Working On A Startup? New Fund Is Building Portfolio From Hard Technology

Root Ventures just announced it has raised a second fund and is in search of startups to invest the $76,726,900 they now have burning a hole on their balance sheet. Their first fund of $31,415,926.53 went to some very cool hardware companies like Shaper, Particle, Plethora, and Prynt. For those keeping score, the first fund is Pi and the second is the speed of sound — it’s a geeky engineer thing.

This is a seed fund, and founding partner Avidan Ross described their role in your company as being the world’s “greatest sherpa to take you on a really tumultuous path”. That path is one of building a product around which a great company can arise. Repeatedly during the conference call with Hackaday, Avidan stressed that what makes Root Ventures stand out is that the partners in the firm are themselves engineers and have hardware backgrounds. For instance, Avidan spoke at the 2016 Hackaday Superconference about his 45-second pizza oven and other food/automation hacks. Partner Chrissy Meyer was an engineering manager at Apple and led hardware programs at Square, before founding a vehicle technology startup. Their point is that if you’re going to entrust part of your company to someone, it’s nice if they have the background to understand it.

Whether or not you have a startup in the works, it’s interesting to know what the keepers of the cash are looking for. Avidan described this as a engineering-heavy seed fund, but stopped short of calling it a hardware seed fund, using the more coy term “hard-tech fund”  although more than half of the portfolio companies already on board are building new, original hardware. It’s impossible to nail down exactly what the fund is seeking — they’ll know it when they see it — but we had a nice conversation of some of the future trends he has in mind.

While economies of scale in the smartphone industry delivered low cost sensors such as accelerometers, GPS, and cameras, along with connectivity, the next wave may be from the self-driving industry. Avidan foresees rising availability of ASICs, specialized GPUs, and the sensing hardware currently under heavy R&D in the automotive industry. His take is that not only will this be a hardware boon for startups, but the machine learning aspects of it will produce both talent and opportunity for new companies.

Pull together those proofs of concept and get your presentation decks ready. That $76 million is just waiting for a great idea to come along. If you make it big, Hackaday still wants an early look at your awesome new hardware!

35 thoughts on “Working On A Startup? New Fund Is Building Portfolio From Hard Technology

    1. i see myself as a sherpa. quietly carrying the bags. carried them up that same trail many many times, and can give advice when needed. when the weather is changing, i’ll tell the climbers before they feel the first wind….and when we all get to the top, im usually not in the selfie :)

  1. Odd..

    …the thought process of these HaD writers and community..

    In one article, a company is lambasted for selling hardware which requires a proprietary cloud service. Yet Particle does the same and called ‘very cool’.

    In another article, printer companies with DRM measures are spoken of like they’re the devil incarnate. Yet Prynt uses the same measures.

    Yet another article discourages service websites like eMachineShop because of their closed source software. Yet Plethora is basically the same thing.

    …and anytime a company withholds hardware design information, they’re burnt at the stake. Yet, the same people with torches and pitchforks feel software should be protected by copyright and patents.

    Isn’t that hypocritical?

    1. Odd…

      The Maker/amateur engineer community here loves Fusion 360, a tool put out by Autodesk that’s subscription only.

      yet the armchair engineers here hate Eagle now because it was bought out by Autodesk and made subscription only.

    2. >>Yet, the same people with torches and pitchforks feel software should be protected by copyright and patents

      You can want people to get paid for their work yet recognize the trouble with DMCA, how many patents are used to bludgeon, or that security through obscurity always fails. Designed obsolescence doesn’t help anyone.

    3. yeah. i had this conversation with mike before we took on this interview.
      fundamentally, Root Ventures and venture capital in general is a bit at odds with the HaD community. However, I personally ascribe to a lot of the HaD ethos. I was a FreeBSD and then Redhat user for a long time (yes, i know, RH wasn’t the best example). I have always voided warranties just to learn about how its made. I continue to build for myself in the most open and free way possible.

      That being said, many businesses would prefer to take another route. This is a difficult post to put on HaD, as we are a business whose sold job is to find and build businesses. Because of that, we end up building a lot of closed/proprietary tech. While I could point to the particle open source firmware, I know that you would point to all the cloud and MVNO side, so I’ll just be clear. We love open source, but it’s not the core of our investment thesis.

      We are proud that our fund got covered by HaD, just because I personally read it daily. Most our other coverage was in the traditional tech and business blogs, so thank you to the HaD community for just taking the time to learn about what we do!

  2. The wank is strong with this one.

    No mention of terms, just fund totals and the fashionable companies that are currently beating the crazy low odds and appear successful.

    Felt like listening to a millennial motivational coach on Youtube.

    1. Yes it’s a shame not more detail given, especially on the website. It’s probably the normal venture capitalists stuff I guess? By the way, Americans aren’t likely to understand the ‘wank’ although we British understand you entirely. And whilst I’m here, was that the real dave jones who made the comment above?

      1. hey, i wrote some more details below, just copying and pasting them here for your pleasure. if you have any more Q’s, happy to answer!

        we are a traditional venture firm, in the sense that we take a 2% management fee from our LPs, and split the profits of the outcome 80/20.
        when we invest in startups, we are looking to own approximately 10-15%. in further rounds of funding, we continue to support the company with ongoing investments at the new terms. we don’t usually join the board of directors, but I’d say about 10% of the time we do!
        if you want to see the docs we use, you can check them out on GitHub (yes, our investments docs are open source!)
        https://github.com/CooleyLLP/seriesseed
        were there specific terms you wanted to know more about? participating preferred? its 1x. vesting? its 4 year with double trigger.
        lots of great content we’d be happy to share. our goal is to make venture investing LESS opaque. so happy to answer any questions.

    2. Public relations campaigns are necessary if your business is using predatory lending to usurp control of narcissistic kids business plans. If a business can’t make money with production, than growth capital is just a gamblers fallacy. Banks also don’t demand shares if you know how to structure risks.

      Besides, $45,310,973 in working capital is not a lot of money in corporate terms — that is like 1 building in a bad area of the city.

      Cranks conning poor people are hilarious.

      1. that’s quite a broad generalization.

        first off, we don’t “usurp control”. none of our investments include entity control.

        second, i entirely disagree with the assertion that we should only build companies that bootstrap to profitability.

        banks are not structured to assess any technological risks. if you plan to build a tech driven company, it will be risky, and their need to be investors will to share in that risk with you.

        that being said, there are MANY great companies that simply make money in production and margin. we think they are great, but clearly not meant for venture capital.

        1. So without shares or a buy-in wedge option, than your group must be asking kids to table personal assets or equity like any other smalltime unregulated lending institution or loan-shark.

          Specialty Banks built Silicon Valley, and you would be delusional to think otherwise.

          Having launched several tech companies in my career with most of them still in operation — I often still consider myself a clown farmer of the highest purity — good to know there is still a steady stream of the faithful to churn over.

          I think you are feigning ignorance, and have not disclosed the contractual terms these clients must endure — or the growth & losses the investor base has endured.

          https://www.youtube.com/watch?v=5hfYJsQAhl0

    3. happy to share the terms!
      we are a traditional venture firm, in the sense that we take a 2% management fee from our LPs, and split the profits of the outcome 80/20.
      when we invest in startups, we are looking to own approximately 10-15%. in further rounds of funding, we continue to support the company with ongoing investments at the new terms. we don’t usually join the board of directors, but I’d say about 10% of the time we do!
      if you want to see the docs we use, you can check them out on GitHub (yes, our investments docs are open source!)
      https://github.com/CooleyLLP/seriesseed
      were there specific terms you wanted to know more about? participating preferred? its 1x. vesting? its 4 year with double trigger.
      lots of great content we’d be happy to share. our goal is to make venture investing LESS opaque. so happy to answer any questions.

  3. How long does a pizza take to bake in a conventional, traditional wood-burning oven? I’ve got the impression that it only takes about a minute from watching food shows.

    1. Most of our investments come from University Endowments, Pension Funds, etc. There are also a few wealthy individuals invested. It should also be stated that I had to invest a large of amount of my own money into the fund as well (it gives the other investors more comfort to know I have “skin in the game”). That being said, all these investors are “Limited Partners”, which means they have absolutely no say in what investments get made. It is referred to as a blind pool, and all investment decisions are made by the three of us on the investing team.

      I hope that gives some clarity!

  4. I’m just curious why [Mike “I’ll buy a vowel” Szczys] didn’t use square brackets for [Avidan] in the story?
    Does this signal a new trend for HaD writers?
    B^)

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