A 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].