- Tempe-based Cartel Roasting Co. is seeking to raise about $1.2 million through an equity crowdfunding campaign.
- Funds raised will primarily be used to expand into California, with new cafes planned for West Hollywood and Palm Springs.
- Equity crowdfunding is an alternative model of raising capital for early-stage companies that allows everyday investors to take a stake.
Cartel Coffee Lab Inc. is calling all coffee aficionados to purchase a piece of its business as it brews up a strategy to expand in California.
The Tempe-based coffee chain — which does business as Cartel Roasting Co. — was started by husband-and-wife team Jason and Amy Silberschlag nearly two decades ago.
It is now offering equity to those who invest at least $300. It’s soliciting co-owners through a campaign on StartEngine, an equity crowdfunding platform, and hopes to raise about $1.2 million. That represents about 250,000 shares at $5 each.
The company operates a dozen cafes in Arizona. It also has a production facility in Tempe, plus a location in Palm Springs — and it wants to grow even more, according to documents filed with the U.S. Securities and Exchange Commission.
Investor dollars will be primarily used to build more cafes in the Golden State. Company leaders envision new locations in West Hollywood, Palm Springs and other areas.
The coffee chain also hopes to introduce new quick-serve food offerings at its stores, improve its e-commerce infrastructure and invest in its wholesale operations. In filings, its leaders said the brand is at an “inflection point in its journey, evolving from being a small-scale roaster with a few cafes to a growing multichannel business.”
“We know we wouldn’t be here as a business if it wasn’t for you, our community members,” said Jesse Pangburn, the company’s president and chief operating officer, in a video announcing the campaign. “So, we want to take a moment and say thank you for getting us here.”
“We hope that you’ll come with us on the next phase of our journey,” he added.
Cartel Roasting Co. hopes to build ‘community-owned business’
Cartel Roasting Co. started as an open-air coffee cart in Tempe. About a year later, it launched its first storefront on Ash Avenue, near the hustle-and-bustle of Mill Avenue and Arizona State University’s main campus.
Since then, it has become one of the largest locally-owned coffee retailers in the region. It specializes in sourcing ethically produced coffees from around the world and roasting coffee to order.
It has several lines of revenue in addition to its cafes. It sells coffee beans, brewing equipment and branded merchandise online, and works with distributors and wholesalers to bring its coffee to a wider market. Its beans are sold at Whole Foods, Sprouts and other locations.
Last year, it opened a 12,000-square-foot production facility. The building houses roasting equipment, cold brewing and canning lines, and a commercial bakery.
The company said in financial filings that it “invested heavily” in building out the facility. The project was financed using traditional lending and loans from the U.S. Small Business Administration.
Now, it wants to scale up. In social media posts, its leaders said it is transitioning into a “community-owned business.” In filings, they highlighted opportunities in the fast-growing specialty coffee industry — from ready-to-drink coffee products in grocery stores to new storefronts in trendy, populous southern California neighborhoods.
The company aims to ultimately compete with several large, national specialty coffee roasters. It listed Blue Bottle Coffee, Stumptown Coffee Roasters and Intelligentsia Coffee as competitors, as well as “local coffee roasters in Phoenix, Tucson, and Southern California who focus on small-batch roasting and unique sourcing practices.”
Blue Bottle Coffee, Stumptown Coffee Roasters and Intelligentsia Coffee are far larger than Cartel and are entirely or partly owned by major corporations. Nestlé owns a majority stake in Blue Bottle Coffee. Peet’s Coffee — via its parent corporation, JAB Holding Company — owns Stumptown Coffee Roasters, and has a majority stake in Intelligentsia Coffee.
“Cartel sets itself apart by leaning into three main pillars: Quality, Experience and Community,” the company wrote in its financial filings.
What is equity crowdfunding?
Equity crowdfunding is an alternative method of raising capital for early-stage companies.
Typically, startup businesses grow through loans, grants, and investments from venture capital firms and wealthy, accredited investors. Non-accredited investors typically don’t get to buy into companies until they go public on the stock exchange.
Crowdfunding flips that traditional model on its head. Businesses raise capital by selling ownership shares to the mass market, allowing regular investors to buy stakes in privately-held companies through regulated online platforms. That makes early-stage investments accessible to the general public.
Investors hope that their equity will eventually provide a return on investment, typically through a future sale of the company or a public offering — but it might not. Early-stage companies are notoriously risky investments, and the fine print on such offerings typically warns that shareholders should be prepared to lose their entire investment.
Cartel’s offering also advises that investors should have financial resources that are “sufficient to enable them to indefinitely retain an illiquid investment” and be “prepared to hold this investment for several years or longer.” There are restrictions on how investors can resell the securities they receive for the first year of their ownership, and few markets to do so, even once those limits no longer apply.
One potential investor, in the comments section of the coffee retailer’s StartEngine fundraising page, asked why company leaders chose the crowdfunding model. Jason Silberschlag said the company had explored traditional funding models but “found crowdfunding to be the best fit for our values.”
“We greatly value our community, and want that to be evident not just by our words but our actions,” he said. “Becoming a community-owned business is one of the ways we can live that out.”
Sasha Hupka covers utilities and technology for The Arizona Republic. Reach her at sasha.hupka@arizonarepublic.com or 480-271-6387. Follow her on X: @SashaHupka. Connect with her on LinkedIn: Sasha Hupka. Follow her on Instagram or Threads: @sashahupkasnaps. Follow her on Bluesky: @sashahupka.bsky.social.
