Razer backs coffee machine startup Morning, leading US$1.27m round

Singapore

SUCCEEDING as a hardware startup is notoriously challenging, but homegrown startup Morning is betting that its coffee machine can make it big. And it has secured the backing of a familiar name in the hardware business, Razer, for this vision.

Morning, which bills itself a "coffee tech" startup, has bagged US$1.27 million in pre-Series A funding led by zVentures, the corporate venture arm of gaming hardware maker Razer.

Other investors in the round include Singapore-based F&B player The Lo & Behold Group, as well as Royston Tay, Wu Wenxiang and Kwok Yang Bin, the founders of Zopim, one of the earliest Singapore startups to be successfully acquired.

Started in 2018, Morning is the maker of a specialty coffee capsule machine, called the "Morning Machine", which retails at S$510. Unlike mass-market capsule machines, it incorporates precision-brewing technology typically found in more high-end machines. The Morning Machine first launched on Kickstarter, and has sold 1,000 units within six months. The startup also has an online marketplace curating capsule coffees from around the world.

Morning is the brainchild of two coffee entrepreneurs, Leon Foo and Andre Chanco. Mr Foo is the founder of PPP Coffee, which he founded in 2009 after a career in private equity. He also co-founded the cafe Chye Seng Huat Hardware and coffee machine importer Stellar-M.

Mr Chanco previously worked at PPP, where Mr Foo mentored him in coffee-roasting. In 2013, Mr Chanco started specialty roaster Yardstick Coffee in Manila. The duo stayed in touch, and over the years, came up with the idea for the Morning Machine.

"In 2018, we noticed that more and more specialty coffee roasters from around the world were putting high-end coffee into capsules. It was a eureka moment, because previously, when we thought of convenience, quality was compromised. (But) there was an opportunity there," Mr Chanco told The Business Times.

The market for coffee capsules has "grown tremendously" since Nespresso pioneered the format, added Mr Foo. "One thing that struck us is that people are brewing coffee a lot at home, and we try to bridge that gap from a home-brewer to a coffee roaster."

Asked what differentiates the Morning Machine from competitors, the founders point to how users can finely control pressure and temperature to extract unique coffee flavours. Users can also use the Morning mobile app to create customised recipes.

Design is another an important factor, said Mr Foo, noting that the Morning Machine won a Red Dot award this year for its product design. "We made sure we designed not only for the geeks, but for the 90 per cent as well," he said, adding that there are 10 preset recipes.

The startup's commitment to quality drew Razer to invest in it, said the gaming company's investment director Cho Weihao. Coffee is also attractive to millennials, the target group that Razer serves.

"Morning is really a highly-innovative company using technology to try and raise the bar to create exceptional products. That's very similar to how Razer as a company started as well; we're very customer-focused," said Mr Cho. He would not share the sum Razer put in, but confirmed that it is an equity investment.

Asked if Razer may collaborate with Morning on a Razer coffee machine, Mr Cho said: "It could be a possibility, depending on what our customers tell us."

Both Mr Cho and Morning's founders acknowledge the tough road ahead in running a hardware startup. Supply chain management will be essential, noted Mr Foo, especially amid pandemic conditions.

Venture investors in South-east Asia have traditionally gravitated towards software startups. It has also been tough to demonstrate the manufacturing process to investors here, since the production happens in Shenzhen, China.

"Hence, finding a strategic investor who has the appetite and patience for hardware, and having strategic partners is vital, because how the business grows and the challenges ahead are all different," said Mr Foo.

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