Scout Ventures” investment in Rokk3r Labs symbolizes how an emphasis on support and structure is increasing the odds of a payoff in the VC scene.
SFBW wrote about Rokk3r in its November issue and reported on both companies” appearance at the Miami Finance Forum in the March issue, but a visit by SFBW to Rokk3r’s headquarters in Miami Beach provided a deeper dive into what’s going on.
Scout’s opening of a Miami office is important because it’s the first permanent boots on the ground move by a VC firm in the area. Scout’s investment in Rokk3r was announced in February, but the dollar amount was not released.
Perhaps more importantly, though, is Scout is a strategic adviser to Rokk3r, helping with business development, fundraising, and product innovation.
Scout is ranked nationally as a top 100 VC firm and has a niche between angel investors and Series A investments, typically investing $50,000 to $500,000 in companies.
Scout has two funds and its first was on track to return 3.7 times what investors had put in, according to Seedinvest.com. An indication of Scout’s pedigree is deal networking with Google Ventures, Spark Capital and General Catalyst.
Ed Boland, formerly with JP Morgan Private Bank in Miami, opened Scout’s Miami office. He pitched Miami to Scout Founder and Managing Partner Brad Harrison. Boland is not only helping find entrepreneurs, but investors.
Rokk3r’s likely or unlikely location?
There’s a growing ecosystem of start-up activity in South Florida at universities, incubators and accelerators, but Miami Beach Mayor Philip Levine created controversy when a year ago he said, “Miami Beach is never going to be a high tech hub.”
Levine correctly pointed out the high cost of office space in Miami Beach is likely to deter startups, especially those who might be better off in the cheaper warehouse type space found in emerging areas like Wynwood. However, Rokk3r seems to have coped with Miami Beach prices by creating a high-density workspace that doesn’t have cubicles and big offices. Much of the technical staff is also based in Colombia.
Rokk3r’s headquarters on Michigan Avenue has the allure of being just a few steps from the Lincoln Road Mall.
While there is trendiness along the mall, Rokk3r appears to be all about functionality. Walk through the entry door on the eighth and you will see workers with computers lined up side by side at long tables. The floor-to-ceiling glass in the offices and conference rooms are covered with ideas and plans like dry-erase boards.
This is the epicenter for the 25 companies in Rokk3r’s portfolio. Out of that total, 18 have gone through a process where Rokk3r’s expert help build the company, said Rokk3r CEO Nabyl Charania. Most importantly, 13 have raised money for the next stage of product development and growth.
“That type of ratio is really unheard of in the early stage – especially for tech companies,” Charania says. “We started getting the attention of these small cap VC firms outside of Miami. They don’t exist in Miami.”
Rokk3r vets hundreds of companies a year to find 100 that are accepted into a “think” phase where the idea, funding structure, go to market strategy and technology road map are evaluated and defined, a video on Rokk3r’s website outlines.
Twenty go on to the “cobuilding,” phase when Rokk3r’s strategists, creative team and engineers help the entrepreneur build the company. Products then go into the “scale,” “grow” and “fuel” stages that involve help with marketing, HR, future investment, partnerships and business development.
Charania, a third generation Kenyan whose family has roots in India, said Rokk3r cut a deal with Scout because it wanted a partner and advisor from outside of Miami who could validate that the companies are scalable and can pique the interest of investors.
“We realized Scout had a very similar vision. They are more focused on the business end of things,” Charania says.
Scout Founder Harrison can pinpoint business issues and with his fund put his money where his mouth is, Charania says.
He hopes Scout will open the floodgates to other investors realizing there is opportunity in Miami. Mosley Ventures of Atlanta and Arsenal Ventures in Orlando are already looking at the area, he said.
Mitigating Risk
Rokk3r’s approach of co-building companies mitigates a lot of the risk that early-stage VC firms take on, Charania says. “They don’t have the scale and capability to do a deep dive on technology, entrepreneurs and the business model. When companies go through our process, that’s a lot of what we do.”
The result is a better model for small cap early stage venture capitalists to make investments, he says.
Scout doesn’t have an exclusive on its relationship with Rokk3r and Charania says different VCs have different targets and investment levels.
Rokk3r’s model requires the entrepreneurs to have some cash. How much equity Rokk3r takes in the portfolio companies can depend on how much help they need. The extremes in equity stakes are 3 to 50 percent, but 12 to 24 percent stakes make up the bulk of the Rokk3r deals, Charania says.
Working with McDonald’s, Celebrity, Citi, DDB, DLA Piper
While its focus is on entrepreneurs, Rokk3r also has done work for major companies, including Bridgestone, Celebrity Cruise Lines, McDonald’s (a real-time analytics dashboard for Latin American and Europe) and Warner Music (a social media app for artist Hunter Hayes), according to its website.
Rokk3r also has attracted the attention of Citibank, a unit of advertising giant DDB and international law firm DLA Piper.
Rokk3r has just started a partnership to help Citibank find entrepreneurs in the financial technology field, Charania says. “If they are good enough, what Citibank can do is plug them into an existing financial system.”
Rokk3r serves as an innovation lab for the Alma DDB agency in Coconut Grove, which was Advertising Age’s 2015 Multicultural Agency of the Year. Alma, which means “soul” in Spanish, picks some of Rokk3r’s startups and becomes their marketing arm.
DLA Piper is providing access to its advisors for Rokk3r’s portfolio companies and is also helping Rokk3r expand with offices in New York and London. DLA Piper, which has 3,200 lawyers in 30 countries, opened a Miami office about 3 – years ago and has focused on the technology ecosystem.
“For a law firm to make that leap of faith speaks volume. What they are banking on is you are building a real strong portfolio of companies,” Charania says. For example, there could be a big pay off in future business for DLA Piper if one of Rokk3r’s companies eventually goes public.
Defying the entrepreneurial
stereotype
While 90 percent of the entrepreneurs at Rokk3r are from South Florida, the company has attracted some from New York, Los Angeles and London, Charania says. “Our philosophy is great new ideas can come from everywhere. Three billion new minds will join the Internet in the next few years. These are the people who will be the innovators and disruptors.”
In the connected world, a kid in Dubai could have a friend in Nairobi and collaborate on an idea that rocks the financial world, he says.
The common notion is that entrepreneurs are typically twenty-somethings testing out ideas, but more typically it’s people in the workforce for 10 to 12 years who have a real life decision to make about becoming an entrepreneur, Charania says. Many of them are successful in the business area, but not necessarily in the tech space – a gap that Rokk3r’s staff can fill with expertise in Apple IOS, Android, the cloud and application program interface (API).
SFBW’s readership of C-level executives, business owners and professionals are also the type of people who bring ideas to Rokk3r, Charania says. Many times they have a great idea and access to funding.
One example is serial entrepreneur Benzion “Benny” Aboud, whose QologyDirect is Dish Network’s largest seller of service. He selected Rokk3r to cobuild his new venture, Public Reputation.
Public Reputation has developed a reputation scoring system for businesses that can be viewed by the public. Business customers get information on how they compare to their peers and can help steer customers” positive reviews to sites with more impact.
Another source of entrepreneurs are successful business people who retire in South Florida and then get bitten by the digital bug, Charania says. “Their daughter or niece sees something in the news. They think, “I don’t have the energy or desire to build a team, but I want to get this idea to the market.”
There are plenty of people in South Florida who fit these profiles, Charania says.
His story seems to be working since the five partners were going through a financial raise when SFBW visited in late February. Their unspecified goal, using a convertible debt instrument, was accomplished in six weeks and Charania expected a close by mid-March.
Rodolfo Saccoman, CEO of AdMobilize
Developing advertising intelligence on the go
Rodolfo Saccoman saw an Apple sticker on a car and thought someone should get paid for doing that sort of marketing.
His office is next to the Lincoln Road Mall on Miami Beach and he thinks it would be cool if someone could analyze the activity of people walking by. Just how many and what type of people are looking at a menu at a given restaurant?
He has created solutions to address both issues as CEO of AdMobilize.Com, one of the portfolio companies at Rokk3r Labs in Miami Beach.
AdMobilize recently started shipping AdBeacon 2.0, which is about the size of an iPhone and has a built-in camera. The device is part of the growing trend of the Internet of Things (IOT) and can analyze traffic at retailers, vending machine sites or other types of outdoor media, including the age and sex of those coming within camera shot.
Clients can see the data on a dashboard and then turn them into actionable insights.
Consumers can go to the IOS app store and download AdMobilize. Users fill in some basic information, such as where they live, what places they frequent and their three favorite brands. Then, they get offers for campaigns to turn the screen of their iPads into mobile advertising devices.
For example, someone sitting in a coffee shop could prop up their iPad so those going by might see a special offer for dessert with their latte. It could be an easy way to pick up $100 a month via PayPal for someone who is active in pursuing opportunities.
One concept has the iPad mounted on backpacks, which could be ideal for marketers on college campuses.
AdMobilize launched in August 2011 and has gained serious attention from investors. The company’s Series A round last year raised $2.2 million from Azoic Ventures, an early-stage investment company in Fort Lauderdale; Rokk3r Fuel, the capital investment arm of Rokk3r Labs; and angel investors from Venezuela.
Saccoman is an example of the type of home-bred entrepreneur that South Florida needs. He studied business at the University of Miami and was director of online marketing at The Breakers before co-founding MyTherapyJournal.com, which landed him on the TV show “Shark Tank.”
Saccoman had raised $100,000 for AdMobilize and was planning to move to Silicon Valley, but ended up becoming Rokk3r’s first partner.
He wants to capitalize on the out of home advertising business, which is $7 billion in the U.S.
In an interview at Rokk3r, Saccoman said he is talking with four of the biggest out of home companies to start pushing AdMobilize’s technology through them. He has also partnered with Verizon to co-sell his product, which would use the telecom giant’s network.
His company has grown to 30 staff members and has engineering staff in Colombia, where Rokk3r does as well. The AdMobilize engineering team was built in 30 days.
AdMobilize has opened an office in London, has a patent writer in Israel and a well connected out of home media specialist in Washington, D.C.
Saccoman says of his relationship with Rokk3r, “We have become true friends and we know it’s a really hard journey. The more we stick together the better everyone does. The more we succeed, the more Rokk3r’s model is proven. The more they succeed, the more resources we have in overall collective intelligence.”
Brad Liff is developing Fitting Room Social, which includes an app
The quest for the perfect fit
A lot of women are buying clothes online these days, but nobody has figured out how to make sure they are satisfied with the fit and style of their purchases.
The result is low conversion rates and high return rates.
Brad Liff is trying to solve that with Fitting Room Social, which will soon be on the IOS app store.
Dozens of startups have tried to address the fitting issue using techniques such as algorithms, body scanners and quizzes, Liff said in an interview at Rokk3r, where Fitting Room Social is one of the portfolio companies. His approach is totally different.
“If we know what you bought in the past and what the people you trust are buying, it is the best predictor of what you should buy in the future,” he says.
The upcoming app will allow users to store their previous purchases and will tie in to emailed receipts of their purchases from retailers. A social media aspect utilizing Facebook and Twitter will allow purchasers to discover and share items among friends.
An application program interface (API) will transmit information to third parties, such as retailers and fashion companies, who will pay for the treasure trove of data.
For example, while Levi may know what its customers bought, Fitting Room Social will present a broader picture across many different brands, he says.
Liff hopes it will do for fashion what Concur’s Tripit has done for the retail industry.
Liff is originally from New York, but has been in South Florida for six years, working as a senior credit analyst at Bayside Capital and then H.I.G. Capital.
“The way Rokk3r fit in is they filled the holes. They are a trustworthy partner that can build and support technology and provide strategic insight and guidance,” he says.
So how did an investment banking guy become a tech/fashion guy?
He was inspired when his wife came back from shopping sales on the day after Christmas
“She looked like she had been through a war zone,” he says. His wife explained how she needed to try everything on.
“It made perfect sense,” he says, “but I thought surely there must be a better way to do this and there was not a better way to do it.”
As a founder-in-residence at Rokk3r, he’s eager to help other entrepreneurs fulfill their visions as well. ?
