Lara Schmoisman 0:05
This is Coffee Number Five. I’m your host, Lara Schmoisman. Hello. Hello. Welcome back to Coffee Number Five. And today I have, I’m so excited about this one because I couldn’t talk about coffee, one of my passions. And so I invited Maria Palacio so welcome.

Maria Palacio 0:28
Yeah, thank you so much.

Lara Schmoisman 0:30
And I know the guys how much I’d love to have another person with an accent. So yo guys is trying to figure it out. It’s like, you have to listen. And you have to listen with an accent with eye contact. takes a minute to get there. So welcome, Maria. So I really want to know more about you. Because I’m, I know that you’re the fifth generation in your family working with coffee. Yes. So how I mean, first of all, it’s hard to decide to go into the more you bred to go into the, in the business, or it’s something that it was your decision as an adult?

Maria Palacio 1:08
No, it wasn’t a decision as an adult. I grew up in a coffee farm, my whole family, our coffee grows, like you mentioned, and fifth generation from my mom’s side, my dad’s side. But I, you know, I faces all those struggles. Coffee’s not very profitable. And if you see their coffee, growing communities, they just fall into the party loops. And so I was one of those that when I graduated, I was like, I want to do something completely different. Because there’s just no opportunities in my family. And so first, I pursued my fashion career where I was working in New York for Marc Jacobs, Alexander Wang, and so on. And so later on, I went back to my roots.

Lara Schmoisman 1:49
Wow, that’s super interesting. I mean, everyone who knows me knows that I love fashion. And I would do marketing for the fashion industry. I used to teach for the fashion industry, but and I believe that fashion is so ahead of the game in so many things, that it makes all industries change really fast. And you can connect fashion with anything. Exactly. Exactly. The same way.

Maria Palacio 2:14
It’s like, yeah, So you see, like, we don’t launch, we launch collections of coffee. I come from my fashion background.

Lara Schmoisman 2:23
That’s amazing. So let’s talk a little bit about that. Because I know how hard is to get into a family business. And sometimes when you when you’re the new blob, and you come with all this experience, and you and being Latina, I know how hard is to break into traditions, men. And it’s like, if it’s working fine, why you’re gonna make something new?

Maria Palacio 2:44
Yes, exactly. Yeah, I remember like, so I came to us. And I didn’t want to do anything with difference for me just men struggle. And but when I was working in fashion, I mean, everybody drinks coffee, and everybody’s running in coffee. There’s such a late nights and quickly realized that you know, how big the coffee industry was second most consumed beverage in the world, people drinking more cups of coffee, and so on. And so it’s like, hey, if it’s such a profitable business, why are we struggling back at home? And so started, you know, with my co founder, John, we started thinking about sustainable coffee chain, how he could be. And there was one we were like, Okay, we figured out we have a model dipo work, we came back to Colombia. And they’re like, like you said, Well, that’s not how it’s done. You know, for years and generations. This is how it has been done. You set it to a cooperative. There’s already a model that works. Even my dad, you know, he was like, no, no, I already have my model. And it took us really four years of knocking doors. In my own community, finally, where a farmer from another town was like, okay, yes, I believe in what you guys are doing, and I’ll send you to your coffee, but it was a journey of for years. He was he’s definitely very male dominant industry. So breaking through that was really difficult. But now,

Lara Schmoisman 4:07
I can imagine and let me tell you a little secret. One of my dreams is to have a coffee shop one day, oh, I know that there are so many coffee shops out there and like an income from the culture that you meet for cafecito some part isn’t part of his social or like doing anything working with coffee or in my case also was. But it’s like, such a strong, strong part of who we are. So even when I had to name my car, my father cars I had to who I am, my name was I’m a cup of coffee after a cup of coffee. That’s what people know me for. I always have a coffee on my hand. So it’s such a big part of the culture. So you brought up a whole new idea about coffee and mostly in the In the United States, because coffee is not such a strong heritage thing that as we have in Latin America, so when you’re not, and you’re competing with huge brands, yes, they are that, how would they even start?

Maria Palacio 5:17
Yeah, so I know when we were first going to start here, and especially where I am in the Bay Area, it’s such a credit market. So you have our coffee, you have Red Bay Equator, and Blue Bottle came from here. So we already have really strong competitors. But we started understanding and kind of looking at the shelf and what was being present there. And one thing that we noticed back then, is that all packaging was brown, everybody was Shane, and voicing it as we are the roasters and the roasters was being the rockstars. And the color palette was very much from a roaster perspective, which is the end result that they get, which is the roasted coffee, so all browns, and if you go to the show, the show was very one color, there was no differentiator, and also you wouldn’t see the farmer. And so that’s where like, we saw that opportunity. Like we could come from a farmer, we are farmers, woman, lead farmer led, and really bring our whole culture you don’t you in that time, you wouldn’t see any colors in the shelf, wouldn’t see the picture of the farmer. And so we decided to go very unapologetically with our culture with our colors. And one of the things we say was like, okay, the picture of the farmer needs to come up front. And so suddenly, like all of our packaging, you don’t see what has the picture of the farmer, the colors, and they all have these, you know, here kind of stuff. And so they will start knowing as by the colorful company, oh, the COLA for branding. And I think those little things of speaking through the farmer and finding like those differentiator help us break through. Because people didn’t have connection to a farmer, and suddenly they did. So it was finding that, that differentiator that really help us, you know, first into the market,

Lara Schmoisman 7:09
And how do you decide, because this is one of the struggles that I talked to so many founders all the times that they are get lost in? Where should I go first? Should I go read the consumer? What? Because it takes a lot of work, whatever you decide to go, whatever approach takes a lot of work, if you want to do it, right. So how, how do you make the decision of what direction you’re going to take? And how do you take it from there?

Maria Palacio 7:37
Yeah, some guys a story of how we started because he only do two. But we started really small. And I remember we’ve gone I remember, we like a funny, rather coffee, and I had the packaging, I have everything. And then it’s like, oh crap, now I need to sell it. I have one of these. We literally went on production because my background was the same. So like I was, we decided we purchased it, and then didn’t have sales background. And so I remember my co founder, he said like find a niche, hit it hard. And eventually it will spread, right. I in that moment, I had a three month old baby. And I had recently moved to California to the Bay Area. And I realized there’s this amazing group of moms, that they will meet at parks. And so I noticed that after the park, they will go and drink Starbucks. Because there’s incredible housewife community or women or incredible moms on maternity leave from all the tech companies around here because I am here in the Silicon Valley area. And so I decide, well, this is the only community that I know, I will go every day, I’ll set my time my table and start serving them cafecito in the parks. What I didn’t know that was creating a community of followers and who better that that you know, who makes the decision of the home mostly, you know, the woman is who makes most of the purchase. And so I realized I was having these really powerful community. Now, we our mission was to leave farmers out of poverty. So there was a moment that we start entering into retail because I was following this group of mums. So I noticed what supermarket that will go so then I’ll approach the supermarket and be like, Hey, I already have a following. I know you know that people are coming to buy the people that buys you know, they’re coming to the supermarkets, we start entering into small supermarkets in the area, and I’ll just start following them. I remember like certain fashion brands,

Lara Schmoisman 9:31
I love what you’re saying because I always say that the my key word of 2023 was community is all about creating community and in any kind of products but also if you get too distracted as a small owner to try to first of all do it yourself. Yesterday I was actually in a conference talking with a group of BCG woman, women in BCG and What the The talk was about finding partners, and not only creating relationship for business, it’s, of course, you need to be located for everyone, but you want to find in that community, your partners, and that creates more community. And that seems that it’s what you found with these small businesses.

Maria Palacio 10:22
Yes, exactly, exactly. Okay, that that community now there was a point that we went back to our mission, our mission is to leave farmers out of poverty. And so it’s like, buy one bag and buy one, we’re not going to leave farmers out of 40. And so then we made a conscious decision that that market was too small to reach our goal. And we noticed that their husbands or they were maternity leaves, and they were going back to tech companies. So then we decided to leverage our communities like, Can you bring us inside your campuses. And then that’s how then we pivoted. And we went for for b2b, corporate food service spending through our initial crowd of moms at parks. And then we ended and were able to get into Google, LinkedIn, and all of these companies. And still today, we’re mostly a b2b company. But it started back there in that part.

Lara Schmoisman 11:14
It’s amazing. And but when you pivot is that you decided to did you leave the small chains completely to go to b2b, or you left a little bit here and concentrate on the b2b.

Maria Palacio 11:29
So for a while, we were still in the retailers. Now, I think one of the things that you just say was focusing, we noticed, like what was going to help us reach our goal and our mission, Lee farmers are authority, therefore, we need to move a lot of volume. So What channel are we going to move a lot of volume. And so then eventually, we didn’t need we did stop on the supermarkets and retail, and just focus on b2b and growing that because that’s the one that was carrying that volume.

Lara Schmoisman 11:57
See, this is a very important lesson for all the founders out there that sometimes it’s better just to focus in one channel that tries to be everywhere.

Maria Palacio 12:09
Yes, yeah, we learned the hard way, there was a moment that we decided, Okay, let’s go to these we reached to the article, right after, you know, COVID. And we realized that our, our team was being stretched too thin. And we were not hitting any goals, because we’re not putting enough attention. And then when we decided to refocus now, we started growing like crazy.

Lara Schmoisman 12:31
Okay, so let’s go back to the minute that you decided, okay, we realize that we want to start getting into these campuses. Yes. If you’ve reached that person, how did you pick up the phone and say, hey, I want to tell you this, because how do you get people to talk to you on the phone?

Maria Palacio 12:49
So I’m sighs I go back to that community. I was like, okay, where does your husband work? Where do they? Because I knew that my coffee is going to their house. And so I literally, we started leveraging that community and be like, Okay, you work out, Mara, you work in so and so. Can you give us an intro to internally. So eventually, we kept asking our current community to give us interest, interest interest until we find our way it it took us nine months, though, to get the right person the first time. And just reaching out by emails.

Lara Schmoisman 13:23
Thank you for saying that. Because it’s time. And that’s something that also, as a founder, I know that you have that anxiety in your chest and that you have it when you have a team. And first of all, you feel like you’re burning them out many times because we are doing so much. And we’re getting so little. So I that anxiety as a founder. It’s and it’s real. Is that that pressure in your chest? Mostly if you’re self funded.

Maria Palacio 13:55
Yes. Yeah, exactly. Yeah. And so yeah, I always share that because people are like, Oh, wow, you send nine emails for nine months, every week, to different people until someone responded. And it’s like, yeah, it was in a Monday was in a overnight. It was a process. But it was definitely just leverage the existing community that we had to then pivot into a different segment.

Lara Schmoisman 14:20
So you were basically targeted companies. And so this is a vision that I have, and this is how the companies that I want to get in.

Maria Palacio 14:27
Yes, yeah. So when we do these, we knew we got our first client in back then. We’re like, we’re gonna focus on this one, and we’re going to make it successful. We went all out, I will say we even hit our mark, like our margins were really low because we wanted to put it all out there. Like if we make it that if we’re able to show everybody that we’re able to serve this whole corporation, then other doors will open and without that So we did. And so then other companies, then open the doors for us. And then now you just went rolling to other accounts.

Lara Schmoisman 15:08
And it remindes people moves also from one company to another. So it’s great. Having a great success story and having a great experience. It’s something that it’s a story that you can tell.

Maria Palacio 15:21
Exactly. And actually, most of later on our growth has been from people from lovely the internal communities, although from the baristas from the account managers and so on that they move and shift from other locations and maintaining those relationships that has opened the doors to other accounts.

Lara Schmoisman 15:40
Absolutely. So what’s next is to keep expanding, or now you’re thinking about opening another channels of distribution.

Maria Palacio 15:49
So right now we’re working in still expanding, we expanded our impact in Colombia, we’re currently working with a community of 500 farmers that were lifted out of poverty. And we do it through our adopted farmer model. And so right now we’re working on finding home to every single farmer because every corporation, we assign them farmers. And so that’s what we’re working on right now. It’s still scaling, we are opening our first cafe in Palo Alto,

Lara Schmoisman 16:18
My dream! I’m gonna have to come to by

Maria Palacio 16:22
Exactly. And so we hope, you know, we want to showcase our farmers and our story and how we present our coffee because it’s really good. So people who are experienced outside of their corporate, that will be a way for us to go into the active consumer, and kind of break a little bit outside of being just your coffee, your office coffee. But most of you right now, we’re really focusing on that growth, steel, to make sure we add more farmers into our platform.

Lara Schmoisman 16:50
And see, what I love about your story and your brand is that there’s so many brands out there that they think that giving back is going to be attracting more customers. And that is that is after the sales. Yes. If you’re if I sell I give back. And I personally have an issue with that, because I think it should be given up all the time. From the beginning.

Maria Palacio 17:18
Yes, yeah, I know it mostly, you’ll notice that it comes as an afterthought. With project you want it to be build something more sustainable, a sustainable coffee chain and circular economy. So one adds to the other one, and it’s all embedded, how it should be right. And we will situation and it’s not about charity, because now we know, you know, you cannot just give more money, because what will they do with that money. But with the support training, we give them furcation technical support, and so on. So every bag you buy in the directly impacts

Lara Schmoisman 17:50
Yeah, and the thing is that you’re making a difference. You’re not just giving one time check that it will give a little bit. You’re you’re making the difference. You’re giving these people more work, you’re giving them housing, you’re giving them something to live for, and then to build a business and build a family and go generation by generation like you’re doing business of coffee.

Maria Palacio 18:15
Yeah, exactly. One of the things that is really interesting that usually founders they think that impact costs money. And what we realized throughout the years is that and we always say impact leads to quality, our impact platform leads to a higher quality leads for us to maintain our supply chain leads to more sales. So yes, there is an upfront but once is that sustainable, he has lower our cost our margins more efficient.

Lara Schmoisman 18:44
And also you’re getting nowadays, I mean, you’re you have each one of the farmers who is invested in giving you the best quality you can have

Maria Palacio 18:54
Yeah, it’s not too long ago, there was like a shortage of coffee in the world. There’s like 25% of shortage, and, and the roasters here are our competitors. were struggling to get coffee and we had our own coffee. Because we had our own farmers, they’re not struggling and so yeah, so it’s really beautiful to see like the whole right, the whole, very holistically high impact leads to just so many things.

Lara Schmoisman 19:18
I have a question for you now. Yes. What does your family say now?

Maria Palacio 19:23
Oh, but they’re always surprised because they never expected me to go back to farming. Always say I was like, I’m I’m gonna go away. But right now they’re very proud, keeping a legacy and I think most of all that was shifting the communities back at home. I, you know, we took our farm and we turned into an innovation farm and one thing that happened recently was the government’s going to remove all the herbs for the coffee community in that area because they thought you couldn’t grow gray coffee. They came to our farm as a case study. And with that, They were able to see that no coffee grows. And we have new methods. And therefore they were able to keep all the funding to all the other farmers. And so they’re really proud to see now, how this has trickled. And now my mom is one of the farmers, my dad works with me, my brother leads the impact. And so it’s

Lara Schmoisman 20:17
That was my next question. Because how do you control a company here? And in Colombia, where you have all these farmers, which is a big operation?

Maria Palacio 20:27
Yes. Yeah, no. So at the beginning, we were trusting partners, and we realized there was not a full transparency and things weren’t going as we were expecting. And so now we have, we have a full time team in Colombia. That is led by my brother Daniel, who he is an incredible farmer. I mean, he he did grew up being like, I am going to be a farmer. And that’s where he specialized and he loves. He loves the farmers. And so now we have a full time team that works all 24/7 with them.

Lara Schmoisman 20:56
That’s amazing. So if you had to do it all over again, yeah. Oh, my gosh, first of all, what do you do it? And second, what would you done differently? I know, and don’t tell me learn from each thing. Because I know that we all do that, if we will have that that piece of thing that is I knew this I would have my life will be so much easier.

Maria Palacio 21:22
Yes. So the honest answer, yes, I will do it. Because now I will see the impact and just to see lives transformed is it really moves me I don’t know, if I will, if – will have happened, and I will be just doing anything else that didn’t have that impact component, I think I will have, you know, just let it go. But what I would have done differently, is I studied design. And for me always, like the financials was always like an afterthought, like I remember, like at the university was like Excel classes, and I’m like, Oh, I’m not gonna use Excel. Like I, I’m just going to design. And so I wish I had more that business acumen at the beginning that financial, how to do the p&l. I mean, now I do, but I feel like I made so many back then. So many financial mistakes, just because I just wasn’t very financial savvy. And later on throughout these years, I put myself into education, just learning and learning and making sure I

Lara Schmoisman 22:27
I can never stop learning.

Maria Palacio 22:28
Exactly. So I wish I would have taken that step before and kind of like, fully feel like how do you do that p&l? How do you get loans and the right financial structure to get loans?

Lara Schmoisman 22:41
And did you have to get funding? Or did you raise capital by yourself? How do you raise fund capital? At what stage

Maria Palacio 22:53
So we were bootstrapped for a long time. Now, once we started going to corporates within here to get access to capital, because every account is a massive account. And so you need to bring containers and production team and scale and so on. At that moment, we we got loans from CDFIs, which are nonprofits, because regular banks wouldn’t lend us you know, I, you know, I literally went to every single bank and every single bank close the door. And so what we’ve figured out that there’s these CDFIs are nonprofits are here to lend to minority bypoll communities, and they’re just do it through your potential, which is amazing. And still today, they’re the ones that loan us money, would you call it like, Opportunity Fund or working solutions, ICA Pacific Community Ventures, later on, we did raise money. So we already raised like about $2 million. But we waited until private capital or from VC funds, and so but we waited until our valuation was at certain point. Because we knew how much we how much we were willing to give up. So it was intentional, the moment we went out and see capital. Before that, we just went fully bootstrapped or with, you know, lenders.

Lara Schmoisman 24:17
My last question, I promise, I let you go. I already took a lot of time, but I am super excited. And I love that you’re so open about this. And because you’re helping a lot of entrepreneurs out there because a lot of people think that when you get funding, that’s it, you’re set for life, and I love your reaction and that you’re gonna start making tons of money.

Maria Palacio 24:48
I mean, I think it does puts your company in a different place, which is great. It allows you to speed up some processes. Now I wouldn’t say it change Just in the way in the sense that like, you still need to make the sales, right, like you could burn $2 million and become multimillionaires overnight. Yeah, yeah, no, like you still burn $2 million and ended up in the same place. What it changed was the pressure to succeed or the pressure to perform. That was what changed. Because when I just had my own loans, and it was just us, I could sell or could not sell, it was up to me. And that seat, the moment you raise capital, then you do have VC funds are looking at your p&l. They want to make sure you’re giving return that you’re growing uncertain growth. And so I feel like more. So you just need to be prepared to be add to that standard and operate at that standard.

Lara Schmoisman 25:45
I’m so glad you mentioned that, because I talk to a lot of founders that are very early on, they’re trying to get a raise capital. I’m very transparent that normally I say, unless someone really trust you, nobody will give you capital for your brand. Because you have nothing to show. Yes, they’re putting money on you as a person not in the brand, yet you need to have searched reach a certain point to raise capital.

Maria Palacio 26:16
Exactly. And I think another thing that they don’t realize is, your valuation has depending on your valuation is how much capital can you raise, you cannot raise a million dollar if you just have a few sales, right.

Lara Schmoisman 26:33
And also, you’re going to be given a part of your company away. When you realize when you’re asking for money, so you’re in a better position to negotiate when you have a value to your company.

Maria Palacio 26:46
Exactly. I know as I was fundraising, I realized there was a point I was like, Oh, my God, I am selling part of my company. Yeah. And also, that was a big thing where we had a mentor. And there was at the beginning a point where I felt like I was begging for money or like, or I will come in a place of disadvantage to the conversation just in the way I felt. I felt and then, you know, the coach was like, No, you’re selling them part of your company, buying an opportunity that you could create for them, you’re coming to bring more value and in grow there, you know. And so that’s another point that we don’t realize the value that they’re looking at us, and that’s why they are investing.

Lara Schmoisman 27:29
Yeah, I mean, no one is going to give the money if they don’t think they’re gonna make money.

Maria Palacio 27:34
Exactly. Yes. So I feel like to your question is, are you ready to take on that? You know, that, that pressure of performing in di, N, I do have a path to perform, and to be able to give that

Lara Schmoisman 27:49
growth and it’s baby steps, I believe one year, you’re gonna create the company, and what do you say, and it’s right to say I learned from all my mistakes, I everything that I did brought me to the place that I am today. And I’m grateful for that. But also it prepares you, you have to have that journey, as a company as a person. And even when you think for example, I always compare my agency. I say that I’ve been in business that I won’t for as long as if it was be in human years. I won’t be in kindergarten yet.

Maria Palacio 28:24
Oh my gosh, yes. So you know, my I started progeny when my daughter was three months old. And she’s now eight years old. It’s time like I think about our business. I just see my daughter’s like that’s, that’s yes.

Lara Schmoisman 28:39
Exactly. So that’s that’s what you need to think and take it with time dots back because you don’t expect a five years old to be doing college things you need and if your journey as entrepreneurs only five year there’s only so much you’re learning. And then when you are an I keep learning all the time and bookkeeping and accounting, there’s only no new things that nobody prepares us for.

Maria Palacio 29:09
Exactly. You don’t realize that you need to learn about HR, about employment laws. 401 K, how do you set up for okay, how do you say health insurance for your employees? And like all those things that you don’t realize that you’re gonna end up wearing so many hats, from sales to HR to accounting?

Lara Schmoisman 29:28
Yeah, that’s what I’m so glad that we keep learning into that, because that to keep learning is the only way to keep growing. Exactly. Yeah. I feel like that’s what I will say to our kids, you have to go to school because that’s why and keep learning. So one day you can have a future and whatever he wants you to do. You need to learn skills. It happens the same as being an entrepreneur.

Maria Palacio 29:53
Exactly right now, I’m doing an MBA and they were like, What are you doing? Where are you going? like you already have two kids you already have, you know, a family business. But you know, I feel like as the company keeps growing, like my skill needs to keep growing to be able to match it up else. I will never want to be the blocker of my business or the bottleneck because my capacities or skills or two need to bring someone else because I’m not up to that challenge.

Lara Schmoisman 30:22
I agree. 100% with you. Yeah. Maria, thank you so, so much for having coffee with me and to be so open and honest about growing coffee business and in any business in that case.

Maria Palacio 30:37
No, thank you so much for this conversation.

Lara Schmoisman 30:40
And to you guys. I will see you next week with more Coffee Number Five. Find everything you need at laraschmoisman.com Or in the Episode Notes right below. Don’t forget to subscribe. It was so good to have you here today. See you next time. Catch you on the flip side. Ciao, ciao. What I love about the beauty industries is that there is always room to grow. I love to learn more about innovation, possibilities of investment and partnerships across the industries. If you want to learn more, join me at Beauty Connect this November 6 to eighth in Los Angeles.