Thrive: 30 Inspirational Rags-to-Riches Stories

Howard Schultz

Howard Schultz was born in Brooklyn, New York. He was raised in a poor household in the Bayview Houses in Canarsie, Brooklyn. When he was seven years old, Howard's father broke his ankle and was out of work for several weeks. His mother, who was seven months pregnant at the time, couldn't work either. So his family had no income, no health insurance, no worker's compensation, and nothing to fall back on. Howard answered the telephone at night, with specific instructions from his mother, to inform bill collectors his parents weren't at home. The family borrowed to make ends meet until his father was able to return to work.

After high school, Howard attended Northern Michigan University on a football scholarship, where he received a Bachelor of Science in Communication. He was the first person from his family to graduate from college. After graduation, Howard didn't know what he wanted to do with his life. He stayed in Michigan and found work at a nearby ski lodge. After a year, he returned to New York and got a job with Xerox Corporation in their sales training program. His training included six months of cold calling, as well as knocking on office doors in midtown Manhattan to gather prospects. He became a good salesman, and earned good commissions for three years. He paid off his college loans and even rented an apartment in Greenwich Village, Manhattan, with a roommate. He met his wife, Sheri Kerish, one summer in the Hamptons.

Although he was doing well, Howard wanted a more challenging career. A friend of his had mentioned that a Swedish company, Perstorp, was planning on setting up a U.S. division for its Hammarplast housewares subsidiary. Howard thought this was a great opportunity to get in on the ground floor of a growing company. The company initially placed Howard in a division selling building supplies. They moved him to North Carolina, where he sold components for kitchen and cabinet furniture. However, Howard hated what he was selling. After ten months, he threatened to quit. To prevent him from leaving, Perstorp transferred Howard to New York and promoted him to vice president and general manager of Hammarplast. He was given a salary of $75,000, as well as a company car, an expense account, and unlimited travel, which included trips to Sweden four times a year. He was also selling products he liked.

By age twenty-eight, Howard and Sheri had rewarding careers and were living in Manhattan's Upper East Side, where they owned an apartment. One day, Howard noticed a small retailer in Seattle, Washington that was placing unusually large orders for a certain type of drip coffeemaker. Starbucks Coffee, Tea, and Spice had only four small stores then, yet it was buying this product in quantities larger than Macy's. Curious, Howard flew to Seattle to investigate. Founded in 1971 by three partners (two teachers and a writer) as a single store near Seattle's famed Pike Street Market, Starbucks sold freshly roasted gourmet coffee beans as well as teas, spices, and various coffee-making accessories. The company enthralled Howard. By the time he left Seattle to return to New York, Howard was determined that Starbucks was his future.

It took Howard a year, however, to convince the original owners of Starbucks to hire him. He flew to Seattle often, arriving prepared with a list of ideas for Starbucks to share with the owners. He repeatedly sold himself as to what skills and experience he could offer to the company. However, after "interviewing" him one evening over dinner, the owners initially rejected him. They thought it was too great of a risk to hire a "high-powered New Yorker," and they were afraid he would steer the company in the wrong direction, away from their vision. After hearing the news, Howard did not give up. He convinced one of the owners over the phone to reconsider. The following morning, Howard got the job and agreed to take a steep pay cut for a small equity share, giving up his luxurious lifestyle and prestigious job in the process. Everyone, including his mother, thought he was crazy.

Howard and Sheri then prepared to drive across the country to their new home in Seattle. Shortly before they left, Howard learned his father had lung cancer and was expected to live for only a year. He went to the hospital to say goodbye to his father, as he was not sure when he would be able to see him again. "Go to Seattle," his dad said. "You and Sheri have a new life to start there. We can handle things here." Howard and Sheri proceeded with moving to Seattle, with a cloud of worry hanging above them. During his early months at Starbucks, Howard worked behind the counter greeting customers, as well as tasting the different kinds of coffee. After a year, the company sent him to Milan, Italy to attend an international housewares show, where Howard discovered the country's love for coffee bars. He became convinced that this was the future for Starbucks, as well as for the American way of life. He returned to Seattle and shared what he discovered. However, the owners weren't interested. To them, Starbucks was a retailer, not a restaurant or bar.

Over the months, Howard grew weary. He was convinced that coffee bars were the future. So he left Starbucks to start his own coffee company, Il Giornale, with $400,000 in seed capital, $150,000 of which came from Starbucks. He immediately followed with raising a $1.25 million round of investment. Over the course of a year that he spent raising the money, Howard spoke to 242 people, with 217 saying no. Many of the investors he approached had bluntly told him he was selling a crazy idea. One of them even said, "Why on earth do you think this is going to work? Americans are never going to spend a dollar and a half on coffee." He heard all of the arguments as to why coffee was not going to become a growing industry, but he never let them stop him. He raised the money and opened three more stores.

Two years after starting Il Giornale, Howard came across an opportunity to buy Starbucks, as the owners were looking to cash out and concentrate on their other business, Peet's Coffee & Tea, which they had acquired a few years earlier. Howard raised $3.8 million to acquire Starbucks in 1987. He merged the two companies, named it Starbucks, and started to expand. At the time of its initial public offering (IPO) in June 1992, Starbucks had 140 stores with $73.5 million in revenue. Fast forward to 2014, and Starbucks has 21,878 stores and $14.89 billion in revenue (in 2013).