A Pinkberry On Every Block

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Is Pinkberry the new Starbucks? It will be if Starbucks founder Howard Schultz has anything to say about it. The Los Angeles-based frozen yogurt chain, affectionately called "crackberry" for its addictive desserts, raised $27.5 million in a Series A round lead by Maveron, Schultz's venture capital firm, reports the New York Times.

Pinkberry founders Shelly Hwang and Young Lee, a failed restaurateur and a former bouncer, routinely draw lines around the block at their 32 locations in Los Angeles and New York—along with a cult of celeb customers like the cast of the Hills and Paris Hilton. In a press release Maveron co-founder Dan Levitan calls Hwang and Lee "visionary entrepreneurs", dubbing the brand "a cultural phenomenon." Schultz's Seattle-based investment firm has previously backed eBay and drugstore.com.

With Pinkberry, Levitan sees Maveron's role as helping to make the two-year old chain scalable. The formula (two flavors and toppings like blueberries, granola, and Fruity Pebbles) sure sounds easy to replicate. And Pinkberry's pricey product shares something in common with the Starbucks model. But the challenge, Levitan tells the Times, will be "to lay the groundwork for expanding the franchise, while being mindful of the all-too-brief lifespan of the last frozen-yogurt trend in the late 1980."

I wrote about Pinkberry back in our August issue after a local New York TV station broadcast footage of mice scampering around its recently-opened Upper East Side digs. But that's hardly the only scandal to mar the start-up's rise to fame. There was the lawsuit that the frozen yogurt chain, which markets itself as a health-conscious snack, doesn't actually sell yogurt (not enough cultures). Then there's the debate over whether Pinkberry, which has been plagued by scads of imitators, actually ripped off of South Korean fro-yo chain Red Mango itself.

Under Hwang and Lee, the chain was already on track to have 50 locations by year's end, including shops in Las Vegas in London. Schultz and Levitan plan to sit on Pinkberry's board and have already set the agenda: selecting a new CEO and setting up an employee stock-option program, a clear precursor to an initial public offering. Hwang and Lee will retain "significant equity."

What do you think about Schultz and Levitan's investment in the company? Are they leading Pinkberry in the right direction? Does the chain warrant a $27.5 million investment?

Last updated: Oct 16, 2007




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