Home Security Deal: iControl Acquires Piper

Almost every month, a new security / surveillance company launches a crowdsourcing campaign. In 2013, one notable startup was Black Sumac's Piper [link no longer available], that raised $300,000 on IndieGoGo for an all-in-one HD fisheye camera, alarm siren, temperature / humidity sensor and a Z-wave hub, for less than $250.

Now, they are being acquired by iControl [link no longer available], a $100+ million Silicon Valley VC funded company.

In this note, we look at the potential of thi deal and its impact on the hot home security / surveillance market.

iControl's Positioning

iControl will target Piper at the lower end of the market, in their words, "rental properties, multiple-dwelling residences and international audiences."

Most importantly, unlike iControl's traditional OEM business model, where they were a component of offerings delivered by [link no longer available] ADT, Cox, Comcast, TimeWarner, etc., iControl says that Piper will allow them to "expand into new, untapped markets that will bring us one step closer to our vision of a home management solution for every household."

The tricky part is whether iControl will become a competitor to their existing partners because Piper has been sold direct to end users without any monthly fees, two elements that service providers do not like to see from their OEMs.

Deal Analysis

This is unlikely to be a good deal for Piper:

• Selling out this early rather than raising VC funding is a bad sign, especially in a market where VC money is so readily available.
• Being acquired by a privately held company means there is unlikely any 'cashing out' and that Piper's investors and management will hold illiquid private iControl shares.
• iControl itself has burned through ~$100 million in VC funding over the past decade and does not appear anywhere close to a market or financial success.

As for iControl, the product, while ambitious is still very early stage, only starting to ship in the past few months. This means it will require significant additional development as well as a foray potentially into an adversarial position with iControl's existing customer base.

This does not necessarily mean anything bad for the consumer security space, as there are many active startups therein, and this is only one deal.