The Starbucks IPO with Dan Levitan

The episode starts with a distinction that later defines Starbucks: the original company sold roasted beans and did not brew coffee. Founded in Seattle in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker, it was shaped by Alfred Peet’s roasting business. Howard Schultz joined in 1982 after visiting the company, then saw a different model in Milan: coffee bars where people met and stayed, rather than simply buying beans or making coffee at home. The founders were focused on buying Peet’s and did not share his immediate plan. Schultz left in 1985 to build Il Giornale around the café idea, then in 1987 bought Starbucks’ Seattle retail stores for $3.8 million and combined them with Il Giornale. The important shift was not merely selling a beverage; it was creating a place and recurring experience that did not yet exist in most US cities.

Schultz had to assemble the purchase capital through persistence. Dan Levitan says Schultz approached roughly 250 people to finance Il Giornale and later raised the $3.8 million for Starbucks from Seattle angel investors. A competing group considered bringing in an experienced operator, but Schultz secured the deal; the combined Starbucks Coffee Company began with about 11 stores. Revenue rose from $1.2 million in 1987 to $10.2 million in 1988, partly because of the combination, then nearly doubled each year for more than five years. Schultz viewed the business as two linked operations: running stores and building a pipeline of future stores. That required hiring ahead of growth and investing in infrastructure. Levitan estimates Starbucks raised $250–300 million in equity before cash generated by existing stores exceeded the incremental funding needed to open new ones. Rapid growth was therefore deliberate and capital-intensive, not simply organic store expansion.