It’s an idea so seemingly easy — a mail-order coffee service delivered to your door featuring coffees roasted from around the world. But try convincing a tank full of business sharks that it’s an idea worth the investment.
The University of Arizona’s McGuire Center for Entrepreneurship’s Mistobox coffee delivery concept was given the chance on national television to stand in front of the sharks and represent the Eller Entrepreneurship program in its quest to be the next “big thing” in business innovation.
Mark Cuban, the owner of the Dallas Mavericks and chairman of AXS TV; real estate mogul Barbara Corcoran; “Queen of QVC” Lori Greiner; technology investor Robert Herjavec; fashion and branding expert Daymond John; and venture capitalist Kevin O’Leary are the sharks. Their job on the ABC reality show “Shark Tank” is to listen to hundreds of pitches and invest in those that they believe will help add to their fortunes.
“It was the craziest, most hectic event of my entire life. It went on forever, you were never in the ‘know,’ and just finding out if we would be on the show took close to five sleepless months,” said Connor Riley, the co-founder of Mistobox.
Riley and his classmate Samantha Meis came up with Mistobox during their time at the McGuire Center for Entrepreneurship at the University of Arizona. McGuire is ranked by Entrepreneur Magazine as the 19th best entrepreneurship program in the country, closely compared to programs from Harvard, Stanford and Rice University. Over the last five years, its graduates have started 12 companies and have collectively raised $1.5 million in funding, according to the magazine. Mistobox is one of those companies who contributed to the school’s success.
Some other successful businesses that have come from the McGuire program or its students are Notehall, an
online marketplace for students to buy and sell class notes that was bought by Chegg for $3.7 million, and JusTouch Digital, which allows students to browse restaurant menus, order a meal, and pay the bill – all at the table, according to UA News.
“Mistobox is a great example of the type of students and the quality of work that comes out of the McGuire program,” said Patty Sias, the McGuire Entrepreneurship Program director. “Once they saw they could go somewhere, that really inspired them and offered them incredible motivation.”
Riley said they named it “Mistobox” — “misto” is Italian for “mixture” — because the name was “industry neutral” enough to let them expand into other products.
Originally funded by a $9,300 Kickstarter campaign from 109 backers, Mistobox elevated its success from “Shark Tank.”
It all started while Riley was sitting in one of his first entrepreneurship classes. His professor urged students to “come up with an innovative business venture that you’d like to see yourself wanting to be a part of,” he recalled. He aspired to create something like Birchbox, a subscription-based cosmetics company that delivers customers personalized beauty, grooming and lifestyle samples.
Riley was intrigued by Birchbox’s concept of delivering a product to a customer in a lightweight, easily shippable box. And he knew exactly what he wanted to put in that box: coffee.
Mistobox searches the globe for far-flung coffee roasters, sampling dozens monthly, and chooses the four best each month to send to its customers. Coffee fanatics and “sippers” alike are able to experience coffee from around the world from micro-roasters that would otherwise be unreachable.
Roasters from every corner of the globe — El Salvador, Colombia, Sumatra, Rwanda, Ethiopia, Honduras — can be found in Mistobox.
In June 2012, “Shark Tank” producers reached out to the McGuire Entrepreneurship program, telling them that they wanted to feature one of the ventures from the program, according to Riley. After a series of interviews, Mistobox stood out among the rest.
From there, Mistobox was given the opportunity to pitch in front of the show’s producers, which was merely the first step of a grueling five-month process. The screening process led to several rounds of applications, interviews, videos and pitches before Mistobox appeared in front of the sharks.
“Throughout this entire process there was an application, then cuts, then an application, then cuts, and they do not tell you what is going on at all,” said Riley. “So it would be like two months since we had heard back from them after one of the rounds and we were like ‘OK, we are done’, but then we’d get a call from them and find out we made it to the next round.”
In October 2012, Riley and Meis found out that they would finally appear in front of the sharks in Los Angeles. From there, all of the company’s focus shifted to preparing for a three-minute pitch, which could potentially offer them the “chance of a lifetime.”
They watched every pitch of every episode of every season of “Shark Tank,” memorized every question that every shark asked the businesses and came up and memorized answers of their own.
“We knew that no matter what question they would ask us, we had an answer for it and knew exactly who would answer it. We were extremely prepared,” said Riley.
Initially, Kevin O’Leary offered them $75,000 for 25 percent of their company, but said that the investment would be a “crapshoot.” Three of the other sharks weren’t interested and after 30 seconds of further convincing, Cuban offered them $75,000 for 30 percent stake in the company; Riley and Meis took the offer.
“I just felt comfortable with Cuban. I’m also a huge sports fan and walked into it knowing that he’s the one I wanted,” said Riley.
Their pitch aired on television on May 2, 2013.
The Current and Future State
Under Cuban’s guidance, Mistobox earned its first profits, meaning they have a positive net income – after all salaries and expenses are paid there is still money left over. This money has been used to recently revamp their website and they are working on new infrastructure that will update the subscription model, effectively reducing the costs of the product. Riley and Meis, along with four others now make up the core Mistobox team.
In their first year, Mistobox’s sales nearly totaled $100,000. This year’s projections are near $1 million, according to The Phoenix Business Journal. They have since relocated their offices to San Francisco, Riley said.
Mistobox now offers two levels of monthly subscriptions: “Awesome,” which includes four 1.7-ounce bags of
hand selected whole bean coffee every month for $19; and “More Awesome,” $30 for four 3.4-ounce bags a month. Each bag makes roughly 10 cups of coffee.
“I love my coffee and I love my subscription (to Mistobox),” said Tracy Wolfswinkle, a loyal customer. “It’s worth the price when you consider that these are cups of coffee that you would never otherwise be able to sample.”
Mistobox also sells coffee makers and mugs, coffee bean grinders and water kettles. They also plan to dive into tea and other products.
For the past six months, Mistobox has been working on a new subscription model similar to Netflix that will help lower the prices and allow for more personalized subscriptions, Riley said.
Here, customers will fill out a coffee profile that tells Mistobox what types of coffee they are most likely to love to provide intelligent recommendations. Customers will then be able to choose the coffee they want and how frequently, including the size — a single large bag or the box of four smaller sample sized bags.
This new subscription model is in beta testing and will be rolled out in the coming months.
To subscribe to or learn more about Mistobox, visit their website at www.mistobox.com
Cole Malham is a reporter at Arizona Sonora News, a service from the Univeristy of Arizona. Reach him at firstname.lastname@example.org