new funding will allow us to expand what we do and move our brand into this position."

It's a hell of a market the company is going after, too. Just last year, Americans spent more than $2 billion on coffee makers and accessories for at-home brewing 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's been a new wave of interest in making coffee that's actually enjoyable at home.

The company raised its first small round of capital in 2014, and claims that it has doubled in size every year since then.

"I'd like to think we were the overnight success that only took nine years. Back in 2013, none of the institutional investors would look at us. I had like 75 'nos'. I was going up and down Sand Hill Road, going 'Hey, do you want to invest in a coffee maker,' and essentially got laughed at, in the most polite way possible. So we just said, okay, we're going to do this on our own," explains Miller. "We grew 100% every single year for eight consecutive years, and we've been profitable for the last five years. So the flywheel really started to spin and we went from two employees to four to 10 to 20 to 30. Today, we have 85 people."

The company's CEO explains how the company was already on a steady trajectory since its $7.6 million angel round (!) at the beginning of 2021, and 18 months later, it's ready to go heavy on the gas.

"To us, the fundraise is just accelerating what we already planned on doing. Now, we can do it in the next three years versus the next 10 years," explains Miller, naming the shift in the investors' take on the company "'Hey, this is a real business,' they said. The market and the industry has done well: There's been a number of other coffee espresso success stories."

It hasn't been an easy journey, though. Miller explains that it cost the company way more to deliver on the first Kickstarter campaign than it originally thought.

"At the time, it was just me, and we sold $200,000 worth of product. I think it took 15 months to deliver the product to our backers, and it cost $330,000 to deliver on the $200,000 Kickstarter campaign," Miller laughs, shaking his head. The initial financial snafu wasn't going to stop him, however: "Fellow is just the perfect mashup of my born desire to create. I'm an entrepreneur, and, you know, I think there has to be something a little off about entrepreneurs; there needs to be this desire to put yourself through this pain. Pair that with a personal love for coffee and product design. There was another motivator too: I just promised 2,000 backers that I'd give them a product. I didn't want to be the TechCrunch article that said 'Fellow fails to deliver on coffee maker.'"

Fellow is slowly building up a reputation for being a company to watch in the coffee space, and it got there by having deep focus on product design.

"For example, we've got a second-generation burr set that we originally designed in-house," he says, about the drop-in replacement for the Ode grinder burr set the company has coming out soon. "It was 23 different burr designs before we landed on the burr that we're going to launch."

Baristas seem to like the brand too, 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 Barista champion brewers champions use the Stagg kettle. That's our goal: beautifully functional products," says Miller. "On the functional side, a lot of it comes down to temperature control. It's the only kettle that we know of that has solid-state TRIACs. A typical kettle just has a mechanical relay that clicks on and off. With our kettle, when it gets within seven degrees of the setpoint, it switches over to the TRIAC. And then we can do true pulse width modulation. That means we can hold temperatures more accurately, far closer to the set point."

With $30 million in the bank, it's going to be interesting to see where the company is planning to expand next. The company's CEO suggests that it is going to start pairing up with roasters to offer more subscription type deals (expanding its Fellow Drops program), and invest heavily into education to help people brew better coffee at home. The company is already doing that in its San Francisco, and is opening a Venice, California showroom soon. It is also considering transitioning some of this educational content online.

I had to ask Miller if I could expect a Fellow espresso machine next... "I cannot comment on that," he says with a wry smile.