• Quick Chat with Investor Avidan Ross

    Root VenturesA year ago, Avidan Ross, an investor with an engineering background, raised a debut, $31.4 million, fund under the brand Root Ventures. The idea was to back early-stage hardware startups — eight to 10 of them each year. StrictlyVC talked with Ross at the time; we more recently caught up with him to ask how things are going, one year into his newest adventure.

    Imagine a new consumer hardware startup team forming. In an ideal world, what kind of team should it assemble if it aims to become an MVP in the consumer market?

    I hate to say this, but it depends. If the team is building some deeply technical hardware with ongoing material science development, then there better be a material scientist on board. Generically, I’d say that at least one person on the team has to be ready to roll up their sleeves and deal with the business development side of the startup. That means everything from sales and marketing to fundraising and operations. The core tech of the company should never be outsourced, so we love seeing a very strong technical team. No matter the team’s professional background, the most important element is a passion for the problem the business is solving. Building hardware companies is way too hard to just be opportunist. Hardware founders have to be driven by a deep fire that will not let them sleep until the problem is solved.

    You’ve been at this for a year. What’s been the single-most surprising element of running your fund so far?

    The help from my LPs. Seriously, I’m not just kissing up to the folks who gave me money. My LP base is far more diverse than the average Silicon Valley fund. We took funds from individuals and institutions, but their industrial affiliation is widely varied, from medical to real estate to manufacturing and logistics. When you’re working on hardware, the industries and partners you’re looking for aren’t just spread across industry but also geographically diverse. Most other firms can get away with extremely deep relationships along the 101 freeway. We had to go broader, and a strong LP network has been helpful in generating great strategic relationships in every possible industry.

    With all of the startups going after the smart home market, how did Amazon Echo just cut through the noise? What can founders and investors in the space learn from Echo’s success?

    I think the main reason for Alexa’s success is the intuitive natural user-interface. Alexa works because she is listening when your hands are full or you’re deeply sitting in the couch. Also, Alexa launched with a very basic first set of functions, making the interaction simple and intuitive. When people interface with software, a counterintuitive experience such as Snapchat actually becomes a feature. In the world of physical objects, the design should be first and foremost intuitive and delightful. I think that founders of hardware startups often think this is just about industrial design, but Echo showed us that it’s more about an intuitive user experience, and interaction is the core.

    You recently opened up a new SF office, or should we say, workshop. Tell us about how you designed and built it. How can people check it out?

    I like building things. My home garage is a mini maker space, filled with CNC routers, laser cutters, and 3D printers. As our team grew, it became clear that we needed a little bit of space to call our own. Just like the garage, it seemed only natural to make it an inspiring workshop. Our friends at Dodocase were kind enough to share some of their factory in the [the San Francisco neighborhood] Dogpatch with us, and we’ve been working there ever since. Instead of creating an office with a lobby, reception, and conference rooms, it’s an open access space for entrepreneurs to collaborate and ideate on designs. We have a café inside the space to keep everyone properly caffeinated, beer taps for meetups, and have access to the larger equipment within Dodocase when someone wants to go big. If anyone wants to come hang, tweet at @rootvc or @avidanross, and we’ll get you some machine time.

    In the context of early-stage investing, what’s something that you believe that isn’t necessarily a popularly held point of view?

    I think that most hardware companies should never take venture money. If you walk down the aisles of a Best Buy or a Target, nearly all those products were never venture backed. Do not feel pressured to measure your success as your ability to raise venture capital. If your product has the ability to be a Trojan horse for a much larger recurring revenue or network-effect-driven business, it might be worth pursuing venture investment.

    I like to think of entrepreneurs as fire starters. You can build a fire with brush, then twigs, then branches, and while it might take a while, the flame is sustainable. Meanwhile, venture capital is like gasoline. If your fire is not built to consume the fuel, it can [destroy your business].

  • Another Hardware Fund Emerges: Meet Root Ventures

    Root VenturesYou may have noticed: Hardware investing is in vogue. Andy Rubin, creator the mobile operating system Android, recently launched Playground Global to advise device makers in exchange for equity. Formation 8 is raising a $100 million hardware-focused venture fund. That’s saying nothing of the seed-stage fund Bolt, which raised $25 million a few months ago, and the numerous accelerators now focused on backing hardware startups, including Haxlr8r, Lemnos Labs, and Highway1, which is an offshoot of the custom design manufacturing company PCH International.

    Now, the Bay Area has yet another entrant on the scene: San Francisco-based Root Ventures, which just closed its debut, hardware-focused fund with $31,415,927 (the first 10 digits of Pi), capital that it raised from a gaggle of high-net-worth investors along with the fund of funds manager Cendana Capital.

    Root Ventures is a single-GP fund founded by Avidan Ross, a trained engineer who was previously CTO of the private equity firm CIM Group. Ross isn’t widely known (yet) in press circles, but a growing number of venture capitalists and entrepreneurs have grown acquainted with him through the roughly 10 bets he has placed in recent years with the help of his friends’ capital.

    Some of Ross’s older bets include Wallaby Financial, a mobile finance company that was acquired by Bankrate in December for an undisclosed amount. Another is Skycatch, an aerial robotics platform that received its first check from Ross and which has gone on to raise $24.7 million altogether, including from Google Ventures. Ross also wrote the first check for Momentum Machines, a company whose robots turn raw ingredients into packaged hamburgers without human intervention. It just raised an undisclosed amount of follow-on financing from Founders Fund.

    “I don’t think people were investing in me based on my individual track record as an angel,” says Ross. “Those investing in me know me from a previous life [as CTO] of a pretty large investment firm where I built a lot of great relationships with people who trust my ability to invest in great technology.”

    Ross, who raised much of his new fund late last year, has made three newer investments on behalf of Root Ventures, where he plans to make concentrated bets, and to write first checks in the range of $500,000.

    The most recent of its portfolio companies is operating in stealth mode, but it’s easy to see the appeal of the others. Mashgin — company Ross met through entrepreneur friends — has developed an automated checkout kiosk machine that employs computer vision to identify any object on a surface (down to the different-flavored Snapples, says Ross). The big idea: to create a far more seamless experience for shoppers.

    The company graduated late last year from Y Combinator and is about to announce a “significant” amount of follow-on funding, says Ross, who wrote its first check.

    Ross also invested in Prynt, which makes a smartphone case that prints out photos. He met the company during his honeymoon in China. The young company was operating out of the Haxlr8r accelerator in Shenzhen, “and I asked if I could take a three-hour break and visit with the companies. I immediately thought: ‘This is amazing.’”

    If you don’t understand why a printing up a digital photo might be interesting, Ross says Prynt’s opportunity goes “above and beyond printing out a polaroid. When you print a photo, you’re basically printing up the last frame of a 10 second video. With Prynt photos, you hand them to someone else, they point their phone at the photo, and the photo becomes alive [by featuring those full 10 seconds]. It’s like a Vine that only that person can watch. It creates privileged access.”

    Others must like it, too. Prynt recently raised $1.5 million in a Kickstarter campaign earlier this year.

    Ross says the company also just raised a “sizable seed round that’s unannounced. An earlier SEC filing suggests the amount is $2 million.


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