Bean Box Inc. CEO Matthew Berk would be worried about competition from Amazon.com Inc. if he were selling the kind of generic coffee offered by Amazon’s house brands. But he’s not.
Instead, Bean Box delivers to monthly subscribers a selection of 16 coffees tailored to their taste preferences, sourced from nearly 50 local roasters all over the U.S., assembled at the company’s warehouse in Seattle, and—the company promises—delivered fast. “Peak freshness and flavor: guaranteed,” Beanbox.com tells visitors.
“Investors ask, ‘What is the moat you’ve built around your business? How defensible is it?’ For us, our supply chain is what’s defensible because it makes our product hard to duplicate,” Berk says.
Matthew Berk, CEO Bean Box Inc.
The uniqueness of sourcing coffees from local coffee roasters is one reason Kirby Winfield, managing partner at early-stage investment firm Ascend, put money into Bean Box, which has raised $4.7 million since its founding in 2012, including $2.4 million in May.
“If you want to buy the coffee Bean Box offers today, you would have to go to a bunch of small coffee shop websites and buy bags of coffee and have them ship it to you,” Winfield says. “Bean Box gives you access to coffee that, unless you live in the neighborhood, you’re not going to be able to drink or make in your home.”
Online retailers looking for capital must convince investors like Winfield that they can offer consumers something they won’t get from giant retailers like Amazon and Walmart Inc. And investment data suggests relatively few e-retailers are successfully making their case.
Online retailers attract nearly $2.8 billion in 2021 funding
A Digital Commerce 360 analysis of data from funding research firm Crunchbase Inc., shows that some 50 North American companies that sell directly to consumers online—digitally native brands, online marketplaces and retailers selling goods supplied by others—have raised $2.79 billion so far in 2021. That’s less than 1% of the $288 billion investors worldwide put into companies in the first six months of the year—a record for a six-month period, according to Crunchbase.
That online retailers in the U.S., Canada and Mexico are attracting such a relatively small amount of cash, at a time when investors have plenty of it, shows how hard it’s become for online entrepreneurs to get the backing they need to grow. Those succeeding often develop products not previously available—such as sourcing coffee from dozens of roasters around the U.S.—and some also win consumer loyalty by the information they offer, with convenient services and through their socially responsible actions.
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