The Blank Street founders talk cold brew, the surprising reason they’re not opening in Los Angeles, and—yes—the trolls.

This is a story about coffee. It’s also about V.C. funding. But it starts with coffee, two young immigrants and a single coffee cart in Williamsburg. That’s the origin story behind Blank Street, founded by Issam Freiha and Vinay Menda, which suddenly feels inescapable. Though the company was founded in 2020, there are already something like 45 locations in New York City plus outposts in Boston, Washington D.C., and London.

The pitch was simple: in a world of precious, pour-over coffee, Blank Street would be a more affordable alternative—coffee served from a grab-and-go, postage-stamp sized café on every corner. The smaller footprint would help keep real estate costs down while the drinks were made by a hulking Swiss machine—meaning Blank Street could employ less workers per shift than their competitors (but pay them more). Venture capital funds loved the pitch. And in 2021 the founders raised $67 million dollars from the likes of Left Lane Capital, General Catalyst, and Tiger Global (who’d backed Allbirds).

It was an exciting time. But also a strange time. Online trolls accused Blank Street of being a tech company masquerading as a local coffee shop, and suggested the chain’s rapid expansion came at the expense of mom-and-pop shops. But V.C. funding had been all over the coffee space for years. Intelligentsia was bought by Peet’s in 2015 (before being absorbed by a German holding company). Nestlé, meanwhile, acquired a majority stake in Blue Bottle in 2017 for a reported $425 million. Why were people so eager to hate on Blank Street? (The founders have a theory. Read on.)

For the new Forbes series “Cereal Entrepreneur,” Blank Street founders Issam Freiha, 28, and Vinay Menda, 31, set the record straight over Cocoa Pebbles.

MICKEY RAPKIN: Before we start, I have to ask—Issam, did you just put protein powder in your Cocoa Pebbles?

VINAY MENDA: (laughs) He’s actually training for the Olympics.

ERIC RYAN: What?

ISSAM FREIHA: I’m training for cycling. I do think it’s possible by 2028 to take a stab at it. I’m originally Lebanese. There’s a lot of work to get the country into the Olympics with the Cycling Federation. But I do have a path if I focus enough on it.

RAPKIN: You’re running a coffee start-up with something like 100 locations. Vinay, are you worried he’s not focused enough on the coffee?

MENDA: If Zuckerberg can learn how to fight jiu-jitsu, I think Issam is going to be fine. It’s very meditative.

Morning Shot

RAPKIN: OK. Let’s get to Blank Street. When did you realize third-wave coffee was too expensive and there was room to disrupt?

FREIHA: I’ve been a coffee nerd for 15 years—popcorning-green-coffee-beans-in-my-kitchen type of thing. It came super natural to me to want to look at something within the coffee space. It’s been dominated by incumbents for the last 50 years. We were thinking about the mission from day one: Let’s figure out how to do high quality, specialty, third-wave coffee at a way more affordable price globally.

MENDA: By having smaller spaces we’re able to save some money on fixed costs to deliver the product for a cheaper price.

RYAN: That is the secret ingredient to most successful startups. How many successful companies were created off of youthful ignorance that allows you to see what other can’t.

RAPKIN: Is there something you’re glad you didn’t know?

FREIHA: VAT taxes in the UK. (laughing) If you had told me about how much accounting has to go behind the scenes before opening in the UK, I would’ve been like, “Yeah, maybe let’s open somewhere else.” But opening in London was one of the best decisions we ever made. The price resonated super well from day one.

Price Sensitive

RAPKIN: Let’s talk about the price of iced coffee. A friend of mine joked that he just got approved for a mortgage on a cold brew. If you’re leaving a tip, iced coffee is approaching $7 dollars.

FREIHA: (laughs) There was this Tweet the other day. I saw someone ordering an iced coffee beverage on DoorDash and end up paying—with delivery and fees and everything—$14 dollars for it. Cold brew elevated both the quality but also the price for coffee across the board. It’s a slower product to create, you’re brewing it overnight typically in-store. We do it at a central facility where we created this thing called the cold brew shot. It’s a way to reduce the price.

RAPKIN: I’m surprised to hear you’re a coffee nerd. Only because the initial Blank Street pitch felt like: This isn’t the best cup of coffee you ever had, it’s going to be good enough. I think you actually said something like that in an interview.

[Editor’s note: In an interview with the New York Times in 2022, Freiha said: “We donʼt need to be the most amazing cup of coffee youʼve ever had. We want to be the really good cup of coffee that you drink twice a day, every day.”]

FREIHA: In reality, what we meant by that— The way the sourcing works is most of your beans get graded on this thing called a Q Grade, which is similar in the wine industry where sommeliers rank wines. Anything that’s above an 82 or 83 out of a 100-point scale is called “specialty coffee.” We source at an 85, 86, 87. Beyond that level it’s very, very difficult for the average coffee consumer to know the difference between an 86 or a 92. What we meant by “it’s not the best” is that it’s not like the 95, 96 point thing.

Adventure Capital

RAPKIN: Let’s get into the V.C. part of this. Every headline seems to mention Blank Street’s V.C. haul. As if that makes the company somehow inauthentic. Is that because you didn’t pitch Blank Street to the public as coming from two guys obsessed with coffee?

MENDA: I think it’s just because, like you said, we opened our first retail store in February 2021. And by the end of 2022 we had 50 stores. We moved very quickly. I think when you see a company raising money—you see that level of growth—it’s very easy to connect those things together. Blue Bottle took ten, 15 years to get to that point. We started scaling from the very beginning.

RYAN: Does that perception bother you?

FREIHA: It’s not human to say that, like, it does not bother you. Reading things that aren’t necessarily about the customer experience or the brand or the products— Yeah, it’s not great. But ultimately our vision from day one was like, “We’re not going to be doing this if we don’t believe that this could be a way better ritual at scale for people.” We knew we could do this in one store. But the real question was, Can you do it in a multitude stores and cities for millions of people?

RAPKIN: Most of your drinks are made on this Swiss machine called an Eversys Machine. Can the average customer tell the difference between a cappuccino made by hand and one made by your machine?

FREIHA: No, no way. Right now, there are Michelin star restaurants using our machine.

RYAN: The machine is such a hero. In a lot of ways you are competing against the home coffee machine just like Southwest Airlines decided to compete against driving. Are you investing in proprietary machinery yet?

FREIHA: No, the machinery will never be really proprietary—not anytime in the short term. The magic of the machine is finding the right blend of coffee, calibrating it super well, making sure each shot is consistent and being on top of cleaning it.

RAPKIN: Boston is such a Dunkin’ town. We think of Ben Affleck— Was there any interesting feedback from that local Boston guy?

FREIHA: Boston really loves Blank Street. (laughing) I would say the one funny feedback that we had in Boston was— People want gigantic-sized drinks from Blank Street. We’re a specialty coffee shop. From a caffeine perspective, I don’t think it’s responsible for us to be selling a 32-ounce cold brew. But you would have people asking for our cold brew with no ice whatsoever, filled to the very, very top. And then a separate cup of ice. That was probably the main feedback that we still get every single day.

RAPKIN: Would you do that for a customer?

FREIHA: Yeah, we do that. From a hospitality perspective, we really want to empower baristas.

Meet Cute

RAPKIN: The Blank Street backstory sounds like it was written by ChatGPT. Two immigrants open a coffee truck in Williamsburg that gets V.C. funding? Let’s talk about how you two met. Did you really go to high school together?

MENDA: We did go to the same high school in Dubai. But at different times. We actually met in New York. He was at Columbia, I was at NYU, and we met through mutual friends. We started working together seven years ago on our fund while we were still in college. Technically speaking, I hired him as my intern. (laughing) Now he’s my boss.

RYAN: I love that.

RAPKIN: Your fund, Reshaped Ventures, invested in Sweetgreen, Postmates, and Sonder. I read somewhere that you were managing $100 million in funds. True?

MENDA: We invested a lot of money over a long period of time, but that was over six years.

RAPKIN: Where did all that cash come from? You started the fund in a dorm.

MENDA: In the very early days, we were raising money from anyone who would give us money. I think our smallest check was $2,000 dollars. We had hundreds of investors. Over time we got larger families, family offices, some institutional investors as well as some real estate developers. I think the fact that we were so young— It was just so crazy that random kids would be pitching you to invest in a startup. People were like, “You know what? Maybe let’s take a risk.”

RAPKIN: Issam, you come from a culture where coffee is meant to be enjoyed leisurely—not on the go. What did your family think of the Blank Street pitch?

FREIHA: My parents, growing up it was them having 15 cups of Turkish coffee a day or some crazy number. I’m not too sure about the health implications of doing such a thing. But they’re quite attuned at this point to the Blank Street experience. I mean, my mom orders the cappuccino six times a day now.

Innovation Caffeination

RAPKIN: I’m curious about your subscription plan—

MENDA: The Blank Street Regulars.

RAPKIN: For something like $18 dollars a week, subscribers can get a cold brew or whatever every two hours—up to 14 drinks. At one point the program was $12 dollars. Was it too successful at that price?

MENDA: The original plan—which was a beta test—was $12 dollars a week. But some drinks were free and some drinks were one dollar. People ended up spending $18 a week anyway. So, we made it an all-in program. We have a cheaper tier at $8 or $9 bucks for certain drinks, and have a more expensive tier at $19 for unlimited everything.

RYAN: That’s brilliant to build recurring revenue intro your business model. How’s the program doing? What have you learned?

MENDA: We only officially launched the program about a month ago. We have roughly 2,000 members right now and we’re growing every single day. People on the program would normally come to us—without the program—maybe two or three times a week. But with the program they’re coming six times a week. It’s really making this a daily ritual. We’re excited to scale it into London, into Boston.

RYAN: You’ve innovated on the business model. In this labor shortage I could see entrepreneurs being inspired to apply your approach to other food and beverage categories. But do you think the real breakthrough is from the consumer perspective—like they’re getting drinks faster? Or the business model?

FREIHA: They really go hand-in-hand. You want a super frictionless experience. Ideally you’re on a corner. You walk into one door, you order, you pick up, and you exit through the second door. That’s just a super smooth flow versus a midblock store. But if you’re opening in a residential neighborhood, people want to sit and linger. They want power outlets, they want Wi-Fi. We can adapt to those things. It doesn’t always need to be a transactional store, grab-and-go store.

RAPKIN: I thought Blank Street didn’t want people to linger? That seems like an evolution from the initial pitch.

FREIHA: 100%. It comes from customer feedback. When we’re opening in residential areas, if I’m working from home, I want to be able to work from a coffee shop as well and be able to linger a bit more. As long as we’re not materially changing the prices by making some of these decisions, we’re happy to do it.

California Dreamin’

RAPKIN: Let’s talk expansion. There were some reports that Blank Street was slowing down now.

FREIHA: From a macro perspective, we’re not scaling back too much. But from city-by-city, we’re being a lot more selective. In New York, we’re definitely pulling back. But we’re growing in London, we’re growing in D.C. and in Boston. We’re looking at new markets for next year.

RYAN: It sounds like you have been very thoughtful on how to pace growth. It’s not easy and companies are more likely to suffer from “indigestion” by trying to swallow too much growth vs. “starvation” by growing too slowly.

RAPKIN: I live in L.A. When will Blank Street open here?

FREIHA: No, we’re not going to see it in L.A.

RAPKIN: Why not?

MENDA: (laughs) One day.

FREIHA: It’s my happy place in the world. The cycling in L.A. is probably the best in the entire U.S.

MENDA: We’re worried that if we open in L.A., half the company will want to move to L.A.

FREIHA: That’s definitely one part of the issue.

The conversation has been edited and condensed for clarity.