From Startup To Selling To Starbucks

Peter Thum
Exited Founder of Ethos Water, Founder of Fonderie 47 and Liberty United
2hr 9 min
April 4, 2024
About the Show

"Through Ethos Water, The idea of democratizing philanthropy and putting it in the hands of the consumer had ultimately been realized in a country with 300 million people."

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Peter Thum is the Co-Founder and CEO of Muse, an AI-powered website builder and collaboration platform. He was previously the Founder of Ethos Water, which he successfully sold to Starbucks in 2005. Thum has also founded Fonderie 47, a company that transforms AK-47 assault rifles from African war zones into high-end jewelry and accessories, and Liberty United, which employs a similar model to reduce gun violence in the United States.

In this interview, Thum shares invaluable insights and experiences from his entrepreneurial journey, particularly the challenges and triumphs of building Ethos Water from a $10,000 startup to a major acquisition by Starbucks. He discusses the importance of bootstrapping, resourcefulness, and unwavering commitment to one's mission, even in the face of adversity. Thum also highlights the significance of strategic partnerships, as exemplified by his collaboration with Howard Schultz, which amplified the impact of Ethos Water and brought clean water access to millions of people in developing countries.

For young entrepreneurs, founders, MBA students, and managers, this episode offers a wealth of knowledge and inspiration. Thum's journey illustrates the importance of perseverance, adaptability, and the potential for businesses to drive positive social change. His experiences serve as a roadmap for navigating the complexities of building a mission-driven business while simultaneously making a meaningful impact on the world.

Episode Resources: 

Ethos Water 
Fonderie 47 (founded by Peter Thum)
Liberty United (founded by Peter Thum)
Muse (current company, co-founded by Peter Thum)
McKinsey & Company (former employer)
Gallo Winery (former employer)
Kellogg School of Management (alma mater)

Key Moments

How Peter Thum Hacked The Water Industry And Changed The Lives Of Millions

In the early 2000s, a young Peter Thum found himself traveling across South Africa for a consulting job. As he gazed out the window, a sight caught his attention: a woman carrying a bucket of water on her head, walking along a dusty road. At that moment, a profound realization struck him—this woman would likely spend the rest of her life bearing this burden, walking back and forth on a dirt road, carrying water for the members of her community. The image seared itself into his mind, refusing to let go.

Months later, while working on a project for a soft drink manufacturer in the UK, Thum found himself sitting on a train, deep in thought. Suddenly, like a bolt of lightning, the idea for Ethos Water hit him. "I realized you could make a luxury water product, a brand, where the reason for buying it wasn't because it came from somewhere far away, but rather because you were doing something to help somebody else get water," Thum recalls. He quickly jotted down the rudiments of the idea on a napkin in the dining car, and thus, Ethos Water was born.

Thum's unique understanding of the beverage and bottled water industry's supply mechanisms and market characteristics allowed him to approach the concept of "luxury water" from a fresh perspective. He believed that by charging the same price as premium brands like Evian or Fiji, but replacing their shipping costs with a donation to fund water programs in developing countries, he could create a successful and impactful business model. Obsession took hold of Thum, and every other aspect of his life became secondary to this newfound purpose. He tirelessly worked on refining the idea and developing a business plan, determined to turn his vision into reality.

However, securing funding proved to be a significant challenge for Thum. At the time, the landscape of mission-driven investing was vastly different from what it is today. Investors were divided into two distinct categories: philanthropists who were solely interested in giving money away without any expectation of return, and those who were focused on traditional business ideas with the potential for high financial returns. The concept of a for-profit company with a strong social mission, like Ethos Water, was not yet widely understood or embraced. Thum found himself pitching to investors who were either uninterested in the business aspect of his venture or were solely focused on maximizing profits without regard for the social impact. Despite the challenges, Thum remained undeterred, believing wholeheartedly in the potential of Ethos Water to make a difference in the world.

One rainy evening, while sitting in his car with his co-founder, Thum had a moment of clarity. Frustrated with the endless rejections from investors, he realized that the power to bring Ethos Water to life was within his grasp. With a mere $10,000, Thum decided to take matters into his own hands and bootstrap the business himself. He knew that every penny would count, and he was prepared to stretch his resources to the limit.

Thum's first task was to find a way to produce the iconic Ethos Water bottles. Serendipity struck when he discovered a blow molder who had been left with a warehouse full of unused Smartwater bottles. The manufacturer had never received payment from Smartwater, and Thum saw an opportunity. He negotiated a deal to purchase 10,000 of these bottles at a fraction of their original cost. Next, he sourced labels—10,000 clear, self-adhesive labels that would give Ethos Water its distinct look. Thum then rented a truck, loaded up the bottles, and drove them to a labeling facility. With the labels affixed, he returned the truck and prepared for the next phase of his plan.

To fill the bottles, Thum sought out a small, independent bottling facility. The owner was intrigued ad agreed to fill the bottles - Thum then borrowed a friend's mother's Volvo station wagon, as he didn't own a vehicle large enough to transport the filled bottles himself. Picture this: Thum, the former McKinsey consultant, driving a station wagon filled to the brim with the first generation of Ethos Water bottles, navigating the loading bays of Whole Foods stores alongside towering semi-trucks. He would single handedly unload cases of Ethos Water, lugging them onto the loading docks with determination and a smile. "I was throwing cases out of the back of a station wagon," Thum laughs, recalling the early days of his unconventional distribution method. This hands-on approach not only kept costs low but also allowed Thum to build personal relationships with the store staff, fostering a sense of camaraderie and shared purpose.

With distribution in Wholefoods underway, Thum's ultimate goal was to secure distribution in Starbucks stores nationwide. He knew that this partnership would not only provide immense exposure for Ethos Water but also amplify its impact on communities in need. Recognizing that the key to success lay in convincing Howard Schultz, the visionary CEO of Starbucks, Thum relentlessly pursued a meeting.

When the long-awaited opportunity to meet with Howard Schultz finally arrived, Thum and his co-founder found themselves in a boardroom at Starbucks' headquarters in Seattle. They had prepared a comprehensive PowerPoint presentation, complete with detailed information about Ethos Water's business model, social impact, and potential for growth. However, as they began to set up their slides, Schultz entered the room and caught them off guard. "What's all this?" he asked, gesturing to the presentation. "We're ready to tell you about Ethos," Thum replied. Schultz, however, had a different idea. "No, let's just go have a cup of coffee and talk in my office," he suggested, picking up a bottle of Ethos Water and leading them into his private workspace.

As they settled into Schultz's office, with its expansive windows overlooking the bustling streets of Seattle, Thum and his partner found themselves engrossed in a deep, personal conversation with the visionary CEO. Schultz was less interested in the nuts and bolts of the business plan; instead, he wanted to understand the people behind Ethos Water and the driving force behind their mission. Thum shared his experiences in South Africa, the moment of inspiration on the train, and the challenges he had faced in bringing Ethos Water to life. Schultz listened intently, asking questions and delving into the core values and aspirations that had propelled Thum forward. As the conversation unfolded, it became clear that Ethos Water's mission resonated deeply with Schultz's own vision for Starbucks as a company that could make a positive impact on the world.

Recognizing the potential of Ethos Water to align seamlessly with Starbucks' values and enhance its brand image, Schultz wasted no time in rallying his team behind the idea. He began calling in high-level executives from various departments, eager to share his enthusiasm and get their buy-in. As each executive entered Schultz's office, Thum and his co-founder found themselves retelling their story, answering questions, and discussing the possibilities for partnership. Schultz's passion for Ethos Water was infectious, and his leadership team quickly caught the vision. By the end of the day, Thum and his partner had met with a dozen key decision-makers, each of whom had listened to their story in the presence of Schultz himself. The groundwork for a transformative partnership had been laid, and the future of Ethos Water within the Starbucks ecosystem looked brighter than ever.

Starbucks wasn’t interested in partnering with another brand - if they were going to build it, they wanted to own it. As Starbucks moved swiftly to acquire Ethos Water, Thum found himself in a delicate balancing act. On one hand, the acquisition represented a tremendous opportunity to scale the impact of Ethos Water and bring clean water to millions of people in developing countries. On the other hand, Thum was acutely aware that the mission and values of Ethos Water could not be compromised in the process. He entered the negotiations with a clear vision and an unwavering commitment to ensuring that the donation model and the promise to make a difference remained at the forefront of the agreement.

Thum fought tirelessly to secure the best possible terms for Ethos Water's mission. He advocated for a higher donation amount per bottle sold, initially pushing for 10 cents per bottle. However, Starbucks ultimately settled on a contribution of 5 cents per bottle, which Thum recognized as a significant commitment given the scale of Starbucks' distribution network. Despite the compromise, Thum remained confident that the acquisition would enable Ethos Water to make a far greater impact than it could have achieved on its own. "The mission was delivered because the company could make profits," Thum explains. "We were giving away the equivalent of 1.9 cents a bottle, and Starbucks, despite the fact that I wanted them to make it 10 cents, made it five. And it has been to this day."

For Thum, the true moment of triumph came not when the acquisition money hit his bank account, but rather during a cross-country promotional campaign for Ethos Water. Thum and his team had embarked on a journey in a bright blue Winnebago, wrapped in the Ethos Water logo, visiting Starbucks stores across the United States. They engaged with Starbucks partners (employees), sharing the story of Ethos Water and leading "Walk for Water" events to raise awareness about the global water crisis. The tour culminated in a grand arrival in New York City, where Thum and his team made a monumental announcement: Starbucks was committing $5 million to support water access projects in developing countries.

As they walked through Times Square, Thum witnessed something that represented the success of all his hard work: people carrying Ethos Water bottles, a tangible symbol of the impact he had worked so hard to achieve. "We were walking across Times Square from our hotel, and there were people carrying Ethos Water bottles in Times Square." Thum recalls. "For me, it was the realization, like the idea of democratizing philanthropy and putting it in the hands of the consumer had ultimately been realized in a country with 300 million people."

Peter Thum's remarkable journey, from a moment of inspiration to the creation of a successful mission-driven business, exemplifies the power of vision, perseverance, and unwavering commitment to a cause. His ability to identify an opportunity, bootstrap a startup, and navigate the complexities of partnerships and acquisitions demonstrates the characteristics and mentalities necessary to turn a dream into reality.

Thum's impact extends far beyond Ethos Water. He has continued to apply his talents and mission-driven approach to his subsequent ventures, including Fonderie 47, which transforms illegal assault rifles from African war zones into luxury jewelry, and Liberty United, which employs a similar model to address gun violence in the United States. His latest endeavor, Muse.io, aims to democratize technology and empower creators and entrepreneurs worldwide.

The story of Peter Thum and Ethos Water serves as a powerful testament to the potential of business as a force for good. It demonstrates that with vision, determination, and a steadfast commitment to making a difference, entrepreneurs can not only succeed financially but also create lasting, positive change in the world. To hear more about Peter Thum's inspiring journey and gain further insights into his entrepreneurial mindset, tune in to the full episode of Forward Obsessed. Discover how you, too, can harness the power of business to make a meaningful impact and build a legacy that extends far beyond the bottom line.

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