Bill Gates' Father Cornered the Investor Trying to Outbid Schultz for Starbucks

In August 1987, Jerry Baldwin, one of the original Starbucks founders, wanted out. He was keeping Peet's Coffee & Tea and selling the six Seattle Starbucks stores plus the roasting plant for $3.8 million. He gave Howard Schultz, who had quit Starbucks the year before to start his own espresso bar chain Il Giornale, a 90-day exclusive to raise the money.

Schultz had gotten about halfway there when Baldwin called him in. One of his own Il Giornale investors, the Seattle businessman Sam Stroum, had circled around behind him and offered Baldwin $4 million in cash, no due diligence. The exclusive was about to evaporate.

Schultz went to his attorney Scott Greenberg at Preston, Gates & Ellis. Greenberg walked him down the hall to the firm's co-founder, William H. Gates Sr. — six-foot-six, a fixture of Seattle civic life, and not yet famous as the father of the Microsoft founder. Gates listened, then took Schultz with him to see Stroum in person.

Schultz later recounted what Gates said in the room: "You are not going to steal this kid's opportunity. You are going to stand down." Stroum stood down. Schultz finished the raise, closed at $3.8 million, and immediately rebranded Il Giornale as Starbucks — keeping the older name because it carried the roastery's reputation.

The whole sequence is a reminder that startup financings in 1987 were not won on term sheets alone. They were won in rooms where someone with standing told someone else with money that this one wasn't theirs to take.