Why Roozt Turned Down $1 Million

By Michael Carney , written on March 28, 2012

From The News Desk

How many founders would turn down $1 million with their company teetering on insolvency? Roozt's CEO Brent Freeman did.

The Los Angeles-based ecommerce startup was reborn today as an online marketplace and platform, connecting cause-based lifestyle brands with mainstream consumers.

Freeman had wanted to re-launch his company last summer with an entirely new look and revised business model, but at the time both his finances and personal life were unraveling. He needed funding to overhaul his site. At the same time, his grandmother, who had helped raise him since his mother’s death early in his life, was losing her battle with lung cancer.

Amid this chaos, Freeman managed to negotiate a $1 million financing round with a group of angels. It was a last-minute lifeline for his company and employees. In a moment of preparatory celebration, he took a screen shot showing his depleted bank account next to the proposed term sheet.

But while he was in the hospital room calling on Hospice, the deal started to look like it would create more problems than it would solve. Prior to closing, he began receiving pressure from his potential investors to completely restructure his company and oust a long-time investor and mentor who had supported Roozt through its toughest times.

Freeman said his potential investors wanted him to change the company's business model to increase profits at the expense of brand identity and core values. It was clear to him that the investors shared neither his vision nor his commitment to the long term direction of the business. Maybe they were right, but Freeman disagreed.

He was suddenly being forced to choose between maintaining his personal and corporate integrity and achieving the milestone that had for so long represented success and validation, Series A financing.

"I'm the type of guy that's just loyal," explains Freeman. "While some people may be able to turn their backs, I can't. The ‘how’ and ‘why’ of Roozt will always be more important to me than the ‘what.’"

Really? Even with a mere $130 left in the company's bank account, and about half a dozen team members counting on a paycheck? Some investors would question that move and whether Freeman would do what it takes to protect their investment, even if it means ousting long-time supporters.

But Freeman was adamant that he didn't want to investors to buy-in, flip-the-house, potentially fire the founders, and take the company in a whole new direction. Roozt is an idea born out of his belief that capitalism can have a conscience and that you can make both a difference and a profit.

It's a choice entrepreneurs struggle with every day. When you sell shares, you are selling a part of the company, a part of the voice and a part of the vote. To him, no amount of money was worth going against his gut and those who had believed in him.

With a renewed focus, Roozt set out to raise essential seed financing from what its CEO calls “mission-aligned investors.” Through a series of fateful introductions and hustle, he managed to schedule a 15-minute coffee meeting with Steve Schimmel, an early Netscape employee and the 13th employee of Google. This meeting, which ended up lasting more than three hours, would prove to be the tipping point in Freeman’s journey.

Schimmel immediately understood Roozt’s value and decided to take a leap of faith on its young founder. In October, he led a $250,000 investment round, that also included Ryan Scott, CEO and founder of Causecast, among others.

In the months since closing this financing, the Roozt team has worked relentlessly to completely redesign and expand its platform. Today, they have finally launched the manifestation of Freeman’s vision from nearly three years earlier. (Go sign up here.)

It is a rare kind of company, which not only offers products and services which make our lives easier, but manages to contribute to the greater good on a meaningful level – not the kind of PR spin that is too often woven to create a feel-good story, but real genuine impact. Roozt has impact bursting out at the seams.

The platform serves to aggregate and highlight the incredible stories of the cause-related brands it serves. Upon opening an account, its members now pledge their commitment to “bringing sexy back to giving back.” In an effort to maximize impact, it incorporates a gameplay element, incentivizing users and offering rewards to those who actively “Discover, Shop and Share the Hottest Cause-Oriented Brands.”

Among its early brands, Roozt has its first celebrity in Travis Aaron Wade, an actor on the TV show Alcatraz and a social entrepreneur whose company Arm The Animals supports small animal rescues.

For the brands themselves, the Roozt platform now provides access to eager consumers as well as use of a complementary, online storefront with state-of-the-art ecommerce tools, including customer analytics, email marketing, order processing, and the ability to run brand-specific promotions and daily-deal-type flash sales. With more than 50 brands on board at the time of launch and hundreds more awaiting evaluation, Roozt is the largest and most impressive advocate of cause-based commerce on the internet.

But these are features. Good features, but features nonetheless. As the product evolves many new features will be added while others are removed. What should be most important to us as consumers is the knowledge that Roozt is more than a “corporate social responsibility” pledge. It is an embodiment of uncompromising commitment to creating impact in a moral and ethical way.

In addition to its willingness to forgo $1 million of misaligned financing, Roozt prioritizes its mission of global philanthropy by integrating cause into its own business model, with a portion of each purchase being donated to Pencils of Promise and its team heavily involved with Network for Teaching Entrepreneurs.

“Our story is not unique,” confesses Freeman. “This happens in Silicon Valley every day. But we feel fortunate and obligated to tell other entrepreneurs that capitalism and social good are in no way mutually exclusive. There are always options to make your dream a reality. What’s not an option is compromising your moral compass."

[Additional writing by Kym McNicholas]