Founded in 2013, Knightscope is the developer of fully autonomous security robots or bots. The company’s mission is “to make the United States of America the safest country in the world.” But is Knightscope a business you can invest in?
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The company is actually raising capital through an online crowdfunding platform, called StartEngine. The goal is to raise $10.3 million.
Note that Knightscope has already raised $46.6 million from prior rounds of financing, such as from family offices and retail investors. So let’s get a backgrounder on the company and its prospects:
Knightscope: It’s All About the Bots
Knightscope’s bots are known as Autonomous Data Machines, or ADMs. These machines can be both for indoor and outdoor environments to patrol for security issues. There is also the Knightscope Security Operations Center (KSOC), which is a cloud platform that allows for remote access and management of the ADMS.
There are different versions of these ADMs, which range in height from four to five feet and weigh anywhere from 150 to 398 pounds. They also travel autonomously – within in a geo-fenced area – and can avoid running into people, vehicles and other obstructions. This is done by using lasers, wheel encoders and other technologies.
Currently, Knightscope is working on its next-generation version: K7 ASR, which is a multi-terrain bot. It actually looks like a mini Tesla (NASDAQ:TSLA)! The K7 also will weigh 770 pounds and should work well in settings like wind farms, large corporate campuses, solar farms and power utility substations.
A key benefit of Knightscope’s ADM system is data collection. Consider it can gather one to two terabytes per week. Then again, there is 360-degree HD video and live-streaming, as well as other capabilities like license plate recognition and thermal imaging (which is based on temperature, such as to detect fires).
In Knightscope’s investor profile on StartEngine, the company provides a case study via the Huntington Park police department in California. A year after adopting the K5 bot, the number of calls for service dropped by 10% and the number of crime reports plunged by 46%.
The Growth Opportunity
No doubt, the security market is massive. In the US, there are more than 8,000 private security firms and close to 18,000 law enforcement agencies. According to Knightscope’s own analysis, the annual spending on security is about $500 billion.
To capitalize on this, the company has adopted a unique business model: Machine-as-a-Service (“MaaS”). Yes, it’s similar to how cloud companies sell their software, such as Salesforce.com (NYSE:CRM) and Workday (NASDAQ:WDAY). In other words, Knightscope’s charges recurring fees for its ADMs, with the monthly revenues averaging from $4,200 to $8,400.
As for the company’s finances, the latest SEC filing only has numbers for 2017 to 2018. During this period, revenues jumped from $1.6 million to $2.9 million. However, the losses were substantial. They came to $12.4 million in 2017 and $13.4 million in 2018.
Bottom Line On Knightscope
All in all, it seems reasonable that bots will increasingly become more important in the security market. The AI technology is getting much more sophisticated and the hardware components are getting cheaper. Knightscope also has the benefit of much experience with its own systems, which have logged over 700,000 operating hours in 15 states.
Regarding the senior executive team, it is seasoned. The CEO, William Santana Li, has worked as an executive at Ford (NYSE:F) and founded GreenLeaf, which is now a part of LKQ (NASDAQ:LKQ). Then there is Aaron Lehnhardt, who serves as the chief design officer. He has more than two decades of experience in sophisticated industrial design.
But of course, when it comes to early-stage investments, there are many risks. Despite the benefits of ADMs, there continues to be skepticism about the technology. This is certainly the case with anything that is new. What’s more, there are heavy costs because of the construction materials and equipment.
Thus, it is important to review the investor materials before making a decision.
As for the deal StartEngine, Knightscope has raised $5.7 million at $8 a share. And note that the minimum investment is $1,000.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.
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