Andrew Tenenbaum | Crain's

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Andrew Tenenbaum

Background:  

Future Beat is a music entertainment company that gives fans the ultimate VIP experience at the concerts of their favorite artists. Last year, it sold 130,000 ticket packages for nearly 2,000 shows and 125 tours.

The Mistake:  

Missing out on a cup of coffee.   

In about 1993, I was a lawyer in Washington, D.C. A client of mine called me up and said she had a friend who wanted to leave her job on Capitol Hill to start a new business and needed a lawyer.  

The woman worked for a congressman who was running for Senate. She had just got back from Seattle, where she saw these little shops that were about to open up to sell cups of coffee. She wanted to quit her secure job on Capitol Hill to open up little coffee shops.  

Here I am looking at a nice retainer check that I would like to have to help this woman, but I have to [ask] her, "How much are you going to charge for a cup of coffee? And how many do you have to sell per day? And how are you ever going to pay rent just selling coffee?"  

She said, "You have no idea! There is this new company in Seattle called Starbucks, and it's opening up on every corner. I want to quit my job and I want to start doing that on the East Coast. Pretty soon this will be a huge business."  

I knew she was short the money and I could invest in her business. I declined both the investment and the representation.  

I never saw Starbucks or Peet's or any of that coming. That's the one that got away.  

There is no substitute for due diligence. 

The Lesson:  

What I learned is there is no substitute for due diligence. In those days there wasn't the Internet. You would have had to get yourself on an airplane and go out to Seattle. If I had, I would have seen how this phenomenon was taking off and would become one of the great business opportunities of a generation.  

Coffee was a commodity. There weren't specialty coffees. You bought [coffee] in a can at a supermarket. It was like gasoline. Motor oil is motor oil. It was almost like coffee was coffee. It didn't matter. You had a coffee machine in the office and that's what you drank from. You had a coffee machine at home and you drank from that. That was it.  

It would be like if somebody came to you in the 1990s and said, "Oh, yeah, I am going to build these little phones and everybody is going to be able to put it in their pockets. And you'll look at movies on it and it'll be a phone and it will have your employment. You'll have something called Snapchat and Facebook." 

[When] Starbucks became one of the highest performing stocks, I realized, "Wow. I could have gotten into this business."  

I just never thought that somebody could have success selling one cup of coffee at a time.   

Follow Future Beat on Twitter at @Future_Beat 

Photo courtesy of Future Beat

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