Meet Whitney Rockley, Managing Partner at McRock Capital

McRock invests in Industrial Internet of Things companies, with $3 to $4 million initial checks

Venture capital used to be a cottage industry, with very few investing in tomorrow's products and services. Oh how times have changed. While there are more startups than ever, there's also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.

But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?

We're highlighting key members of the community to find out.

Whitney Rockley is Co-founder and Managing Partner at McRock Capital.

Rockley has over 20 years of investment, operating and strategic planning experience from the power, water and oil & gas industries.

Prior to co-founding McRock Capital, she was a Partner with a Zurich-based venture capital firm and Nomura New Energy Ventures in London, England. She has experience setting up and managing corporate venture capital programs. Having worked in London, Zurich, San Francisco, Calgary, Edmonton and Toronto, Whitney has an impressive global network. She is trained in the Korean martial art of Taekwondo.

 VatorNews: What is your investment philosophy or methodology?

Whitney Rockley: McRock’s investment philosophy is to look for hungry, passionate entrepreneurs who come from the industry in which their company targets as customers. We focus on the Industrial Internet of Things (IIoT) so we target software companies that are enabling large industries to connect, analyze and gain insights from their operations in order to transform their businesses.

VN: What do you like to invest in? What are your categories of interest?

WR: While McRock invests exclusively in the IIoT, our focus is quite broad in that we look for a variety of software and software-enabled-hardware companies. This includes cyber security, artificial intelligence, data analytics, augmented and virtual reality and biometrics.

VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?

WR: My co-founder and I have been investing in tech companies for over 20 years. One of our most successful companies was RuggedCom, a leader in power substation automation. When we invested in the company, it was generating just over $1 million in revenue. In 2012, it was acquired by Siemens for just under half a billion dollars and was generating over $100 million in revenue.

Through McRock’s most recent fund, we have invested in six high growth tech companies across North America and Europe in everything from data analytics to precision agriculture.

VN: What do you look for in companies that you put money in? What are the most important qualities?

WR: We look for three things when we do our initial screen. The team must have excellent industry domain experience and relevant software backgrounds. We back companies with at least $1 million in trailing-twelve-month (TTM) revenue. We also look for hungry teams that make significant progress on a reasonable (rather than outrageous) amount of capital. We apply a TTM Sales-to-Equity Ratio to each company as part of our initial screen. We strive to find companies that have not taken more than $1 in outside equity for every $1 of TTM revenue. This ratio is an indication of how well the team is executing on its business.  

VN: What kind of traction do you look for in your startups? And can you be specific? Are you looking for a number of customers or order volume?

WR: We care about highly scalable revenue and a path to profitability. The financial metrics of a company never lie so we take a disciplined approach of analyzing sales, the sales pipeline,  the sales cycle and the profit margins. Customer diversification and scalability is key for any tech business.

VN: How long does it take before you meet a startup and make an investment and how do you conduct your due diligence?

WR: We strive to get back to each company that contacts us within two weeks on our level of interest. If we proceed to due diligence, it typically takes about 8 to 12 weeks to complete an investment and wire money.

VN: These days a seed round is yesterday's Series A, meaning today a company raises a $3M seed and no one blinks. But 10 years ago, $3M was a Series A. So what are the attributes of a seed round vs a Series A round?

WR: We are a bit old school in our approach in that we like and prefer the smaller, more traditional Series A rounds of $3-$5 million. The venture math matters so we, like entrepreneurs, are valuation sensitive and want attractive returns. It becomes harder and harder for companies to get the return metrics their investors want if the capital raised is large and the valuations are unrealistically high.

VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?

WR: I left home at 17 and went to Ryerson to study business. After Ryerson, I did my MBA at the University of Calgary. I worked for a tech company in Calgary that provided magnetic bearings to the oil & gas industry. It was my first exposure to tech and I loved it. I then went on to do corporate venture capital for 10 years at a large oil & gas company (PanCanadian Energy now EnCana Corporation) and later a large power company (EPCOR).

Eventually I was recruited by a large Japanese bank (Nomura) in London, England to do late stage VC investing. My track record of investing was pretty good so I was recruited to join a Swiss VC firm as a partner about 10 years ago. My co-founder and I started McRock about 5 years ago as we saw a mega trend of the Industrial IoT emerging. I can honestly say not a day goes by that I am not grateful for the job I have and the enjoyment I get from it.

VN: What do you like best about being a VC? What makes you excited?

WR: I love enabling hungry entrepreneurs to pursue their dreams of changing the world.

VN: What is the size of your current fund?

WR: $70 million

VN: What is the investment range?

WR: Initial investment range is $3 million to $4 million, with total investment in any one company of $6 million to 8 million.  

VN: Is there a typical percent that you want of a round? For instance, do you need to get 20% or 30% of a round?

WR: We do not have a typical percentage ownership that we target. Today our ownership ranges from 8 percent to 40 percent.

VN: Where is the firm currently in the investing cycle of its current fund?

WR: We are about 2.5 years into the 10-year life of our fund. We have deployed about 50 percent of the fund so far.

VN: What percentage of your fund is set aside for follow-on capital?

WR: We set aside about 40 percent for follow-on capital.

VN: What series do you typically invest in? Are they typically Seed or Post Seed or Series A?

WR: We tend to invest in Series A and B rounds where companies are generating between $1 million to $5 million in TTM.

VN: In a typical year how many startups do you invest in?

WR: In a typical year, we invest in three to four new companies.

VN: Is there anything else you think I should know about you or the firm?

WR: We documented our journey creating McRock. If you need inspiration or perspective, check out our videos and blogs.