Starbucks Creates $100 Million Venture Fund Seeking Growth Ideas

(Bloomberg) -- As growth slows in key markets, Starbucks Corp. is funding a new investment arm with $100 million to identify and tap into companies that are developing new technology and products related to food and retail.

  • With Valor Siren Ventures, the world’s biggest coffee chain joins the ranks of large packaged-food companies that have turned to external sources for inspiration. The new fund, which is managed by Valor Equity Partners, seeks to raise an additional $300 million in coming months from other investors, Starbucks said Wednesday ahead of its annual shareholder meeting.

Key Insights

  • Starbucks “may explore commercial relationships down the road” with the businesses it invests in, Chief Executive Officer Kevin Johnson said in a statement. Now one of the world’s largest restaurant chains, Starbucks is contending with the fact that it’s no longer able to produce the rapid sales growth that investors have come to expect.
  • The chain also announced it will start modernizing its cafes with new formats this summer in New York. Chief Operating Officer Roz Brewer said Starbucks wants to revamp the “third place” concept that the company pioneered. The idea -- of offering a space to relax that’s away from home and work -- is one that’s been increasingly replicated by competitors.
  • With shareholders in mind, Starbucks is also starting an accelerated $2 billion share buyback program as part of its goal to return $25 billion to shareholders over a three-year period.

Market Reaction

  • Starbucks shares have risen 11 percent this year through Tuesday’s close, compared with a 13 percent gain for the S&P 500.

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