Pour Your Heart Into It (13 page)

Still, the core idea worked. Within six months, we built up to serving more than 1,000 customers a day. Our tiny 700-square-foot store, near the main entrance of Seattle’s tallest building, became a gathering place. We were filling a void in people’s lives. The regulars learned to pronounce the name, Il Giornale (
il jor-nahl’-ee
), and even took pride in the way they said it, as if they were part of a club. That first store was a little jewel, definitely ahead of its time.

Speed, we realized, was a competitive advantage. Our customers, most of whom worked in the busy downtown office buildings nearby, were always in a hurry. Hap Hewitt, an innovative engineer who had set up the conveyor belts in Starbucks’ factory, also invented a proprietary system for serving three kinds of drip coffee simultaneously, modeled after a beer tap.

Our logo reflected the emphasis on speed. The Il Giornale name was inscribed in a green circle that surrounded a head of Mercury, the swift messenger god. Later, we created a portable backpack tap system and sent employees out with a tray and cups to sell coffee in offices. We called them the Mercury men.

Still, the key to success, we figured, was in the hands of the people we hired. Dave trained them in coffeemaking; I taught them selling and managing techniques. More important, we infused them with a desire to achieve the Big Dream, the spirit that together, we could accomplish great things.

Dawn Pinaud was Il Giornale’s first employee. She helped me start the company and she managed the Columbia Center store. Jennifer Ames-Karreman came on in March and worked as a barista from Day One. She had been an advertising account executive and hoped to grow with the company.

In their enthusiasm, Dawn and Jennifer created systems that, while far too sophisticated for a single store, helped us get an accurate picture of our business. We kept careful accounts of our coffee, our pastries, our cash, our spoilage. We tracked a lot of product categories to see what was selling best. We always knew what we needed to do to make our budget. With all this information, we were able to set definite goals as we began our rollout.

In November, I hired Christine Day as my assistant. She had just ended a maternity leave and had a business degree as well as firsthand experience at a financial company. She wound up doing nearly everything: administration, finance, computers, payroll, human resources, purchasing, banking, and typing. At first, she even prepared the profit and loss statements, balance sheets, and inventory and sales audits. She did all the bookkeeping by hand. Like Dave and me, Christine immediately started working twelve-hour days, so quickly was she caught up in our passion and our conviction.

One day, Christine was negotiating with Solo, the huge paper cup supplier, trying to get a lower price. As we were hardly a major client, they saw no reason to give us a break. “We’ll be your biggest customer someday,” Christine told them. I doubt they believed it, but I’m sure she did. We all had such faith in the enterprise that none of us ever questioned our ability to become a world-class company.

We were, in many respects, like a family. I used to invite everyone to my house for pizza, and they watched as my son learned to crawl and walk. On my thirty-third birthday, they ordered a cake and presented it to me as a surprise in the store. The customers gathered around and joined the baristas in singing “Happy Birthday,” embarrassing me, but filling me with gratitude that with all of our hard work, we were still able to create some fun for each other.

We opened a second store just six months after the first, in another downtown high-rise, the Seattle Trust Tower at Second and Madison. For the third store, however, we went international, and picked a site in Vancouver, British Columbia, in the SeaBus Terminal, which opened in April 1987. That might have seemed an illogical choice for a venture with only two stores. But I figured that, given my desire to grow to 50 stores and given my investors’ doubts about my ability to expand outside Seattle, I needed to demonstrate quickly and decisively that my plan was feasible. I couldn’t afford to wait till the tenth store to make my move. I had to do it soon.

We had no idea of the complexities of exchange rates and customs and different labor practices. We never considered the intricacies of operating in a foreign country, such as the need for a separate bank account, separate statements for the Canadian government, and foreign exchange adjustments in our accounting —all for one small coffee bar.

Dave went north to open the Vancouver store and to train its staff. When Dave is involved in a project, you know not only that it’s going to be done properly but also that it’s going to be done fastidiously. Although he had a young family in Seattle, he spent nearly a month in Canada, living in a budget hotel, just to make sure our Il Giornale coffee bar there would be a mirror image of the service and authenticity of our Columbia Center store in Seattle.

All three of the Il Giornale stores quickly caught on with customers. By mid-1987, our sales were around $500,000 a year for each store. Although we were still losing money, we were on track to reach our ambitious goals, and as a team we were elated about what we were creating. Our customers were delighted. My vision was becoming a reality.

W
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OU
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EE
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PPORTUNITY
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IFETIME,
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OVE
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In March of 1987, something happened that changed the course of my life, and that of Starbucks: Jerry Baldwin and Gordon Bowker decided to sell the Seattle stores, the roasting plant, and the name Starbucks, keeping only the Peet’s assets. Gordon wanted to cash out to take a break from the coffee business to focus on other enterprises, while Jerry, who was dividing his time between Seattle and Berkeley, wanted to concentrate on Peet’s.

They had kept their idea quiet, but it was not completely unexpected to those who knew them. I was aware of some of their troubles and the tension between the two parts of the company. As soon as I heard, I knew I had to buy Starbucks. It seemed like my destiny. Again,
bashert
.

At that time, Starbucks was much bigger than we were, with 6 stores to Il Giornale’s 3. My company hadn’t yet completed a full year of operations, so Starbucks had annual sales many times the size of ours. It would be like a case of salmon swallowing the whale—or, as Dave put it, “the child is father to the man.” But to me, the fit seemed natural and logical: Not only would Il Giornale soon need its own roasting plant, but Starbucks’ whole-bean business and Il Giornale’s beverage business complemented each other perfectly. More important, I understood and valued what Starbucks stood for.

I had only recently exhausted nearly every resource in raising $1.25 million. Now I needed to find nearly $4 million to buy the Starbucks’ assets. However daunting that task appeared, I was confident I could do it. My original supporters were impressed with the progress Il Giornale had made in a short time, and I was sure some of them would agree to increase their stake. And other investors, who had said no the first time, were sure to jump in for this round, now that it involved buying Starbucks. If we managed it well, all the investors would benefit.

Quickly, we pulled together the numbers. I had just hired Ron Lawrence, who had years of experience in the restaurant business, to handle finance and accounting and to design a point-of-sale system for the company.

“Ron,” I said, “we need a pro forma and a complete private-placement package to go out to our investors. We need to get all the financials on Starbucks. Can you do it in a week or two?”

He was game, and we set to work figuring how to raise enough to buy the company and have some expansion capital as well. After arranging a line of credit with local banks, we prepared an offering circular to distribute to all the Il Giornale investors and a few others I had come to know.

I went to my board and ran the plan past them. It seemed like a sure win.

W
HAT
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O
W
HEN
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HEY

T
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TO
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RAB
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OU

Then, one day, it nearly fell apart. I almost lost Starbucks before I ever had it.

While we were structuring the deal, I heard that one of my investors was preparing a separate plan to buy Starbucks. His arrangement would not evenly distribute the ownership among Il Giornale shareholders, but would ensure a disproportionate share for himself and some of his firends. I was certain that this man intended to reduce me from a founder and major shareholder to an employee with a much smaller, diluted position, running Starbucks at the will of a new board he controlled. I also thought his plan would have unfairly treated some of my other early investors, people who had trusted me with their money for Il Giornale.

The pressure on me was almost unbearable. This man was a business leader in Seattle, and I thought he had already lined up support from the city’s other leading lights. I feared all my influential backers would defect to this new arrangement, leaving me with no options. I went to Scott Greenburg, and we approached one of his senior partners, Bill Gates, father of Microsoft’s founder, who at six feet, seven inches, was a towering figure in town. We prepared a new strategy and arranged to meet with the investor. Bill Gates agreed to go with me.

The day of our meeting was one of the toughest, most painful of my life. I had no idea how it would turn out, and my life’s work was at stake. As I walked in, I felt like the Cowardly Lion, shaking on my way to an audience with the Great Oz. My opponent sat at the head of a conference table, larger than life, in full command of the room. Without even waiting to hear me out, he began blasting me.

“We’ve given you the chance of a lifetime,” I remember him shouting. “We invested in you when you were nothing. You’re still nothing. Now you have an opportunity to buy Starbucks. But it’s our money. It’s our idea. It’s our business. This is how we’re going to do it, with or without you.” He sat back before delivering the ultimatum: “If you don’t take this deal, you’ll never work again in this town. You’ll never raise another dollar. You’ll be dog meat.”

I was appalled, but I was also angry. Was I just supposed to roll over and take this? “Listen,” I said, my voice shaking. “This is the chance of a lifetime. It’s
my
idea! I brought it to you, and you’re not taking it away. We
will
raise the money, with or without you.”

“We have nothing to discuss with you,” he said. Others in the room sat quietly or supported him.

When the meeting ended, I walked out and started to cry, right there in the lobby. Bill Gates tried to reassure me that everything would turn out all right, but he was aghast about the outburst at the meeting. I’m certain he had never seen anything quite like it before.

That night, when I got home, I felt as though my life had ended. “There’s no hope,” I told Sheri. “I don’t know how I’m going to raise the money. I don’t know what we’re going to do.”

This was a turning point in my life. If I had agreed to the terms that investor demanded, he would have taken my dream from me. He could have fired me at whim and dictated the atmosphere and values of Starbucks. The passion, the commitment, and the dedication that made it thrive would have all disappeared.

Two days later, with the support of Steve Sarkowsky, I met with some of my other investors and presented my proposal: Every investor in Il Giornale would have a chance to invest in the purchase of Starbucks. The plan would be fair to all of them, and it would be fair to me. They saw that, and they told me they admired my integrity for refusing to agree to a plan that benefited big investors at the expense of smaller ones. They backed me, as did almost all my other investors. Within weeks, we managed to raise the $3.8 million we needed to buy Starbucks, and life has not been the same since.

Many of us face critical moments like that in our lives, when our dreams seem ready to shatter. You can never prepare for such events, but how you react to them is crucial. It is important to remember your values: Be bold, but be fair. Don’t give in. If others around you have integrity, too, you can prevail.

It’s during such vulnerable times, when the unexpected curve balls hit you hard on the head, that an opportunity can be lost. It’s also the time when your strength is tested most tellingly.

I can’t say that I’ve made the right choice in every business interaction of my life. But no matter how much I achieve, no matter how many people report to me, I cannot even imagine treating anyone as I was treated that day. Skeptics smirk when they hear me talk about “treating people with respect and dignity,” a line we later used in the Starbucks Mission Statement. They think it’s empty talk, or a truism that is self-evident. But some people don’t live by that rule. If I sense that a person lacks integrity or principles, I cut off any dealings with him. In the long run, it’s not worth it.

Those original investors, who put their faith in me, were well rewarded. They’ve stood by me through tough times and trusted in my integrity. I have tried to never violate that trust.

By August of 1987, Starbucks was mine. It was electrifying but also frightening.

I woke up early one morning that month and took a long run. By now, the enormity of the task, and the responsibility, was starting to sink in. I had a chance to accomplish my dreams, but I also had the hopes and fears of nearly a hundred people resting on my shoulders. As I jogged through the lush arboretum, I saw a long, winding road stretching out ahead of me, disappearing just over the crest of the next hill, into the heavy mist.