The New Generation of Crowdfunded Security Startups

New entrants to the security market are few and far between.

However, there is one area that is clearly driving new security startups - crowdfunding.

Crowdfunding has grown from a curiosity to a powerful global force raising billions for companies worldwide.

Indeed, IPVM analysis shows that over $10 million USD has been earned by security startups crowdfunding since 2013, leading to millions more in equity investments following on crowdfunding success.

Indeed, the majority of security startup crowdfunding campaigns have meet their revenue goals during this period, a remarkable accomplishment.

19 Successes - Crowdfunded Security Startups

The list of projects reaching or exceeding fundraising goals in the last two years is quite large. Below you will find 18 examples that IPVM has detailed in updates, totalling nearly 8 million dollars in raise funds:

• Piper: DIY intrusion alarm and security system ($309,000 funded)
• Lockitron: Residental and small office Access Control ($2,200,000)
• Defender: A portable, pepper-spraying security camera ($227,000)
• Butterfleye: A battery powered, analytic enabled home surveillance camera ($55,000 [link no longer available])
• Korner: A sub-$100 home intrusion system ($416,000)
• Doorbot: A video doorbell ($250,000 [link no longer available])
• Chui: A face-rec embedded 'smart' video intercom ($72,000 [link no longer available])
• Canary: A DIY home intrusion alarm and security system ($1,900,000)
• Scout: A DIY multiple sensor intrusion security system ($456,000)
• NFC Ring: An alternative access credential for NFC enabled reader ($401,000)
• Noke: A 'smart padlock' that can be opened with mobile devices ($350,000)
• First Sign Hair Clip: A personal emergency alarm and PERS device ($55,000)
• Sentri: A single panel, multi sensor security and home monitoring device ($391,000) 
• Novi: A combo smoke alarm and security camera ($175,000)
• Goji: A video-enabled door lock and Access Control device: ($313,000)
• iSmartAlarm: Small space video and intrusion alarm system: ($226,000)
• iSensorHD: Skype connected home surveillance camera: ($200,000)
• Pixy: $59 smart camera module: ($274,000)

7 Failures - Crowdfunded Security Startups

However, many campaigns are not successful even if the idea is unique or it is designed to meet a broad expectation. Consider these examples, where the concept may have ultimately found success in another product, but fell flat and just did not make it beyond concept stage: 

• Sandbox (<$500 of $77,000 goal)
• TEO (<$108,000 of $165,000)
• Zwobbx (<$10,000 of $20,000)
• Gecko Cam (<$16,000 of $100,000)
• AirPatron Hidden Camera Vase ($200 of $20,000)
• SherloQ Home Security/Automation Platform ($<14,000 of $100,000)
• WIMI Cloud Home Security Camera (<$110 of $58,000)

How Crowdfunding Works

People buy products essentially on faith and a fancy marketing video. Crowdfunding sites, like Kickstarter and Indiegogo take a small cut for managing the campaigns and contribution collections. 

A few thousand early adopters typically pay ~$100 each for products that do not yet exist but that they hope to receive in the future.

Critical to crowdfunding success is the PR campaign, especially considering the products are typically no more than prototypes at this stage.

Promo videos, even for companies only months old, tend to be pretty slick. For example, here's Piper beating up on traditional security providers:

Along with that, PR placed hype pieces across mainstream tech and gadget blogs are critical to raising awareness.

Limits - Consumer Focused

Because crowdsourcing campaigns typically depend on small contributions from many individuals, plus marketing from mainstream blogs, they tend to be consumer / residential focused.

Very few, if any, are truly targeting businesses / the traditional security space.

Risk - Poorly Designed Products

Since the products generally do not exist at the time of 'sale', and people are buying based on promise, they risk getting products that are repeatedly delayed and even fail to deliver on the basic features claimed.

One of the most famous crowdfunded security startups, Lockitron, continues to have major problems, as IPVM's Lockitron test shows.

Burnout

Many crowdsourced project fail, increasingly spectacularly and the fools funders of the project lose their money in the process. If this continues and / or the market turns south, the early adopters who easily throw hundreds of dollars at these campaigns may dry up.

Upside

Despite these limitations, the ability to raise funds and demonstrate real customer interest is a huge benefit to startups.

Like older generations of startups, most will eventually fail, even after successfully crowdsourcing but the upside is far more experimentation and new efforts to deliver innovations products to the market.