Detroit-based iRule LLC, which has developed smartphone apps to network and run high-end home and corporate entertainment systems, is expected to announce Monday that it has closed on a venture capital funding round of $2.5 million.
The significance of the round is far greater than the money involved, said Itai Ben-Gal, iRule’s CEO and co-founder.
Of prime importance was that one of the investors is an overseas electronics manufacturer and retailer with worldwide sales and distribution offices, which will help expand iRule’s reach and revenue.
Also of significance was that the way the round was structured allowed IncWell LLC, the Birmingham-based VC firm founded by former Chrysler Group LLC CEO Tom LaSorda, to make a profitable exit from a previous investment in the company.
Important, too, was that the round was joined by AOL founder Steve Case as a result of iRule’s winning a Google Inc. Demo Day event in Detroit in February. That honor allowed the company to showcase its business plan along with nine other companies at the national Google Demo Day in Silicon Valley in April.
The name of the electronics retailer as well as an announcement about a new iRule product will be disclosed at a trade show in February, Ben-Gal said.
Ben-Gal said he and Detroit Venture Partners, the lead investor in a funding round of $1 million in 2013, wanted to limit the size of this round of funding, raising what was needed to spur the next round of growth without diluting equity needlessly.
“We had a lot of demand and were able to be quite choosy,” Ben-Gal said. “Taking on this strategic partner was important because they have a huge dealer base and worldwide offices.”
Ben-Gal said the electronics retailer wanted to invest more than what was available to it out of the $2.5 million and offered to buy stock in the company from previous angel investors and IncWell.
IRule, founded in 2009, also got a seed round of funding of $500,000 in 2011 that was led by Compuware Ventures LLC, a VC unit of the computer services company that was later shut down by CEO Bob Paul.
“We had a small investment in iRule, a little over $100,000,” LaSorda said. “For us to make a good return in just 15 months is great. Usually you expect it to take three to five years to have an exit.”
This is the first exit for IncWell, which was founded in 2013.
“We’ve already sent checks out to the investors in our first fund,” LaSorda said.
“It was funny. We got some calls saying, ‘What is this for?’ I said, ‘Hey, under the terms of your subscription agreement, we had to write you a check.’
“This is a strategic partner that will be important for iRule. Itai is such an energetic guy, just what you’re looking for as an investor.”
IRule, based in the Madison Building in downtown Detroit, has 22 employees. Ben-Gal said some of the funding will be used to hire eight to 10 employees over the next year, including beefing up the sales and marketing team and adding engineers for product development.
Ben-Gal said he projects revenue to go from almost $2 million in 2014 to more than $3 million this year. He said commercial clients include CNN headquarters in New York City, all the Best Buy stores in the U.S. and Walt Disney Pictures’ LucasFilm division.
In 2012, Ben-Gal was named to Crain’s 2012 class of 40 under 40.
At the huge Consumer Electronics Association show in Nevada in 2013, iRule won the award for best control product of the year.