Root Ventures Raises $30 Million Fund For Investing In Early-Stage Hardware Startups

Investors have been toying around with the idea of hardware startups lately. No, these startups won't balloon to the size of a Snapchat in a few short years, but the opportunities are definitely there -- Fitbit is prepping to go public, and Nest got a nice $3.2 billion exit from Google .

A new San Francisco-based fund called Root Ventures just closed a fund of $31,415,927 (that's Pi -- yes, it was intentional) on Thursday to focus exclusively on early-stage hardware startups. The fund will focus mostly on half a million dollar investments in seed rounds, and will be investing in around six to eight companies a year. Root Ventures is founded and headed up by Avidan Ross, an investor with an engineering background. Ross plans on hiring more partners and associates to fill out the firm, which currently is just a one-man shop.

The oversubscribed $30 million fund is mostly made up of contributions from wealthy entrepreneurs and executives as well as Cendana Capital, which invests in seed venture capital funds.

So far, Ross has made three investments with the fund: In January, he invested in Mashgin, which makes an automated checkout kiosk machine that scans multiple items of food for a faster checkout process. In February, Ross invested in Prynt, which makes a smartphone case that prints out photos. (Prynt also just raised $1.5 million in a recent Kickstarter campaign.) The third investment is in a stealth startup that Ross won't talk about, but said the team includes top hardware engineers from Apple and Google.

Ross sees opportunities investing in three areas around hardware: First, in low-cost robotics and connected devices; second, in more of the infrastructure behind the actual physical device like managing cloud systems; third, in making of use of all the data coming off these new sensors in the world today. With Mashgin, for example, the kiosks are connected together in the cloud and all the scans are continually learning how to better identify whatever food is put in front of them.

“The system becomes more intelligent as more and more devices join the network,” explained Ross in a phone call late Thursday afternoon. "This all has to do with ubiquitous computing. When there's Bluetooth on every person and WiFi in every building and you combine that with low-energy sensors, you can build a system that's far more powerful than just one product.”

Before Root Ventures, Ross had been making investments with his own money under the name of Lion Wells Ventures (Root Ventures is mostly a rebranding of Lion Wells). Using his own funds under that name, he invested in a number of early-stage hardware startups, including Particle IO (formally Spark IO), Taktia and Momentum Machines Company.

Ross also spent 12 years at the CIM Group, a real estate and infrastructure investment management firm, as the chief technology officer. In his later years there, he focused on energy and infrastructure investments around wind, water and solar. He saw how capital intensive the hardware was in something like putting up a smart electrical grid, and he started looking into the possibilities of low-cost hardware. He began playing around with Arduino boards for prototyping hardware and built his own cooking machines, including a smoker that connected to Twitter . The Food Network even got in touch with him at one point and filmed a pilot episode for a show called “Weapons of Mass Consumption.” The show never aired.

There have been a few other venture capital firms jumping into hardware lately. Formation 8 is in the middle of raising a $100 million fund dedicated to hardware, and Andy Rubin (the creator of Android) just recently started Playground Ventures with $242 million to throw at these kinds of startups. Then, for earlier stage startups, there's been a slew of accelerators for these hardware startups, including Lemnos Lab and Highway1 run by contract manufacture PCH International.

There are a few reasons for this growth in hardware startups lately. Prototyping is getting easier with 3D printing and do-it-yourself development boards like Raspberry Pi. Access to manufacturing in Asia is also becoming more accessible once entrepreneur are ready to grow. But there are lots of experiments in this area with hardware that probably should have never been built in the first place.

“It's easy to build stupid hardware,” said Ross. “It used to be expensive to get started. You couldn't build a fart-detecting, Internet-of-Things pocket device. Now you can. At least now you can use Kickstarter to see if people would actually want it.”