$28 Million Funding for Doorbell Cam Startup
By John Honovich, Published Aug 21, 2015, 12:00am EDTYep.
Would you spend $200 to see who it at your door on your phone?
Well, investors, including Richard Branson, just spent $28 million to get a piece of the company, Ring.
In this note, we look at the failure of the traditional surveillance industry to win here and why the funding may work out.
What is Ring?
Fundamentally, Ring is a video intercom accessible by smartphone plus a cloud video recording option. We first covered the company when it was called Doorbot.
Here is their marketing video to get a feel for their pitch:
Metrics for Ring
The product has 1,300+ reviews on Amazon, average of 4 stars (59% 5-star, 11% 1-star). Given those reviews, that implies sales of tens of thousands of units, closing in on 100,000 units.
Ring only started selling products in ~2013. According to the Shark Tank episode they were on, they did $1 million in the first 9 months, estimating an additional $5 million in sales due to their exposure on Shark Tank.
Given the growth rate, reviews and their marketing, we would estimate sales in the low tens of millions this year. We estimate the valuation to be $100+ million or similar to what Mobotix is worth.
On the other hand, the company is spending heavily, reporting 120 employees already, with plans to expand to 200, following this funding.
Miss for the Industry
There's no groundbreaking technology here. There are many intercom manufacturers, including video offerings as well as video intercoms from video manufacturers like Mobotix and, more recently, Axis. However, none of them have been built or optimized for residential / home users.
The main reason they were not is because the industry has traditionally ignored the home market.
Channel Problem
Ring grew so quickly by selling directly off its website and through Amazon, making it easy for them to reach directly to consumers. And given press fascination with covering home products, it was easy for Ring to get their message out.
Contrast to traditional manufacturers locked into a dealer-driven channel model. You can buy Axis from 10,000 different websites, just not on Axis' own. Worse, security dealers are a costly and ineffective vehicle for selling to consumers, especially compared to the growth of online direct sales.
Justifying Valuation
Nonetheless, $28 million investment and a $100+ million valuation is a lot of money for a doorbell camera that has no special IP nor networking effects that would create sizeable barriers to entry.
We do not expect Ring to IPO or even be an independent business for long. Though they have proven that there is some market for outdoor consumer cameras, the market will get more competitive and it will become much harder to grow and reach a profit, as the segment matures.
However, Ring has a strong shot at being the next Dropcam (i.e., mega priced SV acquisition). The smart home market is hot, and many very rich companies want to expand there (even Google / Next is a possibility if they see it as a compliment to their existing portfolio) who could easily justify paying hundreds of millions for a startup like them. Ring simply needs to keep its marketing and growth up, hoping that the investment climate / bubble holds until they get their payday.
UPDATE Test Results
