Why This Man Gave Up His $40M Company To 'Fix' Coffee

agricultural business inspiration

http://www.forbes.com/sites/hollieslade/2014/03/03/why-this-man-gave-up-his-40m-company-to-fix-coffee/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social
Hollie Slade

“When I was a teenager I thought that money, fame and success would be the solution to everything,” says Michael Jones. A serial entrepreneur in his mid-40s, Jones founded Implantable Provider Group in 2004, a healthcare company that buys medical implants like pacemakers, gives them to hospitals and collects reimbursements from insurance carriers.

The company grew rapidly and in 2010, IPG raised $25 million from Sequoia Capital, the Menlo Park-based venture firm whose portfolio reads like a greatest hits of Silicon Valley’s best known companies – Google GOOG -0.4%, YouTube, Instagram, LinkedIn LNKD -0.97%, Apple AAPL -0.11%, Whatsapp – to name a few.

With the Sequoia deal under his belt and IPG growing at 1,300% year-on-year, Jones as founder and president was snapping up accolades at every turn, including securing the number 5 spot on Forbes’ America’s Most Promising Companies list in 2011. “IPG was tracking to be a $40 million company,” yet it felt hollow, says Jones. “It didn’t quite have the allure I thought it would,” he says. This period of, “chasing shiny stuff,” as Jones refers to it now, seemed transient and lasting satisfaction kept slipping through his fingers.

Michael Jones, Founder and CEO of Thrive Coffee

“Being on the Inc. 500 had been an obsession of mine since I was 16,” says Jones. “I vividly remember August of 2008 when that happened – people were calling me, emailing and giving me high fives.”

But out at dinner with friends only a week later, no one mentioned it. “I thought, is it over already? It must be over already.”

Jones decided to stop and think about this. “The things like that I thought would have been mountaintop experiences, that euphoria would last only about a week,” he says. “I wanted the next phase to be about adding value.”

In 2011 he left IPG, taking a sabbatical to think about what to do next. Jones’ father-in-law is a coffee farmer in Jamaica and Jones began thinking about why the coffee market is so volatile and what could be done about it.

“I just kept thinking about why something that was $4 per pound in Jamaica could sell for $80 per pound in Japan,” he says.

He found that individual farmers who own less than five acres each collectively grow more than 70% of coffee consumed globally. At the mercy of global trade, small-scale coffee farming is a harsh mistress – prices for java beans regularly hurtle up and down, depending on weather conditions and the futures market, making it hard to eke out a living and giving producers little incentive to invest in the quality of their crop.

Jones decided he wanted to bring his entrepreneurial verve to coffee farming and develop a new model that would make the whole enterprise more profitable and innovative.

Coffee has continued to increase in price, with people paying more for a cup of joe today than ever before, yet that hasn’t translated into better conditions for coffee farmers. “It all pales in comparison to the economics,” says Jones. “Coffee is the number one or two export in many countries, if we could increase the price farmers get for their coffee we could move GDP,” he says, something that would be much more effective than increasing aid, thinks Jones.

His interest in coffee meant Jones was soon introduced through a friend to Ken Lander, a retired lawyer from Georgia. Lander, his wife, stepdaughter and the youngest three of his seven children had moved to a coffee farm in the cloud forests of the Costa Rican mountains in 2005. He’d hoped to live off his U.S. residential interests but when they lost much of their value during the 2008 financial crisis, Lander was forced to try his hand at to making money selling coffee.

Now fully exposed to the volatile market, Lander quickly realized the difficulties farmers face in the current value chain. He met Alejandro Garcia, a fifth generation coffee farmer who’d recently returned from the U.S. where he’d saved $40,000 over two years working in a restaurant to strengthen his family’s struggling coffee farm.

Experimenting with ways to make more money from their crop, Garcia and Lander opened cafes serving the coffee they’d grown to tourists. Through this they began to realize the possibility of selling their coffee at retail.

Jones hooked up with Garcia, Lander and a growing cohort who’d built a following of 3000 coffee aficionados across the globe using coffee grown by twenty local farmers called the San Rafael Sustainable Coffee Initiative. With ambitions to run a similar project at scale, Jones and Lander created Thrive Farmers Coffee, a revenue-sharing operation through which farmers receive ten times more profit than even Fair Trade standards.

By cutting out the middleman, putting a brand around it and selling quality coffee direct to businesses, Jones worked out they could make five to ten times more on their crop, allowing farmers to improve and expand their farms. Farmers who partner with Thrive produce SCAA specialty grade standard coffee. Only 20% of coffee worldwide is of this quality, says Jones, and this higher quality equates even more monetary benefit.

Coffee producers in Central America are set to earn much more for their crop with Thrive Farmers Coffee.

“It wouldn’t leave me that if someone could take that and make it scalable would it be possible to change the world of coffee,” says Jones. He saw parallels between how changing the supply chain in the medical sphere, for example in selling hip replacements, had created value and driven growth at IPG.