Investment Notes: Rocco
Investment Notes: Rocco
Read why AfterWork Ventures Invested in Rocco - to bring fashion-forward, smart appliances into living rooms everywhere
We live in a design-centric world. Our clothes, cars, accessories and furniture are increasingly stylised, artistic and seen as an extension of our personal tastes. This same phenomenon has made its way from our furniture and wardrobes to our appliances. Now our coffee machines, toasters, blenders and even our vacuum cleaners have been bettered by a designer’s touch.
But our fridges are lagging. Especially bar fridges - until Rocco entered the room. Rocco are a modern appliance brand, with a $1500 USD smart bar fridge as their first product to launch. The Rocco fridge is sophisticated, sleek and designed to be both functional and attractive. It doubles as a drinks cart and a bar fridge, while featuring sub-zero compression and a smart system that makes re-ordering drinks a breeze.
Rocco’s launch went off with a bang. In their first 2 months, they completely sold out of their initial batch of fridges, received 39 pieces of press, racked up 153 million digital impressions and even got the likes of Stanely Tucci experiencing their product. Since launch, they have sold out of their first 4 production runs and have almost sold through the next.
What we loved about the idea
A co-founding team that have proven their consumer chops many times over
In Rocco, we found two consumer superstars, with complementary skill sets. Sam Naparstek led Product Development at D2C luggage pioneer Away, joining the team as employee #5 before helping steer the company through a period of incredible growth. His experience in the luggage category gave him both a sharpened eye for best in class product design, as well as the key relationships, to embark on the journey with another large durable good in home appliances.
Meanwhile, Alyse Borkan is an undisputed brand and marketing boffin, having flexed her muscles on the startup journeys at Billie, Casper and SoulCycle. As head of Brand at Billie, Alyse steered the brand through a tactical launch phase, with a laser-like focus on ROI, a firm grip on CAC and hands on the tools experience. At the same time, she masterfully built a differentiated and enviable brand, that delivered breakthrough and category-leading work.
The union of Alyse and Sam, and their respective spikes, around a new, exciting product in the Rocco fridge was one for the ages.
The underpinnings of a venture scale consumer brand
If you’re anything like us, your first question might be, why fridges? We’ve previously unpacked our thinking on what we believe makes an attractive D2C consumer business here and believe Rocco meets, and defies, the mark of excellence.
First up, there’s the market itself. The bar fridge market size is predicted to reach US$8 billion by 2028, with natural scope to expand into the US$600 billion large appliance market. These markets have established large players, with very few breakthrough brands emerging. This is largely unsurprising, given the non-trivial nature of manufacturing bulk appliances and electronics. Yet behind these initial barriers to entry (a feat Rocco has achieved, thanks to the product design and sourcing chops of the team) lies a business with attractive CPG fundamentals: a sizeable TAM, attractive cash conversion cycles, and the benefits of being a standout brand in a new category of smart fridges.
To make this picture even more attractive, Rocco is exploring partnerships with key retailers, having already launched with 4 Nordstrom stores, and proving that a retail partnership model works.
A greenfield category with reasons to believe we’re ready for a sexy bar fridge
In a design forward world, fridges have been left behind - both the bar fridge and their larger friends. Consumers are increasingly house proud and willing to drop their dollars on stylish appliances. On top of this, there’s also been a proliferation of drinks, both alcoholic and non-alcoholic. In fact, we’re spending 75% more on drinks than we did 5 years ago: we take our drinks seriously and need a fridge to match. Finally, we’re working from and entertaining at home more often - we need a dedicated space for our drinks.
"Finally being able to see Rocco in people's homes has been incredible. We intentionally designed the product to seamlessly blend into anyone's personal style, and already we're seeing how Rocco really appeals to anyone from those that have a house that looks like it could be its own zip code in Arizona filled with ultra modern furniture to a smaller NYC apartment with vintage finds." – Sam Naparstek, co-founder of Rocco
Positioned as an upper mass / lower premium product, Rocco’s fridge is not an impulse purchase, but not one that requires financing either. To help build the brand and justify the purchase, the team continue to push their stylistic credentials; partnering with designers on limited edition runs and even designer magnets.
This buzzing activity is all happening in a world where nobody loves their fridge. Most people cannot recall the brand of their fridge, engagement with fridges on social is a low 0.001%, with an average NPS score of 20. Rocco are already challenging what an appliance brand can look and sound like; sharing cocktail recipes, stocking tips and even ‘house rules’. We have seen through the emergence of cult brands like Vintec (acquired by Electrolux) that niche products, well marketed, can occupy a more meaningful place in our lives and create cut through rare for the category.
Challenges we saw
Baking in defensibility and keeping copy cats at bay
Unlike categories like skincare or even mattresses, it’s not easy to build a fridge. The complexity of manufacturing bulk appliances provides a natural short-term moat for Rocco. On top of this, the team has hit the market with a level of differentiation through their vision system that can identify low levels of drinks, just from looking at your phone. You don't even need to open your fridge to check if levels are comfortably stocked. Additionally, their designer collaborations (mentioned above), allow Rocco to add freshness and desirability into their offer, without the burden of R&D costs.
Effectively funding inventory cycles
Capital efficiency is key for any startup, and as we’ve seen recently; the undoing of many hardware businesses. Thankfully, through a combination of attractive unit economics and a hand-in-glove relationship with manufacturing partners, Rocco are able to achieve best-in-class cash conversion cycles - allowing them to reinvest (or pre-invest) sales into growth very effectively, without having to rely on more expensive sources of capital. This is a real superpower for Rocco.
Questions we had for the team
How do you think about upselling a one-off hardware sale?
Alyse was brimming with ways to help elevate the role of the fridge in our homes. Rocco has already partnered with large beverage companies to delight customers upon initial purchase, while also exploring concepts like monthly tasting clubs and hosted pop-up evenings. However, the goal of the vision system is to become an integral part of consumer’s grocery purchase cycles and leverage the data captured to help beverage companies better understand their consumers.
Are all consumer brands built alike?
Alyse got her reps selling FMCG products like razors and skincare products. We wondered whether the same playbook that made those products fly off the digital shelves would hold true for more considered purchases with a long replacement cycle, like a mass-premium appliance. As Rocco continues to extend their reach into physical stores (through partnerships with the likes of Nordsrom), Rocco will benefit from a vehicle that makes it easy to touch, feel and experience the product firsthand. Aside from this, we got comfort from seeing a marketing playbook that balanced brand and performance marketing, while focusing on a press heavy launch plan that nudged the brand deeper into established and reputable design circles. It’s hard to recall a fridge having the right to appear in places like Architectural Digest and Town & Country. This is social proof, at a higher level.
"The hardest part about our marketing so far has been having restraint. We've been overwhelmed by how many drink brands, like-minded startups, content creators, and designers have reached out to us to work together. We're excited to expand what we're doing while continuing to prioritize the things that are having the biggest impact. In exciting news, we recently had our first piece of content really go viral with more than a million views – it tripled our followers!" – Alyse Borkan, co-founder of Rocco
How we built conviction
Ultimately, we grew excited to join the Rocco story by interrogating the consumer fundamentals and from in depth discussions with the team around the Rocco moat and the marketing playbook. It’s not everyday that macro tailwinds, attractive unit economics and product and marketing whitespace emerge. So join us as we raise a glass to Sam, Alyse and team and watch as the world clears their living rooms to make way for their designer drinks fridge!