Tuesday, April 8, 2014
TYLT Labs' New Seed Fund And The Promise Of Silicon Beach
Story by Benjamin F. Kuo
There seems to a perpetual shortage of local venture capital investors in the region, despite the huge growth in startup activity here, particularly along Silicon Beach. However, that's slowly starting to change, as investors have started to realize the opportunities in the area, and have started setting up operations here to tap into the wealth of startup talent. Among those funds is TYLT Lab (www.tyltlab.com), which recently announced a new, $20M early stage investment fund specifically focused on companies here. We spoke with Rami Rostami and Gerard Casale, who are behind TYLT Labs, and who told us a bit about their new fund, its investment criteria, and where it sees the promise here.
Tell us a little bit about your investments and firm?
Gerard Casale: We've been agnostic to the kinds of deals we've been making over the last five or six years we've been angel investors. We've also had a pretty wide range of check writing in terms of amount. However, we've developed a formula of what, and how we look at deals, and have built out our own advisory network, where we use domain experts to vet deals out. In some cases, we also leverage what we called our tiered device platform, the brand and company Rami has built over the last two decades plus, which is a supply chain, logistics, and distribution company and brand. We decided to formalize our investing in October, and call it TYLT Labs, so here we are. We're making investments, and are based in Santa Monica, and although we have a small team, we're looking forward to becoming part of the local scene here in Silicon Beach.
What are the parameters of the investments you make?
Gerard Casale: The funnel, in terms of intake, is we'll look at any deal. We're pretty agnostic in terms of the kind of company, and historically we've been all over the place. But, the key consideration we need on any single deal we'll do, is that a company has some really serious traction. We need to see a company which has already verified their use cases, has customers, has some form of revenue, or something that shows us that they can differentiate themselves, plus have the right team. The money that we invest and the value we add has to make a difference. If we're a tiny little fish in a big pond, as part of a giant investment round, we're not likely going to play in that realm. Our investments tend to be more seed to A round investments. We've written checks in the past from anywhere from $50,000 to $2 million, but our sweet spot is between $250,000 and $500,000.
How did you guys end up working together on investments?
Rami Rostami: I have been in the wireless business for the last twenty years. My background, is I've been designing and developing accessories for the top carriers in the country, companies like Sprint and Verizon, as well as others. Pretty much the top four carriers here. A few years back, I started looking at angel investing. I go to know Gerard because, as an attorney, he had begun advising me on investments, and in some cases participated in this same investments as a coinvestor. We not only enjoyed working with each other, but we found we had a similar type of ideology about the companies we wanted to invest in, the types of companies we want to partner with, and so one thing led to another and we decided to formalize that relationship into a brand new entity, called TYLT Labs.
The notion there is not only would be investing in the venture aspect of the business, but would help tilt the company to success by bringing shared services to help bring their products to life. We feel that we can really help with manufacturing and bringing products to market. We do invest directly in companies that don't need a shared service, as long as they're tilting their industry. But we particularly like to invest in companies where we add value in terms of shared services and in the supply chain. Our expertise is in manufacturing, in bringing products to market, and advising those companies.
It seems like that background matches well to the popularity of crowdsourced hardware on Kickstarter and other sites, do you play there?
Rami Rostami: One of the things about the new crowdfunding phenomenon, is that everyone is raising money, validating their ideas, and maybe raising $500,00, or $50,000, or $5 million. But, what do they do from there? We feel that often, the expertise in the production and supply chain, and sourcing is missing from those companies. There are lots of companies who have raised millions, but haven't been able to deliver their products as promised, or they've had delays after delays. I think that's one plaec where we can contribute significantly to product companies. With our expertise, and the fact that we work with companies globally means we can add value to those companies. Those kind of companies are a perfect fit for us to contribute to.
Is there anything specific you are looking for in an entrepreneur or company?
Gerard Casale: Traction is one of the big items. That means a lot of different things. As a formula, that means that there's a team that has the ability to execute a repeatable process. We're really looking for that first and foremost. Anyone can talk a good game, and put together a proforma that looks great, and there are lots of great looking ideas, and people can even all have filed a provisional patent. But, can you really get out there and get customers, and get those customers to repeat orders? You've got be smart enough to get those use cases, and get those follow on orders, or those subscriptions. That's way high up on our list, because it provides out the team. It's amazing, because when you attach something like that as a filter to your deals, it really cuts to the chase and cuts through a lot of deals. We're happy to report that we've found quite a bunch of those here in our backyard in Santa Monica.
Why start an investment firm in Los Angeles?Gerard Casale: We both have lived here, and worked here, not only as professionals, but as angel investors and startup guys for over twenty years, going on 24 or 25 years now. Even ten or twelve years ago there was a lot of things happening, and recently that rumbling has gotten pretty strong. I think what is different now, if you look at all the things that help raise the maturity of companies, is there are now local universities, local businesses who can support all of these companies. Plus, there are companies like Yahoo, Google, and others who have set up shop here. I think all of the component parts have risen to a critical mass, and we're now at an inflection. That said, we still need investors here. We don't have the large investors that they have in Silicon Valley. We're now trying to tie into the local universities, incubators, and other centers of entrepreneurship. For example, our friends at the LMU incubator are doing a great job helping companies to mature. And, businesses like Google really have expanded their footprint in the last three or four years. That really is helping to move the ecosystem to the next level.
Rami Rostami: As Gerard mentioned, I grew up in Southern California, in los Angeles, and I think some of this is to help contribute back to the community. With Los Angeles growing, with San Diego as the hub of telecom and software, with lots of talent that Gerard mentions coming out of the school here; there's lots of potential. Why not Los Angeles? Why not Silicon Beach? Why not bring investment into the community. There's so much technology growing, there's those five or six kids who are really smart and creating the next WhatsApp, or the next game, or the next item which becomes the Internet of you, the Internet of things. Those are the kinds of gems we're looking to invest in, and those could be anywhere. We're based here to give back to the community, though we will invest anywhere in the world.