In this bonus newsletter, I wanted to depart for one week from the breakdown of the “Venture Investing Expression” to provide a bit of insider baseball on how I process through comparing startup companies in the same space. 

Earlier this week, I came across an alternative startup to one of our portfolio companies, Octane Coffee. I am going to teardown this upstart alternative with Octane Coffee - a cage fight of sorts. 

The purpose of this teardown is to illuminate the importance of strategic decisions in building a startup. 

Specifically, what I am highlighting here is the importance of trade-offs that need to be made in order to increase the likelihood of winning in the market. 

But, what I aim to draw out is that it is not just ONE trade-off. It’s 3-5 cornerstone trade-offs that cascade into a series of downstream implications. Those trade-offs need to sing in harmony with one another in order for the business to rapidly scale. In other words, it’s not enough to have one important trade-off if the other trade-offs do not sequentially fit in the same arpeggio. 

Here is how it started. 

For context, Tundra Angels’ first investment was in a robotic-automated coffee drive-thru called Octane Coffee. 

Recently, I was checking LinkedIn when I saw this post: 

Full post link here

So naturally, upon seeing the headline for the post, I’m going, “WHATT??! What’s this?” 

As you can see from this Crunchbase data, Blank Street Coffee has raised $93.8M in venture capital - $67M in 2021 and added another $20M in 2023 from General Catalyst and Tiger Global, among other investors. 

Context

For context of Blank Street Coffee’s model and thus my subsequent teardown, check out this article: Scaling the Bitter Bean: How Blank Street Brews Success with a Dash of Mediocrity and a Shot of Frosty Service. 

For context on Octane Coffee, here is the experience in a one minute video.   

Teardown: 

Here is how I think through the trade-off that each startup has made:

My Evaluation: 

There are other trade-offs that could be cited. But there really are only 3-5 major trade-offs that matter. In this case: 

• What type of customer do we want to serve? 

• What experience do we want them to have? 

• How do we want to deliver that experience? 

• What products do we want to sell? 

I ask myself this question → What activities of the startup are additive to the startup’s value proposition to the customer, and which ones are wasted? 

One example is - why does Blank Street have one part of their process automated? If the rest of the process is largely unchanged from the status quo, there is no much value addition there. 

I also ask myself the question - what is the future that I believe the customers need? 

You can conclude your own answer to those questions. I gave you a taste of mine above. 

In fact, every investor or investment firm has their own answers to those questions. That’s why one investor can be over the moon on a startup and the other is completely frigid on it. 

But here is one more thing - imagine investing in a startup without being able to compare it to another company. 

That’s how it was when we invested in Octane Coffee. There was not, nor is there anything else like it now. 

Because ultimately any startup is not in competition with another startup. It’s in competition with existing customer behaviors. 

That’s why we invested in Octane Coffee. We drew the trade-offs that consumers would make for Octane Coffee vs. the status quote coffee drive through experience, it looked like this: 

 It turned out that the end to end experience had elements of predictability. But the most variable point was the input of when customers would arrive through the drive-thru, and the output of how long it would take to make a drink. 

If one is able to resolve the first part by tracking the car by GPS, and the second part by eliminating humans using other means such as a robot, that could be a hypothesis that could stand up in the market. 

Sure enough, it’s more than interesting. Octane Coffee is turning heads and creating talkable moments and is growing week over week.

One major takeaway out of several here is the fact that different investors evaluate the trade-offs differently.

But, what 's more important is not investor perception but how you yourself are increasing the likelihood of winning in the  market.

To that end, what doesn't change is this fact - 

it is not just about ONE trade-off. It’s 3-5 cornerstone trade-offs that cascade into a series of downstream implications.

Those trade-offs need to sing in harmony with one another in order for the business to rapidly scale. In other words, it’s not enough to have one important trade-off if the other trade-offs do not sequentially fit in the same arpeggio.