Root scores $3.25M in funding, keeps institutional VCs at bay

Bellevue, Wash.-based startup Root Wireless scored $3.25 million in a series B round of funding that will allow the company to expand its cellular network mapping service. This ruond of funding included a number of big, familiar names in the wireless space.
The company, which last month unveiled its cellular network mapping service, said the funding will allow it to expand the service beyond the initial launch with online technology site CNET.com to other publishers as well as to offer the service to retailers looking to provide more in-depth coverage maps to consumers. Root also said next year it will “begin issuing performance reports geared to the interests of enterprises buying wireless services; the carriers; device OEMs; operating system and applications developers; and others in the wireless ecosystem.”
“Our first round of funding was based on a promise that we’d prove the value and benefits of both our network-analysis technology and our Root Coverage mapping service,” said Root Wireless CEO Paul Griff. “We’ve done that, as demonstrated by our debut at CNET, and now we’re well positioned to invest in accelerating the rollout of our service.”
Fred Warren co-led a group of venture investors in the series B round of funding that also included Root’s Chairman Scott Anderson, who was formerly an executive at McCaw Cellular Communications Inc. and AT&T Wireless Services Inc. and co-founded Cedar Grove Partners L.L.C.; Consert Inc. Chairman, CEO and President Jack Roberts, who was formerly chairman and CEO at Telephia; and industry veteran and former RCR Wireless News Person of the Year John Stanton, who was founder and CEO of Western Wireless Corp. and VoiceStream Wireless Corp. All of the series B participants also were involved in Root’s series A funding.
Funding left on the table
Root’s Griff noted that there was potential for the company to raise more in its latest funding round, but that it was more interested in sticking with its original growth plans and to not rush into areas where it was not ready to go.
“We had several VCs tell us if we wanted $10, $15 or $20 million dollars that they were very interested,”’ Griff said. “But, the way we’ve designed the business is to be capital efficient and we didn’t need anywhere near that amount of money and frankly that caused us a lot of problems. We would have had a lot easier time raising $10 million than raising $3 million. From the VCs perspective it’s just as much work, it’s another board to sit on, and they are not getting nearly as much money to work, and at least with the first tier VCs they are just not interested in sub-$5 or sub-$10 million investments.”
While the thought of turning down investments during the current economic climate might seem odd, Griff said doing so would have limited the company’s flexibility and increased the pressure for a return.
“There are two issues,” Griff explained. “The primary one is that you have to provide a return for those additional dollars. While I could have stepped back and said that if I was sitting on $10 million instead of $3 million, how would I have accelerated the growth of the business, what would I do differently, what additional opportunities would that create. I am sure I could have found a way to spend the money. It also really reduces your exit flexibility. When you get into the institutional VC money at that level, they are interested in hitting a home run and not hitting a double. If we could have an acquisition offer in the next year or two with our funding from our series A investors, that might be a good deal. But, if we had that institutional VC money, they would just say no way, that they got into this with the intent of a billion dollar exit. While I am as money motivated as any entrepreneur, I am also a bit of a realist, maybe a bit more pragmatic. Seems to happen when you start getting gray hair.”
While there seems to still be plenty of VC interest for Root going forward, Griff said he was relieved the latest round was done.
“It’s a tough market to be raising funds in, but we had a strong showing from our series A investors,” Griff said. “I am so thrilled to be out of the fund raising business at the company. If I had to give that pitch deck one more time … it got very old. We are just thrilled to have gotten it done.”
Root’s application uses a devices embedded voice, data and GPS capabilities to report on the strength and range of carriers’ voice and data networks
Currently, Root Coverage charts network performance in eight markets: New York; Chicago; Washington, D.C.; San Francisco, San Jose, Los Angeles and Orange County, Calif.; Seattle-Tacoma, Wash.; and Dallas. Root Wireless is in the process of mapping another 12 metropolitan markets.