The Digital Skeptic: Venice Cafe Better Investment Than Facebook
BOSTON (MainStreet) -- Given a choice between putting money into Mark Z. of Facebook or Stefano P. of the Venezia Caffe, I'd invest on Stefano and his local coffee business any day of the week.
Right off, investors should love a guy who has as little patience for the social Web as I do. Stefano had no problem being written about or posing for a photo. He'd happily serve anybody a simply fabulous "caffe" or sell velvety, roasted whole beans from Ethiopia or maybe Kenya.
But have his last name printed on Facebook?
"Assolutamente no! I am Stefano at the Venezia Caffe. That's all," he explains. Once you get posted on Facebook it's nothing but salespeople. No real customers."
"It's just all blah, blah, blah," he says.
Better technology than The Social Network
Investors will also dig the tech business story of Stefano, who is maybe a few years older than Mark Zuckerberg. Never mind being an alienated Harvard geek looking to pick up chicks; the Venezia Caffe can trace its roots back to no less than Pope Clement VIII. Sometime early in the 17th century Clement fell hard for the fabulous innovation of carefully roasting Egyptian coffee beans. He was so smitten that the "Papa" granted a great, great-great-grand-relative or other of Stefano's the right to roast coffee in Venice. The Social Network is a daytime soap by comparison.
Stefano also has the investor edge over Zuckerberg in terms of hardcore management experience. He started in the coffee trade when he was 14, learning from his roasting master grandmother. And for more than 20 years he has been roasting, serving and managing coffee businesses around the world -- in London, in Poland, even at Starbucks(:SBUX). Briefly.
"I lasted 20 days," he said. "They serve complete $%$#."
A lagoon-sized business moat
Investors will also yearn for that fact -- unlike the Web giant -- Stefano makes real money from each and every one of his customers. Facebook's SEC filings from Feb. 1 indicate that the company takes in just $4 or so per subscriber per year. And incredibly, the net margins from these revenues appear to be dropping dramatically month by month. Stefano, by contrast, at least by my eye, makes at least $4 per customer every day. And his profits are rock solid. He is vertically integrated, roasts by hand and can charge as much as major coffee vendors such as Lavazza, yet offer a vastly superior product.
Venetians and visitors alike line up for the roasted goods.
But what really makes Venezia Caffe a unique investor opportunity over Facebook is its simple, glorious barrier to entry: quite literally, a lagoon-sized moat. Every single item in this town -- from coffee to carrots to cable TV boxes -- has to be shipped over a vast, shallow, salty swamp using a fleet of small boats. To unpack, stock and sell all this stuff, each product has to be touched multiple times. By multiple hands. All this extra work adds just enough extra cost and headache to keep out even the most monstrous multinational.
"If I was in Padua," just a few miles inland, says Stefano, "I'd be dead."
Attila the Zuckerberg
Of course, what Facebook offers investors that the Venezia Caffe does not is scale: 901 million users, according to company data. But massive is not impressive when viewed from this ancient merchant town. This city/state is tucked, like a Stradivarius violin, under the chin of Europe and Asia. And for the past 2,000 years it has watched the supposed geniuses of each age take their shot at conquering the world: Rome's Nero, Attila the Hun and France's Napoleon, just to name a few. All were young, good looking and had good ideas.
But each was overwhelmed by the logistics of managing vast networks of land, sea and ideas -- a business management problem Facebook is already facing. The firm just forked over a simply ridiculous $1 billion for a trivial photosharing app called Instagram, because this itty-bitty bit of software was becoming too much of a threat for facebook.
And while Stefano might open another shop if the right partner came along, he sees no reason risking scale. He is happy where he is.
"This is a nice business," Stefano says. "Why mess with it?"
If only Mark could say the same thing about Facebook.