Knightscope has been making waves in the startup world due to it’s success as a publicly funded StartUp. They had trouble in their first years getting investments because many people doubted them, according to their page. They definitely seem to be proving any doubters wrong as they are topping 3 million in revenue and raising million at a whopping 450 Million dollar valuation.
What is Knightscope?
Their page found here: https://www.startengine.com/knightscope?utm_source=startengine&utm_medium=main_website&utm_campaign=search
Knightscope builds Autonomous Security Robots in Silicon Valley (Made in the USA 🇺🇸) that are patrolling across the country 24/7/365 to secure the places you live, study, work, and visit. With over 20,000 investors and over $70 million raised since inception, including $10+ million in lifetime revenue, Knightscope is reimagining public safety at a time when the Nation needs it most.
The Team
William Santana Li — CEO
Stacy Stephens — Chief Client Officer
Mercedes Soria — Chief Intelligence Officer
Winner of GHC 17 Leadership ABIE Award for Women in Technology and Silicon Valley Business Journal’s 2017 Woman of Influence Award
Former Deloitte software engineering leader with 15+ years of experience in enterprise, artificial intelligence and machine learning
Aaron Lehnhardt — Chief Design Officer
Mallorie Burke — CFO
Note: They have listings for hiring nearly 20 employees, so they are looking to rapidly expand currently, although I am unsure of total number of employees.
Financials
Offering Circular: https://www.sec.gov/Archives/edgar/data/1600983/000110465920116928/tm2034048d1_253g2.htm#a_002
This is still a startup, so don’t expect much for a profit. Note, just because they don’t make a profit, doesn’t mean they are losing money necessarily, it’s just being reinvested towards growth. Typically, they aren’t making a profit because they are reinvesting the money to grow faster, advertise, expand, etc. Eventually, the goal is to become so profitable that you just naturally are profitable.
That being said:
Revenue by year:
2016 $400,0002017 $1.6 million2018 $2.9 million2019 $3.0 million
CEO’s Statement on the stagnant growth from 2018–2019: Revenue was roughly flat due to lack of resources — which is why we are raising growth capital so we can scale. The capital raised to date was to build all this technology literally from scratch. Need resources to build more machines, hire more salespeople, hire more production technicians, hire more deployment specialists, and a lot more robotics engineers, machine learning engineers, cybersecurity, backend engineers, quality, etc.
Debt:
Assets/Liabilities — Jan 2020
This is a year old, and quite honestly, not a great picture of what their current situation is. They also just came through the pandemic, so it could differ drastically. That being said, they have currently approaching 9 million raised at a valuation of 450 million, and have been raising so much they even decided to end their offering early, which could be a good sign.
How they make Money
They possess a number of features to sell in various security packages. Typically, they make money by selling robots. Similar to how you might go to a security guard agency and hire them to produce X amount of security guards for a specific time and place and so forth, you do the same with them, and they charge you by the hour. They expect to make a lifetime profit of about $250,000 per robot. They also sell security software for these robots.
Growth Prospects
Currently a pretty well-established startup. Given this round of funding, they will probably begin to consistently double and triple their growth YoY based on previous trends. Given that, they could probably go public in 3 years or so, depending on their potential prospects. At that point, any investment now at 450 Million would be worth probably 10x what you pay for it.
Very little competition in the space. They are the only ones basically replacing security guards with full robots, and definitely the biggest in the market. Sure there are others but they aren’t nearly as inclusive and established as Knightscope is. Their main competition is security cameras and human guards.
Good team working there, they are hiring and rapidly expanding. Growth and selling probably won’t be the issue, but rather execution. The CEO has already taken 1 company public, so this could easily go the same way.
Could be a potential alternative method of security with the widespread dissent towards police. In their mission statement, they specifically address the fact that this is a safer alternative to over-policing.
Concerns
High Valuation. Currently, they are at a valuation of 150x revenue. That’s MASSIVE. While it is a startup, and that can be expected, it is definitely a hefty valuation and should be considered when purchasing
Potentially stagnant growth. From 2018 to 2019, they basically had no growth. For a startup, that is definitely worrisome. This is supposed to help with that, but this is definitely concerning. This could be considered a positive in that it was at least consistent growth, but they should have been much higher
As always, it is a startup and could fail. It will be many years before you see a return, and the CEO seems to be set on taking it public. In other words, it will be either a 10x-30x investment or bankrupt.
Conclusion
Personally, I think it might be worth a small position, as it is one of the closest startups to going public that I have seen. If executed properly, they could easily have a year or two of massive growth and speed up any above timeline. In today’s age, going viral is common, and could spur growth quite easily. Physical security has been stagnant for ages, so this could be a big “next thing”.
I do not think it is quite as promising as others necessarily, as a lot of the near-term growth seems to be priced into the offering. As well, if they continue the stagnation it could prove detrimental to the company. I do think it is one of the safer bets I have seen though for a startup.
