How Starbucks Began

This article was written by Phineas Upham

Starbucks had humble beginnings as a coffee stand in 1971. It was based out of Seattle’s Pikes Place market, and it offered some of the finest roasted beans available in the area. It was a passion project, started by three students from the University of San Francisco.

The three had learned how to roast beans from Alfred Peet, and were inspired to take that quality technique and bring it to the marketplace. The founders seemed to have always had an interest in naming the company after some part of Moby Dick. The first name, which was rejected by the co-founders, was Pequod. The name that won over was the name of the ship’s chief mate: Starbuck.

The team managed their first café from 1971 to 1976, at 2000 Western Avenue. The café was then relocated to Pikes Place, where it still stands. In the beginning, Starbucks didn’t actually sell coffee it served. It sold whole beans. Any brewed coffee available in stores was nothing more than free samples.

The company hit some financial speed bumps during the 1980s, after it had purchased Peet’s bean roasting operation, when overall sales of coffee in the US were declining. Still, specialty coffee was on the rise so the team had enough demand to expand into buying espresso.

It was sold to Howard Schultz in 1987, who expanded the company aggressively until its IPO in 1992. Today, Starbucks experiments heavily with mobile marketing and boasts that over 10% of purchases made in-store were done over the Starbucks application.

About the Author: Phineas Upham is an investor at a family office/hedgefund, where he focuses on special situation illiquid investing. Before this position, Phineas Upham was working at Morgan Stanley in the Media & Technology group. You may contact Phineas on his Twitter page.

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