Chocolate in Beta Testing, Offered by a Wired Founder

December 10, 2007

By KATIE HAFNER

SAN FRANCISCO, Dec. 9 -- In a vast refurbished warehouse on one of this city’s historic pier, Louis Rossetto, the co-founder of Wired magazine, is at it again. Only this time, his project has nothing to do with media or high technology. It is hand-crafted chocolate.

But Mr. Rossetto, 58, is applying the language of high-technology business to chocolate making. Mr. Rossetto and his business partner, Timothy Childs, explain that their company, Tcho, is still in start-up mode, its chocolate still in beta.

Beginning today, Tcho’s dark chocolate will be available in 50-gram beta bars, representing Version .10. The $4 bars, made of Ghanaian beans and wrapped in brown paper, will be sold only locally at first, only to those who have signed up on the Tcho Web site, and only to those willing to go pick up the chocolate at Tcho headquarters.

“A lot of people think companies like See’s and Godiva are chocolate makers,” said Mr. Childs. “But they’re not. They’re confectioners who take someone else’s chocolate and do something with it.” Others, said Mr. Childs, simply remelt other people’s chocolate and put their brand on it.

Slightly less fresh-faced than he was in the early 1990s, but with no less fervor for his product, Mr. Rossetto likes to say that Tcho is “where Silicon Valley start-up meets San Francisco food culture.”

The 15-person start-up, said Mr. Rossetto, combines many elements of classic Silicon Valley innovation: Tcho’s approach to working with farmers, the rethinking of the chocolate lexicon, and its approach to raising money.

Mr. Childs, 43, a technologist who is a longtime friend of Mr. Rossetto’s, has been working with chocolate for the last five years. The two decided to go into business together two years ago when Mr. Childs called Mr. Rossetto to tell him he had found a chocolate factory for sale in an old castle in Wernigerode, in the former East Germany. Mr. Rossetto agreed on the spot to buy the equipment and to have it shipped to San Francisco, where it arrived still coated in chocolate. The machinery has been refurbished and is being updated with modern control systems and video cameras for monitoring.

The rest of Tcho’s financing has come not from venture capitalists, but from a few dozen friends and family members.

Mr. Rossetto said he began his involvement with Tcho as little more than an investor, and as he grew increasingly fascinated by the process of making and marketing fine chocolate, his role gradually expanded. Now he is chief executive officer. And not only is Mr. Childs the founder, but he is, appropriately, Tcho’s chief chocolate officer.

Mr. Childs said that wherever possible, Tcho buys fair-trade organic beans.

The company also hopes to move beyond prices to close engagement with the cacao producers, even sending them the finished chocolate. Many cacao farmers have never tasted finished chocolate from their beans, said Mr. Childs.

Tcho is entering a competitive market. At least a dozen brands of artisan chocolate can be found at many grocery stores.

For now, the beta phase at Tcho consists of small batches of handmade bars packaged in brown paper. But when the factory is up and running, early next year, mail-order distribution will be nationwide, through its Tcho.com Web site. By next summer, the partners will open a store in their 15,000-square foot converted warehouse on the San Francisco waterfront.

Once Version 1.0 hits the market, packaging will be modern, said Mr. Rossetto, “reflective of what the founder of Wired might do if he was designing chocolate.”