Terra Kaffe, a New York based startup that makes grind and brew coffee machines, has raised $4 million from The SeedLab, an early stage venture capital firm focused on consumer products.
The company had previously raised $575,000 in a seed funding late last year, and the new round of funding brings the company’s total to just under $5 million.
Last year, company CEO Sahand Dilmaghani showed me their coffee maker, the TK-01, and I liked what I saw. I also liked the fact that it was shipping, something that wasn’t the case (at the time) with my long-overdue Spinn.
Both machines are part of a growing category of grind and brew (also called superautomatic) coffee makers that make espresso-level coffee with the convenience of a Nespresso or Keurig, but without the plastic waste of pod-based systems. Nespresso and Keurig have come under fire in recent years for how much plastic they push into the waste stream, and while both are trying to make their pods more environment-friendly, it makes sense (and better coffee) if you can just grind from fresh within the system when you’re ready to brew.
In researching the TK-01 and the grind and brew market, one thing I noticed is how Terra Kaffe’s machine resembles a few other early grind and brew appliances on the market. And when I say resemble, I mean looks like an exact replica from an outward physical standpoint.
I asked Dilmaghani about this and he told me when he was getting the company off the ground, he didn’t have enough funding to custom design an entirely new coffee machine. This meant getting creative.
“The whole development is a story of trade offs,” said Dilmaghani in a phone interview. Instead of paying a company to create an entirely new product, they worked with a Chinese ODM (original design manufacturer) to build the hardware system architecture using some off the shelf parts such as brew unit and chassis (why there are others that look like the Terra Kaffe). Dilmaghani and his team focused on software, the UI and the overall consumer experience.
“I was like, ‘let’s prove out the market that there is an opportunity here'” said Dilmaghani. “Let’s work with as much off the shelf as possible, give people some awareness that this can sell DTC (direct-to-consumer), that it isn’t the Nespresso model that I have to lose money on the machine and only make money with recurring revenues. That you can make money on the product, and it can be a viable business.”
It’s a much different approach from Spinn, who designed a coffee maker from the ground up. The end result was a long drawn out design and manufacturing ramp-up process that took years to bring their product to market. In contrast, the TK-01 was available and shipping last year, and, according to Dilmaghani, has sold in the thousands.
And I imagine it’s this early sales success, not a complicated piece of hardware, that mattered to the company’s newest investors.
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